Crude Oil – Support and Resistant Levels

Crude Oil Full0616 Future

The above is the daily chart of Crude Oil. Few observations on crude oil price movement:

  1. In the daily chart, Crude Oil formed an ascending channel which indicates an uptrend. Nevertheless, if we look at the weekly chart as below, the long term trend of crude oil is still bearish.
    Crude Oil Full0616 Future Weekly
  2. Refer to the daily chart, we can find the immediate resistance levels
    1. 200 SMA – USD46
    2. Fibonacci retracement 50% – USD45
  3. If Crude Oil can break USD45-46 and form a support there, in my opinion, this is a solid medium-term bullish reversal.
  4. The next strong resistance zone is highlighted with a rectangle box in the daily chart. The zone is from USD53 to USD59. It is still premature to say whether Crude Oil has sufficient momentum to break this zone.
  5. To gain momentum, Crude Oil should form a strong support zone above USD46.

My forecast:

  1. Crude Oil will not break the ascending channel immediately. I think the prices will move in the channel for a while. How long? I don’t know exactly, but I guess few weeks. Crude Oil needs to accumulate momentum to break USD45-46.
  2. I think that Crude Oil will eventually form a support zone above USD46.
  3. I don’t think Crude Oil can break the resistance zone USD53-59 within 2 to 3 months. This resistance zone is pretty strong.
  4. Therefore, I forecast that Crude Oil prices will range between USD46 to USD50 in the next 2-3 months.

This is my view in forecasting medium term price movement of Crude Oil. Accuracy is unknown. If my forecast turns out to be correct, it is just lucky.

TENAGA–Fundamental Analysis (28 Apr 2016)

Excel – Download the analysis file

Latest Financial – Q2 2016 Financial Report (27 Apr 2016)

FY16 Q2 Results Highlight:

  • Tenaga reported 2QFY16 core net profit of RM1.5b (normalised for translation losses of RM235m), which brought 1HFY16 core earnings to RM3.5b. (MIDF 28 Apr 2016)
    • Electricity unit sales in 2QFY16 grew some 4%yoy, much stronger than 1QFY16’s +3.2%yoy and the 2.2% – 2.5% growth seen in the past two financial years. Revenue from Tenaga’s electricity sale grew by a stronger 5%yoy given a higher average tariff achieved at 39.28sen/kwH (+1%yoy).
    • Demand growth was largely driven by the commercial (+6.1%yoy) and residential (+12%yoy) segments while the industrial segment was down slightly (-1.4%yoy). The commercial and residential segments account for 58% of total electricity demand.
  • However, 2QFY16 core net earnings grew by a slower 1.3%yoy (+3.3%ytd) (after normalising 2QFY15 for ICPT over-recovery of RM981m) as margins were impacted by higher fuel cost, i.e. higher subsidised piped gas price (which was increased 9% from RM16.70/mmbtu to RM18.20/mmbtu from Jan 2016 given a subsidy rollback), and higher effective coal price (+5.5%ytd) – which was mainly due to the weaker Ringgit. Underlying USD denominated coal cost actually reduced 16%. These fuel cost volatility is likely to be taken into account in the next ICPT review for 2HCY16.

Valuation:

TENAGA-FY16Q2-Football-Field

In my opinion, fair value of TENAGA range from 15.8 to 17.2. The uncertainty risk of fair value is from MEDIUM to HIGH.

Going Forward:

Main catalysts:

  1. Strong earnings visibility post-ICPT implementation
  2. Overseas expansion provides scope for stronger growth in the mid-term
  3. The prolonged heatwave hitting the country currently provides a temporary boost to demand

(FFO – Dividends) / Debt in FY15 was 36% which is above global industry average (35%). I think TENAGA should consider to increase its dividend payout in view of its strong cash position.

I will continue to hold this share, and accumulate it.

At the time of writing, I owned shares of TENAGA.

DLADY – Fundamental Analysis (28 Apr 2016)

Excel – Download the analysis file

Latest Financial – Q1 2016 Financial Report (25 Apr 2016)

FY16 Q1 Results Highlight:

  • 26 Apr 2016 – YoY, 1Q16 revenue rose 26.9% to RM249.8m as 1Q15 was exceptionally weak due to planned phasing in of the new re-launch of Dutch Lady Children Formula Milk, which resulted in the rundown of sales prior to the re-launch. Gross profit margin expanded by 7.9ppt to 43.5% thanks to favourable milk powder costs (-30%), which pushed gross profit higher by 54.8% to RM108.6m. As a result, net profit catapulted 99.0% to RM33.9m.
  • 26 Apr 2016 – QoQ, 1Q16 revenue shrank by 7.8% to RM249.8m due to seasonality as the Chinese New Year during the quarter cut numbers of selling days short. However, PBT still managed to surge 33.3% to RM45.8m due to the swing in distribution expenses recognition as well as the more favourable raw material prices (-14%) in between the quarters. Net profit grew 34.4% to RM33.9m, further aided by a slight lower effective tax rate of 26.0% (vs 4Q15: 26.6%).

Valuation:

DLADY-FY16Q1-Football-Field

In my opinion, fair value of DLADY range from 50 to 60. Uncertainty risk of fair value is from MEDIUM to VERY HIGH. In long term (10 years), I think DLADY worth 77 to 84. That’s why I accumulating this stock for my kids.

Going Forward:

  • I am positive with DLADY’s future:
    • Its solid fundamentals and strong branding position
    • Aggressive marketing and promotional activities
    • Robust demand of diary product in the long-term as Malaysia’s population is projected to reach 38 million people by 2040 from 30 million currently.
    • 25 Aug 2015 – To date, Dutch Lady had launched a new range of liquid milk products under the name of Dutch Lady PureFarm in an effort to refresh the brand.in addition, Dutch Lady have also strengthened our ready-to-drink products.
    • The Group has re-launched Dutch Lady Children Formula Milk since early FY15 and also repackaged its UHT milk to highlight the freshness of its milk as well as mother company, Friesland Campina’s 140 years of farming heritage. The marketing strategy is essential in building the brand equity as well as stimulating the consumer demand with the new image of its products.
  • Concern:
    • 25 Aug 2015 – Milk powder prices succumbed to multiple year-low in early-August due to the concerns of slowing demand from China and oversupply situation. However, the volatility persists as latest figures in mid-August show strong rebound of 7.2%-16.7% in a short period which we believe was driven by the 33% output cut by Fonterra, the world’s biggest milk supplier.
  • DLADY valuation is still attractive, and it is a very defensive stock.
  • I will continue to hold and accumulate this stock for my kids.

At the time of writing, my family members owned shares of DLADY.

BURSA – Fundamental Analysis (27 Apr 2016)

Excel – Download the analysis file

Latest Financial – Q1 2016 Financial Report (25 Apr 2016)

FY16 Q1 Results Highlight:

  • YoY, operating revenue increased by 5% with better performance in stable revenue (+11%) superseding the flat growth in trading revenue (+2%, which was dragged by lower securities trading revenue) coupled with the decent growth in “other income” segment (+7%) which was predominantly driven by higher interest income (+11%), total income grew by 5%. (Kenanga 27 Apr 2016)
  • QoQ, total income decreased by 1% as marginal growth at the operating revenue (+1) was negated by seasonally weaker performance in the “other income” segment (-25%).
  • Key Operating Drivers:

BURSA-Key-Drivers-FY16-Q1

Valuation:

I think fair value of BURSA range from 8.8 to 9.3. Uncertainty risk of fair value is from MEDIUM to HIGH.

BURSA-FY16Q1-Football-Field

 

Going Forward:

In 2016, retail investors/traders likely to stay on the sideline and become more vigilant with their trading habits given the current choppy market environment. Behavioral finance studies have also shown that investors tend to be more loss averse rather than risk averse, leading to this to effect.

On the other hand, the recent return of foreign funds and impending injection of local funds in 4QFY15 as positive to rejuvenate trading activity in the securities market in the coming months.

The global environment remains challenging with the recovery in high-income economies being gradual and global trade growing at its slowest pace since 2009 (The World Bank, 4 Oct 2015). Malaysia is affected by internal and external factors, particularly the weakening of the Ringgit, with its economic growth currently projected at 4.7% compared to 5.2% at the start of the year. Malaysia remains amongst the world’s healthiest Islamic economic environment (Halal Focus, 28 Sep 2015) that will underpin the interest of its Shariah compliant securities, despite the current global economic situation. Increased adoption of Murabaha and Tawarruq’ contracts in the domestic market for liquidity management as well as the tenor based pricing have deepened the usage and will further spur the growth of Bursa Suq Al-Sila’ (BSAS) activities.

I remain sanguine on the company’s outlook over the longer term. Its business model is also fairly resilient.

I will continue to hold this share, and accumulate it if there is a discount.

At the time of writing, I owned shares of BURSA.

DIGI – Fundamental Analysis (27 Apr 2016)

Excel – Download the analysis file

Latest Financial Report – Q1 2016 Financial Report (22 Apr 2016) and Management Discussion And Analysis 1Q 2016

FY16 Q1 Results Highlight:

  • DIGI reported a 16.7% decline in net profit to RM399mn for 1Q16, mainly due to lower device revenue, higher depreciation cost, net interest cost and effective tax rate.
  • Service revenue down slightly but device sales fell sharply. For 1Q16, service revenue dropped 1.8% YoY but device sales delivered a sharper decline of 54.3% YoY as sales volume for smartphones were weaker and DiGi focuses on offering more affordable devices and sim-only packages. Subscriber growth was impressive at 5.5% but blended ARPU dropped from RM46 in 1Q15 to RM42. Postpaid segment recorded a strong subscriber growth of 8.2% while prepaid ARPU reported a larger decline of 10.3% to RM35.
  • EBITDA margin remained stable at 43%. Traffic cost remained elevated, rose 17% YoY due to higher IDD traffic volumes and cost hike from weaker ringgit. Meanwhile, depreciation cost rose 11.6% YoY from continuous investment in stronger infrastructure capabilities. However, EBITDA margin remained stable at 43% due to lower operating cost while COGS was unchanged. Net profit was down 16.7% YoY mainly due to lower sales, higher depreciation and net interest cost. Additionally, effective tax rate increased from 23% to 25%.
  • DIGI reduced its 1Q16 capital spending by -11.4%yoy to RM171m mainly due to heavy capex deployed for 4G LTE network in 4Q15. As at 1Q16, the 4G LTE network has reach 73% population coverage nationwide, backed by 6,700km of fiber network.

Valuation:

In my opinion, fair value of DIGI range from 4.7 to 5.3. Uncertainty risk of fair value is from MEDIUM to HIGH.

DIGI-FY16Q1-Football-Field

Going Forward:

Digi possesses a strong management team. Based on the historical track record, the group has managed to compete with its peers despite its subservient position in the spectrum allocation domain. This is shown in its ability to move in-tandem with the demand of the market, especially the prepaid segment. Furthermore, latest earnings result has shown that there is encouraging growth in the post-paid segment which is usually dominated by its peers.

Digi’s attractive product offerings and active marketing campaigns has worked in favour of the group as seen in the growth of its subscriber base. However, higher subscriber acquisition cost and lower ARPU has impacted the profit margin. We already can see the intense competition landscape in the market. This would, in turn, lead to subdued earnings growth prospect.

The 2016 guidance remained intact as follows:

  • Service revenue – Sustain at 2015 level
  • EBITDA – Sustain at 2015 level
  • Capex – Sustain at 2015 level

I will continue to hold this share, and accumulate it.

At the time of writing, I owned shares of DIGI.

GAB – Fundamental Analysis (27 Apr 2015)

Excel – Download the analysis file

Financial Report – Q3 2016 Financial Report (12 Apr 2016)

FY16 Q3 Results Highlight:

  • GAB recorded 3QFY16 revenue of RM151.9m (+3.1% yoy) and core earnings of RM50.8m (+28.9% yoy) due to improved cost efficiency, phasing of certain brand advertisement and promotion investments which will take place in the coming months, and higher sales.
  • Profit before tax  increased by 33.5% from RM70.2m to RM52.6m

Valuation:

  • In my opinion, fair value of GAB range from 18.2 to 18.8. Uncertainty risk of fair value is MEDIUM.

GAB-FY16Q3-Football-Field

Going Forward:

  • For FY16, it will be challenging for GAB to pass on large price increases to consumers in view of
    • The softer environment
    • Anti-profiteering act which prohibits price increases if it increases profitability excessively.
  • I will continue to hold and accumulate this stock.

At the time of writing, I owned shares of GAB.

PBBANK – Fundamental Analysis (25 Apr 2016)

Excel – Download the analysis file

Financial Report – Quarterly Report FY16Q1 (20 Apr 2016)

FY16 Q1 Results Highlight:

  • In 1QFY16, the Group reported a net profit of RM1.22b (-17.6%qoq;+5.0%yoy). The on-year improvement in net profit was contributed by higher NII (+9.8%yoy), NOII (+12.4%yoy) and Islamic Banking income (+11.3%yoy) partially offset by higher OPEX (+12.2yoy) due to rise on personnel cost.
  • What surprised positively was that NIM held up (+1bp) QoQ, and forex income continued to be robust (+78% YoY) as a result of ongoing currency volatility.
  • On the flip side, the group experienced negative JAWS during the quarter, due largely to the GST impact that was absent in 1Q15 – some of the input costs for banks are not claimable. Domestic loan growth of 9% was within guidance of 8-9%. The group’s gross impaired loans ratio was stable QoQ at 0.5% end-Mar 2016. The net credit charge was just 10bps – still very benign. Loan loss coverage was stable at 120%.

Valuation:

I think fair value of PBBANK is from 19.2 to 20.2. The uncertainty risk of fair value is High.

PBBANK-FY16Q1-Football-Field

Going Forward:

Despite unexpected good results of PBBANK in FY15, moving forward, I believe that PBBANK result will be stable or a bit slow down. This is because loan applications will continue to be slow marginally and NIM compression will be higher in the future. PBBANK believes that its asset quality position will remain robust, in line with continued employment and income growth notwithstanding the rising cost of living and a moderated economic environment.

PBBANK announced its FY16 KPI targets which were slightly lower than FY15:

  • ROE>15
  • RWCR of >13%
  • GIL ratio < 1%
  • CI ratio < 33.0%
  • Group loan growth of 8-9%
  • Group deposit growth of 7-8%.

I will continue to hold this share, and accumulate it when there is a dip in the price.

At the time of writing, I owned shares of PBBANK.