Homeritz Q2 FY19 Report Quick Review

Financial performance boosted by the greenback appreciation  

The improvement in net profit for this quarter has few key aspects which highlighted in the above.

The risk is that the sales volume to continue slow down in second half year. 

Although Homeritz is enjoying with low material cost, there is no action taken by management to increase its inventories. Hence, I guess that the raw material price will continue to stay lower. 

The increase in PBT is mainly boosted by the greenback appreciation where early year of 2019 the currency stand around RM4.09/USD compared to last year 2018 of RM3.92/USD. However, the 1HFY2019 revenue has dropped by 11.5%, accounting for 46% of previous full year revenue. I expect the EPS for the second half year to be maintained as per last year. Therefore, I can forecast that FY19 EPS would be around 7.18sen ( 3.55sen [1HFY19] + 1.54sen [Q3FY18] + 2.09sen [Q4FY18]). 

The price at FY18 end was around RM0.68 with the PE value of 9.5. 

Hence, my target price for Homeritz based on PE multiple of 10 for FY19 would be RM0.72.  

  

Weekly Technical Highlights (Week 29/04/19)

Profile stock list:

Possible bearish: (Next week)
1. Gadang
2. Gkent
3. Harta
4. Pavreit
5. Penta

Possible bullish: (Next week)
1. CIMB
2. Homeritz
3. Maybank
4. Pohuat

Possible Sideway: (Next week)
1. Annjoo
2. EWINT
3. IGBreit
4. JAG
5. L&G
6. VS
7. YOCB

The coming month of May is the FY 19 Q1 reporting season. Market will trade cautiously. Hence, most stocks will trade side way. Any unexpected result released will change the market sentiment on respective stocks.

1. Annjoo (Sideway)

The closing price has managed to stay at the mid point (RM1.78). Trade volume has reduced. Annjoo expected to rally next week with the strong buying pressure shown on Friday to meet the resistance line.
Support line: RM 1.78
Resistance line: RM 1.86 

2. CIMB (Minor Bullish)

PT Bank CIMB Niaga Tbk’s (CIMB Niaga) net profit grew 7.6% year-on-year (y-o-y) to 944 billion rupiah (RM274.9mil) for the first quarter ended March 31, 2019, on higher non-interest income (NOII) and improvement in credit charges.
CIMB has closed above 30MA line while 9 and 26 MA lines have made a positive crossing. It is expected that the price should maintain above 30 MA line as the latest support line. But 30 MA direction is still moving downward. Therefore, expecting CIMB stock price will remain the same trend with the support line until the Q1 financial report be released.
Although both Thai and Indonesia businesses are doing well, those contributions to the group is just minor. Hence, the slow down in Malaysia economy will bring some negative impacts to its FY19 performance.

3. EWINT (Sideway)

Same as last week comment.

4. Gadang (Bearish)

This week after the latest quarter report has announced, I have cut my holding quantity by half, the reason i sell it as below:
The latest Q3 FY19 reported that:
1. Year-on-year (y-o-y), despite 9MFY19 revenue climbing by 22.0% to RM503 million, net profit was 34.8% lower at RM46.9 million, dragged mainly by normalisation of construction operating margin from 25.6% to 11.6%, and lower contribution from Capital City project, which resulted in the property operating margin deteriorating from 32% to 22.4%.
2. Quarter-on-quarter (q-o-q), 3QFY19 profit before tax was little changed at RM22.4 million (-0.3%). However, the quarterly net profit weakened by 21.9% to RM13.3 million, mainly due to higher taxation as the effective tax rate surged from 24.6% a quarter ago to 39.7%.

With the rising of material and labor cost and also foreign currency, it will further erode the profit for coming financial year.
Hence, I believe Gadang will turn into bearish in the following week to meet the support line at RM 0.79.

5. Gkent (Bearish)

Gkent has completed with the fifth wave and now begin to move into correction. The support line is at the beginning point of the wave 4 which is at RM 1.22. Price falls below the support line, uptrend will end and bearish trend will start.
Therefore, it is crucial to monitor the price movement when touches the support line.

 6. Harta (Bearish)

In this week, Harta price has managed to breakout from the ascending triangle pattern and touched the major downtrend resistance line. But it seems that the price has been pushed up by short term traders, many have took profit when the price met the resistance line causing the chart pattern to create an evening star signal.
The second wave of sell down might be due to the selling pressure from technical traders which sold based on the chart signal.
Trade volume has reduced same goes to the selling pressure. I am looking for the highest low point to be created and then the price rebound. It will be a strong signal that the price is now in the beginning of the bullish trend.
Hence, in short term, price is still moving in bearish trend until the value traders start to collect at low points then the price will rally again.

7.  Homeritz (Bullish)

Homeritz has announced a bonus issue of 1 Bonus Warrant for every 4 existing ordinary shares.

With the exercise price at RM 0.54. The price is very attractive as it is 15% lower than the current closing price. Moreover, it is even lower than 52 weeks lowest price. Well, it is definitely a good deal for traders to accumulate shares right now to entitle for the warrant.
Therefore, I believe the price will rally. Somemore, quarter report release date is just around the corner. With the strong USD/RM recorded in this quarter, I reckon that the result will be favored by the gain in foreign currency. 

8. IGBreit (Sideway)

Same as last week comment.
After hitting the 52 weeks high, the price has been retreated and stay in side way. The price is still moving in uptrend pattern resistance and support lines at RM 1.90 and RM 1.80 respectively. The short term bullish is still effective as the price stays above 9 MA line.

9. JAG (Sideway)

Daily trade volumes are less. Price moves within the range of RM 0.055 to RM 0.045. Side way pattern.

10. L&G (Sideway)

L&G has the same trend pattern as JAG. As mentioned earlier, the volume reduced. Hence, no sign of momentum. Stock traded in the range of RM 0.16 to RM 0.15. Both companies require catalysts to stimulate the uptrend.

11. Maybank (Bullish)

Business news this week:
1. Maybank demands US$418m from Hyflux within seven days for loans, Hyflux Seeks Cash Injection From Middle East Investor
https://www.theedgemarkets.com/article/maybank-demands-us418m-hyflux-within-seven-days-loans
2. New white knight to infuse S$400 million into Hyflux in the offing as CEO Olivia Lum offers to draw a S$1 yearly salary
theindependent.sg/new-white-knight-to-infuse-s400-million-into-hyflux-in-the-offing-as-ceo-olivia-lum-offers-to-draw-a-s1-yearly-salary/
The price has been affected by the Hyflux debt news. The latest news mentioned that Middle East investor has pumped in fund into Hyflux. Hence, it is a good news to Maybank to secure the loan that stood about S$602.4mil.
Looking forward for the price to break above RM 9.22 resistance point.

12. Pavreit (Bearish)

Pavreit has reached the support line at RM 1.80. It is crucial where if the price rebound next week, the stock is still moving in side way pattern, it will rise again to meet the resistance line. But I give a bearish call for Pavreit as the selling pressure was quite high for last three trading days, CCI has moved into negative range, in short term the price will break below support line and continue with the downtrend.

13. Penta (Bearish)

The price believes to have finish moving in its fifth motive wave. The first correction wave has initiated. It has been a long bullish trend, therefore, if the price cannot return back and stay above RM 4.23, the bullish trend has ended. It will be a major bearish trend coming soon.
Also, the recent reporting from Vitrox have affected the market sentiment. It has shown a sign of slow down in technology sectors.

14. Pohuat (Bullish)

A strong upward momentum has created in this week. It is expected to continue the trend in the following week to meet the resistance line at RM 1.56. The only thing that threaten the uptrend is the trade volume. If the volume increases next week, the price can easily breakout the resistance line.
Hence, the volume should closely monitor to confirm the breakout or retrace action.

15. VS (Sideway)

VS is expected to trade in side way pattern.The volume reduced. Hence, no sign of momentum. Stock will be traded in the range of RM 1.09 to RM 1.17.

16. YOCB (Sideway)

YOCB would move in sideway next week as the trading volume reduces. The stock price cannot move up as no news to catalyze it. We will have to wait until the next quarter report to announce.
Expecting stock price to remain at RM 1.20 for the following week.

YOCB (5159): Author's Review

Yoong Onn Corporation Berhad (YOCB) is a leading integrated designer, manufacturer, distributor and retailer of home linen and bedding accessories in the region.

Backed by over five decades of experience, YOCB has more than 10 main brands of home linen for premium to mid-range consumers to date.
Their well-established brands include Novelle, Jean Perry, Ann Taylor, Louis Casa, Genova, Niki Cains, Diana, and Cotonsoft.

YOCB provides home ware and lifestyle furniture to complement own-manufactured home linen and bedding accessories, such as:

• Bed and bath linen; 
• Bed, bath, living room and kitchen accessories; 
• Rugs, carpets and floor mats; home ware; and
• Lifestyle furniture.

Bed linen and bedding accessories made up the bulk of the Group’s revenue.

The range of products export to more than 17 countries namely Australia, Brunei, Cambodia, Dubai, Fiji, Indonesia, Japan, Mozambique, New Caledonia, Nigeria, Papua New Guinea, Philippine, Singapore, Taiwan, Thailand, Turkey and Vietnam.
However, the Group’s domestic operations still remained as the main driver of its revenues and profits.

YOCB's target markets including:

• Third party retailers i.e. departmental stores, hypermarkets, supermarkets and specialty stores;
• Mass end-consumer market through their fully owned retail outlets under the 'Home’s Harmony' and 'Niki Cains Homes' brand name;
• Institutions including hotels, resorts, hostels, hospitals, royal customs and military accommodations and cruise ships;
• Intermediaries including distributors and importers in oversea countries; and
• E-commerce platform companies on online shopping.

There are total 4 divisions under YOCB.
Distribution and Trading generally played the largest part of total revenue gained, which is more than 60%.

Financial Highlights

Over the past 4 years, although the revenue figures were up and down, YOCB managed to earn better profit by years.

In profit margin wise, slightly improvement is expected for FY2019 as Hari Raya festive season drops in June (Q4) this year which should pull up the overall performance.

YOCB has successfully acquired positive growth for 5 quarters continuously. 

It is expected another green quarter for Q3 2019 upon the new retail store opening in EkoCheras Mall.

Future Outlook

1. The Group has actively participated in the Government’s rehiring program and sourcing from other local authorised agency to meet labour needs. Long term wise, the Group opted to reduce dependency on labour by increasing automation.
2. As a brand owner, the Group is not subjected to the full impact of competition from lower cost producing countries like Vietnam and China. In fact, these lower cost producing countries could work to the Group’s advantage to maintain competitiveness as the Group could outsource their products to overseas contractors if the need arises. 
3. The Group recognises the importance of regularly introducing new designs for home linen to be in line with the current trend.
4. The Group maintain foreign currency bank accounts for business transactions in the respective foreign currencies. This approach forms a natural hedge to minimise foreign currency exchange risk exposure. The Group also have forward contracts which serve as a hedging instrument for some of the imports purchases.
5. The Group endeavours to source its raw materials locally in future.

Author's Perception

1. The business is dependent on currency rate of USD against MYR, as majority materials such as textile fabrics and cotton fibres are denominated in USD, while local market is the main driver of the business. Hence, good profits can be predicted if USD is depreciate against MYR.
2. It will be a bonus if the Group able to do more exports in the future. This will eventually reduce the impacts of currency rates to the business.
3. The business nature of the Group are generally categorised in retail sector, which are subject to seasonal variations such as major local festive seasons, school holidays and carnival sales. Usually Q2 (Oct-Dec: Year-end carnival sales) and Q3 (Jan-Mar: Festive season) will perform better than Q1 and Q4, where the Group called it dull season.
4. Thirty largest shareholders owned up to 85.37% of total shares. Thus, the share price is comparably less fluctuate. Technical trend will be less reliable for this stock.
5. Current share price (RM1.18) is 0.84 times undervalued to its NTA of RM1.40.
6. Dividend yield of approximately 3.4% (4 cents average yearly) would be more attractive if to be further improved.

Technical Comment

Although there is no significantly different in pricing, it is observed that MACD lines are moving closer to each others and CCI has started to move into positive range.
It seems to be going into bullish trend soon.
It is expecting the price to rise until previous high at RM1.24. But due to low liquidity of shares in market, it takes time to reflect the true value of this stock.

Weekly Technical Highlights (Week 22/04/19)

Profile stock list:

Might turn bearish: (Next week)
1. Annjoo

Might turn bullish: (Next week)
1. CIMB
2. Gadang
3. Gkent
4. Harta
5. Maybank
6. Penta
7. YOCB

In side way: (Next week)
1. EWINT
2. Homeritz
3. IGBreit
4. JAG
5. L&G
6. Pavreit
7. Pohuat
8. VS

1. Annjoo (Bearish)

After the ECRL project has been revived, as expected, traders take profit and causing a sell down to construction stocks especially annjoo which seems to benefit from mega project.
At the end of the week, this counter closed with doji for two trading days. The price movement for next week will determine the trend pattern. Should the price close with solid green candle on Monday, it will revert the uptrend and it must break above RM1.72.
Else, the downtrend will continue. The next support line is RM1.59.

2. CIMB (Bullish)

Latest financial report released from CIMB Thai (94.83% owned by CIMB) with 1QFY19 net profit grew +92.4%yoy to THB325m. This was also a turnaround in earnings from the losses in 4QFY18.
The contribution from CIMB Thai to the group's profit is less than 7%. Hence, it cannot attract short term traders to push the price up.
With such a good result achieved in Thailand, CIMB is in many research houses' radar, expecting the same performance will be achieved in Malaysia and Indonesia market.
In short term, price has moved above MA 9 trend. I reckon the stock price has reached the bottom. It will rally in anytime, if the price can breakout MA 20 in next week.

3. EWINT (Sideway)

The trend is still in sideway pattern. There is a risk of price turning downward again as the price is closed to the descending triangle tip. No positive good sign as this moment. Support line: RM0.72.

4. Gadang (Bullish)

As predicted from last week highlight. The bullish trend is still strong. The price touched the support (RM 0.676) and rebound.
Next TP we are looking at RM 0.75, expecting the bullish momentum can breakout the RM 0.735 resistance point.
The latest group announcement in this week, Gadang Holdings Bhd has bagged a contract worth RM38.52 million to build a tiered bridge connecting the northern and southern sites of Tun Razak Exchange Development (TRX) from TRX City Sdn Bhd. The project is expected to commence on July 1 and is targeted for completion in the third quarter of 2020.

5. Gkent (Bullish)

Part of the share price dive was due to the profit taking actions by traders, after the revived of ECRL and the reviving of HSR project projects.
Technically, the price has rebound from the support point (RM 1.22) and closed at the mid point of previous week's candle at RM 1.26. Still maintain in the bullish trend with some minor price adjustment.

Currently, we are expecting the price to move in the fifth motive wave with some catalysts from government projects while the stock is still actively traded.
The stock might also expect to move slowly upward or side way due to reducing trade volume.
Currently, the price is trading at 1.43 times of price over book value. I would say the price has already factored in the company future prospect. Next TP we will be looking at RM 1.28 and the following price at the end of fifth wave which is around RM 1.40.

6. Harta (Bullish)

The price moves steadily upward and manages to break and stay above the major downtrend resistance line.
Sell down pressure has reduced, upper wick of candles reduces.
This counter is expected to turn into small bullish trend in short term, as the price closed above 9, 26, 30 MA lines and touched the next resistance line which is RM 4.87. It is very challenging for the price to breakout the resistance. Hence, the price will turn downward once it touches the resistance line.

7. Homeritz (Sideway)

Another doji closed in this week. However, the volume has reduced. Hence, it is expected to trade in side way in the following week.

8. IGBReit (Sideway)

After hitting the 52 weeks high, the price has been retreated and stay in side way. The price is still moving in uptrend pattern resistance and support lines at RM 1.90 and RM 1.80 respectively. The short term bullish is still effective as the price stays above 9 MA line.

9. JAG (Sideway)

Daily trade volumes are less. Price moves within the range of RM 0.055 to RM 0.045. Side way pattern.

10. L&G (Sideway)

L&G has the same trend pattern as JAG. As mentioned earlier, the volume reduced. Hence, no sign of momentum. Stock traded in the range of RM 0.16 to RM 0.15. Both companies require catalysts to stimulate the uptrend.

11. Maybank (Bullish)

The recent tumble in stock price was due to Hyflux debt issue.
Related news as below:
Based on a recent news report, the bailout deal between Singapore’s Hyflux Ltd. and an Indonesian consortium led by the Salim Group has fallen through (announced on 4th and 5th Apr 2019) and meanwhile, Hyflux has until 30th of April before its debt moratorium expires.
Failing which, there could be some negative repercussions on Maybank’s 2019E earnings.
To recap, Maybank has a total exposure of RM1.95bil to Hyflux, which covers project financing for Tuaspring's Integrated Water and Power Plant and TuasOne Waste-to-Energy Plant.
On 19th April, Maybank has decided to terminate the collaboration agreement relating to the divestment of the Tuaspring integrated water and power plant (IWPP) with immediate effect, said water treatment firm Hyflux Ltd.
Under the agreement, the debt-laden Hyflux and Tuaspring Pte Ltd had agreed to the execution of a binding agreement with a successful bidder/investor for the full settlement and discharge of Maybank’s total liabilities by the "standstill deadline”.
Maybank has also stated its intention to appoint receivers and managers over the assets of Tuaspring save for the "desalination plant and shared infrastructure”.

In short term, morning star pattern has shown. The price should rally. However, the price closed below RM 9.10. Hence, it is still under a bearish trend, unless the price can manage to move and stay above it within next two trading days. Else, it might be just a small rebound. Potential sell down might happen again.   

12. Pavreit (Sideway)

After Pavreit's price hit the highest point (RM 1.85), it will retrace back to RM 1.80 and retest again the resistance point at RM 1.85. 

Resistance point: RM 1.85

Support point: RM 1.80

Currently, the stock is trading in a side way pattern, it would expect to be remaining in the same pattern. Unless the stock market is moving in bullish trend and traders would shift the fund out from REIT sector. 

REIT has been over priced recently causing the DY less than 5%. Hence, it is not worth to invest in REIT at this moment. 

13. Penta (Bullish)

Maintain bullish on Penta. It has made another record high in history. Price continues to increase as well as the volume. There is no technical indicator to estimate the next target price. 

Therefore, few info that I have to monitor to predict any sign of turning bearish:

1. The price should not fall below RM 4.09. 

2. Doji appears at the highest point.

3. Volume reduces. 

4. Selling pressure increases. 

14. Pohuat (Sideway)

Side way trend maintains for next week. Lack of trading volume to make any changes to the existing trend. 

15. VS (Sideway)

At the last trading day of the week, the stock has managed to breakout the resistance line at RM 1.09 and closed at RM 1.10. 

If the price can stay above resistance line for next three trading days, the uptrend will initiate. However, it seems to be hard to maintain with such a low trade volume. Thus, I anticipate that the price might go side way even though it stay above resistance line.    

16. YOCB (Bullish)

Although there is no significantly different in pricing as I gave a bullish call for YOCB, it can clearly see that MACD lines are moving closer to each others and CCI has moved into positive range. I will still give a bullish call for it.
Volume has increased compared to last week. Expecting the price to rise to previous high at RM 1.24, but due to the low liquidity of stock in the market, it takes time to reflect the true value of this stock.
Currently, the stock is trading at 0.84 times of the price to book value.

KGB (0151): Author's Review

Kelington Group Berhad (KGB) was founded in 2000 to provide Ultra High Purity (UHP) gas delivery solutions to the electronics and semiconductor industry.

The Group is then positioned as a one-stop facility solution provider of turnkey engineering services from the initial system design up to maintenance and servicing after completion.

The Group expanded within the past 19 years and having business divisions of:

1 Ultra High Purity (UHP) Gases Delivery System

• Bulk/special/chemical gas delivery system; 
• Gas detection and SCADA; 
• Exhaust system

2 Process Engineering

• Tankage construction; 
• Underground pipelines; 
• Equipment fabrication; 
• Steel structure fabrication

3 Industrial Gases - Supply to electronics, semiconductors, food processing, and oil & gas industries

4 General Contracting

• Civil construction works; 
• Cleanroom construction

According to the Group, Division 1 and 2 delivers higher profit margin than the rest.

KGB has a total workforce of around 300 and has regional offices in China, Taiwan, Singapore and Malaysia. It is a registered contractor with Construction Industry Development Board (CIDB) Malaysia and is certified to ISO 9001:2008 and OHSAS 18001:2007.

Certification is important to mention, as it reflects a company's status in terms of regulatory requirements and its potential to grow.
ISO 9001:2008 is focused on meeting customer expectations and delivering customer satisfaction, as well as continual improvements.
While OHSAS 18001:2007 ensures health and safety of employees and workplace.

To-date, the Group has accumulated a vast track record of completed projects for a myriad of international clients in Malaysia, China, Taiwan, Singapore, Philippines and Indonesia.

Financial Highlights

Over the past 4 years, KGB has escaped from profit-lost history and recorded 3 years continuous growth in profit, as well as profit margin.

In view of net profit for FY2017 and FY2018, KGB has achieved growth in 7 out of 8 quarters reported.

Even the only negative quarter was due to the Group has started their new direction to selectively bidding projects which carry higher profit margin.

The Group's effort has been proven effective, when you see the Group generally earned better in FY2018 compared to FY2017.

In financial report Q4 2018, the Group highlighted the ability to pay off most of the short terms debts with a strong net cash position.

Additional Information

It is interesting to know that KGB is reporting impairment loss at least twice in yearly basis.
The impairment loss was incurred from non-received receivables, as well as due from customer on construction contract.

Extracted figures from one of the quarter reports

Although the amounts seem non-significant to revenue gained (the most at approximately 5% over the revenue during Q2 2016), the shareholders would certainly happy to see if the loss could be improved over time.

Impairment loss claimed by quarter

Future Outlook

1. KGB's regional operations are mostly carried out in respective local currencies, thus the impact of currency fluctuations on the Group’s earnings has slightly mitigating.
2. KGB has secured first on-site 10-years nitrogen gas supply contract from a major manufacturer of solar cells and modules. The business has started to commenced since Q1 2018 and has contributed positively in revenue of Industrial Gases' division.
3. Moreover, revenue in coming Q3 2019 onward is expected to contain earnings from new project commencement - manufacturing of liquid carbon dioxide. The Group inked a supply agreement with Petronas to purchase its carbon dioxide gas waste from their Gas Processing Plant (GPP) for a period of 15 years, starting 2019. The Group is building a new state-of-the-art gas plant with a production capacity of 50,000 tonnes per year next to the Petronas GPP in Kerteh, Terengganu to purify and liquidify the CO2 gas waste emitted.
4. A RM93 million-worth new contract has just been confirmed from one of the world's largest gas companies to provide turnkey construction works in Singapore.
5. The Group continuously highlighted their confident to achieve strong order book replenishment.
6. To ensure keeping abreast with the rising competition, the Group has continuously focused on enhancing technical capabilities, improving operating efficiencies and maximising our resources.
7. Top thirty shareholders have owned approximately 70% of total shares in the market.

Author's Perception

• There are significant improvements in profit margin performance. The statement is in-line with the management's direction to only involve in bidding high profit margins' projects. Looking forward to double digits' margin in FY2020.

• Also, proven continuous improvements in terms of ability to pay off debts within short terms.
• The business is in healthy growth when new order book acquired is going stronger.
• However, current share price is approximately 2.83 times over-priced than NTA.

Technical Comment

KGB has started the bullish trend since April'18.

Currently, the price is moving in the third Elliot motive wave.

The price is technically expected to reach TP of RM1.80.

However, RM1.25 is a strong support line.

Should the price break below, the uptrend will be ended.

Looking at the short term perspective, KGB has recorded the highest price in history.
The price should stay above the uptrend resistance line to maintain the bullish trend.
Otherwise, it will create a sell down by short term traders for the sake of profit taking.
It will be the best timing to trade-in if the price rebound from the strong support point.

TP: RM1.80