FKLI and FCPO technical analysis update

The FKLI is slowly gaining momentum and is currently in an uptrend after a shaky start to February.  As long as overseas markets remain robust, the trend will likely continue.  The gap fill to 1860 looks like the target for the uptrend.  

The market remains slow moving due to the volatility early in the year.  Large trend moves are unlikely for now as evidenced by the small ranged days the market had for the last two weeks.

FCPO is a topsy turvy pattern, flipping from bear to bull almost in an instant.  Frequently markets don't flip, from bull to bear or bear to bull in such a short timespan, so FCPO will likely quiet down as well.

The market is still ranged, and the recent move to RM 2,221 shows bears still have a say in prices.  Likely the market will still range between RM 2,340 and RM 2,220 for the next few weeks.

Money bags Tenaga run by incompetent negotiators

From the Edge:

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) ( Financial Dashboard) upped its offer for the acquisition of port operator Integrax Bhd ( Financial Dashboard) by 50 sen to RM3.25 per share yesterday, bowing to pressure fromPerak Corp Bhd ( Financial Dashboard), which had earlier rejected the utility’s original RM2.75-per-share offer unless it is raised to RM3.25.

The revised offer price represents a price-to-book ratio of 1.58 times based on Integrax’s audited consolidated net assets per share of RM2.06 as at Dec 31, 2013.

In a notice to Integrax’s board of directors filed with Bursa Malaysia yesterday, CIMB Investment Bank Bhd (CIMB IB), on behalf of TNB, said Integrax shareholders who had accepted the earlier offer will be entitled to receive the revised offer price.

Money bags Tenaga is run by executives who really don't know what they are doing.  They are just so desperate to acquire Integrax!  At first Tenaga executives came out saying they aren't going to pay more than their initial offer.

Now they are upping the price!  Not only is Tenaga rich, but they are run by dum dums who don't know how to negotiate and have lack of foresight.

Remember what I said before, Integrax is going to milk them like the cows they are!

Water problem

From the Edge:

KUALA LUMPUR: Pakatan Rakyat’s Selangor water committee foresees another potential crisis emerging over the water restructuring in Selangor, due to a conflict between the federal and state governments over the ownership of water assets.

In a statement yesterday, Pakatan said a dispute materialised after the federal government claimed the Semenyih and Bukit Nanas reservoirs, together with all the water pipelines in Selangor, are under Putrajaya’s management and ownership, while Pakatan said the assets belong to the Selangor government.

“Assets such as dams and rivers are sources of water which definitely belong to the state government, according to parties that 

are familiar with the water industry,” said Pakatan.

The federal government is again causing a ruckus with the water in Selangor.  At this point, it is not certain whether the move is impatience with the water situation in Klang Valley or has more to do with a play for power.

Water has been a problem with Selangor in the last few years.  The population has grown quite a significant amount given the influx of foreign workers.

This will be the MB of Selangor, Azmin Ali's major test of what he will do as the first shots have been fired.

1MDB just can't get a break

From the Edge:

Feb 24): 1Malaysia Development Bhd.’s bonds are trading like junk as investors seek greater clarity over the state investment fund’s plans to wind down and sell off assets.

Investors are demanding a 439 basis-point premium over similar maturity Treasuries to hold the Kuala Lumpur-based company’s securities, compared with an average of 415 for speculative-grade quasi-sovereign notes in the region, a JPMorgan Chase & Co. index shows. Its $3 billion of 4.4 percent notes due 2023 closed at 86.72 cents on the dollar on Feb. 16, a record low. They traded at 87.62 cents on Monday.

1MDB has been suffering blow after blow in the media.  The most recent statement by the CEO Arul tried to paint a profitable picture of the beleaguered investment fund by saying it made 400 million in profits on that deal.

Tony Pua, a state MP, begged to differ and stuck to his guns and asked where is the profit on this supposed profitable deal.  The market is also thinking that 1MDB may not be able to repay its debts and would need a cash injection from the government, as can be seen by the large premium over treasuries.

The problem in a lot of these "investments" 1MDB does is that it is very opaque, something like a private equity fund.  Winding down an investment like this will likely come at a significant cost as its projects are not finished yet.  Furthermore, ability to make payments on its debts is really difficult as coming up with money to hold the fund over has met many challenges.   The delayed IPO really saw how close 1MDB was to bankrupting the Malaysian banks as 1MDB was not able to pay back its loans on time.

Will investors buy into the IPO?  I'm not so sure as a couple of Malaysian government backed IPOs have not done too well.  Look at Felda and Gas Malaysia.  Confidence isn't as high as before.  Only time will tell.

Companies that benefit from savings in energy bills

Tenaga's price cut is a boon to almost all companies.  Almost every stock has a big power bill they would like reduced, but perhaps the hottest companies will be....shopping malls.

Everyone who pays a utility bill knows the biggest component comes from Air conditioning.  If you want to reduce your electricity bill, use less air conditioning.  Not running air conditioners can reduce an electric bill by close to 40 percent.  These beasts take up to 1000 watts of electricity on run for hours on end.  Higher horse power = higher energy bills.

Now, who are the biggest users of air conditioning in KL, yeap you guessed it, shopping malls.  It's not just the sheer square feet, but also the volume.  Most shopping malls are cavernous and have huge volumes of air pockets to cool.  Not only that, they open for many hours much longer than your average business.

What else do these shopping malls have going for them?  Many of them have raised rental fees from parking to shop lot rentals to cope with the rise in electricity costs in 2015.  These rental fees don't drop and are not prone to price reductions like most government entities are.    Any reduction in costs of business will flow directly to their bottom line.

Shopping malls seem to be one of the tasty treats for 2015.

Felda Global Ventures changes management

From the Star:

Felda Global Ventures Holdings Bhd (FGV), whose market capitalisation is now almost half of what it was at its initial public offering (IPO) in 2012, is poised for a change in its top leadership.

Tan Sri Ismee Ismail is expected to replace FGV’s current group president and CEO Dr Mohammed Emir Mavani Abdullah, whose contract comes to an end this July.

Ismee, the managing director and CEO of Lembaga Tabung Haji (LTH), a position he has held for the last eight years, is speculated to be leaving the pilgrim fund and that the fund will be headed by Datuk Johan Abdullah.

According to LTH’s website, Johan was appointed as LTH deputy group managing director and CEO on January 15 this year.

Anyone will tell you a journey begins with a single step.  But with Felda, It's really just a step and won't solve legacy issues.

Replacing the current group president with the CEO of Lembaga Tabung Haji is not what I would say an ideal replacement.  Aside from financial engineering, it's doubtful a finance guy can be up to the task of putting Felda back on the right track.

Felda needs a few things, freedom to enact negotiations with suppliers, in other words, it needs to not be a punching bag for the Felda settlers.  They have to leverage their infrastructure strength to take the lions share of margins from it's suppliers.   They have to say"  pay the prices we want , or go find someone else."

As it stands, Felda Global Ventures has two major problems.  The first is that it is too lenient on suppliers.  The second goes deeper down on a political scale.  Felda settlers are very status quo oriented.  Basically the current government is in power due in large part to the settlers.  If FGV has the corporate will to push through reforms, the government may just stop them dead in their tracks.

To make FGV an investable entity, we need the government to give some sort of subsidy to FGV so they can make better margins. The second option is that they are able to go through corporate reforms politically unscathed.  I'll probably choose the first one of subsidy as the government just simply won't let their voting base erode away.

1MDB jitters abated, banks up

From the Edge:

Malaysian bankers will trigger an event of default (EOD) if state strategic investor1Malaysia Development Bhd (1MDB) fails to repay RM2 billion loan for its power unit taken in May 2014, say sources.

The loan has been rolled over twice with the last deadline being last month and is part of a RM5.5 billion debt taken by a unit of the company wholly owned by the Finance Ministry.

 A few banks were on the hook for loans, namely RHB bank, Maybank, Alliance bank, Malaysian Builder society, and Hwang DBS investment bank.  These few banks provided the 2 billion loan for 1MDB to repay.

On the plus side, these companies won't go into receivership as they won't have to write down the loan as per accounting rules.  Even the Malaysian central bank commented how auditors are to handle the bank's accounts if the loan if the principal is not paid back by February 18.

As a consequence.  All the stocks are up for these companies, and so is the market.

Tenaga Technical Analysis

Tenaga is certainly on an uptrend.  But where are the trend lines?



Two major trend lines are both near RM 13 a share and RM 12.  Supposedly the resistance level at RM 9-10 a share should have held the upside, but markets tend to blow past this area especially if news is big which was in the case of Tenaga at the end of 2013.

For support, likely the range of RM 11-13 a share is possible to hold.  But we need to discern whether the rebound is strong after breaching the bottom of the range.  If it is not, we could see much lower numbers.  Better wait and see whether Tenaga has the strength at support levels first before jumping in.

Tenaga cuts tariffs

From the Edge:

UR: TNB Nasional Bhd (TNB) ( Financial Dashboard) saw its market value shrink by RM2.6 billion yesterday as investors offloaded its shares on the government’s announcement of a new, lower electricity tariff.

TNB’s counter, which opened at RM14.94 yesterday, was stable up until the moment when the Energy, Green Technology and Water Ministry (KeTTHA) announced that electricity tariff in Peninsula Malaysia had been revised downward by 2.25 sen per kilo watt hour (kWh).

 Tenaga just cut its tariffs....ouch.  A lot of investors were banking on the fact that Najib stated no tariff cuts would be instituted.  Likely that froth will come out of the market.  At the end of the day, Tenaga is still a government entity which will cater to the government whims.

Seeing as how unpopular the profits for Tenaga is, Najib has a bit of a sore spot whenever politicians raise the question on enriching Tenaga's shareholder's pockets at the expense of the common Malaysian folk.

Government entities will usually have their upside capped due to the fact that if profits are too large, people will start to complain.  Most economics books will tell you these companies which operate in a government regulated monopoly will earn a decent return for shareholders but not outlandish due to public and government meddling.  This seems to be the case for Tenaga.

So where does that leave us?

Probably an attempt to target the gap at around 10 Ringgit a share.  Let's see what happens.  Already analysts are calling for more tariff cuts.

FKLI and FCPO technical update

The FKLI is a market that has many people baffled.  It shows signs of an upward movement yet is conflicting some traditional technical indicators such as the 200 day moving average.  A trend line within the 1800 to 1850 box was tested and seems to be holding for the sellers.  

If the market were to go below 1670, the low in February, it would probably find some support.  At any rate the market is in a difficult place right now, trying to break upward but just not having the same follow through.



FCPO is an even more difficult market to analyse.  The recent swings in prices have been going from bearish to bullish in just a manner of a few days.  All I can see is that the market is neutral, having tested the lowest trend line but may encounter some resistance on the way up.  Volatility doesn't happen this often usually, so rest assured this movement is a rare occurrence.

The new Petronas CEO

From the Edge:

Finding the balance now falls to Wan Zulkiflee, 54. He’ll succeed Shamsul Azhar Abbas as president and chief executive officer of Petroliam Nasional Bhd. in April, Prime Minister Najib Razak said in a statement via state news service Bernama yesterday.

Wan Zulkiflee is currently chief operating officer and head of Petronas’ downstream business. He oversees the company’s $27 billion spending plan in a refining and petrochemicals project in the southern Johor state bordering Singapore.

That’s one of two major investments Petronas is working on, the other is a C$36 billion liquefied natural gas project in Canada’s British Columbia.

The previous Petronas CEO was fairly unpopular among the political elite, so I suppose it is no surprise a new CEO will be taking the helm in a few months.  ex PM Tun Dr. Mahathir Mohammed has criticized the oil giant for using more international companies in contracts than domestic ones.

Perhaps this will earmark a new phase in domestic oil services expansion.  Another criticism of the previous CEO was a cut in operating expenditures due to the oil price.  I haven't any clue whether this may be influencing the firing, but it could be a factor as domestic money seems to be more important than ever as Malaysia braces for GST and the Ringgit keeps on tumbling.

Judging by the excerpt, the new boss does concentrate on the spending side of things. So the possibility for a higher boom in spending for oil prices is possible.  If he wants to keep his job, I think he will not make decisions too liberally as the previous one did.

AppAsia....the Edge Financial Daily must be smoking something

From the Edge Financial Daily:

The Edge Financial daily should exercise some control in its stock selections.  They may argue its not a recommendation, but have some quality control for goodness sakes.  This is not just any publication, it is the premier financial publication in Malaysia.  Putting penny stocks like these just enriches all the pump and dump schemers.

I'm not sure who this Anticipatory Analytics Sdn bhd.  is but the Edge should give them the boot as well for printing such garbage.

AppAsia, is a speculative stock.

1.  This company has had NO record of track earnings, hasn't turned a profit except for 2012.  Almost every year, they have lost money.

2.  10 times book value.  This is a joke.  Even by raising 13 million ringgit, no way is this company worth 73 million ringgit on fundamentals.

3.  If no news in the next year or so, this stock will go to the toilet.  so will all the people who jumped on this retarded valuation today.

4.  Surprise, no dividends.

Anonymous blogger wielding some serious power...not really

From the Edge Financial Daily:

Much has been made of the "anonymous" blogger who has criticized many authoritative figures in Malaysia.  Just who is this blogger?  is there an ulterior motive?

I think there is, it is money.  Money from advertisers who pay the blog because of the huge amount of hits that are generated.  People in Malaysia love conspiracies.  Blame who you want, but as long as a few hundred thousand hits are generated, the "anonymous" blogger will come up with lots of blog posts, true or not.

By poking and prodding some of the largest news agencies, the anonymous blogger has in effect gotten free publicity.  Now even more people will go visit his blogs generating thousands in revenue, if not, tens of thousands.  All he has to do is come up with creative blog posts.  

If there is one thing I know about the blogger, is that the blogger has blogged somewhere before, probably well known.  To generate the amount of content that consistently requires a lot of will power that not everyone has.  The content seems similar and consistent, indicating not much variation in the people that write the blogs, thus a singular blogger and not a huge group.    Beginner bloggers don't generate this kind of content overnight.

He's familiar with the style of "online" investigation although "online" investigation can seem legitimate, it really isn't.  Lots of holes can be found in these "online" investigations.  Don't read too much into the "anonymous blogger", I won't.

KLCI/FKLI and FCPO technical analysis update

FKLI futures broke out from a very strong support level at 1760 directly to an uptrend, but not all is well as we note the 200 day moving average is negative sloping and also 1800-1850 contains pretty difficult resistance.  In order for the market to set up to try and break 1850, simple supports must have held, baby steps, starting with 1770.

Today we seem to have gotten that support level holding with a clear break above 1790 after a test below.  The market is looking like it is on its way to testing 1850.  In my last update, I did state the market is most likely looking to move higher from 1750, but the nature of the rally seems to be a slow large range movement upward based on today's market information.  Movement is still decidedly upward for the short term though.  Ultimately I do expect the market to hit 1850 in the next few months.  Note* Although it may hit 1850, it may not follow through much higher.

FCPO is in a totally different camp.  A move past the 200 day moving average saw prices drop like a rock.  In order for FCPO to have a chance at reaching new yearly highs, the support at RM 2,080 must hold.  A move below that will set the tone for this year as somewhat bearish or ranged and choppy.



So far though, the immediate sentiment is bearish, so careful trading!