Monday 24 August 2009.
WEEKLY MARKET OUTLOOK.
Friday Market Closing Prices.
FBMKLCI 1163.79 up 0.36.
November FCPO RM2,345.
Ringgit 3.5175.
DJIA 9,505.96 up 155.91 or 1.67%.
NASDAQ up 2020.90 or 31.68 or 1.59%.
S&P 500 1026.13 up 18.76 or 1.86%.
Crude Oil USD73.89 up 0.98 or 1.34%.
Natural Gas US$2.80 down 0.14 or 4.79%.
Gold US$954.70 up 13.00 or 1.38%.
STOCK MARKET OUTLOOK.
The local stock market is expected to trade range bound in a consolidation mode with an upward bias toward the 1200 level. The FBMKLCI didn’t expected to break below the 1150 level on the back of corporate earnings recovery (15% to 30% earnings growth for the next couple of years) in tandem with Malaysian and the global economy recovery as evidenced by the latest economics number here such as July car sales up 15% from previous month (TRADING BUY rating for Proton Hldgs Bhd RM2.99, 1Q09 Net Profit RM54.5m, Net EPS 9.90 sen, Net Assets RM9.46). Moreover, Bank Negara M’sia foreign exchange reserve rose to RM322.2 billion as at August 14 from RM321.5 billion on July 31, and in the U.S. the latest new home sales in July rose 7.2%. Fed Chairman at Jackson Hole, Wyoming said the U.S. and world economies are in early recovery phase even though long and bumpy road can be expected ahead. Therefore, I forecast the DJIA to break the 10,000 level anytime now.
In my opinion, the worry about the Chinese stock markets where Shanghai bourse drop almost 20% last week is overdone and provide the buying opportunities. The drop is due to overstretched valuations there. As a closed stock market in China, it is up to their Government to control the direction of the market. Moreover, as the world economic recover especially in the U.S. and Europe, it will certainly benefit China and the rest of Asian exports oriented economies. Meanwhile, the economies of OECD’s has stabilized in 2Q with Japan, Germany, France and Taiwan come out of recession.
Lesson from the 1997/1998 Asian economic crisis, in order to get a faster economy recovery, the U.S. Dollar need to weaken further against Asian countries currency. This will then facilitate strong recovery in U.S. exports but at the same time will benefits country like Malaysia in term of demand for E&E products and higher prices for oil and commodities such as palm oil and rubber too.
Good profit announced last Friday by listed companies such as TM Bhd RM3.06, PPB Group Bhd RM15.30, PharmaNiaga Bhd, etc etc will act as a catalyst for the market.
STOCK MARKET STRATEGY.
We recommend investors to BUY and ACCUMULATE FBMKLCI linked and quality stocks at this level and between the 1150 and 1160 level or below if the market fall steeper than anticipated to position for future market rally in the medium to long term toward the previous all time high of 1525.
FBMKLCI TECHNICAL OUTLOOK.
Support Level at between 1150 to 1160.
Resistance Level at 1200.
Next Target Level at 1331.
Previous all time high at 1525.
WEEKLY MARKET OUTLOOK.
Friday Market Closing Prices.
FBMKLCI 1163.79 up 0.36.
November FCPO RM2,345.
Ringgit 3.5175.
DJIA 9,505.96 up 155.91 or 1.67%.
NASDAQ up 2020.90 or 31.68 or 1.59%.
S&P 500 1026.13 up 18.76 or 1.86%.
Crude Oil USD73.89 up 0.98 or 1.34%.
Natural Gas US$2.80 down 0.14 or 4.79%.
Gold US$954.70 up 13.00 or 1.38%.
STOCK MARKET OUTLOOK.
The local stock market is expected to trade range bound in a consolidation mode with an upward bias toward the 1200 level. The FBMKLCI didn’t expected to break below the 1150 level on the back of corporate earnings recovery (15% to 30% earnings growth for the next couple of years) in tandem with Malaysian and the global economy recovery as evidenced by the latest economics number here such as July car sales up 15% from previous month (TRADING BUY rating for Proton Hldgs Bhd RM2.99, 1Q09 Net Profit RM54.5m, Net EPS 9.90 sen, Net Assets RM9.46). Moreover, Bank Negara M’sia foreign exchange reserve rose to RM322.2 billion as at August 14 from RM321.5 billion on July 31, and in the U.S. the latest new home sales in July rose 7.2%. Fed Chairman at Jackson Hole, Wyoming said the U.S. and world economies are in early recovery phase even though long and bumpy road can be expected ahead. Therefore, I forecast the DJIA to break the 10,000 level anytime now.
In my opinion, the worry about the Chinese stock markets where Shanghai bourse drop almost 20% last week is overdone and provide the buying opportunities. The drop is due to overstretched valuations there. As a closed stock market in China, it is up to their Government to control the direction of the market. Moreover, as the world economic recover especially in the U.S. and Europe, it will certainly benefit China and the rest of Asian exports oriented economies. Meanwhile, the economies of OECD’s has stabilized in 2Q with Japan, Germany, France and Taiwan come out of recession.
Lesson from the 1997/1998 Asian economic crisis, in order to get a faster economy recovery, the U.S. Dollar need to weaken further against Asian countries currency. This will then facilitate strong recovery in U.S. exports but at the same time will benefits country like Malaysia in term of demand for E&E products and higher prices for oil and commodities such as palm oil and rubber too.
Good profit announced last Friday by listed companies such as TM Bhd RM3.06, PPB Group Bhd RM15.30, PharmaNiaga Bhd, etc etc will act as a catalyst for the market.
STOCK MARKET STRATEGY.
We recommend investors to BUY and ACCUMULATE FBMKLCI linked and quality stocks at this level and between the 1150 and 1160 level or below if the market fall steeper than anticipated to position for future market rally in the medium to long term toward the previous all time high of 1525.
FBMKLCI TECHNICAL OUTLOOK.
Support Level at between 1150 to 1160.
Resistance Level at 1200.
Next Target Level at 1331.
Previous all time high at 1525.
STOCKS BUY RECOMMENDATION.
TM BHD RM3.06. Results Q2, FYE 31.12.2009.
2Q 2009 6M 2009
RM 000 RM 000
Revenue 2,129,000 4,234,400
Pretax profit 358,900 450,200
Net Profit 266,000 293,700
Net EPS 7.6 sen 8.4 sen
Dividend 10 sen tax exempt.
Net Assets RM1.934.
Cash RM2,820,900,000.
Debt RM7,075,700,000. S.T. Debt RM41.9m.
Group revenue up 1.1% Q on Q due to higher revenue from internet and multimedia, other telco and non telco related services. Higher PATAMI of RM266m compared to RM27.7 in the previous quarter due to unrealized forex gain of RM123.2m as compared to a loss of RM70.9m in Q1 2009.
TM Bhd Business Outlook – Remain challenging in view of the anticipated gradual recovery of global economy but expects the growth in broadband markets to remain strong with estimated CAGR at 8.3% between 2008 to 2013.
BUY TM Bhd - Trading at annualized 2009 PER of 13X and 3.3% net dividend yield.
PPB GROUP BHD RM15.30. Results Q2, FYE 31.12.2009.
2Q 2009 6M 2009
RM 000 RM 000
Revenue 833,952 1,606,457
Pretax Profit 433,089 713,901
Net Profit 397,532 669,367
Net EPS 33.53 sen 56.46 sen
Dividend 5.00 sen 5.00 sen
Net Assets RM11.35
Cash RM391,254,000.
Debt RM252,644,000.
Higher net profit quarter on quarter due to higher contribution from Wilmar International despite as well as improved performance from the sugar refining, trading, and cane plantation division despite lower revenue from flour and feed milling, chemical trading and manufacturing and property divisions.
Outlook for the rest of 2009 – Global economic slowdown will continue to affect the Group in term of lower demand and margins for the good and services offered. Fluctuation in prices of raw materials and ocean freight will persist as challenging factors affecting the Group’s profitability.
BUY PPB Group Bhd – Trading at annualized 2009 PER of 12.4X plus the market value of their stake in S’pore listed Wilmar International at SGD6.05 almost at RM15.00. Moreover Wilmar will list their China marketing arm subsidiary in HKSE early next year. Fair Value for PPB Group Bhd at least RM20.00 based on Wilmar listing exercise and the outlook for palm oil and other businesses on the back of global economy recovery.
PHARMANIAGA BHD. Results Q2, FYE 31.12.2009.
2Q 2009 6M 2009
RM 000 RM 000
Revenue 333,212 646,928
Pretax Profit 24,337 44,521
Net Profit 17,697 32,219
Net EPS 16.54 sen 30.12 sen
Dividend 27.00 sen 27.00 sen
Net Assets RM3.74
Cash RM86,942,000
Debt RM87,730,000. S.T. Debt RM63.5m.
Q on Q higher revenue due to improved sales to government hospitals and sales contribution from Indonesian subsidiary.
Pretax profit up 20.6% to RM24.3m Q on Q due to increased revenue, improved gross profit margin and recognition of gain on disposal of property, plant and equipment.
Outlook for the rest of 2009 – The Group has intensified its focus on securing improvements in operational efficiency and cost containment. Cautiously optimistic for the 2H 2009.
BUY recommendation for Pharmaniaga Bhd.
CALENDAR WATCH.
August 25.
* Bank Negara Malaysia Overnight Policy Rate decision.
* U.S. S&P/Case –Schiller June home price.
* U.S consumer confidence data.
* Maybank 4Q and full year results.
August 26.
* Malaysia 2Q GDP.
* US durable goods orders.
* US home sales figures.
* US EIA petroleum status report.
August 27.
* US annualized 2Q GDP figures.
* US jobless claims.
August 28.
* Malaysia Producer Price Index for July.
* US personal income data.
For further inquiries please call:-
KAMEL BIN MOHD YUSOH, KIBB, 03-21634549/50 OR 013-6306544.
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