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Saturday, July 05, 2014

Success Poised for Success

1Q14 result of 6.41 sen per share vs 1Q13 result of 5.25 sen per share is commendable. The daily chart above shows that the stock has been in a very gradual uptrend. In my opinion, all this is about to change for the better. Once the overhead resistance at RM1.67 is decisively breached, the stock will be at the start of a new uptrend. At the last traded price of RM1.65, there is a lot of value for the stock. Click here to learn more.

Saturday, June 07, 2014

From an Ugly Duckling to a Golden Swan

GPAROS (GP), stock code 5649 hit the limelight with a big surprise when it reported EPS of 14.84 sen for 1Q14 on 26.05.14. The stock jumped limit-up the following day from 30 sen to 60 sen after the announcement. 

The next day, it quickly went up to 80 sen before profiting-taking surfaced and pushed the stock down to a low of 61.5 sen. The quick correction appears to be over after stock rallied back in the last three days to close at 79.5 sen. Its overhead resistance is now at 80 sen. This resistance is likely to be breached, come Monday morning. Keep a close watch on it.

Fundamentally speaking this stock is a rare gem. Over the past years, it had nothing to show except losses and mediocre earnings year after year. But things are beginning to look attractive now. Revenue for 1Q14 at RM46.34 million and profit RM26.802 million before tax are indeed something to crow about. EPS after tax = 14.84 sen. (Note that its profit margin is exceptionally high.)

In the corresponding period of the previous year, revenue was only RM19.32 million and loss was RM379,000. And in the preceding quarter, revenue was RM20.92 million and loss of RM1.835 million. The big turnaround is indeed a big surprise. How it was done, I have no idea. I believe a change in the management did the trick. 

It appears to me that GP has been transformed from an ugly duckling to an elegant swan. 

In 1999, I made RM100k within 3 months investing in this stock. Here is my chance to repeat that feat and make it better. 

GP has a paid-up capital of RM67.273 million. Its par value is 50 sen per share. So the number of shares issued is 134.546 million. This is considered to be a small-cap stock. 

The jewels in the crown of this stock are the Dungun Timber Complex Concession Forest and the Cherul Forest Concession it gotten from the Terengganu government. Together they cover some 190,134 ha of good timber forest. This is a huge area to the company as its paid-up capital is small.

The main income for the group comes from the harvesting of timber, saw milling and kiln drying. The other segments of manufacturing and trading of wooden doors and tempered glass do not contribute much to earnings presently. 

What is so attractive about this stock is that it timber forest concessions have obtained the FSC (Forest Stewardship Council) endorsed certification.This means the company can sell their logs, timber or wooden products to any country including the European countries without any problem. 

My main concern for this stock is whether its earnings are sustainable. Timber prices and the production of logs are the deciding factors. 

Lets us have a look at its log productions. For this year, productions are as follows: For Jan: 2525 hpt; for Feb: 4680 hpt; for March: 4625 hpt and for April it was 5328 hpt. ("hpt" refers to hoppus tone = 64 c.f.tonne). 

For May and June, productions are expected to be good because weather condition is expected to be favorable. As for the price of timber, demand is not expected to slow down because world economy is slowly being nursed to good health, especially Europe, US and China. The company also exports timber and timber products to the middle east. 

As at May 21, 2013, Terengganu Inc held 63.807% and Lembaga Tabung Amanah Warisan Negeri Terengganu held 8.526% of the company. Together, they control 72.333% of the paid-up capital. To me this is an added advantage. You need only to look at KPJ and TDM to understand this. 

For the next two quarters, I expect the company to do well. For the last quarter of the year, logging will probably be curtailed because of monsoon rain. 

Assuming that in the first three quarters, earnings remain the same and the in the last quarter there is no earnings, the annual earnings will come in at 44.52 sen per share. Barring unforeseen circumstances, this estimation is reasonable, in my opinion. 

JTiasa and TAAN are presently being traded at  PE of 109 and 17 respectively. The two counters are partially involved in the timber business. While they have high borrowings, GP has close to zero borrowings. As at 31.03.14 its borrowing is only RM1.070. Please compare the earnings of their latest quarter. 

In view of the above, what PE should GP be trading at? Let's give it a big discount. Five to six is reasonable. So lets take it to be 5.5. On a PE of 5.5, GP should be worth (5.5 x 44.52 sen) RM2.448!!! 
Actually, I think a higher PE is not unreasonable. GP was last traded at 79.5 sen. I expect it to be rated differently in the near future.

Looking at the balance sheet, the company had a current ratio of 1.539 as at 31.3.14. It cash position of RM29.89 million was much better than previously. 
Another thing that I like is that though its revenues have gone up, its receivables have gone down. 

Some extracts from the annual report of 2013 are as follows:

 A recovery could take shape later in 2014.

Tropical log supply will remain tight as Myanmar will ban log exports starting April 2014. Myanmar is a significant supplier, accounting for 17% of the world’s tropical log export in 2011

In 2013, exports to emerging markets for Malaysian timber products particularly Middle-East countries such as Saudi Arabia, Qatar, Oman and Bahrain, showed a positive growth. Mega construction projects in these countries are in favor towards Malaysian timber products, such as sawn timber, MDF and furniture

The outlook for the timber industry remains positive based on the improving housing activities, consumer sentiment and expected improving demand from developed nations in line with the improving global economy.

Our timber management subsidiary has been awarded the Forest Stewardship Council (“FSC”) endorsed certification on 21 April 2008 by Scientific Certification Systems (“SCS”), a leader and pioneer in third-party auditing and certification of forest management operations around the world, for well-managed forests. This certification verifies that the subsidiary’s forests of 108,900 hectares are managed according to the rigorous international standards of the FSC under a selective cutting approach that maintains continuous forest cover and species diversity.
The certification has been recertified for another five years until 20 October 2018. The subsidiary’s concession area is the largest forest in Peninsular Malaysia to have received FSC certification and only the second natural forest in Malaysia to achieve this distinction.
In addition, another subsidiary has successfully obtained the FSC endorsed certification for its 20,243 hectares Cherul Forest Concession on 10 December 2012 as certified by SCS Global Services. The certification is valid for five years until 9 December 2017.
With the FSC certification, the Group would be able to access to an increasing number of markets and customers that demand environmental friendly certified products domestically and abroad.

In addition, the Group’s two sawmilling subsidiaries are Chain-of-Custody (“CoC”) certified by third party certifiers accredited by the FSC since July 2008. With this certification, it means that the wood used in the sawmills come from well-managed forests, independently certified in accordance with the criteria and principles set by the FSC.
This would mean that the subsidiaries are well placed to market their sawn timber and other wood based products in markets which insist on wood products to be sourced from sustainable and well managed forests.

The above extracts show that GP is likely to do well going forward. If 1Q14 earnings are sustainable in the next three quarters, EPS for the full year may come in at 59 sen. 

Please do your own research before you buy this stock. Click here to know more about the company. 

As usual, you buy at your won risk. 

Saturday, May 24, 2014

Vietnam Riot Blessing in Disguise for Latitude

- Riots in Vietnam arising from Vietnam and China dispute over Paracel Islands in South China Sea

Further to our announcement dated 14 May 2014, we wish to inform that the manufacturing facilities of the Company’s subsidiary, Latitude Tree Vietnam Joint Stock Company (“LTV’) has resumed operation today, 22 May 2014.

The shut-down arising from the riot has resulted in a loss of 8 production days. The customers have been informed of the delays in delivery and rescheduling of delivery has been made.   

Asset losses arising from the incident were limited to office equipment and computers, glass doors and windows of the main office building and a small portion of the packing section. The insurance adjusters are in the process of assessing the losses arising from the damages. Claims will be made against loss of business interruption and other damages. The losses are not expected to have any material impact to the financial earnings for the financial year ending 30 June 2014.

This announcement is dated 22 May 2014. (Filing of Lat. with Bursa)

Last Friday, Latitude (Lat) closed at RM3.24 for a gain of 19 sen. In the last 3 candles, there are 2 gaps. These gaps are a reflection of eager buyers. 

The chart clearly shows that the stock has been in an uptrend.  As a trend in motion is likely to continue, Lat in now in a good position to move higher. 

The recent riot in Vietnam is no longer a concern. The above announcement says it all. The Vietnamese government has also assured that all companies affected by the riot will be compensated by way of a tax cut.

Lat is actually a Malaysian-based company. It has three factories in Malaysia, two in Vietnam and 1 in Thailand. The major share owners are Taiwanese, not Chinese from mainland China. 

From an optimist point of view, the souring of relationship between Vietnam and China may turn out to be a blessing in disguise for Lat simply because it does not belonged to the Chinese but to some Taiwanese. 

Lat will announce its third quarterly result, latest by end of this month. If showings in its chart is anything to go by, the result is mostly likely to be good. 

The chart below gives you an idea as to how Lat has been faring when compared to some of its peers in the last one year. Have a good look, it easy to see the trend.

The red line is Lat. The others are: Lii Hen, Poh Huat and Homeriz.

I am long on Lat. I believe the stock deserves a better rating. 

Sunday, May 04, 2014

Latitude, What's On My Mind

In the daily chart shown above, I  see higher highs and higher lows. This means an uptrend is in progress. My focus now is in the last two candles where there is a gap between them. 

This gap signified eagerness to buy at the opening bell. As the day progressed, demand continued  to come in culminating the stock to a high of RM3.08 for a gain of 33 sen at the close of trading. This the best one-day performance of the stock so far. 

Daily skillful traders should have jumped in to buy soon after the opening bell and made a good profit by cashing out at the end of the day. Day traders do not hold position over night. 

The last candle is a bullish Marubozu. The validity of this candle is confirmed by the high volume traded. 

I always sell some of my shares whenever I get that feeling of elation. In fact I sold 5400 shares in Latitude at RM3.08 per share towards the close of trading on Friday. Please do not be misled by this action. These shares were bought in early December 2013 at RM1.60 CD per share. They represent only a tiny fraction of my total holdings of the stock. At RM3.08, the price has gone up by 92.5% in 5 months. I sold simply because I wanted to lock in some of my profit. In the stock market, we can't be sure of what is going to happen next. 

Now, let us have a good look at the chart again. The price shot past the overhead resistance at RM2.85 in style with high volume. As such, RM2.85 has now become the support level of the stock. Because the stock has risen too much too soon, profit taking is bound to set in, come Monday morning. So It will be interesting to see how the bulls react. I think the stock will hold up well because its fundamentals is extremely strong. (Please refer to my post on March 04,2014 under the heading, "Latitude (LT) Too Good To Ignore" on why the stock is worth RM4.83 per share.)

The stochastic indicator is close to its overbought level. Another few percent rise in the price will sent this indicator into the overbought region. This does not mean it will quickly reverse direction, but it does mean that you have to be on the alert for any bearish signal to emerge. 

If you are ignorant about charts then you have to depend on your feel. Intuition, that's what they call it. 

A correction to around the RM2.85 level is an opportunity to buy. 

Whatever action you take is your full responsibility. 

You buy, sell or hold at your risk. 

Saturday, April 19, 2014

What Remains At Hwang-DBS After The Special Dividend

 Hwang-DBS (HDBS) is now known as Hwang Capital (HC). On Monday, 21.4.14, the stock will be traded ex-special dividend of RM2.50. Lets take a look at what remains at HC presently. 

The company has two subsidiaries, namely: 

HDM Capital Sdn Bhd & HDM Properties Sdn Bhd.

These two subsidiaries contributed to the revenue HDBS for the year ended 31.7.13, 11.1% and 28.3% respectively. Whether they contributed to profits or not, I do not know.

Cash in hand is estimated to be about RM775.8 million. 

Total number of shares issued is 255,158,900 after cancellation of 10,686,100 shares on 14.04.14. This works out to cash per share of RM3.04!!!

HC has 2 years to look for a core business from Jan 22, 2014, the date HDBS signed the SPA with Affin, to remain as a public listed company. If it fails to do this, it has to fold, and whatever remains in the company will be disposed off and distributed to the shareholders. 

The company said that it had allocated RM250 million to look for new businesses. I believe it is likely to be successful in this respect and retain its listing status.

In the meantime, HC will probably remain as a quiet stock until Management has something to announce, such as the acquiring of a new business or a reverse takeover or maybe another special dividend. 

For those who have deep pockets, the stock is a value buy at below RM2 per share. Remember its net cash position per share is RM3.04.

I do not vouch that the above figures are 100% correct. Please do your own research before taking any action.

 You always buy at your own risk.

Sunday, April 13, 2014

It's easy to plan a trade, but it's hard to trade the plan. Here's why.

Consider this scenario:

You buy 1000 lots (1 lot = 100 units) of a stock at  Rm1 per share. You place a stop-loss at 95 sen. You say to yourself, " I am only prepared to lose only 5% in this trade if it turns sour. So my loss is limited to RM500. "  

Immediately after you have bought, the price starts to drop. The screen shows: Buy 95sen 100 lots; Sell: 96 sen 500 lots; Last done 96 sen.

Now, are you going to trigger your stop-loss and sell 100 lots to the buyer? Bear in mind that you have 1000 lots to sell at 95 sen.

While you are undecided, the buyer suddenly pulls out. The screen shows: Buy 94 sen 200 lots; Sell 500 lots 94.5 sen. In such a circumstance, what are you going to do? Sell everything at below 95 sen or wait until there's a pullback to 95 sen, then sell. What if there is no pullback, and the price keeps dropping? 

So, you see, you can plan your trade, but you may not be able to trade your plan. 

Here's another possible scenario: Stock AQ has been in an uptrend for sometime and in the last few days, the stock has been hitting new highs everyday. Your remiser whispers to you, " Buy this stock, I have insider news that it will hit RM10 in the next few days. The stock is now selling at RM6." 

Wow! You said to yourself, " Here's my chance to make a lot of money. I shall take the tip and place a stop-loss at RM5.50. My risk is only 50 sen. So there is not much danger." Now what may happen is this:

After you have bought at RM6, the stock really moves up. Higher and higher it goes,
RM6.30,  6.40,  6.50 and still going strong. You become greedy and buy more. The stocks hits limit-up sending you to cloud 7. 

Suddenly, Bursa makes an announcement, AQ is suspended pending an enquiry. After a few days of investigation, Bursa classifies  the stock as a designated security. This means that if you want to buy the stock, you have to put money upfront.

This has a big impact on the stock immediately. When suspension of the stock is lifted the following day, it gaps down at the opening bell. Fear sets in. There is a rush for the exit but only a few can get out before it goes limit-down. 

Before long it was trading at a much lower price than your initial purchases. You are trapped. 

From the above two scenarios, you can see that it's actually not easy to trade according to what you have planned.

Tips from remisers are actually the most unreliable. When a big boy wants to unload,  whom do you think they will entrust the job to. Remisers of course.

Want to trade? Think again. Do you have the capability to cope with ablest money getters in the world? 

Tuesday, April 08, 2014

Why I like ECS

The reasons are as follows:

It is a small-cap stock; its paid-up capital is only RM90 million.

It has a strong balance sheet with over RM80 million in cash as at 31.12.13

It has no borrowings 

Its current ratio is over 2 as at 31.12.13

Its par value is 50 sen

It has a dividend policy of giving out 30% of its earnings as dividends

It distributes a comprehensive range of ICT products comprising of notebooks, personal computers, printers, software, network and communication infrastructure, servers, and enterprise software from more than 30 leading principals such as HP, IBM, Cisco, Asus, Microsoft, Apple, Dell, Oracle, Epson, Samsung, Buffalo, Adobe, Juniper, Blue Coat, VMware and Lenovo.

It has more than 3000 outlets to sell its more than 3000 products.
In our modem world of ICT, computers, PC tablets and smart phones are no longer luxury items, they are necessities of life. Mobile devices, especially smart phones and PC tablets are increasingly in demands. This trend is sure to continue as new technology comes into play.

High Speed Broad Band 2 (HSBB2) and Budget 2014 will boost the demand for ICT products. 

The company is also involved in cloud computing and enterprise systems which every business needs. Cloud computing is popular in Japan and Hong Kong. Malaysia will be next.

The founders of ECS are still managing the company.

The company is expected is do well this year. Growth will come from its business in smart phones and other mobile devices. 

Keep a close watch on this counter. Presently at around RM1.28, it is a laggard, cheap and lowly priced. 

When it finally moves, drive into the market and load up your truck.

Buy at our own risk.