When company buy back its own stock it shows that it is confident about the business and future prospects. We should definitely follow. We should even put in a bigger bet because it is under-valued. We should obey the mantra - be greedy when others are fearful.
Moving Average: 9-Day Moving average is above the 20-Day Moving average, indicating bulling short-term trend. A Golden Cross was formed between the 50-Day Moving average and the 200-Day Moving average on 20th September 2023, indicating long-term upward momentum. We hope that this will be a turning point for SP TOTO to capitalize on a long-term bullish trend.
RSI: The current RSI reading of 60.94 is above the central line of 50. This is a sign of strength as it shows that more traders are buying this share than selling. The current RSI is still below the overbought region. Depending on the trader’s strategy, it is still a good time to buy now.
MACD: The MACD line has moved above the Signal line on 13th September 2023, indicating bullish momentum. The bullish momentum has continued in the past week, and we hope to see larger green histograms in the coming days.
Directional movement index: The DI+ line has remained above the DI- line since 26th June 2023, indicating upward pressure on the share price. The current ADX line reading of 39.5 is above the central line of 25, indicating that this upward trend has significant strength.
At the price of 1.56 it is still an opportune time to collect and benefit from the 2.5sen dividend going ex on 29th sept 2023. Furthermore, SP TOTO is strongly supported by company share buy-back on a daily basis.
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1.Share buyback has strongly sustained the share price. Slowly and gradually it has again successfully elevated SPTOTO to the one fifty level today.
2. Even at Rm1.50 it is only valued at a PE multiple of merely 9 times. In addition , it has an attractive dividend yield of 6%. Therefore, the counter is somewhat undervalued. And for the same reason the management has been persistently buying back its own shares on a daily basis.
3.At the moment, Rm1.20 seem remotely unlikely and unthinkable. It would take a catastrophic phenomenon to collapse the share price to the miserable level.
4.Hence, waiting for 1.20 is like waiting for a ship to arrive at the airport. It is a futile adventure and a fruitless endeavor.
NFO cant be collecting RM1.08 from customers. So they probably maintain RM1 per bet, and from there RM0.08 goes to service tax. Every RM1 revenue, profit going to drop by RM0.02 when service tax increase to 8%.
1.Nothing is static in operating and managing a business. The business environment is dynamic and ever changing. It is inherent and forming part and parcel of running a business. A little service tax is nothing new. It is a business operation parameter that came in different shape and form that need to be addressed. Although it is a challenge and shortcoming it is not alarming.
2.These are the normal issues and challenges of business management. Years ago manufacturing sectors had to absorb the mandatory minimum wage of RM1500. This item altered their balance sheet, profit & loss and cash flow of companies. It did not kill them. They responded and reacted to the issue and came up on top of it. Share price subsequently bounced back and conquered new height.
3.Again, if you are in the cable manufacturing sector, you have to face with the share rise and fall of copper price recently. A hedge in the wrong direction would kill your profit. Management is there to react and respond to issues and challenges in the dynamic business environment. SCG survived and share price is advancing sky high.
4.The depreciation of ringgit has made all input cost and all imported items costly and expensive. These too did not kill the business. The rising cost of fertilizers and chemical pesticides and fungicides did not kill them. Planters are generating higher revenue and profit. Why? The management manage the issues and challenges efficiently and effectively. 5. For these companies, their issues and challenges are far more damaging than a 2% service tax. They do not only survive and but triumph over it. If they can, so can sptoto.
5. Hence, one should not lose any sleep over the service tax. Let the expert handle it. The recent collapse from 158 to 143 and bounce back to 146 yesterday has in fact open up an opportunity for you to enter cheap and collect a huge position. Happy trading 22/10/23
The aggressive sharebuyback is good but I think the management should also consider paring down the sizable borrowings as interest rates have increased and the prospect of further increase would make a big dent on the bottomlines.
@sheldon, read the QR carefully - the dividend of ~ 3 sen/share is funded by Treasury shares and not by issuing new shares. The Treasury shares have been built up by buying SPTOTO shares when its price is depressed. This means the cost of paying out dividends is cheaper than giving straight cash - it's good management by SPTOTO:
"The Board has declared a first interim share dividend of approximately 26.46 million shares on the basis of 1 treasury share for every 50 existing ordinary shares held (fractions of treasury shares to be disregarded) in respect of financial year ending 30 June 2024. Based on the treasury shares book cost of RM39.58 million (equivalent to approximately RM1.50 per share), the share dividend is equivalent to approximately 3.0 sen per share based on the ordinary shares in issue with voting rights as at 20 November 2023 of 1.32 billion (previous year corresponding quarter ended 30 September 2022: cash dividend of 2.0 sen per share)"
1 Treasury shares for every 50 ordinary shares held will not cause a flood of shares to be sold in the market - for most shareholders, that 1 for every 50 will not cause them to sell - e.g. I won't be selling the dividend shares because it is only 2% extra. But 2% is a nice return as SPTOTO pays dividends 4 times per year, and getting 2% for 1 out of the 4 payments in a year is very, very nice. BEATS EPF and FD by a mile.
Having said that, for this stock price action, there's 2 important things to note: 1. It is in a long term decline over the past 10 years. 2. There's a divergence between its share price action the past 5-10 years vs its business performance.
1. The long term price decline is something all investors and traders should respect i.e. such a long term decline is not so easy to halt and reverse - this usually takes time. Only patient investors and traders should consider such stocks.
2. The divergence between share price vs business performance will not appeal to momentum price traders but appeals to long term investors. Over the past 4 years, its EPS is actually showing a slight increase printing a bottom, nearly 9.95 sen/share. Last 4 quarters is 15.68 sen/share. This is a profitable business, notwitstanding all the TALKS about many things. Short term, TALKS generate fears and lower prices. Longer term, the market is a weighing machine - all that earnings will eventually mean something.
Because of this, if I am buying, I will never chase this stock. The long term downtrend is more likely to reassert itself. The standard trading strategy is to sell on strength because odds are good you can buy back cheaper.
Nevertheless, this company is long on turning around - it's EPS is already turned around 4 years ago, but its price has yet to follow - so, sellers beware because this kind of situation will not last long - chart wise, it looks like good odds, but market has a way to fool chartists and technical traders.
My strategy remains unchanged. Accumulate at lower prices, and sell partially on strength at higher prices. PARTIALLY because there's a risk, when it rises, it might not go down as long as the underlying business numbers keep improving.
Between owning an FD vs buying this stock, to me, the choice is obvious. In a diversified portfolio, this is better if you can find a number of stocks like this to own. The dividend yield is solid 6%, backed by business. Lower prices is opportunity to accumulate. I don't this this business will be reporting worse EPS than 2019/2020 levels. It generates cash and is paring down its debt (slowly). It pays dividends to shareholders, typically 1 time in shares and 3 times in cash. Like any stocks, I will never own more than 5% in my portfolio no matter how appealing the business is, but it is above average holdings due to its attractiveness longer term.
The other consideration is dividend payout ratio. Normal payout ratio is around 80%. Last year, it earns 16.5 sen and pays out 9 sen or 55%, i.e. it is consolidating and rebuilding its war chest and will have room in the future to pay out more. 9 sen / 1.5 ~ 6% dividend yield with potential to rise. Q1/24 3 sen equivalent is already higher than Q1/23 2 sen i.e. 2024 dividends is looking potentially better than 2023. Its earnings can dip a little bit, and it can support a marginally higher dividend this year and still have a lower than long term average payout ratio of 80%. I am very comfortable with its numbers. Only the price chart needs respectiing and not chase.
The reason why distributing treasury shares will cause EPS to drop is because EPS = earnings divided by shares issued NET of treasury shares.
When EPS drops, the fairly constant PE relationsip will result in share price to drop. It's just a sacrifice for 1 quarter and then going forward we will enjoy better EPS as well as dividends if the performance is maintained.
Having received $370 in dividends from 1,000 shrs (bought '10, sold early '12) & over $4600 dividends since re-entering in early '14 & averaging down consistently since then, I bought more this morning @ 1.48 in a bid to finally bring the avg to below $2 [holding 13,800 now]
Treasury shares is counted in the total number of shares that is issued. EPS is earnings over total number of shares issued. Regardless whether the shares owned by the public or by the company in the form of treasury shares, the total number of shares remain the same. Thus, the distribution of treasury shares has no effect in EPS.
Deekay - you be the judge. The following extract from Note 35 last annual report ...
"The earnings per share is calculated by dividing the profit for the financial year attributable to owners of the parent by the weighted average number of ordinary shares with voting rights in issue during the financial year EXCLUDING treasury shares held by the Company ...
treasury shares do not have voting right, likewise it will not entitled any dividend when dividend is declared. treasury shares can be treated in the following by a company :- 1. cancel out 2. distribute as shares in species 3. keep it
Sheldon, if you are concern about the EPS being lower after the distribution of treasury shares, why don't you think it from the perspective that you as a shareholder, now owns more shares in the company (after share dividend) even with the lower EPS like what you said. So basically it negate the effect of dilution. We are only concern if there's new shares that's been issued, that really will dilute the EPS and thus the DPS.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....