Tropicana City technical Analysis

Tropicana is known for its high end devlopments and has an excellent land bank, reported a nice 24 percent growth in earnings this morning, but when I read earnings increased from 2.12 to 2.2 sen, I wasn't that impressed.  Third quarter always seems like its weakest and overall, this year hasn't been stellar.

So lets look at the charts.

The question is, is this stock in an uptrend?  I would say it is more of a punters stock as a trend isn't clearly defined.  A punter's stock means the stock gets kicked way up and kicked way down.  I don't see many consolidation periods.  Personally I would stay away.

I can't really recommend anything but to buy below RM 0.80 send and sell at RM1.60.

Indonesia to Foreign banks: we be rolling, we be scammin

I believe CIMB was the first to report dismal earnings in the form of its Indonesia operations not performing so well. More will be coming.   From the latest CIMB research report on Maybank:

The operating environment in Indonesia had been challenging since the middle of last year, due to the rise in inflation and tight liquidity, which has exerted pressure on banks’ margins and asset quality. As such, the net profit of Maybank’s unit in Indonesia, Bank Internasional Indonesia (BII), plunged by 69% yoy to RM100m in 9MFY14.

Lets recall the time where buying large stakes in Indonesia banks were all the rage a couple of years ago.  Maybank purchased Bank International Indonesia for 3.8x book value.  Ridiculous price!  Now what has happened since then?  Joko has been elected president, he has cut fuel subsidies and cost of living has increased.  Indonesians *surprised* now find it hard to make payments on their loans.

Indonesia has more or less outsourced its risk in the banking industry while gearing up to settle their in house problems.  Score 1 for Indonesia, foreigners 0.  I'm sure Indonesia will be willing to buy the stuff back at a discount. 

CIMB and Maybank...ouch.

FCPO and FKLI technical update

The FKLI is trying to reach the resistance level at 1855.  The support near 1803 was tested just once two days later at 1810 before jumping up to 1840.  The buying is something of an oddity but looks like people are anticipating healthy economic news.

Ideally we would like to see the market attempt to test that lower level more than just once.  Three times would be much better.  If the market really is breaking up higher and the buying is strong, we should wait for a solid break above 1855 to make a decision.  At this point the market should still be ranged bound.

FCPO is entering the start of a new down trend according to the DTI indicator.  Now lets look at the likelihood of the downtrend starting.

The major point to consider is whether the new downtrend is heading into tough support areas.  The answer is No, the RM 2,250 and below is no man's land and is anyone's game to where the market can go.

The likelihood that a downtrend could be beginning is quite possible. That being said.  If we consider RM 2,104 support point as a test for the breakdown, the market could be consolidating for a break higher with RM 2,193 as the bottom.

At any rate, we should probably see sub RM 2,200 prices at least once more.

6 percent GST

In the next year, the Malaysian government plans to issue GST at 6 percent.  I have several thoughts on this new tax.

It seems that Malaysia is entering some economic difficulty stemming from poor revenues towards the end of the year.  Generally both consumers and companies are cutting back.  I'm actually surprised that this is the case for Malaysian consumption because like many others, I've done a lot of durable goods purchasing over this year in anticipation that if I didn't buy the big ticket items, I would have to pay 6 percent more next year.

We should expect to see economic weakness NEXT YEAR.  Not this year.  Unless the next few months see an explosion of goods purchased, it's almost guaranteed we will hit an economic slowdown next year.  We haven't had the GST implemented and already the economy is having difficulty.

The 6 percent is actually extremely high.  Malaysia should rethink their rate.  Singapore introduced a 4 percent GST their very first year of implementation and only after some years of the tax regime, moved GST to six percent.

Next year will be tough slogging for many Malaysians.  Any income tax reduction from the government to offset GST won't make up for the increased cost of living most will face.  

Air Asia X, whats going on?

From the Edge:

KUALA LUMPUR: AirAsia X Bhd fell as much as 6.7% to emerge among the most actively traded stocks as investors reacted to a report by The Edge Financial Daily on the airlines financial constraints. The Edge Financial Daily, quoting sources, reported yesterday that the long-haul low-cost carrier faced difficulties in paying staff wages.

Describing the unprecedented payment issue as a temporary setback, the management of AirAsia X blamed the payment delay to the late arrival of incoming funds. It was also reported that Tan Sri Tony Fernandes, AirAsia Bhd co-founder and group chief executive officer, was planning to play a more active role in AirAsia X. 

AirAsia X reported some nasty losses.  I see a lot of finger pointing.  But what is really wrong?  Are they pricing wrongly, is their strategy not working?  It seems no one really knows.

I think the problem is really simple.  It actually starts from my own personal experience with the airline.  I flew on AirAsia X to Sydney and back to Kuala Lumpur from Melbourne.  The plane was quite full.  The experience I felt was decent, although the food was the worst I ever had on an airline.  No problem because it's also the cheapest flight I ever took to and from Australia.

The flight attendants are an upgrade over the regular AirAsia flight attendants.  But still not as professional as Singapore airlines.  Their business model is quite solid.

But there is one thing I felt mad about.  one:  the flight I had originally wanted to take was cancelled and I was moved to the following time slot.  The exact same thing happened for the flight back from Australia.  This not only disrupted my schedule, but also my relatives who were dropping me off at the airport.  But, I'm thinking it's usual for airlines to do this as my brother had the same problem with his Cathay Pacific flight to Malaysia.

After seeing the AirAsiaX losses, I didn't think the cancelled flight was a usual occurrence.  It's apparent that AirAsiaX had expanded too fast and too aggressively, adding capacity even though the demand was not yet there, hence the cancelled flights.

I don't have a strong conclusion, but perhaps the flight industry is due for some hard times.  I don't really see a way for AirAsiaX to claw its way out of this mess, especially if they have obligations to purchase new aircraft.  Deferring those obligations will cost a bomb.

POS Malaysia, technical Analysis

POS Malaysia is another government linked company, but has the enviable position of the most low cost provider of package delivery services in Malaysia.  With oil touching new lows, what are we to discern about POS Malaysia?





The postal service would actually stand to benefit from low oil prices in a perfect world.  But will the low oil prices carry through to profits realistically?  The answer is  no.  This is due to subsidized prices of petrol.  In fact, as petrol prices have decreased around the world, Malaysia's petrol price remains high.  Unless there is a price drop, POS Malaysia seems like in no man's land.

For now, the market seems to be trying for an uptrend, but it's not certain yet.  The market in my opinion will likely come back.  It will find it tough slogging at highs set a couple years ago, especially given the severity of resistance.

But, there is a silver lining.  At RM 3.30 the breakout was so good, that would be a great area to buy at.  At RM 3 a share, POS Malaysia would be a great buy.  For breakout traders, another 6 months of trade above the RM 3.30 mark a more confident breakout buy.  At this point, it's too soon to say whether this will continue higher.

Another nugget of wisdom from Kobe Bryant

I've posted earlier about some of the qualities I admire of Kobe Bryant.  Remember, even his coach said he surpassed the all time great Michael Jordan in terms of work ethic.  

Here's another quote that will find you helping out in your job, investment decisions, or whatever you want to achieve.  Not only help out, but help you to Excel at the activity.  

Young was the Lakers' star last season while Bryant was sidelined, at least in terms of braggadocio (talking trash).  He may have met his match in this year's Bryant.

"He playfully does it, but then, I kind of take it to another level," Bryant said. "When you're tired, it's very easy to kind of go through the motions.  Somebody talking to you, you have no choice but to try and perform"

Nick Young is one of LA Lakers brightest stars.  In order to keep performing at the level he wants to Nick to play at, he talks trash to him.  In other words, challenges him buy poking him with a few personal attacks.

Sometimes, the office, work, or investing gets a little dull and boring after some time.  It's easy to just slack off, take a nap, surf the internet, or distract yourself.  How do you keep the team and you performing at a high level?  You or other workmates can challenge each other, have other people motivate you by poking and prodding you when you are tired and unmotivated to step up your commitment.

 This is the power of teamwork.  Your partners in the activity want the activity to be a success, but it's not necessarily partners = buddies.  These partners will have to challenge you even on a personal level in order to keep performance of the group at a high level.  When the going gets rough, you and your partners will know in order to get the necessary performance out of each other, some feelings might be hurt.

Of course, everything in moderation, too over the top criticism can cause permanent damage in relationships.  But rest assured personal attacks at strategic moments can go a long way to make the activity a success.

1MDB: what to do about its Penang land venture

1MDB has a huge amount of property on Penang Island, some 234 acres.  This is roughly 10 million square feet of land.  On paper, it looks like it's worth a lot, but in reality, as long as Penang is in opposition hands, its worth a lot less.  1MDB probably will have to take a write down.

I don't really see any way for them and the state government to come to a conclusion.  To realize top value for this land, the coming election will have to favor BN for penang.   This isn't going to happen for the next 20 years judging by the 90 some percentage for the opposition in the previous election.

FCPO and FKLI/KLCI technical update

Lets take a look at the technical picture for the KLCI.  We have actually entered into a downtrend, but it remains to be seen whether the downtrend will materialize due to the strong support areas the trend is materializing into.  I still imagine the market is ranged at this point. between 1800 and 1850.

The FCPO market is still in a slightly bullish mode, but faces a lot of headwinds as staying above RM 2,250 seems to be difficult.  This was the prior breakout point that failed.  But at this point, there doesn't seem to be any particular direction.

The Nikkei: breakout or fakeout

Much has been made about the Nikkei reaching highs not seen in years.  Japan has expanded its QE program unexpectedly and the Japanese government pension fund has also more than doubled its equity allocation to 25% from 12%.  Is this enough stimulus to push the Nikkei to an uptrend for the next decade?

We can see the Nikkei is above the high of around 16400 set in December of last year.  What is the correct answer?  In this case, the answer is we're not sure yet.  It certainly has the potential.  But we will need multiple attempts to reach 16400 in order to discern if this is a breakout or not.  If the market stays well above 17000, It probably will reach higher levels for the next few years.  I'm guessing we will not know until next year.

In the mean time, sit tight and relax, Nikkei watchers.  

BAT Malaysia technical analysis

I've been talking about BAT Malaysia a few times before.  It should do alright in spite of tax hikes.

Now, lets take a look at the technical picture of BAT Malaysia.  The chart is relatively simple to analyze.  There is one huge consolidation period and a breakout in 2012.  The breakout at RM 52 per share has been tried 3 times since the beginning of the red trend line in 2012.  All three times it has seen ready buyers to come in.

It's on an uptrend for sure.

For me, I'm not sure what strategy the tobacco companies could come up for revenue growth to warrant the uptrend.  Perhaps they may pursue a strategy of bringing in a wide variety of brands just like Carlsberg and Tiger did.  The beer companies have brought in a wide variety of brands:  Asahi, Paulaner, Hoegarden, etc and saw their revenue stream take off.  Tobacco could do the same by bringing in speciality cigar or cigarette producers with unique and interesting tastes.

Of course I don't really smoke, and don't really have knowledge, so I'd have to defer to more expert people on the subject.

FCPO and FKLI/KLCi technical update

The KLCI market is doing average in performance. It hasn't been as strong as US or Japan, but it's not incredibly weak either.  Had it been extremely weak, it probably would not have reached 1850.

I imagine it will retest 1810, the prior breakout point.  Support will be around 1800.  If news is bad, it could break down much lower, but given light economic data at the end of the year, this isn't likely.  If the market manages to stay above 1805, then I think it is bullish and will go higher for a long time, but if we come down past 1800, The market is still anyone's game.  It could go either way.

The FCPO market rebounded near the breakout point, at RM 2,200, but it is not looking so rosy.  A retest of RM 2,300 will be likely.  But we can see the breakout failed to stay above RM 2,250 and fell all the way to RM 2,200 ,which was the point I was watching for continued strength.  I imagine RM 2,300 will be tested once again in the next week or so, then try and reverse to RM 2,250, If it happens to break down below as I foresee it, watchout!

My super long term buy point on CPO will be in the RM 1,600 area, but we need something disastrous for that to happen.

Maybank issues a positive BAT report, remember you heard it here first.

Maybank issued a report on BAT, issuing positive guidance, from The Edge:

As a gauge cigarette prices jumped 18% to 21% when the excise duty was raised by 14% in September 2013 and year-to-date (YTD) industry volumes (to September 2014) have contracted 7%. 

We now assume larger 10% contraction (down 5% previously) in industry volumes for 2015 (down 6% for 2014). 

Our forecasts are unchanged, having already imputed the respective variables. 

Overall, we expect a net positive impact on BAT’s earnings from this recent price hike, for it would mitigate some of the cost pressures amid falling export volumes.

Tax increases are generally positive if the company can raise prices.  If price rises aren't done, then it is a net negative for the company.

Something interesting, BAT did try to hike prices of cigarettes earlier, but were not able to do so.  We could interpret this a few ways, collusion among the top players are poor in Malaysia, and/or BAT doesn't have the power to move prices, or they aren't as efficient as the other producers.

If they were testing the market, it was poorly conceived.  There might be some hard times brewing at the cigarette industry.

Pitfalls of investing in a turnaround, May Bulk Carrier

The background for this post originated from me wanting to write an article about a the turn around possibilities for Malaysian Bulk Carrier.  But I can't be sure about a recommendation after reading more into the industry.

A lot of investors love to catch the bottom of a downturn.  The profits of investing at the bottom and selling at the top is tremendous.  If there was one industry that might be ripe for a turn around, it would be shipping.  But of course, a lot of analysts and funds called it a turn around play and it's been in the garbage for the last few years.

The dry bulk shipping industry seems like it fits the definition of a text book turn around perfectly.  In 2013, the industry has been in the doldrums with the 4th largest bankruptcy in  US history being from a shipper.  In 2014, 2 of the top 10 bankruptcies were in dry bulk shipping.  Investors have been salivating at a turn around like this for quite some time.  In the world of high priced equities, people want to put their money somewhere that is undervalued. 

Here are three major reasons why a turnaround might not be so easy for shipping: 

1.  Turnarounds happen when there is severe under capacity compared to overcapacity.  Over the last few years, the shipping industry has built a lot of capacity.  I'm not sure if all the capacity has been wrung from the system.  Bankruptcy does not automatically mean capacity destruction.  Are companies in the industry scrapping or mothballing their ships?  Seeing how the price of iron has plummeted, it doesn't make sense for ship makers to scrap their ships,  scrap metal prices aren't so hot, so I'm not certain that the industry has wrung the over capacity out. 

If the companies have been mothballing their ships like I suspect, then it would be a rather simple process to bring them to operational status.  Hence probably why shipping rates haven't taken off like a rocket, and thus holding profits in the industry back.  Unfortunately I haven't the time to do the large amount of research required in this area so I'm only speculating.

2.  New technology.  There is none in shipping that so far has made the cost of operations much lower.  Materials still are the same.  Ships aren't that more efficient from a 10 years ago.  Lower costs to shipping will bring new opportunities for profit and revenue growth.  Other markets will now consider using the industry if it means lower shipping rates than before whereas they wouldn't have in the past.

For example, the airline industry is booming because of new planes which are 20 percent more fuel efficient.  This is huge.  Air lines will be able to lower their prices even more and reach a new breed of customer they haven't reached before.  I don't see anything of this sort in shipping.  Nothing revolutionary has happened.

3.  Current economic environment.  The current environment of low interest rates isn't conducive to capacity reduction.  Excess supply of bulk ships can be kept on stand by as interest rates are incredibly low.  Companies and traders have low interest rates supporting them, so they will wait it out as long as they can raise money from loans and investors.

Given some of the major reasons I've listed, I'm inclined to stay away from the shipping industry until scrap metal prices or interest rates make it more reasonable to strip capacity from the system.  But given how there is an abundance of metal, particularly iron, I'm not foreseeing this happening any time soon.

Long term technical outlook for FKLI, and the stock market and updates to FCPO.

The FKLI is one of the more difficult charts to plot trend lines for and interpret, My interpretation is that the uptrend is still in tact, set back in 2011.  But is losing steam especially with the current short term up trend over the last few days  fizziling out.

Given the weakness in oil price, I believe Malaysia might not be as attractive an investment destination as it once was due to the country basing its budget on higher price oil.  With all those dividends from Petronas used to fund the budget federal, There could be a shortfall.

But, the country also gains on subsidy savings, so perhaps it's not so bad.  The weakness in the ringgit tends to lead me to think Malaysia will be hurting more from lower oil prices than subsidy savings though.

If we are to consider the FKLI as an uptrend market, yes, the uptrend is still in tact.  But I actually think that we might hit down towards the 1400-1600 area some time in the future.  We certainly have the catalyst with lower oil prices.  If the market is able to come down, the next test of the trend line near 1780 could be a massive failure.

The trendline at 1770 in October is running at an increasing rate of about 8 points per month for those wanting to predict where the trend line will run in the near future.

Short term Outlook

Palm oil did an about face to the downside, pretty much at the area which i mentioned last week, the July breakdown point.  The resistance zone just took the uptrend and smacked it on its head.  Support is at RM2,220



The FKLI looks to be ending the upward movement after 3-4 red days.  Usually uptrends have just one down day followed by reversals higher.  This uptrend looks dead.  When we zoom in on the micro trends, we have two areas, the lower box and the middle box as possible support points.

1MDB more news

Fresh from The Edge:

KUALA LUMPUR: 1Malaysia Development Bhd (1MDB), which previous financial year’s earnings was boosted by property revaluation gains, slipped into the red with net loss of RM665.36 million for the year ended March 31, 2014. 

The electronic filing does not reveal the factors that have dragged the government’s investment fund into the massive losses of over RM660 million. 

Last year (FY2013), 1MDB would have posted RM1.85 billion losses if not for RM2.7 billion worth of property revaluation gains. Its debt stood at just over RM36 billion as at end-March 2013

Not much to say here.  Probably some of those losses is due to payment to Goldman Sachs.  LOL.

I don't know how 1MDB can really be defended.  I do remember reading Najib saying that this is a professional company with professional managers with track records.  Defending this is like trying to get off a sinking ship.  It now looks like another PKFZ in the making. 

BAT cigarette price hike

BAT is one of those stocks which is time tested and recession proof.  People will still buy cigarettes, and are fairly loyal to their brand.  But at what price?   At first loyalty for the product is fine, but eventually some time down the road people will look for a cheaper alternative.  Brand to brand, BAT has a stable of loyal cigarette consumers.

But how about legal to illegal cigarettes?  The growth of illegal cigarettes is astounding, but I think analysts put too much emphasis on the dire straits of the industry in its war against illicit cigarettes.  Most of the cigarettes are imported from lower tax countries such as Indonesia.  The neighbouring countries will also eventually raise their cigarette tax eventually along with places in Asia.  In fact, almost all the "low" tax regions have raised their taxes in October.

So how about the price hike of RM 1.50 a pack.  This is quite a large hike, but it is rather in line with previous rate hikes.  It's not the largest we've seen.  I expect BAT to actually reap rewards as they raise prices with  higher profit margins.  Lower revenue is a given, but shareholder returns are still viable on margins.

The right investing attitude, just like Kobe Bryant

If you are like me, it doesn't matter what you do, whether it would be sports, starting a business, scientific research, studying, or investing. The right attitude is important.

In terms of work ethics, one of the people I draw inspiration and drive is from Kobe Bryant.  How good is he?  His coach, said his work ethics even went past Michael Jordan, the all time legendary basketball player who has no match.

So, here is the secret sauce:  Phil Jackson quotes:

He pushes himself beyond what's reasonable

That is it!

Of course it there could be more.  But he constantly challenges himself and others around him by doing more than seems reasonable.  At his age, the average NBA player has long since retired and he is the only one still around and performing at an all-star level.

Next time you set yourself a goal, make it reasonable, then go beyond that 150%.  That is how you push yourself to beyond what is reasonable and find success in life.  If the average person does 3 practice exams, you do 5 exams for what you study.

That is what it means to excel at what you do.


Is it repeatable with someone else?  you bet your ass.

Ever heard of Klay Thompson?  neither did I until he got a huge contract extension.  Kobe quoted:

“It was late at night, and I went to the gym and lifted weights. I was in there by myself. I thought I was.”
Kobe on Klay: “I judge a player by that type of stuff.”

I went on to read more about Klay Thompson.  It so happens that Kobe was Klay's Idol when he was growing up and seems to have the same work ethic.  So it is repeatable and time tested.  

Klay recently got a 72 million dollar contract for playing in Golden State and he's only 23.

Palm Oil and KLCI market update

The Palm oil market is in a clear uptrend, but will hit resistance near the breakout point back in July. The trend line break upward had been tested a few weeks ago.  It is likely the resistance point in July will stop the upward trend, so be aware.

Untested breakout points have a high chance of reversing markets.  We can see very clearly , the break out from the downtrend to an uptrend was clearly tested  when the market came down to RM 2,120 a few weeks ago.  So now we have a test of the RM 2,340 area, the break down point set in July.




The KLCI hit its first day in an uptrend, although the move up was less than convincing.  Sellers may decide to take some profits here.
T

Woe is the packaging industry Can One, Bright Packaging.

A couple of stocks, has surprised me when I heard about their sharp increases in stock prices.  One is Can One, another is Bright Packaging.  They are both in the containment of business goods, or packaging.  I give credit to these companies as they have done well and increased revenues and dividends for their share holders.

But here in lies the problem.  For me these companies represent a good story.  The packaging industry is driven by the boom in demand for consumer goods across Asia.  People can easily pickup their product, an aluminium can, candy bar, or glass container,  and say "I'm invested in this, I know their product."

But do they really know it?  Aluminium isn't exactly a product that can only be made in Malaysia, so the lowest cost can be done elsewhere, same with packaging material.  If the profits are this good, it is expected competition will come in shortly.

Is the making of cans really done at the lowest cost in Malaysia?  Maybe, but it's easily replicable.  Kian Joo started off using former staff of Can One.  I also doubt it can't be done for a lower price and neighbouring Vietnam or Thailand.

The final icing on the cake is the ridiculous valuations.  It is a capital intensive business, so low price to Free cash flow multiples are needed.  Six times is good, but trading at 30x free cash flow for this type of business is insane.  Even at the current 16x free cash flow is overvaluing it.