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Author: Tan KW   |   Latest post: Sat, 19 Jan 2019, 03:43 PM

 

Stocks For 2019 - A Discussion - Salvador Dali

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This is merely a discussion and not an invite or recommendation to buy or sell any stocks. Yes, Bursa and SC do look at what I write, even when most of what I write is for the benefit of all investors. It is also good that investors and regulators alike are nowadays more circumspect of potential shenanigans. 

I do think 2019 will be a much better year for stocks locally. Almost anything that could have gone haywire,  have. 

Oil Prices
Palm Oil
Caught up in international trade wars
Property slump

 


Since the election, we have been bombarded, necessarily, by the implosions in:

Tabung Haji Fund
Felda/FGV
Bank Pembangunan questionable loans
Bank Negara land deal
LGM's "forced" land deal that profited MOF and had EPF as the end buyer

...the government needs to step up do positive market-boosting measures. That is because, for the past 6 months, almost every single thing has been negative, restrictive, constrictive, regressive, deflating for economic activity ... even though many of the measures taken WERE NECESSARY for the good of governance and fiscal responsibility. But you cannot strangle the bad till the good part also suffocates.


Politics - The Warring States Revisited

 

Please remember the rakyat who voted you in. Not just that, but the sacrifices, the toiling by the rakyat for years before that to get the "change effected". Then you guys go and play politics. I know that it is always difficult to hammer a loose coalition within a short time span and expect everything else to be hunky dory... but please, be reminded of how hard the struggle was for most of us to get here. ITS NOT EVEN ONE YEAR!!! The worst "bad spot", ...it is not even a year old and we have the following questionable questions about the current Pakatan Harapan:
- will Anwar be able to take over in 2 or 3 years, or at all
- is Azmin the preferred next PM by other parties in the coalition
- isn't Bersatu looking too much like the old UMNO in accepting frogs
- is Bersatu behaving that way to stave off a possible breakaway by Keadilan
- enough already with the Azmin or Rafizi thing, both are important and useful, don't split the party unnecessarily
- what was so bad that Nurul can't take it anymore
- the silly DAP voting "out" Tony Pua because not enough grassroots "work put in" and that there were too many "parachuted candidates" now getting important positions at the expense of longtime members - grow the fuck up, without the newer candidates DAP would not have reached the masses
- some Ministers should not be ministers (please read next para.)

Yes, Minister! - All Ministers must be made aware that there are: Strategic Issues and Initiatives (most important, as they set the course and direction of the "goals of the ministry". Then there are the Operational Issues, that has to do with day-in-day-out stuff, just make them more efficient and effective and properly enforced. Then there are the Peripheral Issues: not important and do not ever confuse that you are doing excellent work by announcing these peripheral new rules and changes.

Black shoes for students, very peripheral issue, and as a first announcement it was deflating. Swimming pools, omg, so peripheral. We appointed a Minister, not a Trainee Assistant Vice President!!!

Tackle the UEC head-on, that's Strategic Issues and Initiatives. No balls. 

On that note, asking us to consume more palm oil was worse than peripheral issues. It is like asking us to plant our own veggies. Want to go down that road again...??!! Tackle the palm oil Strategic Issues, we have been the target of very biased propaganda against the usage of palm oil. We seem to have no defense against that except to accept/not accept the various palm oil certification. Why no certification against soy oil and other oils? Why we do not have a concerted and sustained campaign on the real benefits of palm oil over other oils? Why not have a long-term "barter trade" exchange agreement with big users such as China and India which would make palm oil producers less of a coward in the face of European buyers?

Get the politics straightened out and start recharging the economy.


The bright spots were:

The new government, starting to clean up the balance sheet
Hopefully, new leaders at regulatory, GLCs and judicial... will invoke a new Malaysia


BULL AROUND THE CORNER

 

Why I think the turnaround is just around the corner. Must look for catalysts, cause prices itself has already gone past what is considered cheap by most financial measurements. 

a) The issuance of the RM7.4b Samurai bond at 0.65% 10-year before the end of March 2019

b) The upcoming indictment, resolution, conviction, repatriation of fines by DOJ/US Courts on Goldman Sachs involvement

 

c) The re-issuance of government electronic government programs contract, albeit at a "more cost savings to the government" mode

d) Government restarting some of the stalled big projects, albeit a lower scale


We should be looking at some small caps fishing because the bear market is nearing its last legs rather than in the middle of one.

You will note I won't be mentioning the run of the mill stocks covered by analysts, blah, blah... you can read them yourselves. Just so you know, most of those analysts who write decent reports about big caps and decent stocks, ultimately trade the most in stocks they don't write about, hint, hint, second and third liners. Stop laughing and tell me it's not true.


Small Caps Fishing

1) must have volume (liquidity) - you need this to move in and out, a great value stock with no liquidity is no use in a stock market.

2) must have lost more than 50% from its 52 week high - the bigger the losses the better; why 12 months, not longer?... cause 12 months would have captured the period before the elections, anything longer might not be as meaningful.

3) P/NA (share price /net asset per share) must be less than 30% - this is where the value comes in, even if you factor in some dubious "assets", below 30% is a good comfort level.

4) Cumulative losses for the past 7 Qs must not be more than RM2m; better if its positive - naturally most will not have been doing well, but you want their PAT to be manageable, this will be reflective via their cash flow; by adding up the PAT for the last 7 Qs, it gives a good measure of its "PAT/cash flow. I can't emphasize enough how important this measurement is, its to ensure that it has some sort of viable business and that they are in no danger of falling into PN17. .. which translates into better viability to bounce back later when sentiment improves.

5) Bearing in mind the premium for a relatively clean listed vehicle will be between RM20-30m in a normal functioning market - hence that can be used as a base for our own valuation.

6) No RTO /listing by China companies type - I am still not convinced (for the past 8 years) on the veracity of the financials.


Example:

ASIAPOLY (0105)
Share price:  0.07
52 week high:  0.155
P/NA:  19%
Market Cap:  RM31m
Last 7 Qs Cumulative net figure: +RM206,000

HHH (0160)
Share price:  0.085
52 week high:  0.125
P/NA:  17%
Market Cap:  RM29m
Last 7 Qs Cumulative net figure: +RM2,417,000

JAG (0024)
Share price:  0.05
52 week high:  0.11
P/NA:  9.6%
Market Cap:  RM76m
Last 7 Qs Cumulative net figure: +RM9,914,000

SERSOL (0055)
Share price:  0.105
52 week high:  0.205
P/NA:  8%
Market Cap:  RM23m
Last 7 Qs Cumulative net figure: -RM436,000

TECHFAST (0084)
Share price:  0.305
52 week high:  0.61
P/NA:  11.3%
Market Cap:  RM70m
Last 7 Qs Cumulative net figure: +RM6,942,000

FINTEC GLOBAL (0150)
Share price:  0.065
52 week high:  0.18
P/NA:  24.8%
Market Cap:  RM39m
Last 7 Qs Cumulative net figure: +RM24,134,000

PUC (0007)
Share price:  0.11
52 week high:  0.34
P/NA:  10.13%
Market Cap:  RM211m
Last 7 Qs Cumulative net figure: N.M. owing to new biz injection

REDTONE (0032)
Share price:  0.18
52 week high:  0.425
P/NA:  19.6%
Market Cap:  RM136m
Last 7 Qs Cumulative net figure: +RM11,302,000

AEMULUS (0181)
Share price:  0.215
52 week high:  0.66
P/NA:  13.9%
Market Cap:  RM118m
Last 7 Qs Cumulative net figure: +RM12,220,000

FOCUS DYNAMICS (0116)
Share price:  0.145
52 week high:  0.43
P/NA:  2.1%
Market Cap:  RM296m
Last 7 Qs Cumulative net figure: +RM2,640,000


You can peruse all these figures by going to i3 site. You can tweak for your own parameters and you will come up with some decent picks. Mind you to bottom fish on small caps, you will need holding power, but we are looking at a 50%-100% return. Buy, lock it up, come back when sentiment flourishes.


SITUATIONAL INVESTING

If you don't like small caps, then have a look at these two stocks for situational investing. Both counters were subject to massive forced selling by the principals or substantial shareholders. Margin calls are common in a bear market. Look at Seacera, forced selling but it took some big punters a couple of days to start fishing - it didn't look like the new big buyers knew anything more than just trying to sniff out a bargain.
 





 



However, look at the buyers for MYEG and Prestariang following the forced selling, they were firm and big. Its a follow the money strategy. You may not need to know much on the fundamentals (both are more than decent), but the "firmed up" buying would indicate a likely positive turnaround.

http://malaysiafinance.blogspot.com/2018/12/two-notable-corporate-announcements.html

http://malaysiafinance.blogspot.com/2018/12/my-eg-unexplainable-drop.html


So, yes... one can consider both Prestariang and MYEG for the above reasons.

 

http://malaysiafinance.blogspot.com/2019/01/stocks-for-2019-discussion.html

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