Highlights

The Alpha Trader

Author: TheAlphaTrader   |   Latest post: Thu, 21 Apr 2022, 10:45 AM

 

RESERVOIR LINK ENERGY BHD (0219) - WHY DID DATO EDDIE ONG BUY INTO THIS COMPANY?

Author: TheAlphaTrader   |  Publish date: Thu, 21 Apr 2022, 10:45 AM


 

 

 

Reservoir Link Energy Bhd (RL) is an Oil and Gas (O&G) company specializing in providing well services for the O&G operators that support the upstream segments of the industry. Apart from its core perforation service, RL also provides well leak repair, well testing, wireline services and consultancy services. In addition, RL has recently entered the solar and renewable energy business via a 51% acquisition of Founder Energy Sdn Bhd.

 

 

 

EMERGENCE OF DATO EDDIE ONG CHOO MENG AS A PROMINENT SHAREHOLDER

 

In the 2021 RL annual report released last week we find Dato Eddie Ong’s name as the 4th biggest shareholder list with a total shareholding of 12 million shares, which equates to 4.1% of the company. Upon further checking from the Direct Business Transaction (DBT) transactions on Bursa in March, we observed a DBT of 12 million shares traded off market by the majority owners of RL, ie. RL Holdings Sdn Bhd on 7 March 2022 with 8.2 million shares transacted at RM0.42 and 3.8 million shares at RM0.40. If this is the block of shares that were sold to Dato Eddie Ong, his average cost is calculated at RM0.414 per share.

 

Dato Eddie Ong is, of course, the controlling shareholder at the Hextar Group of companies as well as a host of other public listed companies. It is well documented that Dato Eddie Ong’s entry into any public listed company usually stirs some excitement in those companies, both from a corporate development standpoint as well as share price movements.

 

 

 

Let us try to handicap what Dato Eddie Ong sees in RL.

 

1) Good proxy to the current bull market in commodity prices

  

WTI crude oil has pierced through the USD100 mark on the 1 March 2022 on the outbreak of the Russia and Ukraine conflict. It has reached an 8 year high of USD130 per barrel on 7 Mar 2022 and has remained stubbornly above USD95 since then. (WTI Crude is currently at around the  USD103 level at time of writing)

 

Commodities across the board are mostly trading in bull market territory, from food commodities, fertilizer prices, metals to the oil complex. Dato Eddie Ong’s core companies, the Hextar group of companies, are doing exceedingly well as they are in the bullish agrochemical sector, with prices in Hextar Global up 20% YTD while Hextar Industries is up a staggering 140% YTD!

 

 

2) RL is a company with solid fundamentals

 

RL has reported  a profit for 8 consecutive quarters since its listing in July 2020. Although the most recent quarter showed a sharp decline in profits, from RM5.8 million to RM871,000 QoQ, this included an Impairment of Intangible Assets of RM1.56 million which was not present in the previous quarter. 

 

RL is also has a net cash position of RM18 million or 6.2sen per share. Based on a Ex cash PER, RL is trading at a prospective PER of only 10.5 times.

 

In recent announcements to Bursa Malaysia, RL has continued securing new contracts for both its O&G as well as the renewable energy division. Since March 2022, RL has already been awarded 4 new contracts, including from ExxonMobil Exploration and Production Malaysia, and Petronas Carigali Sdn Bhd and Solarvest Bhd. These contracts are expected to have a positive contribution to the bottomline of FYE2022.

 

 

3) Price chart is at the bottom of the range

 

 

 

RL has a relatively short technical history since it was only listed in July 2020. From its debut price of RM0.68 on 15 July 2022, RL has traded in a wide range of RM0.54, from a low of RM0.29 low on 5 October 2020 to a high of RM0.83 on 13 April 2021.

 

The price structure is in a symmetrical triangle pattern with the lower boundary providing strong support at RM0.41 (which also represents the IPO price and Dato Eddie Ong’s entry price). On the upside, the current upper boundary sits at around RM0.545.

 

 

4) IPO was 11.5X oversubscribed

 

RL was listed in July 2020 and the IPO received an oversubscription of 11.5x at an offer price of RM0.41. Given the strong financial performance since its listing, the current price of RM0.47 seems reasonable since it only represents a premium of only 15% over the IPO price and a 31% discount over the debut price of RM0.68 on listing day!

 

 

 

5) Impending transfer to the Main Board

 

RL had submitted the application to transfer its listing to the Main Board on 28 Sept 2021 as it has managed to achieve an accumulated profit of RM25.4 million for 3 consecutive financial years. A successful transfer to the Main Board would further increase the company’s investibility and reputation in the eyes of the investment community.

 

 

 

 

CONCLUSION

 

The prolonged conflict in Ukraine could only mean continous uncertainties over oil supply disruptions and oil prices to stay elevated for the medium term. We still believe that that RL has yet to reflect its fair value as the Oil and Gas sector on Bursa Malaysia is still lagging the overall market and price performance in crude oil.

 

One of the cited reasons for the underperformance of the O&G sector include ESG concerns, which was also the same reason cited for plantation companies’ underperformance in 2021. Well we all know that changed in 2022 as the continued rise and sustainability of high Crude Palm Oil prices can no longer be ignored! 

 

Will the same re-rating occur for the O&G sector and RL soon? Dato Eddie Ong has surely placed his bets!

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: RL
  sherlockman likes this.
 
sensonic Post removed. Why?
23/04/2022 12:16 PM

REX INDUSTRY BHD (9946) - A HIGH CONVICTION TRADE SETUP WITH GOOD PRECEDENT

Author: TheAlphaTrader   |  Publish date: Fri, 8 Apr 2022, 10:13 AM


 

 

 

 

BACKGROUND 

 

 

Rex Industry Berhad (Rex) was founded in Nov 1993 and listed on the Bursa Malaysia on 29 Nov 1995. The company is involved in the manufacturing of F&B products, specialising in canned food, confectionery goods and flavoured drinks. 

 

Rex undertook a 3-year turnaround plan in 2018, which was completed in 2021 and managed to turn the business back into profitability. The company has remained profitable for the last 6 consecutive financial quarters. Profits are expected to get a boost from the recovery in the HORECA channel as well as the rebound in domestic demand as the country transition into the endemic phase.

 

The fundamentals of Rex has been well covered by CIMB Research when they initiated a Non Rated Note on 9 November 2021 when the price was trading at RM0.255. Today, we will examine a potentially profitable trade setup by participating in the recently approved rights issue exercise.

 

 

 

 

PRICE CHART

 

 

 

After hitting a 3 year high of RM0.30 on 8 November 2021, Rex has been on a steady decline, touching a low of RM0.185 on 8 March 2022. It has since started regaining some upward momentum and has just broken the downtrend line on 6 April 2022, when it closed above the RM0.21 pivot point.

 

Initial resistance can be found at RM0.27, and if broken convincingly could see a retest of the RM0.30 level.

 

 

 

 

BUSINESS EXPANSION AND PROPOSED RIGHTS ISSUE EXERCISE

 

Rex has just received approval from Bursa Malaysia on 4 April 2022 for the proposed rights issue with warrants. The rights issue will comprise of 1 rights share for every 3 existing shares, with 1 free warrant for every 3 rights shares subscribed. The indicative issue price per Rights share has been set at RM0.10 but the entitlement date has yet to be announced. The whole exercise is expected to be completed by the end of 2Q 2022.

 

The proceeds from the rights issue will be used for business expansion plans within 18 months and working capital for the next 12 months. Within the next three years, Rex aims to double its revenue from RM160 million in FY21 by introducing new products and expanding its client base and partners with more large scale retailers.

 

 

 

 

 

PROFITABLE TRADE SETUP FROM RIGHTS ISSUE EXERCISE

 

 

  • WILL HISTORY REPEAT ITSELF?

 

 

 

 

 

Rex had previously completed a 1 for 1 rights issue back in Dec 2020, which raised about RM19 million. The funds were mainly used to pare down its borrowings and for working capital. If one had participated in this exercise, what would have been the returns?

 

 

Investors who bought during the entitlement period would have paid an adjusted ex price of around RM0.17 in Nov 2020. The price would eventually move to a high of RM0.28 on 6 Jan 2021! That is a considerable 64% in just 2 months!

 

Despite the strong performance in Rex for 2021, there had been no declaration of any Company Insider selling. From Bursa Malaysia filings, it was reported that the Managing Director, Darmendran Kunaretnam through his holding company, Daiman Taipan Sdn Bhd (DTSB) had purchased a total of 16 million shares from the open market with prices ranging from RM0.23 to RM0.25 since 31 Dec 2020. Together with DTSB, Darmendran collectively owns around 39% of Rex as per the latest annual report.

 

 

 

 

 

  • OTHER PROFITABLE RIGHTS ISSUE EXERCISES

 

 

 

HEXTAR INDUSTRIES

 

 

 

 

Hextar Industries (Hexind) undertook a 5-for-1 rights issue in October 2021 at an exercise price of RM0.12 per share. Investors who went through the exercise and are still holding the shares today would have tripled their money!

 

Dato Eddie Ong and his family collectively owned 47% of Hexind after the completion of the rights issue exercise.

 

 

 

 

TAFI INDUSTRIES BHD

 

 

 

 

 

 

Tafi Industries Bhd (Tafi) had a 3 for 5 rights issue in March 2021. The bonus adjusted price in March 2021 was RM0.21. By September 2021 the price had rocketed to a high of RM0.97 for a staggering gain of 460%!

 

The major shareholder of Tafi, Dato Sri Andrew Lim had been actively accumulating shares 3 months prior to the entitlement date of the rights issue exercise.

 

 

 

 

 

CONCLUSION

 

We have found that corporate exercises like rights issues and warrant conversion (ie. Dancomech Bhd which was covered recently) can be very rewarding trade setups. The key is to pick companies with good fundamentals and align our interest with the company insiders who have large equity commitment at stake.

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: REX
  2 people like this.
 
Dkk08 Hoot9e
08/04/2022 10:35 AM

TOMYPAK HOLDINGS BHD (7285) - REBUILD AND RESTART

Author: TheAlphaTrader   |  Publish date: Fri, 1 Apr 2022, 10:06 AM


 

BUSINESS BACKGROUND

 

Tomypak Holdings Berhad (Tomypak) is a manufacturer of flexible packaging materials including polyethylene, polypropylene films and sheets. 

 

Since incorporation in 1979, Tomypak Holdings Berhad and its subsidiaries has established itself as a leader in the flexible packaging marketplace. Tomypak listed on the main board of Bursa Malaysia in 1996. 

 

 

 

 

 

GAME CHANGER INCIDENT

 

On 19 December 2021, a massive fire broke out at Tomypak’s wholly owned subsidiary, Tomypak Flexible Packaging Sdn Bhd’s (TFPSB) factory in Senai, Johor. The blaze occurred in the afternoon at 12.30pm and was finally contained at 7.00am the next morning. 

 

In an immediate disclosure to Bursa Malaysia on 20 December 2021, the company had assured the investing public that TFPSB has adequate insurance coverage of up to RM271 million for property damage and stock in trade and another RM80 million for business interruption up to 24 months.

 

 

 

 

 

PRICE CHART

 

 

Tomypak share price was trading at the RM0.50 level just prior to the fire incident. Unsurprisingly, there was a huge gap down in price to RM0.30 at the open of trade on 20 December 2021 in reaction to the incident. However, it was perceived to be overdone and closing way off the lows at RM0.36 by the end of the day. In fact, the subsequent rebound in the following days, impressively closed the whole gap on the daily chart when it managed to trade as high as RM0.505 on 27 Dec 2021.

 

The price started drifting down towards the RM0.40 level where it has found good support. Investors probably turned cautious on the stock as there was lack in guidance from management as well as several Investment Banks ceasing coverage on the company.

 

Technically, the current breakout move from the 3 month long consolidation phase looks strong and aims to test the immediate resistance of RM0.50 and RM0.62 thereafter.

 

 

 

 

 

 

NEW MANAGEMENT TEAM TO TURN AROUND THE BUSINESS?

 

Tomypak has long been regarded as a market leader in the flexible packaging industry. It once commanded a market capitalisation of over RM500 million and had boasted a 12 year track record of consistent yearly profits from 2005 till 2017. At the peak in 2015, Tomypak recorded a very respectable profit of RM23.2 million. However, since 2018 the company has not been performing, clocking in consecutive yearly losses. Reasons cited by management included higher cost of materials and depreciation charges stemming from the company relocating its plant from Tampoi to Senai.

 

Tomypak has seen some big changes in senior management with the stepping down of Eddie Lim Hun Swee as the Managing Director from 31 Dec 2020. Eddie Lim is also the second largest shareholder of Tomypak. His replacement, Mr Tan See Yin has been with Tomypak since 2014, also brought in some new key management personnels in operations and marketing, to turn the business around. 

 

 

From the table above, it is clear that Tomypak has clearly underperformed against the majority of its peers in the last 2 years in terms of share price and market capitalisation. Ironically, the fire incident could present an unusual opportunity for the new management team to implement new ideas and also acquire new state of the art machines that could increase productivity and profits.

 

 

 

 

 

 

FIRE-SALE PRICE!

 

The largest shareholder of Tomypak who is also the current Chairman Adrian Yong, first purchased a 25.4% stake back in 2014 from the founders, the Chow family. The adjusted cost ex-corporate exercise price paid would be RM0.48 per share. From Bursa Malaysia announcements, Adrian Yong was also actively buying Tomypak since 2020 when prices were trading above RM0.50.

 

Bursa filings have also shown that Eddie Lim had also been actively buying shares of Tomypak since 2019.

 

So it is safe to say that if Tomypak can navigate back to its glory days, buying in at RM0.45 seems like a good bargain.

 

 

 

 

 

 

CONCLUSION

 

Often, unfortunate and unforeseen situations create unusual investing opportunities. Tomypak has just announced that they have received and accepted an offer on 31 March 2022 for the first interim insurance compensation of RM60 million for material damage and RM15 million for Business Interruption Loss. This could be viewed positively as it means the insurance company has done its due diligence and have agreed to compensate.

 

This is a good first step in the rebuilding process for Tomypak. Even if the final insurance compensation amount to 70% of the total amount insured, this could boost the net cash per share of Tomypak by RM0.57 per share.

 

With the insurance payout, this poses a good starting position to rebuild the business from scratch with a huge cash pile. Nevertheless, a lot will also depend on the Management’s ability to execute and capitalize on the current situation. It should be noted in the latest Bursa announcement that some of the new ordered equipment will be delivered beginning in Q3 FY2022, which implies that business operations could resume quite soon.

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

  3 people like this.
 
pokerpro88 hextar Ind so nice I better buy some Tomy!
01/04/2022 4:28 PM
Fundamental Trader TOMYPAK quick analysis:

Debt/Equity = 1.07 [NO]
Current Ratio = 0.55 [NO]
ROE = -191 [DISGUSTING!]
Growth [HORRIBLE!]
Number of negative quarter in last 4Q: 2 [RUN]
FCF(TTM) negative [RUN]
Dividend Yield = 0 [NO]

Verdict: RUN FOR LIFE!

The gold standard for a buy is to have all yes.
Read the method in detail here: https://klse.i3investor.com/web/blog/recent/fundamental_trading
03/04/2022 7:30 AM

DANCOMECH HOLDINGS BERHAD (5276)- RECENT SELLDOWN PRESENTS A GOOD BUY OPPORTUNITY?

Author: TheAlphaTrader   |  Publish date: Wed, 23 Mar 2022, 11:19 AM


 

BUSINESS BACKGROUND

 

Dancomech Holdings Berhad (Danco) was listed on the Main Market of Bursa Malaysia Securities Berhad on 21 July 2016. The company is principally involved in the trading and distribution of process control equipment, measurement instruments and industrial pumps. They also provide material handling system solutions and are involved in the production of metal stamping parts and components, and design and manufacture of tools and dies. 

 

The trading division which accounts for the main operations, is involved in  3rd party products purchasing from suppliers based in countries such as Germany, United Kingdom, China, Taiwan, South Korea, Spain, Italy, etc. The company offer its products to palm oil and oleochemicals, oil & gas and petrochemical, and water treatment & sewerage industries.

 

 

 

REASONS FOR THE RECENT SELLDOWN

 

 

 

 

 

 

 

 

The impending expiry of Danco warrants (expiring on 22 May 2022) has resulted some irrational selling of the Danco mother share. Danco shares hit a year high of RM0.60 on 25 February 2022 after reporting a strong set of quarterly results. It has since shed 25% of its value with the warrants dropping about 60% in the last month.

 

This could be the result of many minority warrant holders deciding to sell the warrants instead of converting them at a cost of RM0.30 per warrant. This is understandable given the fact that the warrants were offered as free bonus warrants back in 2017 on the basis of 1 warrant for every 2 shares. Retail shareholders also often view the conversion process as cumbersome.

 

The constant 4% to 7% discount of the warrant price had also presented an arbitrage opportunity for existing shareholders to sell the mother shares and buy the warrants to go through the conversion process. This has also place further pressure on the mother share price.

 

It should be noted from the Bursa Malaysia announcements that there has been heavy conversion of warrants into ordinary shares by the major shareholders. This is viewed positively as this reinforces their commitment and confidence in the future of the company.

 

 

 

SOLID FUNDAMENTALS

 

 

 

Danco has the strong distinction of NEVER failing to report a profit since its listing in 2016! It recently reported its best ever annual profit in 2021, since its listing debut on Bursa Malaysia. Since it has a 40% profit distribution policy, it pays a good dividend yield of 4.55%.

 

From the latest Balance Sheet, we can see that the company has a net cash position of RM61.65 million. Assuming the full conversion of the warrants, the net cash position would be raised to RM86 million or 19.23sen per share with the fully dilluted PER of 12 times on the enlarged share base. However, based on the Ex cash PER, Danco is trading at a prospective PER of only 7 times!

 

The closest comparison of a company with similar business operations on Bursa Malaysia would be Unimech Bhd, which trades at a PER of 10 times. Other internationally listed companies in the same industry like KITZ Corp (listed in Japan), Emerson and Flowserv (listed in the USA) trades at over 20 times PER.

 

 

 

MULTIPLE ACCOLADES

 

 

i) FORBES ASIA’S 2021 BEST UNDER A BILLION LIST

 

Danco was one of the eleven Malaysian companies recognised under Forbes Asia’s 2021 Best Under A Billion list, which highlighted the resilience of 200 public listed small and mid-sized companies in the Asia Pacific region, with sales under US1 billion. Also included in the list of eleven companies in Malaysia, are the likes of Scientex Bhd, Thong Guan Bhd and Frontken Bhd.

 

This is quite an achievement as the top 200 companies are selected from a universe of 20,000 public traded companies in the Asia-Pacific region. The matrix used in compiling the lists include debt, sales and EPS growth over both the most recent one and three year period.

 

 

ii) “TOP MALAYSIA SMALL CAP COMPANIES 20 JEWELS 2019” 

 

Danco also was selected as one of the top 20 small cap companies in 2019 by RHB Investment Bank Bhd to invest in from South East Asian Markets. This was pretty impressive given that only 5 Malaysian companies made it to the list from the total of 757 companies listed on Bursa Malaysia with a market cap of below RM1 billion.

 

 

 

 

CONCLUSION

 

The best buying opportunities present themselves in the most unusual and unexpected ways. In the case of Danco, after reporting blockbuster quarterly results, the share price was trading at 2022 high of RM0.60. The valuations were already considered very attractive at RM0.60, but due to the selldown of the warrants, a fantastic opportunity to get into the stock at a deeply discounted  price has presented itself.

 

When fundamentally good stocks are sold down for the WRONG reasons, history has shown that capitalising on the short term anomaly generally pays off handsomely in the long run!

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: DANCO
  3 people like this.
 
Lsly88 noted this writer articles quite good..follow few times can get some some free drinks
23/03/2022 12:09 PM
sherlockman good article thanks for sharing!
23/03/2022 12:25 PM
chkhooju At this price, Danco presents a great buying opportunity. Should be a good buy.
23/03/2022 1:13 PM

FOCUS LUMBER BHD (5197) - WHY THIS STOCK REMAINS ON OUR RADAR

Author: TheAlphaTrader   |  Publish date: Thu, 10 Mar 2022, 12:57 PM


 

What a crazy couple of days it has been for the global markets! Bursa Malaysia was not spared in the market selldown caused by the ongoing conflict between Ukraine and Russia. Any headlines hinting of an escalation in the war would bring another wave of selling in stocks and pushing commodity prices to new highs.

 

As we approach the 2 week mark into the conflict, the clear winners emerging from this uncertainty are commodity prices. In fact, the Malaysian economy actually stands to benefit from the high prices of crude oil since the country is a net exporters of crude oil. 

 

 

Of course, the biggest boon for the Malaysian economy and stock market is the all time high prices of crude palm oil prices (CPO), which have touched a new high of RM7,268 per tonne on the most active traded contract today (9 Mar2022). The record breaking CPO prices have resulted in a huge rally in the whole plantation index, which is up by an impressive 28% YTD and outperforming every other sector on the Bursa Malaysia. 

 

Since plantation stocks have been very well covered, we like to revisit a stock that was highlighted as there have been many positive developments since the last update.

 

 

 

 

 

 

 

 

KEY POINTS FOR FOCUS LUMBER BHD

 

 

 

1) BLOWOUT EARNINGS

 

 

 

 

 

 

Focus Lumber reported a new record quarter profit of RM12.94 million or EPS of 13.08 sen per share, an increase of 661% QoQ! Management has guided that they are confident that FYE 2022 will be a fruitful year for the company. In a non-rated note by Hong Leong Investment Bank Research dated 8 Feb 2022, they have an assumption of 23 sen for FY22 and pegged the fair value at RM1.98 based on 8.6X FY22. The report was issued before the latest quarter results were released, hence we could be looking at higher revisions of EPS and fair value for the stock going forward.

 

 

 

2) LUMBER FUTURES HAVE CONTINUED RISING TO NEW HIGHS

 

 

 

At the time of the last posting on 7 Feb 2022, the price of Lumber was trading at USD1,070 per 1000 board feet and has since gone up to touch another new high of USD1,400 per 1000 board feet this week.This would translate to higher ASPs for plywood sold in the USA of which, 60% of Focus Lumber’s revenue is derived from the Recreational Vehicle segment.

 

 

 

 

3) UNFAIRLY SOLD DOWN THIS WEEK

 

 

 

Focus Lumber was not spared in the recent stock market malice. After hitting a high of RM1.66 after reporting the latest blowout quarterly results,  the stock was heavily sold down in the last 2 days to touch a low of RM1.29. The selldown has found good buying support around the RM1.35 to RM1.40 level, We still believe that provided the RM1.22 is not violated, the uptrend that started since Dec 2021 is still intact.

 

 

 

CONCLUSION

 

The recent panic selling has presented a good opportunity to add or initiate new positions into Focus Lumber at the current price of RM1.36. Just based on the latest quarter EPS of RM0.13 per share, we could be looking at prospective PER of only 2.6X! Also, not forgetting that Focus Lumber has a net cash position of RM0.73 per share with no bank borrowings.

 

With the expectation of stagflation being the theme for the foreseeable future, the place to seek extraordinary returns would be to own a basket of commodities via ETFs or investing in the Futures Markets or simply to buy the stocks that would benefit directly from the elevated commodity prices.

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

KEY POINTS FOR FOCUS LUMBER BHD

 

Labels: FLBHD
  3 people like this.
 
Dkk08 Wow.. Cash rich Co
10/03/2022 4:01 PM

THE UKRAINE-RUSSIA CONFLICT - WHAT IT MEANS FOR THIS MALAYSIAN STOCK?

Author: TheAlphaTrader   |  Publish date: Sat, 26 Feb 2022, 9:57 AM


 

 

 

A lot has been written in recent days as we watched in disbelief of a then impending, and now happening invasion of Ukraine by Russia. Commodity prices have gone ballistic on supply disruptions worries as Ukraine and Russia are major producers of many of the key commodities in the world. 

 

Much attention has been focussed on crude oil, even though Russia only accounts for 10 percent of global output for crude oil. It was a frantic day for commodities trading on Thursday 24 February, where we saw WTI crude trading above USD100 per barrel for the first time since 2014.

 

By the close of trading on that day, most of the commodities prices had retraced significantly and most had closed way off the day highs (WTI crude settled at USD92.10) with the exception of wheat which still closed near the daily limit up price of 5%. So why was wheat the best performer on Thursday?

 

Wheat production in Russia and Ukraine account for almost 25% of the world output. Therefore, any potential disruptions will have a huge impact on prices. Furthermore, the major ports in Ukraine, where 90% of grain exports are shipped by sea, have been closed. 

 

Apart from wheat, Russia is also one of the top producers of fertilizer in the world. Along with wheat, fertilizer will have the greatest price impact as a result of the war in Ukraine. While there are no futures market for fertilizer, market reports have shown that it had already been rising to its highest levels since 2014 (as much at 400% in 2021 alone in the USA), prior to the Ukraine incursion. It has even prompted the USA Secretary of Agriculture, Tom Vilsack, to voice his concern on fertilizer prices to spike even higher and remain elevated as a result of the invasion. (https://www.agriculture.com/news/business/vilsack-fertilizer-prices-are-biggest-worry-for-farmers-after-russian-invasion)

 

 

Now, the question is how do we capitalise on the rising trend in fertilizer prices on the home front?

 

 

 

HEXTAR INDUSTRIES BHD (HEXIND: 0161)

 

 

 

 

As highlighted in our previous post, HEXIND is a very good proxy to the fertilizer industry. It derives almost 70% of its revenue from the fertilizer business. In its recent quarterly report released in January 2022, saw a huge spike in profits by 800% increase QoQ. Assuming that the price of fertilizers likely to remain high in the near future, this will bode very well for HEXIND in the next financial quarters. HEXIND share price is currently up 78% from a year ago.

 

Another positive point for HEXIND is that most of its products are sold to the palmoil industry. The recent exponential moves in crude palm oil prices to new all-time highs will be a boon for HEXIND as the demand will remain robust despite the high fertilizer prices.

 

 

Another company that has benefitted handsomely from the surge in fertilizer prices is Ancom Bhd. The share price is up a whopping 225% from a year ago. Ancom is quite well reviewed by stock analysts and already known to the investing community, while HEXIND has yet to be covered by any mainstream investment houses, therefore its potential upside is as a proxy to the fertilzer play remains largely uncovered.

 

 

 

 

TECHNICAL PICTURE

 

 

The previous post on 9 November 2021 highlighted HEXIND at the time when it was trading at around the RM0.175 level. The downtrend line was broken on 3 February 2022 after the price broke above RM0.28 convincingly. The price has moved nicely along since the start of year 2022, reaching a high of RM0.325 on 11 February. It has since retraced to test the RM0.24 long term support level, which has held firm. It is likely tracing out its next motive move and could be targetting a new high if it breaks the RM0.325 level convincingly. 

 

 

 

 

DATUK EDDIE ONG IS THE MAN WITH A PLAN

 

 

 

 

Datuk Eddie Ong is a man with the Midas touch when it comes to stock movement. After concluding his big play in Complete Logistics recently, which saw the price moving up 130% in the last year, a lot of market speculation is rife on what will be Datuk Eddie Ong’s next move.

 

To recap, the huge rights issue exercise undertaken last year saw Datuk Eddie Ong become the single biggest shareholder in HEXIND with he and his family collectively owning 47%. With the name change from SCH Bhd to HEXIND (to reflect the Hextar brand name), could also signal that he has big plans for this company. Given the right fundamentals being aligned, this could be the huge catalyst for HEXIND to really shine.

 

 

 

 

 

 

CONCLUSION

 

It is difficult to predict how long (or short) the conflict between Ukraine-Russia will last. One thing is for certain, is that the supply disruption to commodities will take a while to return to normalcy.

 

History has shown that when any huge crisis unfolds, a major investing theme always emerges. When the Covid 19 pandemic unravelled, the stock markets were crashing globally. It took almost 2 weeks before the markets realised that the glove makers would be a huge winner from the pandemic and prices actually ran up for another 6 months before topping out in Aug 2021.

 

Sometimes, the market takes time to digest what is in front of them before the consensus is reached and moving on to the next bullish move. To the sharp eyed investors, their job is to position themselves before this happens in earnest. Could this be the start of a raging bull move for HEXIND? Based on the information in front of us, this could be “Tiger-ific” year for HEXIND shareholders. 

 

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

 

Labels: HEXIND
  Dkk08 likes this.
 
Dkk08 Thanks a lot to this writer..I have a good start this year after following his Nov article on Hexind..I will sailang on Monday again.. hoot 9e.. Heng, Huat ah..
26/02/2022 10:11 AM
information raw material for making fertilizer costlier now due to oil price rise?
26/02/2022 5:53 PM
pokerpro88 thank you for the article alphatrader. Very well written and presented.
27/02/2022 2:30 PM
Johnzhang Did you do a thorough check if Hexind and Ancom are in fertilizer business?? Pls do so before you post .
As far as I know , Hexind is a small trading outfit for industrial chemicals, nothing to do with fertilizer. For Ancom, it core business is Agricultural chemical eg herbicide, insecticide etc. Ancom benefited a lot from one herbicide that they manufacture and the product price has surged considerably.
27/02/2022 4:44 PM
Johnzhang The real direct beneficiaries are palm oil , oil & gas Upstream producers. Aluminium and steel companies will also benefit to some extent
27/02/2022 4:46 PM
pokerpro88 hey John I read the annual report and it's correct. You are are always promoting cpo only and thats ok. But this article is not for you to promote your agenda
27/02/2022 5:02 PM
pokerpro88 dont be another KYY. sick of people like you
27/02/2022 5:04 PM
information China so far not helping Russia evade Western sanctions-U.S. official

https://www.ibtimes.com/china-so-far-not-helping-russia-evade-western-sanctions-us-official-3415677

Some of that trade is conducted in China's yuan currency, which could technically fall outside of sanctions aimed at cutting Russia off from transactions in U.S. dollars, euros, sterling and other major currencies.

But Chinese banks that do business with Russian banks and other entities hit with full blocking sanctions and put on the Treasury's "specially designated nationals" list could face sanctions themselves and loss of access to the U.S. financial system.

The official said that if China were to help Russia evade U.S. sanctions, "it really would be an unfortunate signal for China's vision of the world," and give "tacit or explicit accommodation to Russia's invasion of a sovereign country in the heart of Europe."

"It would do profound damage to its reputation in Europe, but really across the world," the official said of China.
27/02/2022 5:13 PM
Johnzhang Pokerpro88,
I suppose you are a big investor in Hexind. I had no intention to spoil your soup. I am just sharing information that i personally know in a public forum befitting to the title of the blog . So, what are you so angry about ?

Hexind was renamed from SCH Group bhd in 2021. In 2018, in a corporate exercise, PK fertilizers was injected into the group , I supposed is was for the intention of boosting turnover only. You must go to check what's SCH core business and expertise prior to 2018.

Let's talk about fertilizer !. In FY2020 and 2021, fertilizer sales was only $81 mil compared to $7.0 - 7.5 bil market size in Malaysia. Its market share is a tiny 1.1% that the market don,t even noticed it is a fertilizer player.

Let's look at financial numbers :
FY2021 EPS was 0.68 sen , PAT margin 1.6%
FY2019 EPS was 2.4 sen , PAT margin 4.7%
FY2018 EPS was 1.02 sen , PAT margin 4.1%
EPS and PAT margin decline substantially in FY2021.

In 2021, fertilizer prices were HIGHER between 50 to 100% compared to previous years. Let me ask you a simple question : Did the company make more money in FY2021 when fertilizer prices rocketed ? Clearly NO! Then, what makes you think that the company will benefit from further price increase due to Ukraine-russian war ?

I only share things that I know very well including plantation business. Can you tell me what have I shared about plantation that do not hold water ? I share my knowledge in plantation since 2020 and isn't all what i share come true ?

Don't be blind and lose the little money you have.
27/02/2022 7:19 PM
calvintaneng Ukraine and Russia export 75% of sunflower seed oil and being bread basket of Europe will see corn and wheat price spike

now Ukraine farmers are running away and Agriculture export from Russia got boycott

Canola oil of Canada already failed due to drought
In Brazil north too much rain impact soybean harvest while Brazil Parana suffered from drought

Malaysia recently experienced a 100 year flood even plus lack of Fruit harvester for palm oil reduced production

All these events will converge and make palm oil go up in the Once a Century Super Bull Run time

Expect palm oil stocks to go up 300% to Rm1,000%
27/02/2022 7:43 PM
Sslee Haha nowadays many KYY wannable, just look at the cover story and did not even read the content before come up with all the half past six promotion articles. No wonder 90% of investors are actually lossing money in stock market.
27/02/2022 7:45 PM
mrbusiness If I am to choose between fertilizer and palm oil, of course palm oil is better and I think it is common sense. Correct?
27/02/2022 8:03 PM
Sslee In Malaysia who is the biggest Urea producer?

SOURCES OF NPK FERTILIZER...COMPOSITION
The sources of nitrogen used in fertilizers are many, including ammonia (NH3 ), diammonium phosphate ((NH4 ) 2HPO4 ), ammonium nitrate (NH4NO3 ), ammonium sulfate ((NH4 ) 2 SO4 ), calcium cyanamide (CaCN2 ), calcium nitrate (Ca(NO3 ) 2 ), sodium nitrate (NaNO3 ), and urea (N2H4CO). Phosphorus is generally supplied as a phosphate, such as diammonium phosphate ((NH4 ) 2HPO4 ) or calcium dihydrogen phosphate (Ca(H2 PO4 ) 2 ).

Potassium comes from potassium sulfate (K2 SO4 ) or potassium chloride (KCl), which is also called muriate of potash. The phosphorus content of a fertilizer is specified as the amount of P2O5 because this is the anhydrous form of phosphoric acid. In this sense it is the most concentrated form of phosphate, which is the form of phosphorus required by plants. The potassium content is designated in terms of K2O, which is also called potash. Potash is a component of the residue left when plant materials are incinerated. The spreading of ashes on fields is an ancient method of replenishing potassium.

Modern chemical fertilizers usually contain KCl instead, but the potassium content is still specified as the equivalent amount of potash. Potassium chloride is 52% by weight K. Potash is 83% potassium. Thus, KCl provides only about 2/3 as much potassium asthe same weight of K2O. Thus, if a fertilizer is 25% KCl by weight, its potassium rating, based on potash, would be only 16.
27/02/2022 8:45 PM
pokerpro88 Johnzhang First of all thank you for "looking out for the little money I have" and I see fine. I do not disagree with your numbers and analysis on cpo and hence thats why cpo stocks are already flying. I do not even own hextar but would consider buying it. My point is this forum is for sharing of info and not to run down or put down peolple's opinion
27/02/2022 8:56 PM
pokerpro88 Some bloggers get a bad rap on i3 not because they make bad calls or bad reports, but the mere fact of recommending a stock and doing a 180 shortly.
27/02/2022 8:59 PM
pokerpro88 I believe stocks go up and down for a myriad of reasons. If you are a fundamentalist and only want to make money that way, thats fine. Other'may make money from charts, thats great. Bottom line there is no "right" or "correct' stock to buy. Peace to you
27/02/2022 9:02 PM
Johnzhang Pokerpro88, There is big difference between running down on people and pointing out misinformation or misleading information for the interest of general public. Hope you don’t take both the same .
————————————————————————-

Posted by pokerpro88 > Feb 27, 2022 8:56 PM | Report Abuse

Johnzhang First of all thank you for "looking out for the little money I have" and I see fine. I do not disagree with your numbers and analysis on cpo and hence thats why cpo stocks are already flying. I do not even own hextar but would consider buying it. My point is this forum is for sharing of info and not to run down or put down peolple's opinion
27/02/2022 9:17 PM
sherlockman Well said pokerpro88....most important is making money. No right or wrong way!
27/02/2022 9:31 PM
calvintaneng If you really want to make real serious money there is only one class of stocks that will outperform all others

That is palm oil shares

Palm oil for the last one year being suppressed by ib banks and the fickle media will now rise up in pent up explosive demand to make up for loss time
27/02/2022 10:41 PM
TheAlphaTrader Sslee...Why would I wanna be KYY? It is hard enough just to be myself. Btw, as a Christian I did pray for your mum after I read your article. I hope she is good and well now.
28/02/2022 8:38 AM
pokerpro88 good call!
18/04/2022 5:39 PM
pokerpro88 it's already up over 35% since this article...wonder if it's time to take some profits...
18/04/2022 5:41 PM

FOOD FOR THOUGHT: SOMETHING IS BREWING AT CWG HOLDINGS BHD (9423)?

Author: TheAlphaTrader   |  Publish date: Fri, 18 Feb 2022, 11:35 AM


 

 

BACKGROUND 

 

CWG Holdings Bhd (CWG) is primarily involved in the manufacture and sale of stationery and printing materials. The company has been around since 1959 and was listed on the KLSE in 1994 as Chee Wah Corporation Bhd. In 2017, the company underwent an intrernal reorganization and share exchange exercise, as well as renaming the company to CWG Holdings Bhd. Their premium brand, “CAMPAP” is very well known and as a consumer, I have been using their stationery products for many years. The brand has received multiple accolades, both locally and abroad,including the Superbrands Malaysia Award in 2005 and the BrandLaureate BestBrands Award 2018-2019.

 

CWG derives a whopping 75% of its revenue from exports. The strong USD augurs well for the company’s earnings, and that is good news for CWG since the Federal Reserve is on the bias of raising interest rates for the rest of this year. In fact, CWG had quite a good run in 2015 as a proxy to the weak RM play when it went up almost 400% in a span of 6 months!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Just like many other companies, the pandemic had a negative impact on CMG’s performance in FYE 2021, with the company registering a loss of RM1.5 million. Having said that, it is worth to note that CWG had been consistently making profits for the prior 6 years preceding Covid-19, with profits ranging from RM2.6 million to RM7.0 million. Going forward, things should be perking up with the worse of the pandemic behind us. Most recently, CWG registered a Q1 FYE2022 profit of RM346,000. The next quarterly financial report is expected to be released by end of February 2022.

 

Going beyond financials, what is exciting for CWG is actually the emergence of a new subsatntial shareholder on 28th January 2022 and the bonus issue of free warrants.

 

 

 

 

INTERESTING CORPORATE DEVELOPMENTS 

 

 

1) Private placement 

 

A Private Placement of 20% of the total number of issued shares or 25.2 million new shares were placed out to Datuk Hong Choon Hau at RM0.40 while another 10% new shares were placed out to unidentified new investors at RM0.405.  Datuk Hong has also been made Executive Director of CWG effective from 16 Feb 2022. 

 

 

 

So, who is Datuk Hong Choon Hau?  

 

 

 

 

Datuk Hong bought a substantial stake into the biotech company Sunzen Bhd back in June 2014. From the Bursa Malaysia announcements, he aquired 41 million shares or 27.5% of the company at RM0.26 per share. He has since exited the company in Jan 2021.

 

 

 

 

 

Interesting to note from the price chart of Sunzen, in the span of 12 months after Datuk Hong’s entry into Sunzen in June 2014, the price of the company went up 80% from RM0.26 RM0.47! Will the same magic happen with CWG? 

 

 

 

2) Bonus Issue of Warrants

 

As a way to reward existing and new shareholders, CWG will also issue bonus free warrants on the basis of 2 warrants for every 1 existing share. The ex date for these free warrants are on the 25 Feb 2022. What this mean is that shares have to be purchased by 24 Feb 2022 in order to be entiltled for the free warrants. The exercise price of the warrants are fixed at only RM0.36 with a tenure of 5 years.

 

 

From our observation of late, there have been many profitable corporate exercises that resulted in good returns for investors by purchasing the mother share and participating in the bonus warrants/bonus shares exercise. 

 

 

 

 

TECHNICAL PICTURE 

 

 

 

From the weekly chart, we can see a that until July 2021 the volume traded on CWG was very light. However, for reasons that were not driven by any newsflow at that time. volumes saw a huge spike in July 2021, leading to big jump in price from the RM0.40 level to a high of RM0.70. 

 

Since the past 6 months, the volume traded has been way above the daily average while the stock has been slowly trending up from the RM0.40 level to the current RM0.50 level.

 

From the rising uptrend channel that started in June 2020, the levels to be tested on the upside rests at RM0.70, while the support sits firmly at the RM0.43 level.

 

 

 

 

CONCLUSION

 

It will be interesting to see what Datuk Hong’s plans are for CWG in the coming months. The best way to benefit from any potential upside fo CWG’s price is to buy the shares before it goes ex bonus as the leverage from the upside of the warrants will be amplified.

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: CWG
  3 people like this.
 
Dkk08 Wow.. hoot9e.. Huat ar.. Must thanks this writer for sharing a few good writeup recently
18/02/2022 11:47 AM
Kangol99 Sharp observation! Alpha Trader
18/02/2022 5:36 PM

ROARING YEAR FOR COMMODITY RELATED STOCKS - TOP PICK: FOCUS LUMBER BHD (5197)

Author: TheAlphaTrader   |  Publish date: Mon, 7 Feb 2022, 11:32 AM


 

Commodity prices have been on a tear, reaching multi-year highs. We are seeing surging prices in crude oil to food commodities, potash and fertilizer to lumber prices. Supply side constraints have played a more prominent role in driving the recent leg up in prices across commodities. Weather has also played a key role in pushing agricultural prices higher across the board, as recent torrential rains in Malaysia wreaked havoc on crude palm oil prices, while the drought in South America pushed soybeans and corn prices to multi-year levels. Not to mention the conflict in Ukraine, raising the geopolitical risk premium and magnifying the prices of crude oil and wheat, as fears of any supply disruptions would further exacerbate the already tight supply balance sheet for these commodities.

 

On the home front, we see clear winners in commodity related stocks benefitting from the global  commodity bull run. Three of the commodity related stocks which I have highlighted in previous posts on this blog have done well and will continue to do well in the current environment.

 

 

 

1) HEXTAR INDUSTRIES BHD

 

 

Agrochemical and fertilizer prices have been on a rise since 2021 and there is no signs of slowing down. Hextar Industries Bhd has been a big beneficiary of this, having seen its price almost doubling from RM0.16 at the start of 2022 to RM0.30 (as of 5 Feb 2022)!

 

 

 

2) RESERVOIR LINK BHD

 

 

With crude prices breaking through USD90 per barrel, the long term prospects for Reservoir Link Bhd remain promising. Technically, a break and close above RM0.58 would be a bullish confirmation for the next move.

 

 


3) FOCUS LUMBER BHD

 

 

 

Focus Lumber traded at a 52 week high of RM1.47 on 19 Jan 2022. It is currently in a consolidaton range between RM1.35 to RM1.40, which in my view offers a good buying opportunity before the next motive move occurs. The current uptrend move started after a successful retest of the RM1.00 level on 7 Dec 2021 is still intact, as long as the RM1.22 level is not broken. 

 

As mentioned in a previous article, a test of RM1.90 and RM2.50 would be target levels to aim for in the medium term.

 

 

 

 

WHY FOCUS LUMBER? 

 

 

1) HIGH LUMBER PRICES

 

 

 

Lumber prices have been on a strong uptrend since bottoming at USD 448 in Aug 2021. It last  closed at USD 1070 on 4 Feb 2022, up a whopping 238% from the lows in Aug 2021!  In fact, the lumber futures trade locked at limit up for the last 3 trading sessions on the Chicago Mercantile Exchange!

 

Focus Lumber is able to capitalise on the high lumber prices as it supplies plywood to the USA for the Recreational Vehicles (RV) sector. In fact 60% of Focus Lumber’s revenue in the USA is derived from the RV sector. Although there is no futures contract for plywood prices, it tends to mirror the price movement in the price of lumber futures. 

 

 

2) UPCOMING QUARTER RESULTS 

 

The next quarterly financial results is due to release by the end of February 2022. Given the information that we have, it is likely going to be good set of results which will be the catalyst for the market to work with. However, if you prefer to play it safe you may want to wait for the results to confirm your prognosis before buying but given the relative illiquid nature of the stock, the price will adjust very swiftly to any good news (or bad news)!

 

As we say in this business, we are trading with the probabities and take the best trades with the best risk-to-reward tilted in our favour.

 

 

 

 

CONCLUSION

 

I believe we are currently at the start of a commodity super cycle. It is probably prudent to invest in some commodity themed stocks to capitalize on the impending bull market conditions. Being early in a supercycle can be very profitable as we have seen in the glove and tech mania recently, but knowing when to cash out is equally important! 

 

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks.Consult your financial consultant before making any financial investments.

Labels: FLBHD
  3 people like this.
 
Dkk08 Hoot 9E
07/02/2022 11:42 AM
Johnzhang ….and all the plantation stocks. Earnings and dividend for 2021 are very robust. Forecast earnings for 2022 is even better .
07/02/2022 1:29 PM
gladiator Buy Taann with palm oil, timber & plywood with good profit and good dividend.
07/02/2022 4:35 PM
vision912 https://www.theedgemarkets.com/article/focus-lumber-rises-28-positive-technical-and-quarterly-earnings-outlook
08/02/2022 1:13 PM
sherlockman lumber futures were limit up again for the 5th consecutive day last night!
09/02/2022 9:40 AM

HEITECH PADU BHD (5028) ENTERING THE DATA CENTRE BUSINESS IN A BIG WAY

Author: TheAlphaTrader   |  Publish date: Mon, 17 Jan 2022, 2:22 PM


 

COMPANY BACKGROUND

 

HeiTech Padu Berhad (Heitech) is engaged in the provision of information technolgy (IT) systems, specialising in the development of Information and Communication Technology (ICT) systems and infrastructure solutions for the public and private sectors. Apart from ICT, the Group also ventured into other areas such as engineering works, mailing and document processing activities and renewable energy. 

 

 

 

POINTS OF INTEREST

 

 

 

1. JOINT VENTURE (JV) WITH REGAL ORION BHD AS A CATALYST

 

 

- Background of Regal Orion (RO)

 

RO is a company incorporated on 19 October 2017 and is owned by Japanese IT specialists investors. The principal activities of RO are the engineering, construction and project management specificaly in the data centre development sector.

 

RO’s maiden project is located at Techpark @Enstek, Labu, Negeri Sembilan which it bought back in March 2018. 

 

 

- The JV between Heitech and RO

 

Heitech and RO entered into an unincorporated joint venture agreement on 5 March 2021 for the construction of a Tier IV data centre on a piece of land owned by Heitech in Shah Alam, Selangor. The JV project includes the construction, commissioning and testing of the Tier IV data centre, which comprises a five storey building with racks to be tenanted upon completion by international or multinational tenants.

 

Heitech currently operates another data centre on the Shah Alam land and the new JV project will be built on the undeveloped portion of the land. Under the agreement, Heitech will grant RO the right to develop the land in exchange for a 20% cut of the profit after tax of the project. The project is expected to be completed by Sept 2024.

 

 

- RM350 million contract from RO for the design, engineering, procurement, construction, installation and commissioning (DEPCIC) of a data centre in Negeri Sembilan

 

Further to the JV in March 2021, on 16 Aug 2021 Heitech also secured a RM350 million contract from RO for the DEPCIC of the data centre in Negeri Sembilan, which it acquired back in 2018. RO aims to turn the facility into a premium Tier IV next generation green mega data centre, which will have a total of 120,000 sq feet of Net Hosting Space Area.

 

The execution and successful completion of the DEPCIC will contribute positively to the revenue and earnings of Heitech in the years to come.

 

 

- Private Placement of 10 million new shares to RO

 

A Private Placement of 10 million new ordinary shares to RO was proposed on 24 June 2021 and was subsequently approved by Bursa Malaysia on 17 July 2021. As at the time of writing (15 Jan 2022) the placement has not been completed nor has the price been fixed. 

 

Typically, Private Placements are completed within 6 months of the regulatory approval date. So could the recent strength in price be linked to the price fixing for the Private Placement?

 

 

 

 

2.  GOOD CHART STRUCTURE

 

 

 

Heitech broke the downtrend line (in place since 16 Feb 2021) on 13 Dec 2021 by closing at the day high of RM1.30. It has successfully retested the new uptrendline on 7Jan 2022 at RM1.25 and has managed to close above RM1.30 for the next 5 conseutive days despite the current challenging market environment for tech stocks.

 

1st resistance zone can be pegged at RM1.55 to RM1.70 while the next resistance stands at RM1.80, which if broken would represent a new 52 week high. The support zone is at RM1.03 to RM1.13 levels.

 

Interesting to note that when the JV with Regal Orion was announced on 5 March 2021, the price of Heitech was at RM1.60.

 

 

 

 

3.  INTERESTING LIST OF SUBSTANTIAL SHAREHOLDERS

 

 

Looking at the list of the top 30 shareholders from the latest Annual Report, we find 2 new prominent investors who bought into Heitech somewhere between 30 April 2020 and 3 April 2021. 

 

Dato Eddie Ong Choo Meng( Dato Eddie) is the third biggest shareholder with 5 million shares (4.9% of the company) while Datuk Chiau Beng Teik (Datuk Chiau) and his son collectively own 5.1 million shares.

 

Dato Eddie Ong is the owner of the Hextar Group of companies and also has substantial holdings in a string of other public listed companies. Based on historical evidence, there is always a lot of price action in the companies that Dato Eddie has investments in, the most recent being in Complete Logistics Bhd which has just made a new all-time high of RM2.92 on 14 Jan 2022. Hextar Global Bhd was up a whopping 193% in 2021 making it one of the best performing stocks of the year.

 

Datuk Chiau is no stranger to stock market punters, being the boss at Chin Hin Group of companies. Chin Hin Group Bhd was also one of the darlings of the stock market in 2021 rising from RM0.90 in Jan 2021 to close at RM2.55 on 31 Dec 2021, for an astounding gain of 280%!

 

Some may remember back in 2020 when Regal Orion was considering a reverse takeover (RTO) into GPA Holdings Bhd (now renamed Joe Bhd). Coincidentally, Dato Eddie was also in the running to acquire the stake in GPA from Tan Sri Tan Hua Choon. Could it be a sheer coincidence that both Regal Orion and Dato Eddie also made presence in Heitech?

 

 

 

 

4. STILL OBTAINING NEW AWARDS OF CONTRACT WORK

 

Heitech was recently awarded a contract on 17 Dec 2021 for the supply, installation and management of the network infrastructure for Permodalan Nasional Berhad (PNB)’s new office at Merdeka 118. The contract is valued at RM21.7 million and is for a period of 42 months.

 

Heitech also has an ongoing contract worth RM36.2 million with JPJ Malaysia for Infrastructure ICT work and the mySIKAP project. This project duration is for 1 year starting in September 2021 and will contribute positively to the the bottomline for Heitech’s FYE 2022.

 

 

 

 

CONCLUSION

 

Valued at only RM133 million market cap coupled with the right catalyst and good technical chart setup, Heitech could be a stock to look out for in 2022 and beyond! Although tech stocks may not be in vouge at the moment, Heitech has its own fundamental reasons for getting a rerating.

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

  4 people like this.
 

FOCUS LUMBER BHD (5197) - THE TREND IS YOUR FRIEND

Author: TheAlphaTrader   |  Publish date: Thu, 6 Jan 2022, 11:07 AM


 

 

BACKGROUND INFORMATION

 

Focus Lumber Bhd (FLB) is involved in the maufacturing and sale of plywood, veneer and laminated lumber. The company also reuses bulk waste to generate biomass energy to supply electricity for its operations. FLB’s products are mainly targetted for the export market (95%) mainly to the USA, Taiwan, Thailand, Hong Kong and Japan. The USA market accounts for about 76% of the exports and growing.

 

FLB was incorporated in 1989 and listed on the Main Board of the KLSE in 2011 with an IPO price of RM0.60 per share. The major shareholder of FLB is owned by Mr. Lin Fong Ming and his family members, accounting for 27%. Mr Lin, a Taiwanese, is also one of the founders of the company.

 

 

 

POINTS OF INTEREST

 

 

1) VERY SOLID CHART STRUCTURE

 

 

From the daily chart, we can see a very nice uptrend in motion. The current move started to take shape after the long-term pivot point of RM1.00 was broken to the upside on 18 Nov 2021 to reach a high of RM1.17 on 22 Nov 2021. A successful retest of the RM1.00 level on 7 Dec 2021 paved the way for the current motive move which is still making new 52-week highs. 

 

What is impressive about FLB’s price movement was, despite the overall weak market sentiment in Nov and Dec 2021, FLB continued to show strength. Further confirmation of this new motive move was when prices broke through the previous 52-week high of RM1.22 on 22 Dec 2021 and continued to make new highs with hardly any price retracements.

 

 

 

Looking at the weekly chart of FLB from the time of its listing, we can see a wide range in price from an all-time  low of RM0.50 to an all-time high of RM3.10.  A clear downtrend line breakout has occurred on 5 Dec 2021 and continues to trend nicely with little price retracement so far.

 

If the same momentum of the move persists, it seems like a test of RM1.90 (1st resistance) and RM2.50 (2nd resistance) could be on the cards in the coming weeks.

 

 

 

2)  RECOVERY THEMED PLAY

 

FLB is a good proxy to the recovery themed play through the USA recreational vehicles (RV) sector.  About 60% of FLB’s revenue in the USA is derived from the RV sector. With stock indices in the USA trading near the all-time highs,  this bodes well for the strong consumer spending to continue in the near future.

 

 

 

3) NET CASH COMPANY

 

FLB has a very healthy net cash position of RM88.7 million or RM0.83 per share with no bank borrowings. That is impressive gven that the market capitalisation of the company is only at RM149 million! 

 

 

 

4) IMPROVING FINANCIALS

 

 

 

After showing a dismal consecutive 8 quarters of losses, FLB has managed to turn around good profits in the last 2 consecutive quarters of RM4.1 million and RM1.7 million, respectively. The next quarterly profit is expected to release in Feb 2022 and judging by the recent price action, the market seems to be betting that it will be a good one.

 

FLB is also trading below its NTA of RM1.63 and offers a decent dividend yield of 3.62%.

 

 

 

CONCLUSION

 

FLB is showing a very promising price structure that seems to be only at the beginning stage of a big move. At the present time, there does not seem to be any market moving news for this stock but price always precedes news flow. The first resistance is at RM1.90 followed by RM2.50with only a break below RM1.22 would invalidate the current chart structure.

 

 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: FLBHD
  3 people like this.
 
morivae 1) Do you know where's the company office located?
2) Do you know that the company's directors actually "LIVE" in the company office?
3) Do you know the company management style?
06/01/2022 2:10 PM
Yong Chian Haw morivae what point are you actually trying to bring? As far as I know it is operating it business mainly at Sabah. They live in company office to work 24/7???
07/01/2022 9:41 AM
sato Issue more ESOS tickets…
08/01/2022 9:52 PM

KARYON INDUSTRIES BERHAD (0054) - A CONSISTENTLY PROFITABLE SMALL CAP COMPANY

Author: TheAlphaTrader   |  Publish date: Mon, 27 Dec 2021, 10:26 AM


 

Karyon Industries Bhd (KIB) is an investment holding company founded in 1989. It was listed on the MESDAQ Market in September 2004 and was successfully transferred to the Main Board in May 2014. 

 

KIB has two major wholly owned subsidiaries, Hsin Lung Sdn Bhd (HLSB) and Albright Industries (M) Sdn Bhd (AISB), which are involved in the manufacturing polymeric products.

 

HLSB is one of the largest manufacturers of Polyvinyl Chloride Compound (PVC) in Malaysia with a production capacity of 30,000 metric tonnes per annum. PVC is used in various applications including wire and cable coverings, footwear linings, gaskets and many more. HLSB also produces various types of PVC hoses for household and industrial purposes.

 

AISB is mainly involved in the manufacturing and trading of metallic stearates, PVC stabilisers and additives.

 

 

 

 

POINTS OF INTEREST

 

 

 

 

1) NEVER FAILED TO TURN IN A PROFIT ANNUALLY 

 

 

 

 

 

KIB has reported annual profits consistently for the last 17 years since its listing! KIB currently trades at a trailing PE ratio of 16 times and has an NTA of RM0.23 per share. It has a net cash position of RM25.3 milliion vs a market capitalisation of only RM114 million. It has also adopted a consistent dividend payout policy with the current divident yield at 4.16%.

 

Although the most recent financial quarter showed a decrease in profit due to the MCO period, which limited the workforce operations to 60 percent capacity. Despite the challenging period, KIB was still able to turn in a profit of RM829,000. I expect the next quarterly results to improve with the production capacity returning to normal operating levels.

 

 

 

2) KEY EXECUTIVES ARE ALSO SUBSTANTIAL SHAREHOLDERS

 

KIB was founded by Dr Chua Kee Lam, a very well respected chemist back in 1989. He is also currently the second largest shareholder in KIB. His son, Mr. Chua Ling Hong, is the current CEO of the company (helming the positon since 2016), and also the fourth biggest shareholder with a 4% stake. The younger Chua has already demonstrated his calibre by delivering the best profit results (RM10.8 million) in the company’s history in FYE 2018!

 

Another major shareholder is Mr. Yeoh Chin Kiang, who has recently assumed the position of Executive Deputy Chairman. He was previously the Executive Director at Ta Win Holdings Bhd. His son Mr.Yeoh Eng How is also the Executive Director of KIB. 

 

 

 

3) INSIDER BUYING

 

Both executive families of KIB have been consistently purchasing shares of the company. Since May 2021, both the Chua and Yeoh families have collectively purchased over 7 milion shares at prices ranging from RM0.225 to RM0.30. The most recent purchase was just made on 21 Dec 2021 for 350,000 shares at RM0.225.

 

As an illustration of how markets can be irrational, in April 2014, the NTA of KIB was at RM0.20 per share when the stock hit an all-time high of RM0.385. The surge in price then was premise on the excitement of KIB’s transfer to the Main Board.  Fast forward 7 years later, the company’s balance sheet is now stronger, with NTA at RM0.22 per share. This is after taking into account dividends paid out almost yearly, yet the share price is only RM0.24! Maybe that is why the insiders are buying so many shares at current prices!

 

So, if the insiders who know their company so well, see value at the current prices, it is definitely a good buying indicator for the fundamental investor!

 

 

 

4) SMALL CAP STOCKS SEASONALITY

 

Small cap and penny stocks tend to have seasonal rallies near Chinese New Year. At the current price, KIB offers a good entry point to capture any seasonal rallies, if it materializes.

 

 

 

 

TECHNICALS

 

 

 

 

From the daily chart, a nice trading range is clearly defined with the support zone at RM0.20 to RM0.22 zone, while the resistance zone is at RM0.31 to RM0.33. A break above resistance zone would see a test of the 2020 year high of RM0.355, and then the all-time high price of RM0.385 set back in 2014.

 

 

 

 

CONCLUSION

 

At the current level, KIB offers an excellent value proposition. Downside seems limited, both from a fundamental and technical perspective. As one of the largest PVC manufacturers in Malaysia and backed by a strong management team, I am confident of the long-term growth and prospect of this company.

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: KARYON
  3 people like this.
 

RESERVOIR LINK ENERGY BHD ( 0219 ) - AN INTERESTING SOLAR RENEWABLE ENERGY PLAY

Author: TheAlphaTrader   |  Publish date: Thu, 16 Dec 2021, 10:40 AM


 

Reservoir Link Energy Bhd (RL) is one of my favourite stocks in the Oil and Gas (O&G) sector on the KLSE. RL is the provider of well services for O&G Operators that support upstream segments of the industry. Apart from its core perforation service, RL also provides well leak repair, well testing, wireline services and consultancy services.

 

RL was incorporated in 2009 and has 12 years of experience in the niche segment of providing well perforation services. The company was listed recently in July 2020 on the ACE Market. The IPO received an oversubscription of 11.5 times and was offered at RM0.41 per share.

 

While there has been several reports covered on RL’s O&G business, this article will emphasize on RL’s recent foray into the solar and renewable energy business. In April 2021, RL made a  51% acquisition of Founder Energy Sdn Bhd for RM21.16 million. The acquisition will be funded via a cash consideration of RM8.46 million and the issuance of 18.15 million new shares at RM0.70 to Mr Lee Seng Chi, the owner of Solar Bina Sdn Bhd.

 

 

 

 

POINTS OF INTEREST

 

 

 

1) PURCHASE OF FOUNDER ENERGY SDN BHD (FESB)

 

FESB is a special purpose vehicle that was incorporated to facilitate the transfer of the identified business and assets from Solar Bina Sdn Bhd (Mr Lee Seng Chi’s company) into the new entity.

 

Solar Bina Sdn Bhd was incorporated on 8 May 2015. It is involved primarily in the supply of solar mounting system and provision of services for the installation of solar mounting system. Since its incorporation, Solar Bina has successfully completed 50MW of solar rooftop projects and 250MW of LSSPV projects.

 

The acquisition also has the comfort of a RM13.8 million profit guarantee from Mr. Lee over the next 2 years. With regard to the price paid for FESB of RM21 million, it is deemed very attractive as it values the acquistion at only 6 times PE (based on RM3.528 million being 51% of the annualised Profit Guarantee). This is a very compelling valuation when compared to the likes of Solarvest Holdings Bhd (PE of 51.9 times), Samaiden Group Bhd (PE ratio of 44.2 times) and Pekat Group Bhd (PE ratio of 15.2 times)

 

The structure of the acquisition also has a good safety element for RL since only 30% of new shares will be issued to Mr. Lee Seng Chi once the acquisition is completed, and the remaining shares  will only be issued once FESB meets its profit guarantee as per the agreement.

 

 

 

2) IMPRESSIVE LATEST QUARTER RESULTS

 

 

 

 

The recent quarter showed an astounding 9 fold quarter-on-quarter profit jump from RM630k to RM5.8 million. Turnover was at a new record of RM38.2 million. The very strong showing already reflects the maiden contribution of the new solar renewable energy business.

 

RL currently trades at a undemanding trailing PE of only 9 times and also has a net cash balance sheet of RM25 million.

 

 

3) TRANSFER TO MAIN BOARD OF KLSE

 

RL has submitted the application to transfer its listing to the Main Board of the KLSE on 28 Sept 2021. If all goes well, the transfer could take place around March 2022. RL was able to apply for the transfer as it has managed to achieve an accumulated profit of RM25.4 million for 3 consecutive financial years. A transfer to the Main Board could further endorses RL’s reputation and investibility in the eyes of the investment community. 

 

 

3) COMPANY INSIDERS BUYING 

 

The Executive Director of the company Mr. Thien Chiet Chai recently bought 100k shares at RM0.474 on 30 Nov 2021 after being a net seller of shares earlier in the year at much higher prices. Mr Lee Seng Chi (the owner of Solar Bina) also followed suit by buying 300k shares recently at RM0.475 on 2 Dec 2021.

 

This is a good signal that a floor price could be set at RM0.475 since the insiders see good value at this level.

 

 

 

 

TECHNICALS

 

 

 

 

RL has shown a wide price range from a low of RM0.29 on 5 October 2020 to a high of RM0.83 on 13 April 2021. The highs hit in April 2021 was attributed to the positive response to the FESB news. The lows recorded in Oct 2020 was probably due the bearish sentiment in oil prices. (WTI crude was trading at USD35.00 per barrel  then vs USD71.00 per barrel today)

 

It is in a classic symmetrical triangle pattern with the lower boundary sitting at RM0.47 and upper boundary at RM0.58. For the price structure to turn really bullish we would need a clean break above RM0.58 (which is also the resistance-turned-pivot point). After which, I would be looking at RM0.66 and then a test of RM0.83.

 

 

 

CONCLUSION

 

RL is a breath of fresh air given the recent controversy surrounding some O&G stocks. With no legacy issues plaguing them, I am optimistic that the strong and focussed management team at RL can continue to deliver the goods.

 

With the attractive valuations of the the new acquistion in FESB and consistent growth in its core upstream O&G well services, I believe RL will be a stock to watch in 2022! 

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: RL
  2 people like this.
 
Dkk08 hoot 9e
16/12/2021 11:10 AM
Peterng123 Sell of shares seems to be direct business transaction
16/12/2021 3:04 PM

MARKET MUSINGS: MY FIVE TRADING PRINCIPLES

Author: TheAlphaTrader   |  Publish date: Tue, 7 Dec 2021, 12:22 PM


Whether you consider yourself an investor or trader, a fundamentalist or technician, long-term or short-term biased, I believe we should strive to follow a set of rules when it comes to the financial markets. In the past couple of weeks, the volatility we witnessed in the markets have demonstrated how a single headline can move asset classes in ranges way outside the normal standard deviations.

 

 

 

MY PERSONAL VIEW 

 

I consider myself more of a trader than an investor, favouring technical over fundamental analysis. There is no right or wrong approach here. It is more of a function on your personality traits and how you view the financial markets. 

 

Being involved in the derivatives market for over 20 years, where markets react in mere seconds and minutes (rather than days) using technical trading is the only way to thrive in that world. As for stocks, I prefer to be take on a more medium-term approach as stocks typically do not move as rapidly as in the futures markets (of course recent events have shown otherwise!)

 

 

1) ALWAYS HAVE A STOP LOSS POLICY

 

From most good investment books that you read out there, this is always the number one rule that is frequently mentioned. Stop loss should be determined once a trade or investment is initiated. Most people like to ask what the target price or profit objective is, but the more important question should be where to place the stop loss. It is human nature to be optimistic when a trade is entered, the excitement of the profit potential that we do not account for worst case scenarios.

 

 

2)  NEVER FALL IN LOVE WITH A INVESTMENT/TRADE

 

How often do we hear of how good a stock is and the fundamental reasons why it should be worth this much? All the fundamentals could be true, but let us not forget we are living in volatile and uncertain times, and there are many macro conditions to consider when assessing a particular investment or trade. 

So, to fall in love with a particular investment or trade without employing a stop loss policy, could be potentially devastating to your bankroll and financial health.

 

 

3) NEVER GIVE UP ON A TRADE IDEA

 

This could sound contradictory to the previous rule, but it is actually quite the opposite. Let us assume that you do really believe in a certain hypothesis on why you want to enter a particular trade. However, due to bad market conditions or some other reason, your stop loss was triggered. Now, if you think your  original hypothesis is still sound, you could still explore the trade  again but from a better price point and better risk-to-reward profile.

 

 

4) CAPITAL PRESERVATION

 

To quote one the greatest stock trader of all time, Jesse Livermore, “Don’t lose your stake. A speculator without cash is like a store-owner with no inventory”.

This highlights the importance of using a stop loss policy to conserve our firepower. As long as there is a market, we can always come back and fight another day!

 

 

5) STAYING POSITIVE AND BELIEVING IN YOUR METHODOLOGY

 

As an active trader, having drawdowns is a very normal occurrence. However, having CONSECUTIVE drawdowns for an extended period of time can be very debilitating to our bankroll as well as to our self confidence! 

Believing in our trading or investing methodology is important. I like looking at good risk-to-return setups so that when I catch on to a good trade, it can make up for the many small losses that i had to take from the losing trades.

 

 

 

CONCLUSION

 

Losing money in financial markets is part and parcel of investing or trading. However, when I lose MORE than what I was supposed to, it was probably because I violated one of my own trading rules! 

 

Stay safe in these uncertain times and happy trading!

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

 

 

 

  Kangol99 likes this.
 
ksng0307 Totally agreed. Trading in fact is a waiting game, one needs to be patience and going for the kill when situations are favorable. Always keep an eye on market structure and the use of multiple time frame really will help to improve your trade performance significantly.
07/12/2021 8:47 PM

ARE GLOVE STOCKS MAKING A COMEBACK?

Author: TheAlphaTrader   |  Publish date: Mon, 29 Nov 2021, 8:49 AM


Last Friday was a brutal day across stock markets worldwide. The KLSE saw nearly 1000 counters down while the Dow Jones Industrial retreated 905 points at the close. Commodities were not spared either, with crude oil dropping over 13%, while gold had small gains from some safe haven buying.

 

Back at the KLSE, a sense of déjà vu played out with the Covid-19 themed stocks from last year. Glove makers and stocks related to the manufacturing of Personal Protective Equipment (PPE) made a stunning comeback.

 

So does the rally this time have legs or is it another failed rally like so many we have seen this year? It is probably too early to tell but from a technical perspective, we will take a look at some potential targets to aim for, if a substantial rally does actually materialize.

 

Let us examine 4 of my favourite covid themed stocks. We will use the fibonacci (FIB) retracement levels as possible target areas.The FIB retracement levels are measured from the pandemic lows in March 2020 to the highs in August 2020. (Note: prices on chart have been adjusted for bonus issues)

 

 

1. TOPGLOVE (7113)

 

 

  • At 61.8% FIB retracement level: RM 4.83

  • At 50% FIB retracement level: RM 5.77

 

 

2.  SUPERMAX (7106)

 

 

 

  • At 61.8% FIB retracement level: RM 5.10

  • At 50% FIB retracement level: RM 6.40

 

 

 

3. CAREPLUS (0163)

 

  • At 61.8% FIB retracement level: RM 2.34

  • At 50% FIB retracement level: RM 3.01

 

 

 

4. TEK SENG (7200)

 

  • At 61.8% FIB retracement level: RM 0.63

  • At 50% FIB retracement level: RM 0.78

 

 

 

INTERESTING OBSERVATIONS

 

  1. All 4 stocks were trading at or near the 52-week lows prior to the big rally on Friday of 26 Nov 2021.
  2. The downtrendline that has been in place since the highs’ in 2020 has just been broken.
  3. Newsflow for the entire glove sectors and PPE related stocks has been very negative, may indicate possible  downside exhaustion?
  4. Macquarie Equities Research has also started coverage on glove stocks on 19 Nov 2021 with the view that the negatives in the sector may already be priced in.

 

 

CONCLUSION

 

The FIB retracement levels may sound quite impossible to achieve given how far down the prices have come. However, at the start of the pandemic, few would have predicted that the Covid 19 themed stocks could have reached those stratospheric price levels that they did. The magnitutude of the subsequent crash in prices also took investors by surprise.

 

The bottomline is, markets are so unpredictable that we have to keep an open mind to all posible scenarios. At the end “Mr Market” will decide where it wants to go. We can only trade the probabilities with the information and technical tools that we are equipped with!  

 

 

Have a good week ahead and happy trading!

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

  vision912 likes this.
 
Fundamental Trader its a downtrend because u are unable to draw an uptrendline, simple as that.
30/11/2021 9:06 AM
Timercheng Downtrend over bro! beginning of new trend
30/11/2021 9:46 AM
CharlesT China mari n change the whole game....susah
30/11/2021 12:05 PM
calvintaneng Those who bought last two days have been caught in bull trap

https://www.youtube.com/watch?v=HKtKcj7PGlQ
30/11/2021 12:10 PM
TheGardener Post removed. Why?
30/11/2021 12:24 PM
ahbah A bigger bull trap now ?
30/11/2021 2:59 PM
Lucifer999 can't say trap lah cos in long term it's still good glove companies are making money
30/11/2021 2:59 PM
SALAM NEW NORMAL..
Share prices can be your money...Co profits may not be your money....
01/12/2021 10:07 AM
Anaconder Supermx give dividends better than put in the bank
01/12/2021 3:59 PM

TEK SENG HOLDINGS BHD (7200) -A VERY GOOD “MEAN REVERSION” TRADE SETUP

Author: TheAlphaTrader   |  Publish date: Fri, 26 Nov 2021, 10:37 AM


Today we will examine a mean reversion trade setup, which I have identified in Tek Seng Holdings Bhd (Tek Seng). This trade is quite different from the other posts that i have shared recently. The premise of previous trades presented so far have come with a good fundamental story, accompanied by a good price chart structure. 

 

In a mean reversion trade setup, we argue that the price chart may not be pretty now but is probably overdone on the downside/upside in relation to the underlying fundamentals.

 

 

FUNDAMENTALS

 

Tek Seng is an investment holding company with its subsidiaries principally involved in the manufacturing and trading of PVC related and non-woven related products, trading of solar cell products, generation and supply of renewable energy as well as property rentals.

 

Tekseng was incorporated in 2002 and listed on the KLSE Second Board in Nov 2004. In Sept 2006, Tekseng successfully transferred its listing to the Main Board of the KLSE.

 

Tekseng trades at a very undemanding trailing PE ratio of only 7 times and below its NTA of RM0.61. It is also a NET CASH company of RM25 million. What is even more attractive about this stock is that, in the current low interest rate environment, Tekseng offers a dividend yield of 8% (the latest dividend of RM0.01 ex date is on 3 Dec 2021)

 

Tekseng was a huge beneficiary from the “Covid-related stocks” theme as it is involved in the manufacture of non-woven related products that are used in the manufacture of face mask and protective gowns. It was a blockbuster FYE 2020 for Tekseng where its profits soared to an astounding RM27.41 million. Thanks to the Covid-related stocks frenzy, the price of Tekseng rallied to an ALL-TIME HIGH of RM1.44 on 6 Aug 2020. At the highs for the year, Tekseng was trading at a PE of almost 19 times for FYE 2020.

 

When the bubble burst on Covid-related stocks, Tekseng was not also spared and dropped precipitously to close at RM0.66 on 21 Dec 2020. Tekseng continued its slide in 2021 and  recently touched its year low of RM0.395 on 19 Nov 2021.

 

 

 

It is clear that the profit for 2021 has been downtrending as the ASP for face mask and protective gowns have been on the decline since the beginning of 2021. However, even with the nationwide lockdowns affecting all companies Tekseng was still able to turn in a commendable cumulative profit of RM 13.7 million for the first 3 quarters of 2021!

 

The reopening of the economy, both locally and globally, will benefit the PVC sheeting segment, which has traditionally been Tekseng’s major revenue contributor for the last 30 years. 

 

 

 

TECHNICALS

 

 

 

From the daily chart we can observe that the price is attempting to break the downtrendline, which held since Oct 2020. As a guide for possible targets for the mean reversion trade, we can utilise fibonacci (FIB) retracement levels. 

 

As measured from the pandemic lows of RM0.12 in Mar 2020 to the Covid theme-induced high of RM1.44, we get the 61.8% FIB level of RM0.63, while 50% FIB level would be RM0.78. Further up, the next FIB level would be RM0.94, which is the 38.2% level.

 

 

 

INTERESTING OBSERVATIONS

 

 

1. The price has overshot on both the upside and downside.

 

 

 

 

Prices tend to overreact on the upside when the sentiment goes in mania overdrive and likewise, overshoots on the downside when slipping into despair mode. If I am making a calculated guess, we are pretty much at the tail end of the latter!

 

 

2. Price reaction was positive after the latest Quarterly Report

 

Post-pandemic, although there has been a massive de-rating of Covid-related stocks, one should not forget that Tekseng remains a profitable company. As reported in the latest quarterly report (released on 19 Nov 2021), Tekseng clocked in a noteworthy Net Profit of RM2.5 million! 

 

The latest quarter was impressive since the country was still in lockdown mode and the demand as well as ASP for personal protective equipment (PPE) had already been on the decline.

 

Interesting to note that Tekseng hit a year low of RM0.395 on the day the latest quarterly results were released. The price action has been positive since then, signalling that the smart money have a view that the worst is probably priced in.

 

 

 

SCENARIOS GOING FORWARD

 

 

1. Current Profit Levels Remains or Improve

 

We will assume that the PPE demand and prices have stabilised and the company will go back to relying on its traditional income stream in manufacturing and trading of PVC sheets. Therefore, in our worse case scenario of RM2.5 million per quarter would translate to a prospective PE ratio of 12 times (if we take into account the net cash position of RM25 million) 

 

 

2. Dividend Payout Policy Remains

 

Tekseng has declared a dividend of RM0.01 for the last 3 Quarters of 2021! So, if we add the RM0.005 declared in Q4 2020 we get a total dividend of RM0.035 for the last 4 quarters, which translates to a yield of 8.3%!  

 

If the company maintains this exceptional dividend payout policy, I see many investors flocking to Tekseng as a dividend stock investment.

 

A simple check on the Insage software for the top dividend stocks on KLSE you will find only 9 stocks that pay over 7% dividend. Amongs the other popular dividend stocks like Topglove, Kossan and TAANN, you will find that Tekseng is the only small cap stock (below RM200 million market cap) on that list!

 

 

 

CONCLUSION

 

Prices always get overdone on the upside frenzy and similarly, overshoots on the downside when it falls into panic mode. More often than not, picking bottoms in stocks can be hazardous to your wealth. However, with this mean reversion trade setup in Tekseng, the risk to reward profile is well defined and could be very financially rewarding. We also have the high dividend yield element as a strong buffer.

 

A stop loss can be placed at RM0.38, below the RM0.40 pivotal support, while the 1st target could be set at RM0.63 to RM0.78 range. At RM0.63 Tekseng would trade at at reasonable trailing PE ratio of only 10 times! 

 

Have a good weekend and happy trading!

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks.Consult your financial consultant before making any financial investments.

Labels: TEKSENG
  5 people like this.
 
Axcapital Excellent article and well argued
26/11/2021 10:51 AM

UNIMECH GROUP BHD (7091) TOO CHEAP TO IGNORE!

Author: TheAlphaTrader   |  Publish date: Thu, 18 Nov 2021, 6:32 PM


 

Today we will look at UNIMECH GROUP BHD (UNIMECH). It is exciting to discover a hidden gem such as UNIMECH as I like to get into trades/stocks before they become well known or hot stocks. Although market sentiment is currently soft, these are opportunistic times for the sharp-eyed investors.

 

 

FUNDAMENTALS

 

UNIMECH was founded in 1996 and made its listing debut on the KLSE Main Board in 2000. It is primarily involved in the making of industrial valves, instrumentation and fittings (VIF) as well as providing value add engineering services. Their clientele include those in palm oil, heat and ventilation, oil & gas and water. The majority of the revenue (53%) is derived locally while exports to Indonesia, Thailand, Australia, Singapore, Vietnam, China and the US account for the balance of 47%

 

UNIMECH trades at an undemanding PE ratio of only 10 times and trades below its NTA of RM1.92. It also has an attractive dividend yield of 2.35%. But what is even more impressive is that since listing, UNIMECH has NEVER posted a losing year!

 

From the time the stock was listed, UNIMECH has traded in a conservative range of RM0.36 (Oct 2005) to RM1.87 (Jan 2021).  This might be because the stock is not covered by any Investment Bank and the low liquidity of the stock. 

 

A notable catalyst or game changer for UNIMECH is the entry of KITZ CORPORATION (KITZ) in Sept 2019. KITZ is a globally recognized valve company, with a history of over 70 years and has global offices in US, Europe and Asia . It is listed on the Tokyo Stock Exchange, commanding a market capitalisation of JPY68.16B (USD600M) and trades at a PE of 20 times. 

 

KITZ bought a 25% stake from the founder, Dato  Seri Lim Cheah Chooi, for RM1.65 a share, which represented a 15% premium above the market price when the deal was announced.

 

 

 

TECHNICALS

 

 

 

 

It is quite remarkable to note that during the start of the pandemic, the selldown for UNIMECH was so shallow that it only hit a low of RM0.91 on 24 Mar 2020. This is very commendable if we compare to the stock performance of most other stocks during the same period. Since hitting the low point it has since recovered very nicely and in fact, reached a new ALL-TIME HIGH ( also a 21 year high) of RM1.87 on 21 Jan 2021! It has since retraced and has found strong support at the RM1.43 level. 

 

As we mentioned before, new highs in a stock is very exciting for us as it usually signals that new fundamental drivers may be taking shape. 

 

 

 

 

The Monthly chart shows that UNIMECH is in an uptrend since it hit its lows of RM0.36 in 2005. With most stocks hitting their all time lows during the pandemic induced selldown, UNIMECH was  able to stay above the long term uptrend line. 

 

 

 

 

INTERESTING OBSERVATIONS

 

1. SHARE BUYBACKS

 

When done responsibly, share buybacks is viewed as a positive corporate development since the company would know if the price of the buybacks represents a good value proposition in relation to its fundamentals.

 

From the latest Annual Report in 2020, from Jul 2020 to Apr 2021, UNIMECH purchased a total of 1.415 million  shares from the open market at an value weighted average price (VWAP) of RM1.42 per share. Recent Bursa Malaysia announcements have shown that the share buybacks have continued with the most recent purchase made on 12 Nov 2021.

 

With this in mind the current price of RM1.52 seems pretty attractive in relation to what the company is willing to pay.

 

 

2. TOP 30 SHAREHOLDER LIST (As at 26 April 2021)

 

 

From the latest annual report, we can see the top 30 shareholders collectively own 80% of the company. Between Dato Seri Lim and KITZ, they already own 52% of the company. The public shareholding spread stands at about 29%.

 

As previously discussed in the Seremban Engineering Bhd (SEB) post, tightly held stocks with low levels of free float could lead to sudden explosive price action as observed for both SEB and UNIMECH in Jan 2021. All that is needed is a positive price catalyst.

 

 

3. ENTRY OF KITZ CORPORATION 

 

For a low profile company like UNIMECH, the synergy with KITZ is tremendous including gaining access to new markets, products as well as leveraging on KITZ’s manufacturing and R&D expertise. Since KITZ is globally recognized as one of the top 8 valve manufacturers in the world, it is indeed exciting for UNIMECH to be part of this alliance. As part of the agreement, UNIMECH has been been granted the rights to distribute valves under the “KITZ” brand name in 2019.

 

 

 

4. REMINISCENCE OF SCOPE BHD

 

 

 

The entry of KITZ brings to mind a similar development in SCOPE BHD (Scope). 

 

Scope has been one of the best hottest and best performing stocks on the KLSE. It recently hit an ALL -TIME HIGH of RM0.47 on 11 Nov 2021.

 

Scope recently underwent a Rights Issue in June 2021, which saw Inventec, a Taiwanese PLC with a market cap of TWD95.6 billion, increasing their stake in the company by buying 36.4 million shares from the controlling sahreholders Lim Chiow Hoo amd Lee Min Huat for RM0.22 per share. Inventec first bought into Scope in Mar 2019.

 

The huge stamp of approval from Inventec has already paid huge dividends to the Scope shareholders with the doubling in price of Scope in the span of just 5 months!

 

Will the same happen to UNIMECH with the entry of a world renowned company like KITZ?

 

 

5. NEW VALVE FACTORY IN WEST JAVA 

 

The factory in Java commenced operation in late 2020 and the increased capacity is expected to contribute significantly to earnings growth in the near future. UNIMECH will also greatly benefit from the Indonesian government’s plan to expand its national shipping industry ability from 85,000 deadweight tonnes (DWT) to 300,000 DWT by 2025. (quoted from The Star 12 Jul 2021)

 

 

6. HIGH CRUDE PALM OIL (CPO) PRICE CATALYST

 

The current strong price of CPO  bodes well for UNIMECH since its valves are widely used in the palm oil industry Strong CPO prices generally means palm oil output, resulting in higher orders for Unimec’s products.

 

 

 

CONCLUSION

 

It is indeed hard to ignore how incredibly attractive UNIMECH is at the current price. In my view, a company with such consistent performance, deserves to be re-rated to at least 15 times PE. KITZ is trading at 20 times PE while its peers in the USA (ie. Emeson and Flowserve) are trading at over 20 times PE multiples.

 

At 15 times PE should see UNIMECH trading at a new all-time high of RM2.30! The good thing about markets is how an undiscovered stock can enjoy a one off re-rating in a relatively short time frame. 

 

On the matter of stock liquidity, this should not be too concerning as the management can easily increase liquidity by means of a bonus issue, which seems to be a very effective way in boosting prices these days. In fact, the price discovery process is usually very fast if a stock is fairly illiquid as the market would be forced to price in the rerating quickly!

 

If such a well established MNC like  KITZ can see great value in UNIMECH at RM1.65, I would be very happy to buy at the current price of RM1.52 (since it has also retraced from the all-time high of RM1.87) and hold it until it reaches what I see as fair value!

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks.Consult your financial consultant before making any financial investments.

Labels: UNIMECH
  2 people like this.
 
vision912 never heard of this stock but sounds interesting
18/11/2021 8:22 PM

TOMEI CONSOLIDATED BHD (7230) - REPOST WITH UPDATES

Author: TheAlphaTrader   |  Publish date: Thu, 11 Nov 2021, 3:18 PM


Good afternoon fellow traders! 

So much has happened in the gold price since our original article on 20 Oct 2021 that I should provide an update.

 

Here is the original article with some updates to follow the conclusion. ( https://klse.i3investor.com/blogs/thealphatrader/2021-10-20-story-h1592797603-TOMEI_CONSOLIDATED_BHD_7230_Powerful_Trade_Setup_Identified.jsp )

 

 

 

UPDATES

 

 

1.  GOLD HAS CROSSED USD1800 CONVINCINGLY!

 

  

 

 

 

Gold is currently trading at the USD 1850 at the time of writing and is looking very bullish as inflation fears intensifies. Also I believe the seasonal factors as mentioned above are in motion and all the pieces are falling into place.

 

 

 

2. TOMEI CHART IS LOOKING GOOD!

 

 

 

 

TOMEI price is moving along nicely with the GOLD price and I believe will continue to do so until February 2022. Since our original entry price of RM0.95, the stop loss of RM0.88 has not been triggered as the price has stayed comfortably above RM0.93

 

 

3. SO… WHAT IS NEXT?

 

I will just stay with this trade as planned and will revist the trade again in February 2022 or if a minimum of RM1.30 is hit!! 

 

Thanks for reading and happy trading!

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks.Consult your financial consultant before making any financial investments.

 
Labels: TOMEI
  2 people like this.
 
UnicornTrader Fantastic!! Gold price is almost close to 1850 and indeed it is reflected in Tomei's stock chart today top at RM1.07 at point of writing. Nice correlation.
11/11/2021 3:55 PM
vision912 Tomei has done better than poh kong
12/11/2021 12:22 PM

HEXTAR INDUSTRIES BHD (0161)- THE NEXT HEXTAR GLOBAL IN THE MAKING?

Author: TheAlphaTrader   |  Publish date: Tue, 9 Nov 2021, 6:25 PM


 

Today we will look at Hextar Industries Bhd (HEXIND), a company under Dato Eddie Ong Choo Meng’s group of companies. 

 

Dato Eddie Ong (Eddie Ong) entered the limelight last year when he emerged as a major shareholder of Rubberex Bhd. At the time, Eddie Ong was already a household name in the agrochemical sector where he operates Hextar Holdings Sdn Bhd, the country’s largest pesticide producer, founded by his father, Datuk Ong Soon Ho.

 

Since then, Eddie Ong has ventured into many other investments in several PLCs including Opcom Bhd, Complete Logistics Bhd and Classic Scenic Bhd.

 

 

BACKGROUND

 

HEXIND (formerly SCH Group Bhd) was originally engaged in the distribution and supply of quarry industrial products for the quarry industry. In June 2018, SCH saw the arrival of Eddie Ong after the company acquired TK Tent & Air-Conditioning Rental Sdn Bhd from Hextar Holdings Sdn Bhd for RM50 million. 

 

In the same year, SCH also bought PK Fertilizer Sdn Bhd.  With these acquisitions, SCH Group was able to diversify into the fertilizer and equipment rental business.

 

In July 2018, Hextar Sdn Bhd increased their stake in SCH to 25%, by buying a 13% stake from Tan Sri Richard Koh and 3 others, making them the majority shareholders. By October 2018, Hextar Sdn Bhd had further raised their stake to 31%.

 

Since then, it has been relatively quiet on the corporate front for SCH right until March 2021. On 12 March 2021, SCH Group Bhd was renamed as Hextar Industries. If we were to read between the lines, this could mean that Eddie Ong plans to allign the direction of Hextar Industries Bhd together with Hextar Global. A share consolidation of 3 to 1 shares as well as a rights issue exercise was subsequently proposed.

 

HEXIND registered a net profit of RM 232,000 in the most recent quarter from a net loss of RM 4.31 million a year ago. For the full financial year ending 31 August 2021, the company registered a net profit of RM 1.64 million reversing the net loss of RM 8.32 million in FY2020. However, it is the recent spate of corporate developments that really catches the eye and stirs the imagination!

 

 

 

 

TECHNICALS

 

 

There was a huge spike in the price on the 12 March 2021 possibly from the proposed name change from SCH to HEXIND and the share consolidation exercise. HEXIND hit a 52-week high of RM 0.54 on 15 March 2021 and since then steadily downtrending and hitting a low of RM 0.12 on 21 September after the rights issue (of 5 for 1) date was announced.

 

Since the new shares from Right Issues were issued on 29 October 2021, the price has finally made a TRIPLE bottom of RM 0.12 and has started to climb upwards. The price structure will improve tremendously if can break above downtrend line (currently at RM0.28) that has held since 15 March 2021.

 

 

 

 

INTERESTING OBSERVATIONS

 

1) The “Magic” of Eddie Ong - Stocks owned by Eddie Ong moves big when it is time!

 

 

 

 

 

Case Study 1: HEXTAR GLOBAL BHD

 

 

Hextar Global needs little introduction. The chart above sums up the whole story! Currently trading at RM1.57, near the all-time high with a market capitalisation of RM 2.06 billion. Eddie Ong has been actively growing Hextar Global through various M&A deals like the purchase of Chempro Group of Companies, the Nobel Group of Companies and most recently, chemical specialty maker, Tufbond Technologies Sdn Bhd. The market has rewarded Hextar Global Bhd with a new highs for each new deal made by Eddie Ong! Adjusted for the bonus issue, Hextar Global is up an astonishing 193% YTD!

 

 

 

 

 

Case Study 2: OPCOM BHD

 

 

Eddie Ong first acquired OPCOM at RM 0.84 a share for a total of RM 20.69 million from Datuk Seri Mukhriz Mahathir in 10 February 2021. What is interesting to note from the daily chart is that the price actually came off after the announcement of his purchase as it had actually already moved up from RM 0.40 at the beginning of the year. 

 

After consolidating for 7 months, the stock took off in a big way in September 2021 hitting an ALL-TIME HIGH of RM1.79 on 10 October 2021. So, it only took 8 months for the stock to double after Eddie Ong bought into it.

 

 

 

 

 

Case study 3: COMPLETE LOGISTICS BHD

 

 

 

 

Eddie Ong emerged as the largest shareholder of Complete Logistics Bhd on 9 Mar 2021 after acquiring 29.18% stake from Dolphin Assets Sdn Bhd. Although the price was not announced, it should be in the region of RM1.40 based on the tabulated VWAP.

 

A similar price pattern happened as with Opcom. The price came down after the anouncement of the acquisition and touched a low of RM1.09 by the end of March 2021.

 

After touching the low of RM1.09 on 26 March 2021 the price has steadily climbed to hit an ALL-TIME HIGH of RM2.57 on 3 November 2021! So again, in another short span of 8 months, the stock has almost doubled after Eddie Ong’s entry!

 

 

 

2) RIGHTS ISSUE EXERCISE

 

A Rights Issue exercise of 5 for 1 (exercise price of RM0.12 per new share) was completed with the new shares listing on  29 October 2021.  The exercise was oversubscribed by 26%. An interesting point to note is that from the 929 million new shares issued, Hextar Holdings Sdn Bhd actually subscribed for half of the shares at 466 million shares! This has bumped their shareholding from 31% to 47%. At RM0.12 a share costing RM56 million, this represents a huge commitment and stamp of confidence from Eddie Ong and his family towards HEXIND. 

 

 

 

3) HEXTAR AS A BRAND NAME

 

From the name change to Hextar Industries (formerly SCH Group Bhd) on 11 Mar 2021, we can deduce that Eddie Ong could have big plans to diversifying from the legacy quarry business and placing more focus into the agrochemical and fertilizer space. (HEXIND already derives 67% of their revenue from the fertilizer segment)

 

The allignment and synergies with Hextar Global can only mean good things to come for HEXIND.

 

 

 

 

 

CONCLUSION

 

I believe HEXIND is entering a very exciting and expansionary phase in their business. With the Rights Issue exercise out of the way and the financial commitment made by Eddie Ong and his family holding company to HEXIND, this could be the next stock to really EXCITE THE MARKET in the near future! 

 

At RM0.175 HEXIND seems like a very good entry price given the Rights Issue price of RM0.12 and improving price chart structure!

 

Will it be the next HEXTAR GLOBAL BHD? Given Eddie Ong’s track record, you would not bet against it and probably would not take that long to find out too!!

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: HEXTAR
  Dkk08 likes this.
 
sherlockman Didn't realise Dato Eddie Ong was also in Hextar industries Bhd. Thanks for the article
09/11/2021 10:50 PM
Tradingbuddy Hextar has been good trade for me since .. and I have no doubt Hextar Industries will follow the trade chart foot print >> up up and above. Buy at 0.175 and hold mid term to even longer term hold for this one.
10/11/2021 8:55 AM
Tradingbuddy Wah Wah! SEB and Wong up! Good idea to buy Hextar Industries .. high chance to follow same pattern. Thank you Alphatrader!
10/11/2021 4:45 PM
TheAlphaTrader @Tradingbuddy.. You are most welcome! I research my trade ideas independently and present it in the most interesting way that i can. It is my hope that the readers of my blog are able to reap benefits from reading it. And YES…I really like HEXIND and think it could be the stock of 2022! Just buy and enjoy the ride!
10/11/2021 7:11 PM

SEREMBAN ENGINEERING BERHAD (5163) - A LITTLE KNOWN COMPANY THAT IS ABOUT TO SHINE?

Author: TheAlphaTrader   |  Publish date: Fri, 5 Nov 2021, 12:52 PM


 

 

 

Today we will look at SEREMBAN ENGINEERING BERHAD (SEB) and explore a very promising trade setup in the weeks ahead. 

 

 

FUNDAMENTALS

 

SEB was incorporated in 1979 and listed on the KLSE Main Board in 2010 at an IPO price of RM0.85. The issued number of share stands at only 80M giving a market capitalisation of RM94M.

 

Over the years, SEB has grown to provide a host of engineering services including fabrication, engineering support, offsale installation, maintenance and shutdown works for palm oil refineries, water and waste treatment, food, glove, chemical plants and oil & gas industries.

 

The price of SEB has not done much in the past 9 years since listing. The stock price ranged between a low of RM0.20 to a high of RM0.85 over the past 9 years. It was only in October 2019 that things started to get interesting for the company.

More specifically, on 17th October 2019, saw the emergence of a new controlling shareholder MIE Industrial Sdn Bhd (MIE), a leading Engineering, Procurement & Construction Management (EPCM) service company in Malaysia. A Mandatory General Offer( MGO) was triggered with an offer price of RM 0.50, which led to MIE owning 72% of the company. The synergy with MIE has helped SEB penetrate into new markets including civil construction, structural works for projects and plant expansions in the oil & gas industry as well as the gloves industry. 

 

I believe MIE had big plans when they first took over SEB back in Oct 2019 but were unfortunately, hampered by the pandemic outbreak in March 2020. The synergies of the new shareholders in SEB is probably now starting to SHOW as we move into the recovery phase. 

 

 

 

 

 

 

What is interesting to note is the record profit and turnover achieved in the latest quarter!

 

The turnover of RM41.46 million and net profit of RM8.16 million was by far, the highest level in the company’s history. Even after subtracting the one-off profit of RM3.69 million from the disposal of a piece of industrial land in Gombak, the operating profit remains at an impressive RM4.47 million! The higher turnover which more than doubled from a year ago was driven mainly by a few high value projects in the oil & gas and rubber glove industries. Hopefully, the company can maintain the same (or even better) performance, which could present a great turnaround story for next year, and the possibility of a re-rating since a single digit PE stock for an EPCC company would be too cheap!  SEB is due to announce its next quarterly result by 30th November 2021.

 

 

TECHNICALS

 

 

 

Technicals often reflect how well a company is doing. As observed from the daily chart, SEB is already up RM 0.49 or 71% year-to-date!  The stock hit an ALL-TIME HIGH of RM1.57 on 7th Oct 2021 in response to the record profits announced on 30th Sept 2021

 

 

 

 

 

 

 

 

 

 

As we can see from the weekly chart, the long term resistance of RM 0.85 was taken out on the 2nd June 2021, reaching a high of RM 1.02. A subsequent SUCCESSFUL retest of the long term resistance-turned-support price of RM 0.85 was triggered on the 27th Sept 2021. (just 2 days prior to the announcement of the blockbuster results)

 

The subsequent move to the all-time high of RM1.57 was done with increased volume that reflects a new awareness and interest in this little known stock. So as with all parabolic moves, a retracement is to be expected and this offers a good opprtunity for those who missed out on the initial move to participate.

 

As readers can see from my blog posts, I like to enter trades that have well-defined moves, combining that with positive catalysts and a good chart structure. I usually like to join a trend on a retracement move to improve my probability of success. As the saying goes, “we cannot control the outcome of a trade but we can control the probabilities of the trade!

 

 

 

 

INTERESTING OBSERVATIONS

 

 

 

1) TOP 30 SHAREHOLDER LIST ( As of 1st October 2021)

 

 

From the latest annual report, we can see that the top 30 shareholders collectively own 90% of the company. The biggest shareholder MIE, owns 72% of the company. This could probably mean the following:

 

 

i) EXPLOSIVE PRICE ACTION

 

With a positive price catalyst like a good quarterly report could see an explosive and extreme price movement to the upside as witnessed after the last quarter report on 30th Sept 2021. This is due to the small number of issued shares (80 million)  and the small free float of shares available.

 

 

 ii) POSSIBLE BONUS ISSUE?

 

As we have seen from many profitable companies recently, a BONUS issue is a great exercise to reward existing shareholders and increasing liquidity in the stock. The case for SEB to do a BONUS Issue is very compelling from a low liquidity and small share base case.

 

 

 

 

 

 

2) CHART STRUCTURE TELLS A STORY

 

I believe new multi-year highs in prices usually indicate that there is a fundamental shift that could be occurring in the company which is usually reflected in the price but is unknown to the public - yet (unless it is a pure pump-and-dump operation!) So the big breakouts in long-term charts should be respected and capitalised for a hugely profitable trade! 

 

Two stocks that come to mind are KGB Bhd and Hextar Global Bhd. These 2 stocks clearly moved to multi-year highs prior to any positive newsflow. So is SEB a potential candidate to be a multi-bagger in the years to come? The chart does look promising!!

 

 

 

 

 

CONCLUSION

 

Since nothing has fundamentally changed for SEB from 7th Oct 2021 (when the all-time high of RM1.57 was hit)  we will assume that the retracement to RM1.18 represents a good entry level for this trade, with the potential target of reaching NEW HIGHS in the weeks ahead!  With the synergies of MIE starting to pay off and the upcoming release of the next quarter report, it is an exciting time to own SEB!

 

Seeing that this is a fairly illiquid stock, I would set my stop loss at a wider level of RM 0.85 (resistance turned support level) which I do not expect to be reached given the current chart structure and fundamentals of the company!

Have a good week and happy trading!

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks.Consult your financial consultant before making any financial investments.

Labels: SEB
  Be the first to like this.
 
sherlockman so refreshing to read about a new stock!! last couple of days all i saw was AYS and palm oil
05/11/2021 1:11 PM
Anaconder Aya ! making 3 sen /sh what to highlight better buy Supermx earning 147 sen /sh mah!
07/11/2021 5:47 PM

WONG ENGINEERING CORP BHD (7050)- POISED FOR ANOTHER HIGH BY DECEMBER?

Author: TheAlphaTrader   |  Publish date: Tue, 26 Oct 2021, 7:34 PM


As promised in our last post, we will look at WONG ENGINEERING BHD (WONG) and explore how we can take advantage of a possible price pattern that could happen by DECEMBER 2021!

 

WONG is a fundamentally solid company which has been around since 1982 and listed on the KLSE Mainboard in 1998. 

 

However, what is more exciting is the technical price setup! I tend to rely more on technical indicators and price action, as I always believe that price usually precedes fundamental news.

 

 

FUNDAMENTALS

 

WONG is principally engaged in the manufacturing of high precision stamped and turned metal parts and components, complex welded frame structure, related modules and systems as  well as trading, marketing and retailing of industrial and consumer products. These products are used in oil & gas, aerospace. telecommunication, test instrument, semiconductor, automotive and medical services sectors.They have also ventured into construction and property development since 2017.

 

From a PE prespective, WONG is not considered expensive, trading at a PE of 24 times and price-to-book of 2.39. It does not command the PE ratios of other tech or EMS  companies (which could trade to PE ratios of up to 100 times) as the company is not considered a tech play although they are part of the electronics manufacturing chain. About 25% of the earnings is currently derived from the technology/manufacturing division. However, from the latest annual report the comapany has stated that the Manufacturing  division invested RM3.04 million to improve its facilities, including the addition of new milling machines. There is great potential for the manufacturing division to further grow and the PE ratios could easily be re-rated to reflect this.

 

What is more interesting to note is that the company has posted 3 consecutive quarters of profits exceeding RM2 million each quarter. If the level of profits is maintained in the coming 4th quarter (releasing in December 2021),  the company could be looking at its best financial year ever!

 

 

 

TECHNICALS

 

 

 

From the daily price chart, we can see that the price started trending upward from RM0.70 on 26th March 2021 (A) and broke through the key psychology resistance of RM1.00 (B) on 3rd of June before touching a new 52-week high of RM1.56 (C) on 7th July. Subsequent retracements have all been well supported at the upward trendline on the daily chart with higer-highs and higher-lows structure. 

 

WONG touched a 17 year high of RM2.17 (D) on 10th Sept and then retraced to test  the upward trendline at RM1.6, which has held. Currently, the price at RM1,76 seems to be making its way up again with the potential test of the highs again on the cards. Incidentally, the “ALL TIME HIGH” was RM3.26 in Feb 2000.

 

 

INTERESTING CHART OBSERVATIONS 

 

1) The start of the move from (A) was probably due to the Q1 earnings catalyst (profit rose by 439% q-o-q) that was announced on 25th March 2021.

2) (C) was hit 1 week after the Q2 results (profit up by 26% q-o-q) were announced.

 

3) (D), which was a 17 Year high was hit after Q3 results on Sept 10 (up 11% q-o-q))  and announcement of the Bonus Issue of 6 new shares for every 5 existing shares.

 

 

 

BONUS ISSUE CATALYST 

 

Bonus issues typically sends a positive signal to the market that the company is confident of its long-term growth prospects. Also, the bonus issue increases liquidity in the stock as well as allowing for wider retail paticipation at more attractive prices.

 

Case in point: Recently, there were 2 announcements of proposed bonus issues by JAYCORP and SKB SHUTTERS, which saw their respective share prices propelling to new 52 week high!

 

Similarly, when WONG proposed a 6 for 5 bonus issue on 10th Sept 2021, the share price hit a 17 year high that very same day. The share price also went up by RM0.12, from RM1.57 to RM1.69 when the  bonus issue by approved in the EGM held on 20th Oct 2021.

 

 

BIG GAP TRADE SETUP

 

With the the bonus issue of 6 for 5, assuming the current price of RM1.76, this would give an ex price of RM0.80. This would create a nice gap trade setup, as I have discussed previously. (https://klse.i3investor.com/blogs/thealphatrader/2021-10-16-story-h1592735067-FAJARBARU_BUILDER_BHD_7047_Potential_Explosive_Trade_Setup.jsp)

 

 

 

CONCLUSION

 

At the current price of RM1.76, WONG offers a very good trade setup since it has retraced from the recent 17 year high of RM2.17 and has bounced off the upward trendline support around RM1.60 and rising. From the start of this uptrend since March 2021 every retracement to the uptrend support line has held. The next catalyst could be the Q4 results announcement in December 2021. Gauging from the last 3 quarterly results, there is a strong possibility that they might report their best annual financial results ever! Also the setting for the BONUS entitlement date could spark another round of buying!  

 

I would like to stay with this trade as long as the daily upward trendline is not violated. If all the right variables are in place, I hope to see a new 17 year high by December 2021 and hopefully, a new ALL TIME HIGH in the not too distant future! Have a good week everyone and happy trading!          

 

 

 

 

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

Labels: WONG
  2 people like this.
 
Flamini Wong always One day show....why u so excited? Hmm big portion arh .........
27/10/2021 3:40 PM
vcinvestor only time will tell if you're right or "wong" with your prediction
27/10/2021 3:41 PM
sherlockman Right or wrong, at least the writer has a clear trading strategy including to cut loss if wrong unlike other irresponsible writers
27/10/2021 3:55 PM
Flamini Road to 1.55 ah Wong
28/10/2021 10:04 AM
rookie95 Post removed. Why?
28/10/2021 10:06 AM
amateurJR wong fei hong geng
28/10/2021 1:22 PM
UnicornTrader Interesting tech write-up. Bonus issue is always interesting play, but would certainly be more a mid term investment... waiting to hear the bonus issue ex-date!
29/10/2021 12:00 PM
sherlockman here we go!!!
03/11/2021 3:11 PM
sherlockman this wong chart is a technical trader's dream! hit support then bounce...v nice
03/11/2021 3:22 PM
sherlockman Good price action with volume
09/11/2021 9:53 AM
Kangol99 Wong is certainly looking good these past two days, lovely chart. More to come!
09/11/2021 11:08 AM


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Stock Screener using Technical and Fundamental criteria
MQ Affiliate
Join the MQ Affiliate Program today to earn rewards
 
 

270  484  468  1172 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 PTRB 0.415+0.045 
 TOPGLOV 0.59-0.02 
 HSI-CJO 0.095-0.06 
 HSI-CJW 0.105-0.065 
 SERBADK 0.0250.00 
 SNS 0.27-0.01 
 HSI-HEM 0.57+0.175 
 YB-WA 0.115+0.11 
 SAPNRG 0.04-0.005 
 WIDAD 0.36+0.005 
PARTNERS & BROKERS