Annjoo Q1 2019

Annjoo posted net losses for its 1st quarter report for FY 2019. A stark contract of its net profit compared to Q1 FY18 and Q4 FY18 as much as -111% and -120% respectively.

Look in detail of its financial statement showing that the group operating expenses have surpassed its revenue which is severe as every single tonnage that send out from production has already losing money.

Lower revenue and the loss incurred in the first quarter of 2019 (“1Q2019”) as compared to the previous year correspondence quarter were mainly due to lower tonnage sold coupled with depressed selling price in domestic market despite higher export tonnage in 1Q2019.

Lower revenue and the loss incurred in 1Q2019 as compared to fourth quarter of 2018 (“4Q2018”) were mainly due to lower sale tonnage coupled with depressed selling price arisen from the oversupply condition in the domestic market. 

Based on business segments review, manufacturing segment is turning red for 2 quarters; it started since last quarter (Q4 2018) when the group claimed that the decline in selling price which mainly attributed to the over supply situation due to a new competitor that foreign owned steel mills entering into domestic market. Manufacturing segment losses turn more severe in Q1 2019.  

Trading segment can consider still doing fine amid the slow economic growth situation. The group has increased their export volume as it can see from the geographical segment. Which is a good strategic from the management. 

Overall the company prospect is not encouraging.

Bad Points from Prospect: 

1. severe domestic oversupply situation (still unsolved)

2. expects a lower second quarter of 2019 due partly to seasonal factors that typically affecting construction activity, including the Ramadan month and Raya holiday. (Management does not look good on next quarter result)

3. oversupply situation in the domestic industry is still a main concern as steel prices continue

to be depressed by foreign-owned steel mills. (Domestic sales been threaten by foreign owned steel mills)

4. discussions with the relevant government authorities to resolve the current issues faced by the steel industry (Currently still in the midst of discussing with related government authorities, no solution and timeline at this moment yet)

Good Points from Prospect:

1. domestic sentiment has improved with the revival of selected mega infrastructure and large scale

development projects, for example the East Coast Rail Link and Bandar Malaysia.(coming second half year mega projects will revive.)

2. the industry is constantly in proactive discussions with the relevant government authorities to resolve the current issues faced by the steel industry. (At least some approaches to resolve the price war issue)

3. The Group remains highly responsive to market changes and agile in sales mix to meet international demand and targets to increase export sales (goods sold has shifted to export)

Comment:
Annjoo Q1 FY19 result is very disappointing, the domestic steel price competition issue remains unsolved for 2 quarters and no concrete solution to counter it. Therefore, the group will remain in red for the following quarters until the domestic demand recover again.

Technical analysis:

Annjoo price is currently making the 3rd Elliot downtrend wave. The price has dived below MA 9 and 200 meaning that in short and long term the stock is moving in a bearish trend.
The next support line I will see it at RM 1.30.

It is not a good sign to bottom fish now. I will wait until the demand boosted by those revival mega projects

Weekly Technical Highlight (13/5/19)

After the trade talk fail between US and China, US has on Friday (10-5-2019) raised the tariff on $200 billion of Chinese imports to 25% from 10%. The globe will slap with another wave of market turbulence.
Technical analysis will not be able to forecast stocks movement. It has to go back to fundamental of each stock. The latest trade war will cause Asian market turn into red. Exporting companies which competing with China product will be benefited in this condition.

Back to local market, Bank Negara has cut its overnight policy rate to 3% on Tuesday. The reduce in interest rates can offer monetary stimulus to the economy as the US-China trade war continues to pose downside risks to growth. The interest rate cut has further weaken the RM against USD as we can see that the trend is raising steadily upward beginning at the end of March. It will further benefit export sectors in Malaysia.

Stocks with possible bullish:

Gkent is closed to break the bullish trend. It is critical moment to monitor the stock movement. But it might not able to stay positive as the uncertainty news from trade war. With the weakening of RM in this period, it will provide extra foreign gain for Gkent metering division.

If the price does not break below support line and stay above RM 1.19, it will be an uptrend. Buy when rebound.

Kenanga Research said the oversupply concerns affecting the rubber glove sector appeared to be overplayed and that this would only be a temporary rough patch.

Glove maker will see better quarters ahead with the recovery in demand and average selling prices (ASPs) as well as the weakening of the ringgit against the US dollar. 

Interestingly, industry ASP pressure is well contained, ranging between US$21 and US$23 per 1,000 pieces as compared to the previous downcycle in 2016 ranging between US$19 and US$21 per 1,000 pieces

Overall, Harta is worth to monitor next week, grab at low when there is panic sell happen. In coming quarter, Harta is definitely doing better than this quarter. Target price to collect at RM 4.80. 

Homeritz and Pohuat are potential winners of the trade war and interest rate cut as both companies are exporting furniture to US and Europe.

IGBreit is moving in sideway with positive momentum. Hence, I believe it can make another touch at RM 1.90. The recent interest rate cut has brought attention to REIT sector. But i believe the price has already factored in as market majority forecast that Bank Negara will cut the interest.   

While Pavreit will have a little slow momentum compared to that of IGBreit. It will also hit the resistance line at RM 1.85. 

However, REIT have already overpriced, somemore, not much margin to move up. Therefore, the risk to buy now is definitely high. 

On the other hand, banking sectors will oppose with REIT movement. CIMB and Maybank stock prices have slumped a lot after Q4 FY18 reported. Both stock are still moving in bearish trend. I believe the downtrends are almost ended. 

After the announcement of interest rate cut, both banks reacted fast to reduce their interest rates. The prompt action will potentially pull some fresh loans from other banks. 

Stock that turn into bearish trend:

Annjoo price has broken down the support line. Hence, bearish trend initiated. Next support line will be RM 1.49-1.51. At this point, investor should execute cut loss when necessary. 

Same goes to VS, the stock price has broken below its support line. The price will move in a major down trend with possible of 3 motive waves. As market worries with the latest report of lower revenue recorded from electronic industry. 

Gadang after announced the private share placement news, the stock have loss momentum and fall near to the support line. I anticipate that the price will move within the range of  RM0.79 - 0.87 when it reaches its support line.  

Harta Q4 FY2019

Harta 4th quarter revenue has improved compared to preceding year due to higher sales volume. However, PBT affected by fluctuation in currency causing a reduction of 15.8%. Higher labour cost as the minimum wages adjustment took effect in earlier this year. 

Total year revenue increased by 17.6% due to the improvement in sales volume of 10.1%, in tandem with growing demands for nitrile gloves and continuous expansion for their production capacity.

Throughout the reporting period, USD/RM trend is very fluctuating. It can drop around 2% within a month. Hence, export sectors who their operating revenue and operating cost are very sensitive with foreign currency will get affected. 

Looking at the asset, the management has reduced their inventories in this quarter. Trade receivables have increased which showing signs of more sales have yet to receive payments. It is good for management to reduce their inventories, as it can show that their operation processes are lean enough. However, payment receivable might show that the recent market is not doing great.

Total liabilities has increased by 15.2%. Although long term borrowing has slightly reduced, short term borrowing on the other hand has increased by 15%. Checking on operating activities, it is still maintained growing positively. Hence, the company performance is considered very healthy. Borrowing might be used in the plant expansion activities.

Compared to previous quarter, the group reported the reduction in sales revenue was mainly due to lower average selling price. Meaning that, currently the group is facing keener price competition on selling niltrile gloves as mentioned by few research houses.

The management has mentioned again in its prospect that currently company is facing over supply issue where supply grows faster more than demand.

Comment:
1. Management has admitted that the gloves have been over produced. Therefore, it will take some time for market to absorb the access capacity remain and industry players will slow down their production capacity expansion activities to align with market demand growth. I anticipate it will take a year for the market to recover.
2. Currency has been growing rapidly from end of March until now. Q4 report showing that the currency has badly affected the profit, on the other hand, the coming Q1, we shall see profit gain from USD/RM strengthening.
3. Company is not performing in Q4, as management was unable to hedge the fluctuation in the currency and the market demand has reduced. Therefore, I believe tomorrow there will be a heavy sell down pressure on Harta. The support line is RM 4.87. If the price cannot hold above it, it will be a bullish trend coming soon.

Weekly Technical Highlights (week 06/05/19)

KLCI is still in a bearish trend. This week KLCI closes with a doji. Expecting KLCI to close lower for month of May. Traders are making trade cautiously as this is a month of Q1 report releasing season. 

Profile stock list:

Possible bearish: (Next week)

1. EWINT

2. Gkent

3. Homeritz

4. Pohuat

5. VS

Possible bullish: (Next week)

1. CIMB

2. Gadang

3. Maybank

Possible sideway: (Next week)

1. Annjoo

2. Harta

3. IGBreit

4. JAG

5. L&G

6. Pavreit

7. YOCB

1. Annjoo (Sideway)

The revival of mega structure projects announced by government last month has boosted the price drastically. The good news has been digested by the market, the heat in the stock has faded off.  The resistance point is at RM 1.77. The dividend issued is expiring soon, there will be a price adjustment afterward. Currently, the price is at the lower part of the mother bar. Hence, it is expecting to move in the inside bar trend. Hoping the price will hold on the uptrend momentum and will not fall below the support line which looking at RM 1.67. Else the bearish trend will start again. 

It is not a good point to invest in this stock, moreover, the quarter report is going to release in end of this month. 

2. CIMB (Minor Bullish)

CIMB Group has informed that the release of the first quarter of financial year 2019 (1QFY19) results on May 29. Key takeaways are management reiterated its guidance for loan growth of 7% for 2019. In Malaysia, 1QFY19’s loan growth was good, supported by drawdowns of corporate loans — similar to that in 4QFY18. The management guided for 6% to 7% loan growth for Malaysia. Lending growth in Indonesia is expected at 5% in 2019, on a pickup in the second half (2H) of FY19.

CIMB expects the policy rate in Malaysia to remain stable in 2019. For 1QFY19, we expect NIM to be stable to slightly better. The management expects margins to compress in the quarters ahead, as loan growth gathers momentum in 2HFY19.

With the market confident that Bank Negara would remain the interest rate, banking sectors will slowly regain the price.

3. EWINT (Bearish)

EWINT has broken down below the strong support line at RM 0.72. The price will not able to recover back easily. Market sentiment is weak due to the falling in property price in UK. Hence, I anticipate that the price will move near to the lowest point and rebound. Hoping that it will not make a new lowest point record. 

4. Gadang (Bullish)

Last week I anticipated that the stock will turn into bearish and meet the support point at RM 0.79. The price does not fall below support line but rally. Thus, it is a good sign for Gadang. Next week price will continue with the uptrend momentum. However, there is still a risk as the price is moving below 9 MA line, where the uptrend will be very weak. If the price can breakout 9 MA line and next resistance line at RM 0.89 and stay above them, then the price will move in a strong bullish trend. 

At this moment, no more supportive news from government to boost the construction sector. Hence, Gadang is now a bit overpriced. 

5. Gkent (Bearish)

I give a bearish call for Gkent due to the price closed below the mid point of previous candle and CCI is still moving in negative territory. If the price didn't break below the strong resistance line at RM 1.22, Gkent is still moving in the correction wave. Else, the trend will turn into strong bearish. 

It is good to accumulate Gkent at the end of the correction wave, future perspective for the group is still remain positive. It has an outstanding order book stands over RM 5bil on the LRT3 project, two government hospitals and others. Its water meter division has a contract of supplying 110,000 meters to Singapore over six months beginning of Feb 2019.

6. Harta (Sideway)

Harta share price is expected to move in sideway toward the tip of the symmetrical triangle pattern. Some research houses forecast that the coming quarter result will slow down due to the pressure on the ASP and competition in the nitrile glove segment. Therefore, I shall wait for the performance of the Q1 to decide on topping up the holding amount. 

7. Homeritz (Bearish)

It is not a good sign for Homeritz yet, the price is still moving under 200 MA line and it is considered a bearish trend. After the quarter report released, stock price shoot up accompanied with the high volume traded. However, the momentum cannot maintain, causing the price to sink down. A bearish call for Homeritz because the trade volume has reduced, price is hardly to push up further. We would have to wait for the free warrant issue date to be announced to boost the trading volume again. 

Future prospect for Homeritz is still remain healthy, average USD/RM for Q3 is 3-4% higher than previous year. Hence, I am sure Homeritz will give another good result for next quarter.

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 1.86 respectively. The short term bullish is still effective as the price stays above 9 MA line.

9. JAG (sideway)

Same as last week comment.

Daily trade volumes are less. Price moves within the range of RM 0.05 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.

The coming quarter report result will not be better than previous year as the contribution of RM7.54 mil from the write back of its Damansara Foresta project and RM10.22mil from the writeback from the resolution of prior years taxes with tax authorities. But, the coming financial year will be giving a better result. Therefore, it is a good chance to accumulate this stock while it still stay at lower point. 

11. Maybank (Minor Bullish)

Maybank Indonesia reported a lower net profit of 414.9 billion rupiah for the first quarter of 2019, compared with 463.1 billion rupiah in the previous corresponding period due to a higher loan loss provision of 52.2% y-o-y to 400.5 billion rupiah as the bank took a conservative stance in setting aside the provision for business loans, which were impacted by the continued challenging  economy. Maybank Indonesia revealed that overall, its asset quality continued to improve as reflected by the lower non-performing loan levels of 2.9% (gross) and 1.7% (net) as at March 31, 2019, compared with 3% (gross) and 1.8% (net) a year ago.

During the period in review, the 97.4%-owned unit of Malayan Banking Bhd reported a 6.2% increase in operating income before provisions to 966.5 billion rupiah (RM281.5mil), compared with 909.7 billion rupiah in the previous corresponding period.

The group said the growth in operating profit was mainly supported by improvement in net interest income, as loan growth reached 10.9% year-on-year (y-o-y) for the first three months of 2019.

Maybank Indonesia said its net interest income grew 7.7% y-o-y to two trillion rupiah, while net interest margin for the quarter was unchanged at 4.8%. The group’s loans grew to 135.8 trillion rupiah from 122.5 trillion rupiah a year ago, driven by its global banking segment, which booked a strong loan growth of 29.8% y-o-y supported mainly by loans from state-owned enterprises and top-tier corporates.

With the market confident that Bank Negara would remain the interest rate, banking sectors will slowly regain the price.

12. Pavreit (sideway)

The price movement was not as severe as I anticipated last week. The price will move in sideway in the range of RM 1.85 to RM 1.80.

13. Pohuat (Bearish)

Pohuat price is moving in a rectangle pattern. The price is expecting to fall back to the support line at RM 1.50 then rebound back again to touch the resistance line at RM 1.56. 

Hence, it is worth to collect at the low (RM 1.50) and sell it at high (RM 1.55) for short term trading. For the coming quarter Q2, I forecast that Pohuat will be benefited from the gain in foreign currency and also increase in revenue due to the recent orders from new customers. 

14. VS (Bearish)

VS has touched the support line, CCI continues to move lower. Hence, it has higher possibility that next week the price will fall below the support line and move into bearish trend. If next Monday price rises and closes with a green candle, it will create a morning star pattern. Then, price moving in the rectangle pattern is still maintained.

 15. YOCB (sideway)

Same as last week comment.

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.

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.