KLCI snaps winning streak, drops below 1,600-level

KUALA LUMPUR (April 4): The FBM KLCI snapped its winning streak on Wednesday and fell below the 1,600-point level, in line with the retreat at most global markets after on generally weaker sentiment at key regional markets following the overnight dip at Wall Street.

The FBM KLCI fell 7.36 points to close at 1,599.27, weighed by losses and banking and select blue chips.

"Stocks and the euro fell on Wednesday after the US Federal Reserve dimmed hopes for fresh asset-buying, further underlining its divergence with an embattled Europe that remains in crisis-fighting mode," according to Reuters.

Overnight minutes from the Fed's March meet showed less support for more quantitative easing (QE), or bond-buying, in the face of improved economic data, which buoyed the dollar and hit stocks in both the United States and Asia, it said.

With Europe still battling its debt crisis and struggling with economic growth, the focus later will be on the European Central Bank's latest rate-setting meeting, with rates expected to remain on hold at 1%, said Reuters.

At the regional markets, Japan’s Nikkei 225 fell 2.29% to 9,819.99, South Korea’s Kospi fell 1.60% to 2,018.61, and Taiwan’s Taiex lost 1.3% to 7,760.85, while Singapore’s Straits Times Index

The Hong Kong and Shanghai markets were closed for a public holiday.

On Bursa Malaysia, among the banking stocks, CIMB and RHB Capital lost nine sen each to RM7.72 and RM7.74, Hong Leong Bank and HLFG lost eight sen each to RM12.38 and RM12.48, AMMB down six sen to RM6.32, while Public Bank shed two sen to RM13.78.

Among the other decliners, BAT fell 64 sen to RM55.58, Dutch lady down 44 sen to RM35.50, Carlsberg fell 20 sen to RM10.60, F&N 18 sen to RM19, Sarawak Oil Palms 13 sen to RM6.81, while BLD PLANTATION []s, Cepco, Shell, Tenaga and PPB fell 10 sen each to RM9.15, RM1.55, RM10.18, RM6.47 and RM16.60 respectively.

GAB was the top gainer and rose 16 sen to RM13.20, Milux gained 15 sen to RM1.40, GBH 13 sen to RM1.25, Kamdar 12.5 sen to 49.5 sen, Malpac and JCY 10 sen each to RM1.59 and RM1.29, Tradewinds Plantations nine sen to RM4.94, Kurasia 6.5 sen to 63.5 sen and Tradewinds up six sen to RM9.60.

The actives included Ingenuity Solutions, Metronic, Cerotech, ManagePay, Naim Indah Corp, Ariantec, JCY and SuperComNet.



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CIMB Research upgrades tech sector to Trading Buy

KUALA LUMPUR (March 30): CIMB Equities Research is upgrading the tech sector from Underperform to Trading Buy as sentiment is turning positive, helped by a better book-to-bill ratio.

In its outlook report issued on Friday, it said the sector was not an outright Overweight as 1Q12 may be a weak quarter, similar to 4Q11.

“In light of our recent semicon sector upgrade, we now have three Trading Buys(JCY, MPI, and Unisem) and two Neutral calls (Jobstreet and Uchi). We raise our target prices for JCY, MPI and Unisem but lower our target price for Jobstreet and Uchi. Our top picks are Unisem and JCY,” said CIMB Research.



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OSK Research: JCY’s share price may rise further

KUALA LUMPUR (March 26): OSK Research said JCY’s share price may rise further if it can close above the 50-day MAV line.

In its technical outlook, it said on Monday the stock has been correcting the sharp rise of the October-January rally for two months now.

However, the research house said this could be over following the consecutive price increase in the past three days. There were signs of strength after it failed to close below RM1.07 last week, despite testing it three days in a row.

“The level also happens to be the 38% retracement of the Oct 2011-Jan 2012 rally. Buying was confirmed on March 21 when it closed the highest in seven days, on a “Long White” candle. Volume has been consistently higher, suggesting the return of buying interest. Therefore, purchases can be made possibly on pullback toward the stop-loss level of RM1.07,” it said.

OSK Research said a more conservative trade may even wait until the December-high of RM1.26 is broken, which will erase the dampening effect at the March 22 “Shooting Star”. The research house added the target is the early-January high of RM1.50 and a strong move could see the test of RM1.60, the high of June 2010.

“However, a failure to break above RM1.26 could see the return of selling, with a close below RM1.07 as the confirmation. Look for further support at 94 sen and 80 sen,” it said.



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Interest may return to HDD component makers

KUALA LUMPUR: Investing interest may return to smaller hard disk drive (HDD) component makers after recent earnings results from JCY International Bhd, as well as Western Digital Corp and Seagate Technology in the US topped analysts’ expectations, implying a more positive outlook on the sector.

Ironically, the devastating floods in Thailand which disrupted the global supply chain of HDDs have created an opportunity for the industry. From excess inventory and falling prices amid keen competition from existing players and the threat of solid state drives (SSD), the HDD industry is now witnessing supply shortages and higher prices. Companies like Dufu Technology Corp Bhd, Eng Teknologi Holdings Bhd (EngTek) and Notion VTec Bhd, which supply smaller HDD components that benefited less after the Thai floods, may see investor interest return as the outlook on the sector improves. However, analysts also note that they are unlikely to see a large increase in profit on a scale similar to JCY.

JCY reported a 20-fold increase in net profit to RM162.45 million for 1QFY12 ended Dec 31, from RM7.5 million a year earlier. Revenue also grew 27% to RM559.04 million from RM438.9 million. Its share price has risen 18% year-to-date (YTD).

Apart from the Thai floods which inundated the factories of other competitors, JCY finance director James Wong cited internal measures to increase output and reduce costs as a contributor to its performance.

“If the floods did not happen, I think we could have recorded 50% of our net profit for the quarter due to our internal efficient cost measures,” Wong told The Edge Financial Daily.

Industry observers attributed JCY’s commendable performance to its ability to capitalise on the supply chain disruption which saw demand for two of the larger HDD component parts — base plates and actuators — spike as their manufacturers in Thailand were flooded.

JCY, which supplies to Seagate and Western Digital, was able to secure contracts for these larger components at relatively high prices.

Be that as it may, positive earnings announcements at the end of last month by Seagate and Western Digital, which reported “substantial progress” in the recovery from the flooding, suggest the outlook for the industry is improving.

Seagate’s share price has risen 62% and Western Digital’s 26% YTD. Unlike Western Digital, Seagate was not directly affected by the floods and saw its profit surge as HDD prices increased. Seagate managed to quadruple its net profit to US$563 million (RM1.7 billion) for the quarter ended Dec 30, 2011 on the back of increased revenue of US$3.2 billion. Although hit by the floods, Western Digital’s earnings fell but were still better than expected.

In a statement on Jan 23, Western Digital president and CEO John Coyne said supply remained significantly constrained, adding that this will persist throughout 2012 with improvement during the year.

EngTek, Notion VTec and Dufu will announce earnings results in the next few weeks. Notion will announce its results on Feb 20, while EngTek traditionally releases its results in the third week of February and Dufu the fourth. YTD, Notion’s shares are up 15%, while Dufu has risen 4.5% and Engtek 8.2%.

In an announcement to Bursa Malaysia last Friday, Notion VTec updated its progress on the cleaning up of its Ayutthaya, Thailand, plant and indicated confidence in its prospects for the year.

“The Group’s business outlook has turned for the better with a strong recovery in January 2012 sales to much higher than pre-flood levels. The trend is expected to be upwards for the remainder of the financial year ending Sept 30 and beyond, as the HDD segment is expected to be in short supply until mid-2013 due to a backlog of orders,” it said.

“The average selling price of HDD is expected to remain above pre-flood levels for multi-quarters ahead,” Notion said.

“With the entrance of three new major Japanese customers in the HDD segment and the ramp-up in HDD component sales, we expect FY2012’s revenue to grow in strong double digits over FY11. The sustainability of this new business is expected to be good as the customers’ commitment is assumed to be long term,” it added.

The group expects camera orders to remain robust from this month as the camera segment is expected to be en route to full pre-flood operations by March, while its auto and industrial segment remains stable.


This article appeared in The Edge Financial Daily, February 15, 2012.



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CIMB boost for KLCI, but broader market weaker

KUALA LUMPUR (Feb 14): Blue chips closed higher on Tuesday, extending their gains again for the second day on fund buying of selected index linked stocks, especially banking stocks like CIMB, but the broader market displayed some caution.

The FBM KLCI rose 3.23 points to 1,566.05. Turnover was 2.55 billion shares valued at RM2.25 billion. Declining stocks beat advanced 581 to 321 while 288 stocks were unchanged.

Rating agency Moody’s put a dampener on the markets, threatening to put the United Kingdom's triple-A rating in jeopardy for the first time and warned it may cut France as well, while downgrading six euro zone nations including Spain and Italy.

European shares fell as the ratings move by Moody's was a reminder to investors about the problems faced by the Europe to fight the debt crisis, with the agency saying it was concerned about whether governments could implement the reforms necessary to address it, Reuters reported.

Among regional markets, Japan’s Nikkei 225 rose 0.59% to 9,052.07, Hong Kong’s Hang Seng Index added 0.15% to 20,917.80 and Singapore’s Straits Times Index 0.3% higher at 2,985.37. However, Shanghai’s Composite Index lost 0.3% to 2,344.77, Taiwan’s taiex 0.36% lower at 7,884.08 and South Korea’s Kospi 0.15% lower at 2,002.64.

US light crude oil rose 0.04% to US$100.95 per barrel. The ringgit weakened against the US dollar to 3.0455.

Crude palm oil futures rose, with the third-month delivery up RM14 to RM3,181. This was the highest level in three week on market concerns that output in Malaysia would fall for the fourth consecutive month.

Among the banks, CIMB rose 15 sen to RM7.31, pushing the KLCI up 2.64 points. Public Bank added four sen to RM13.98, Maybank two sen to RM8.52 and Hong Leong Bank 14 sen to RM11.70.

Genting Malaysia added five sen to RM3.94 and GENTING BHD [] four sen to RM10.54 while Sime Darby three sen to RM9.64.

Hibiscus was the top gainer, up 31 sen to RM1.82 and the warrants five sen to RM1.02, BAT 28 sen to RM51.78, Aeon Credit 24 sen to RM7.58 and F&N 24 sen to RM17.60.

Naim Indah was the most active with 315.10 million shares done. It was eight sen lower at 48 sen, the third straight day of losses. However, investors should be aware of the price surge from only nine sen on Feb 2.

JCY lost nine sen to RM1.26 as it recent run-up seemed to have exhausted. CIMB Research said JCY’s rally from the 38.5 sen September low has been nothing but spectacular. “However, we think that this rally is over and looks poised for a deep correction,” it said.

Among the decliners were KLK, down 52 sen to RM25.46, dragging the index down by 0.87 of a point. AirAsia gave up eight sen to RM3.68, Tenaga and Telekom six sen each to RM6.13 and RM4.81 while YTL shed four sen to RM1.48.



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Market lacklustre as investors cautious of Greece's reforms commitment

KUALA LUMPUR (Feb 14): Blue chips reversed into the red after the first hour of trading on Tuesday following the lack of follow-through buying support, in line with the cautious regional markets.

Reuters reported that the initial relief over Greece's approval of harsh austerity measures in exchange for crucial aid gave way to doubts about Athens' ability to pursue the reforms, with social unrest intensifying.

At 10.02am, the FBM KLCI was down 1.06 points to 1,561.76. Turnover was 620.93 million shares valued at RM300.42 million. Losers beat gainers 331 to 170 while 289 stocks were unchanged.

CIMB Equities Research in its technical outlook that it was beginning to see more weakness creeping into the KLCI index.

“The past two candles have been small with Friday’s candle forming a bearish harami pattern. The strong volume run-up the past week could potentially be a buying climax with prices stalling at the 1,560-1,565 resistance level. A close below the 1,550 levels would likely confirm the reversal and send the index back towards 1,524 and 1,500 next.

“Anything above 1,565 should be viewed as a bonus to lock in profits at a higher level. A break below 1,500 would mean that 1,565 is most likely going to be a very significant top that is unlikely to be challenged for at least a couple of years,” said CIMB Research’s technical outlook for the market.

KLK was the top loser, down 38 sen to RM25.60, BAT 20 sen to RM51.30, HL Bank 10 sen to RM11.46, Tenaga seven sen to RM6.12 and PetDag six sen to RM18.72.

Naim Indah Corp fell seven sen to 49 sen with 34.89 million shares done.

JCY fell five sen to RM1.30. CIMB Research said the rally in JCY’s share could be over and looks poised for a deep correction.

“We believe that it is time to get out and lock in gains. Even if there is upside left, it is likely limited to RM1.50-1.60 levels. The key level to watch out for is RM1.31, where a break below would likely signal that prices are headed back to RM1.08 and RM1.03 next, where the latter is its 50-day SMA. Sell now,” it said in its technical outlook.

Among the gainers were Petronas Gas, up 18 sen to RM16.78, Ta Ann 12 sen to RM5.89, MNRB 11 sen to RM2.80 while PetChem gained six sen to RM7.01.



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CIMB Research has technical sell on JCY at RM1.35

KUALA LUMPUR (Feb 14): CIMB Equities Research has a technical sell on JCY International at RM1.35 at which it is trading at a FY13 price-to-earnings of 3.6 times and price-to-book value of 3.1 times.

It said on Tuesday that JCY’s rally from the 38.5 sen September low has been nothing but spectacular.

“However, we think that this rally is over and looks poised for a deep correction,” it said.

CIMB Research said the upward momentum is weakening via bearish divergence signals on both its MACD and RSI. The overbought RSI is also a warning sign for bulls.

“We believe that it is time to get out and lock in gains. Even if there is upside left, it is likely limited to RM1.50-1.60 levels. The key level to watch out for is RM1.31, where a break below would likely signal that prices are headed back to RM1.08 and RM1.03 next, where the latter is its 50-day SMA. Sell now,” it said.



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JCY expects growth to continue

KUALA LUMPUR: JCY International Bhd is expected to continue its growth into 2QFY12 ending March 31, continuing its good numbers for 1QFY12.

“We are on target and are able to achieve as good as what we are achieving right now [for 1QFY12 ended Dec 31],” James Wong, the group’s finance director, told a media briefing yesterday. The group announced its 1QFY12 results yesterday.

The hard disk drive (HDD) component manufacturer posted a net profit of RM162.45 million for 1QFY12, a 2,063% year-on-year (y-o-y) increase from its net profit of RM7.51 million in the previous corresponding period.

Wong said its performance was 50% attributable to the advantages it gained over its competitors due to the floods in Thailand in October last year. His group also made some internal changes to increase output and to reduce costs.

JCY was one of the few HDD component producers able to continue to supply its main vendor, Seagate Techonology plc, as its Thai operations were not affected by the flooding.

There was a shortage in HDD component products and drives as many producers had to shut down their Thai operations. This disrupted the HDD supply chain which increased the average selling prices, contributing to JCY’s increase in profit.

Addressing the issue of sustainability, Wong said: “The full recovery in terms of the supply will not be (seen) until 2013.”

“The first thing to do is to capture global market share,” he said, adding that JCY is at an advantage as its competitors could face hurdles in re-establishing their HDD operations, and it is not easy for newcomers to enter the HDD industry.

“The demand is there, the question is how can you provide (supply),” Wong said.

As part of its initiative to increase its market share, the group announced in early January that it would spend RM300 million over the next 24 months to expand its facilities in Malaysia, Thailand and China.

“Some 80% of the expenditure is on machinery and the other 20% is on infrastructure,” said Wong. The group is purchasing new machinery which will help increase output of HDD components.

JCY is opening a plant in Guangzhou, China in June in addition to its other China plant in Suzhou. Wong said his group is expecting the Guangzhou plant to have a high efficiency partly due to its strategic location close to a port.

The group’s net profit is a complete turnaround from its previous financial standing a year ago. JCY previously posted losses for 3QFY11 due to a combination of lower selling prices, smaller sales volume and a weaker US dollar.

The group’s stock has been on an uptrend since the Thai floods in October, closing at a 52-week high on Feb 3 at RM1.42. It closed yesterday one sen lower at RM1.41 with 39.72 million shares changing hands.


This article appeared in The Edge Financial Daily, February 9, 2012.




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JCY expects growth to continue

KUALA LUMPUR: JCY International Bhd is expected to continue its growth into 2QFY12 ending March 31, continuing its good numbers for 1QFY12.

“We are on target and are able to achieve as good as what we are achieving right now [for 1QFY12 ended Dec 31],” James Wong, the group’s finance director, told a media briefing yesterday. The group announced its 1QFY12 results yesterday.

The hard disk drive (HDD) component manufacturer posted a net profit of RM162.45 million for 1QFY12, a 2,063% year-on-year (y-o-y) increase from its net profit of RM7.51 million in the previous corresponding period.

Wong said its performance was 50% attributable to the advantages it gained over its competitors due to the floods in Thailand in October last year. His group also made some internal changes to increase output and to reduce costs.

JCY was one of the few HDD component producers able to continue to supply its main vendor, Seagate Techonology plc, as its Thai operations were not affected by the flooding.

There was a shortage in HDD component products and drives as many producers had to shut down their Thai operations. This disrupted the HDD supply chain which increased the average selling prices, contributing to JCY’s increase in profit.

Wong says the HDD supply chain will not see full recovery till 2013.

Addressing the issue of sustainability, Wong said: “The full recovery in terms of the supply will not be (seen) until 2013.”

“The first thing to do is to capture global market share,” he said, adding that JCY is at an advantage as its competitors could face hurdles in re-establishing their HDD operations, and it is not easy for newcomers to enter the HDD industry.

“The demand is there, the question is how can you provide (supply),” Wong said.

As part of its initiative to increase its market share, the group announced in early January that it would spend RM300 million over the next 24 months to expand its facilities in Malaysia, Thailand and China.

“Some 80% of the expenditure is on machinery and the other 20% is on infrastructure,” said Wong. The group is purchasing new machinery which will help increase output of HDD components.

JCY is opening a plant in Guangzhou, China in June in addition to its other China plant in Suzhou. Wong said his group is expecting the Guangzhou plant to have a high efficiency partly due to its strategic location close to a port.

The group’s net profit is a complete turnaround from its previous financial standing a year ago. JCY previously posted losses for 3QFY11 due to a combination of lower selling prices, smaller sales volume and a weaker US dollar.

The group’s stock has been on an uptrend since the Thai floods in October, closing at a 52-week high on Feb 3 at RM1.42. It closed yesterday one sen lower at RM1.41 with 39.72 million shares changing hands.


This article appeared in The Edge Financial Daily, February 9, 2012.



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CIMB Research ups JCY TP to RM2.22, keeps trading buy

KUALA LUMPUR (Feb 9): CIMB Equities Research said JCY International’s positive earnings momentum should continue for the rest of FY9/12, judging from recent comments made by major hard disk drive original equipment manufacturers (OEMs).

It said on Thursday that it sees more upside despite its sterling price performance YTD and its forecast remains ahead of consensus numbers.

“At 32% of our full-year forecast, 1QFY9/12 net profit was 5% ahead of consensus and our forecast due to better-than-expected sales. We bump up FY12-14 EPS for higher 2H sales.

“This raises our target from RM1.54 to RM2.22, which is still based on 6x CY13 P/E, in line with comparables. Maintain Trading Buy,” CIMB Research said.



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Stocks to watch: Kimlun, WCT, JCY, MRCB, Naim Indah

KUALA LUMPUR (Feb 9): With the trading volume surging to fresh highs and the FBM KLCI at a six month high on Wednesday, investors should be ready to take some profit.

Key regional markets had also a strong run on Wednesday and whether the rally can be sustained on Thursday hinges on Greece as its leaders seem nearing a deal to secure a second bailout and avoid a messy default.

Trading volume on Bursa Malaysia surged to a record 4.39 billion units on Wednesday, driven by strong speculative trading in penny stocks while the FBM KLCI hit a six-month high of 1,553 as it played catch-up with regional peers.

Stocks to watch are Kimlun Corporation Bhd, WCT BHD [], JCY International Bhd, MALAYSIAN RESOURCES CORPORATION BHD (MRCB) and NAIM INDAH CORPORATION BHD [].

Kimlun’s unit SPC Industries Sdn Bhd has secured a RM223.18-million contract from Mass Rapid Transit Corporation Sdn. Bhd to supply segmental box girders for the Sungai Buloh to Kajang stretch of the Klang Valley MRT.

WCT secured a RM300.52 million contract for the headquarters of the Ministry of International Trade and Industry from Putrajaya Management Sdn Bhd.

Hard-disk drive manufacturer JCY International Bhd’s earnings surged to a record RM162.45 million in the first quarter ended Dec 31, 2011 from only RM7.51 million a year ago. Its revenue rose 27.3% to RM559.03 million from RM438.90 million a year ago.

MRCB’s net profit fell 37% to RM26.11 million in the fourth quarter ended Dec 31, 2011 (4Q 2011) from RM41.50 million a year ago. It recorded a slightly lower profit before taxation amounting to RM42.5 million for 4Q 2011 compared to RM49.3 million in 4Q 2010.

Its revenue rose 8.6% to RM470.38 million from RM433.12 million. Its earnings per share were 1.88 sen compared with 3.01 sen. It proposed dividend of 2.0 sen a share compared with 1.50 sen a year ago.

For the financial year ended Dec 31, 2011, its net profit rose 15.1% to RM77.46 million from RM67.27 million. Its revenue increased by 13.6% to RM1.213 billion from RM1.067 billion.

Naim Indah Corporation Bhd’s major shareholder Crest Energy Sdn. Bhd had disposed of all its 22.80% stake comprising of 160.06 million shares in the company. The counter hit limit-up and was the second most active on expectations of a turnaround for the company with the entry of new shareholders.

The shares were chased up on expectations of another bout of buying by speculators. However, it remains to be seen if the upward trend and high volume can be sustained.

Bursa Malaysia Securities issued an unusual market activity (UMA) query to COMPUGATES HOLDINGS BHD [] on Wednesday. The query was due to the sharp rise in price and high volume in the company’s shares. Compugates rose 3.5 sen to 12.5 sen with 451.47 million shares done.



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JCY International 1Q net profit surges to RM162.45m

KUALA LUMPUR (Feb 8): Hard-disk drive manufacturer JCY International Bhd’s earnings surged to a record RM162.45 million in the first quarter ended Dec 31, 2011 from only RM7.51 million a year ago.

It said on Wednesday its revenue rose 27.3% to RM559.03 million from RM438.90 million a year ago.

JCY said the board was recommending an interim single tier tax exempt dividend of 2.0 sen per share for the financial year ending Sept 30, 2012.



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Stocks to watch: KLCI to trend higher, 4Q earnings in focus

KUALA LUMPUR: Trading on Bursa Malaysia will resume today after the Prophet Muhammad and Thaipusam public holidays, and analysts are mixed on the prospects for the FBM KLCI going forward.

Investor sentiment for the local market this month would no doubt be influenced by the 4Q11 corporate earnings, which would be announced over the next fortnight.

MIDF Research’s Syed Muhammed Kifni in his 4Q11 earnings preview report said that early gauges supported the likelihood of slower growth in the final quarter of last year.

He said Public Bank Bhd, which released its 4Q11 results recently, recorded a stark reduction in on-year quarterly earnings growth of 3.6%.

“Moreover, other index heavyweights such as Sime Darby Bhd and IOI Corp Bhd are expected to report lower core earnings in 4Q11 as average CPO prices declined by 8.4% year-on-year to RM3,018 per tonne during the corresponding period.

“It is noteworthy that both the banking and plantation sectors represent more than half of FBM KLCI total weightage,” he said.

Nevertheless, Syed Muhammed said both MIDF Research’s and consensus FBM KLCI earnings growth for 2011 remained well within positive territory, supported by its good earnings growth performance in the first half of 2011.

“Furthermore, we expect KLCI earnings growth for 2012 to remain positive albeit only in single digit.

“While the current liquidity-driven rally may boost the market to up to 1,600 in the near term, at this juncture, we retain our year-end 2012 KLCI base case target at 1,530 points,” he said.

Meanwhile, Affin Investment Bank Bhd vice-president and head of retail research Dr Nazri Khan said that despite the holiday shortened session, the FBM KLCI would trend higher this week on continuous fund inflow, the stronger ringgit, good progress made in the eurozone, continuous US economic recovery and stronger global manufacturing data.

Given the solid January gains for the local equities (FBM100, FBM Fledgling, FBM SmallCap and FBM Ace gaining 1%, 5%, 8% and 10% respectively with smaller-caps outperforming larger-caps stocks), the FBM KLCI was likely to get more momentum and follow through into February, he said.

Nazri said punters would also likely continue churning penny stocks last week (with 90% of the top 40 active volume below RM1 including DBE, Focus, Tebrau, Nicorp and Compugates) even after the Chinese New Year celebration.

“We also expect growing hype on the upcoming flotation of Felda and Integrated Healthcare Holding IPO in 2Q12 (with estimated market cap of RM20 billion and RM8 billion respectively) to raise interest in the local plantation and healthcare stocks.

“Overall, we expect the market to continue rising with the 1,560-level as the near-term target,” he said.

Among the stocks that could be in focus this week are Genting Bhd, JCY International Bhd, AirAsia Bhd, Fraser & Neave Holdings Bhd and Naim Indah Corp Bhd.

Genting shares could come under some pressure after a bill that would have ushered in the largest gambling expansion in Florida history was withdrawn by its legislative sponsor last Friday.

The bill, which proponents said could lead to 100,000 new jobs for the state, faced a probable defeat at its first stop — the House Business and Consumer Affairs Subcommittee, according to Reuters.

Rules in the Florida House of Representatives prohibit the chamber from taking further action on a bill that has failed to pass at least one committee; so the measure is dead for 2012, it said.

Genting announced in May last year it was buying a 14 acre (5.7 ha) waterfront property in downtown Miami for US$236 million (RM710.4 million) and would build a mega-resort on the site, which currently houses the Miami Herald newspaper.

Shares of hard-disk drive (HDD) maker JCY extended their gains last Friday ahead of the release of the company’s earnings for the 1Q ended Dec 31, 2011 this week.

JCY in early January stated the group was likely to record a surge in earnings for the quarter ended Dec 31, 2011.

AirAsia’s joint venture with All Nippon Airways Co Ltd has obtained an air operators certificate (AOC) from the Japanese Civil Aviation Bureau.

“The AOC shall enable AirAsia Japan to operate aircraft in its fleet for commercial flights to international and domestic destinations,” AirAsia said last Friday.

F&N’s 1Q earnings fell 61% to RM41.74 million from RM107.08 million a year ago, due to the absence of contribution from the Coca-Cola business.

It said last Friday the earnings were also impacted by the different timing in the accounting of operating losses in Thailand due to the severe floods last year and the recovery under its business interruption insurance policy.

F&N said other factors were higher raw material costs, particularly for skimmed milk powder and sugar, and lower sales in Dairies Malaysia.

Meanwhile, Naim Indah Corp’s major shareholder Crest Energy Sdn Bhd is said to be in discussions with various parties to dispose of its shares. Naim Indah, however, said last Friday that no details of the proposed disposal, including the price, had been finalised.


This article appeared in The Edge Financial Daily, February 8, 2012.



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Stocks to watch Genting, JCY, AirAsia, F&N, Naim Indah

KUALA LUMPUR (Feb 4): Trading on Bursa Malaysia will resume on Wednesday, Feb 8 after the extended weekend to observe the Prophet Muhammad and Thaipusam public holidays, and analysts are expecting the FBM KLCI to trend higher.

However, GENTING BHD [] shares could come under some pressure after a bill that would have ushered in the largest gambling expansion in Florida history was withdrawn by its legislative sponsor on Friday.

The bill, which proponents said could lead to 100,000 new jobs for the state, faced a probable defeat at its first stop - the House Business and Consumer Affairs Subcommittee, according to Reuters.

Rules in the Florida House of Representatives prohibit the chamber from taking further action on a bill that has failed to pass at least one committee, so the measure is dead for 2012, it said.

Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said that despite the holiday shortened session, the FBM KLCI would trend higher next week on continuous fund inflow, stronger ringgit, good progress made in the Eurozone, continuous USA economic recovery and stronger global manufacturing data.

Given the solid January gains for the local equities (FBM100 [], FBMFledgling, FBMSmallCap & FBMAce gaining 1%, 5%, 8% and 10% respectively with smaller-caps outperforming larger-caps stocks), the FBM KLCI was likely to get more momentum and follow through into February, he said.

Nazri said punters would also likely continue churning of penny stocks last week (with 90% top 40 active volume below RM1 including DBE, Focus, Tebrau, Nicorp, Compugates) even after the Chinese New Year celebration.

“We also expect growing hype on the upcoming floatation of Felda and Integrated Healthcare Holding IPO in 2Q2012 (with estimated market cap RM20 billion and RM8 billion market cap respectively) to raise interest in the local PLANTATION [] and healthcare stocks.

“Overall, we expect the market to continue rising with 1,560 level as the near term target,” he said.

The other stocks that could be in focus on Wednesday are JCY International Bhd, AIRASIA BHD [], Fraser & Neave Holdings Bhd and NAIM INDAH CORPORATION BHD []

Shares of hard-disk drive (HDD) maker JCY extended their gains last Friday ahead of the release of its earnings for the first quarter ended Dec 31, 2011 this week.

JCY had in early January, stated the group was likely to record a surge in earnings for the quarter ended Dec 31, 2011.

AirAsia’s joint venture with All Nippon Airways Co., Ltd has obtained an air operators certificate (AOC) from the Japanese Civil Aviation Bureau.

“The AOC shall enable AirAsia Japan to operate aircraft in its fleet for commercial flights to international and domestic destinations,” AirAsia said on Friday.

F&N’s 1Q earnings fell 61% to RM41.74 million RM107.08 million a year ago, due to the absence of contribution from the Coca-Cola business.

It said on Friday, the earnings were also impacted by the different timing in the accounting of operating losses in Thailand due to the severe floods last year and recovery under its business interruption insurance policy.

F&N said other factors were higher raw material costs particularly skimmed milk powder and sugar and lower sales in Dairies Malaysia.

Meanwhile, Naim Indah Corp’s major shareholder, Crest Energy Sdn Bhd is said to be in discussions with various parties to dispose of the shares.

Naim Indah however said last Friday that no details of the proposed disposal, including the price, had been finalised.



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JCY continues upward trend ahead of 1Q earnings next week

KUALA LUMPUR (Feb 3): Shares of hard-disk drive (HDD) maker JCY International Bhd extended their gains on Friday ahead of the release of the earnings for the first quarter ended Dec 31, 2011.

JCY added seven sen to RM1.40 while JCY-CD rose seven sen also to 69.5 sen in very active trade.

The FBM KLCI was in positive territory, up2.18 points to 1,539.27. Turnover was 1.88 billion shares valued at RM1.43 billion. There were 377 gainers, 444 losers and 323 stocks unchanged.

It is expected to release its earnings next week. In early January, it stated the group was likely to record a surge in earnings for the quarter ended Dec 31, 2011.

JCY had also said that based on current available information, the group was likely to record an increase in net profit for the financial quarter ended Dec 31, 2011 “of approximately 1,900%” compared with a year ago where net profit was RM7.5million.

For the quarter ended Dec 31, 2011, it expected net profit to be an increase of 460% compared with the quarter ended Sept 30, 2011’s net profit of RM26.4million.

JCY cited the surge in earnings to an increase in average selling prices caused by component shortages arising from the October 2011 floods in Thailand; effective product mix; appreciating US dollar against the ringgit and continuous efficient cost management.



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KLCI edges up at mid-morning, but struggles to sustain early gains

KUALA LUMPUR (Feb 2): The FBM KLCI rose at mid-morning on Thursday, in line with the gains at the key regional markets, but found it hard to sustains its gains.

At 10am, the FBM KLCI was up 7.87 points to 1,529.16, lifted by gains at select blue chips. The index had initially breached the 1,540-level in very early trade.

Gainers led losers by 388 to 188, while 287 counters traded unchanged. Volume was 628.94 million shares valued at RM519.44 million.

At the regional markets, Hong Kong’s Hang Seng Index rose 1.2% to 29,577.00, Japan’s Nikkei 225 added 0.84% to 8,883.94, the Shanghai Composite Index edged up 0.19% to 2,272.28, Taiwan’s Taiex rose 1.15% to 7,635.93, South Korea’s Kospi added 1.42% to 1,987.04 and Singapore’s Straits Times Index was up 0.44% to 2,917.59.

OSK Research director Chris Eng Poh Yoon in his February market outlook on Thursday said the research house’s January Sell call on the FBM KLCI was correct as the market dipped slightly, underperforming almost all major markets in the world.

He said its “Alternative” Top Buys also did well in January with four out of its five Top Buys outperforming the FBM KLCI, namely Supermax, JCY, Old Town and Sarawak Oil Palm

Still, markets performed better than expected and the global rally seems sustained by a flush of liquidity from the Long Term Refinancing Operation (LTRO), he said.

“As such, we are keeping a close eye on the market for the 1st half of Feb. If indeed markets continue to do well, we may be forced to abandon our Bearish stance and upgrade the KLCI to a Neutral with a preliminary year-end target of around 1,600 points.

“To note our 1,466 points current Fair Value will remain intact but it’s a Fair Value not a year-end target,” he said.

Eng said an upgrade would likely see the research house more aggressively promoting the CONSTRUCTION [] and O&G sectors, adding that for now, Consumer stocks are the flavor of the month.

“Top Buys are KPJ, MBSB, QL and Media Chinese as well as Padini which should attract interest as a cheap and good consumer stock,” he said.

On Bursa Malaysia, Petronas Gas added 52 sen to RM16.20, BAT 48 sen to RM49.88, Hartalega 47 sen to RM7.69, Ekovest 21 sen to RM2.96, Kretam and Petronas Dagangan 20 sen each to RM2.55 and RM18.30, Malayan Flour Mills 17 sen to RM4.50, United PLANTATION []s 16 sen to RM20.50, IJM Corp 14 sen to RM5.88 and Lafarge Malayan Cement up 12 sen to RM6.80.

Tebrau Teguh was the most actively traded counter after a takeover offer made by Iskandar Waterfront Holdings Sdn Bhd (IWH), which is offering 76 sen per share – or just one sen above Tebrau’s pre-suspension price of 75 sen.

The stock rose eight sen to 83 sen with 40.7 million shares done.

Other actives included Coastal Contracts, DRB-Hicom, DBE Gurney, UEM Land, Petronas Chemicals, Mudajaya and Jotech.

Decliners included Tahps, Dutch Lady, Melewar, Southern Steel, MPI, Ajinomoto, Glenealy and BHIC.



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Flood-induced higher margins may not be sustainable

KUALA LUMPUR: Some hard disk drive (HDD) component makers are receiving a boost after last year’s Thailand floods disrupted the HDD supply chain and resulted in a rise in the prices caused by a drop in production volume.

Certain players, notably JCY International Bhd, stand to benefit from a strong growth spurt in profitability in the near term, say industry observers. However, they reckon that this earnings boost may not last long.

Some industry players believe structural issues continue to plague the HDD industry. Against the backdrop of slowing demand and thin margins as a result of competition from solid state drives (SSD), plus an industry oversupply, the long-term prospects for the HDD industry have not improved much.

Investing interest in Dufu Technology Corp Bhd, Eng Teknologi Holdings Bhd (EngTek) and Notion VTec Bhd has increased, thanks to JCY’s recent announcement that it is likely to see an increase of 1,900% in profits for 1Q2012.

JCY cited higher selling prices as a result of the floods that have caused a supply shortage and the US dollar’s appreciation versus the ringgit. In addition, effective product mix and better cost management helped enhance its earnings.




“We and others in the industry saw an increase in average selling prices (ASP) of about 10% to 20% after the [Thai] floods,” its finance director James Wong told The Edge Financial Daily recently.

While JCY’s profit forecast raises hopes and stock prices of HDD-related companies, analysts warn that it may not hold true for all HDD component manufacturers.

They caution on the sustainability of high margins and profits when the supply chain shortages are rectified.

According to industry observers, JCY was able to capitalise well on the supply chain disruption as it saw increased demand for two of its products — base plates and actuators. These two are the larger parts in an HDD.

Production of these parts was severely disrupted because most of the manufacturers making such parts were located in Thailand, and they were inundated by floodwaters.

This turned out to be a blessing for JCY, whose production plants were not affected by the flood. Thus, JCY, which supplies mainly to Seagate Technology and Western Digital Corp, was able to secure contracts for these components at relatively high prices.

However, companies like Dufu, which produces smaller HDD components, benefited less as these parts saw a smaller increase in prices.

“For smaller parts such as pins, clamps and spacers, production is spread across Malaysia and Singapore. As being smaller, they are cheaper to ship to factories in Thailand,” said an analyst.

“The supply of these parts was not disrupted, unlike bigger parts like base plates and actuators, which are produced in Thailand to lower transport costs.”

While higher prices amid volume compression can only compensate for bigger margins for so long, the higher demand for SDD is seen as a threat to the longer term prospects of HDDs.

With HDD prices now sharply higher due to the shortage problems, it could exacerbate the problem as the price gap narrows between the two memory devices.

OSK Research said Western Digital and Seagate had used this opportunity to raise prices of their HDD products by 50% to 100%, while cutting down warranty periods.

Wong: We and others in the industry saw an increase in average selling prices of about 10% to 20% after the floods.

“We believe demand for HDDs could be hampered in the longer term by demand for alternative storage mechanisms, such as cloud computing and hybrid storage,” RHB Research said in a research note on the outlook for semiconductors.

Furthermore, according to MIDF Research’s Byte IT report, the development of cloud computing will result in mobile devices lighter than current smartphones or tablets, and these would be able to access large amounts of Internet data at any given time or place.

“Once cloud computing technology matures, tablets will replace personal computers as the main device for greater corporate productivity,” the report said, implying that the need for HDDs will decline as more SSD-based gadgets emerge in the market.

In the meantime, analysts are awaiting the release of the 4Q2011 results of the local HDD component players, due by end-February, to gauge the financial impact of the floods.

It will be interesting to see if the effects of higher margins due to parts shortages can outweigh the impact of lower volume sales.


This article appeared in The Edge Financial Daily, January 31, 2012.



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KL shares mixed at midafternoon

Share prices on Bursa Malaysia continued their mixed trend during mid-afternoon trading today, dealers said.

They added despite the anticipated short-term volatility of the market, particularly from external headlines, expectations of acceleration in Economic Transformation Programme projects and a positive Chinese New Year performance will further augment an upward trajectory.

At 3pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.88 of a point to 1,520.85.

The Finance Index inched up 7.51 points to 13,451.21,the Plantation Index advanced 4.510 points to 8,474.37 and the Industrial Index added 4.950 points to 2,779.64.

The FBM Emas Index shed 3.479 points to 10,470.65 but the FBM 70 Index was 2.549 points higher at 11,660.59 and the FBM Ace added 19.940 points to 4,209.96.

Decliners led advancers 363 to 288 while 352 counters were unchanged, 482 untraded and 17 others suspended.

Volume stood at 1.136 billion shares valued at RM975.614 million.

Of the active stocks, Takaso Resources rose 1.5 sen to 25.5 sen, JCY-CD improved four sen to 59.5 sen and JCY International firmed by five sen to RM1.16.

Among heavyweights, Maybank declined one sen to RM8.23, Sime Darby rose two sen to RM9.09 and CIMB Group added three sen to RM7.32. -- Bernama



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KLCI dips at mid-morning, sentiment continues to be jittery

KUALA LUMPUR (Jan 10): The FBM KLCI fell at mid-morning on Tuesday amidst lackluster trade, weighed by losses at select blue chips including Genting-related stocks.

The FBM KLCI shed 0.61 of a point to 1,521.12 at mid-morning.

Losers edged gainers by 195 to 189, while 260 counters traded unchanged. Volume was 412.49 million shares valued at RM268.33 million.

Asian shares and the euro rose on Tuesday, but concerns over funding of euro zone sovereigns ahead of key auctions this week and of the debt crisis spilling over into the wider financial system kept investors cautious about taking riskier positions, according to Reuters.

With European woes overshadowing recent positive economic data from the United States, market players will be seeking from Chinese trade data due later in the session signs of how the euro zone debt crisis is affecting Asian growth, it said.

At the regional markets, Japan’s Nikkei 225 rose 0.41% to 8,424.47, South Korea’s Kospi gained 1.67% to 1,856.98, Taiwan’s Taiex was up 1.08% to 7,169.96, Singapore’s Straits Times Index gained 0.44% to 2,703.07, the Shanghai Composite Index edged up 0.28% to 2,232.11 and Hong Kong’s Hang Seng Index added 0.09% to 18,882.63.

MIDF Research acting head of equity Syed Muhammed Kifni said the market was expected to remain jittery going forward with the possibility of the KLCI re-testing its 2011 lows.

Nonetheless, he said that the Euro debt issue would begin to show credible signs of healing later in the 1H2012, adding that when that transpires, the underperforming indices can be expected to show swifter resurgence on the way up.

In contrast, the KLCI is anticipated to experience relative underperformance during the recovery phase, he said.

“With that in mind, we reiterate our KLCI year-end 2012 base case target of 1,530 points.

“As our base case KLCI year-end target for this year virtually matched its 2011 close, in our view, 2012 may quintessentially be a consolidation year.

Among the losers at mid-morning, Genting lost 12 sen to RM11.02, Genting PLANTATION []s down 10 sen to RM8.80, BHIC nine sen to RM3.70, KPJ eight sen to RM4.18, BLD Plantations seven sen to RM7.956, JCY six sen to RM1.05. Paragon 5.5 sen to 24.5 sen, while Tradewinds and Kian Joo lost five sen each to RM9.73 and RM2.07.

Takaso was the most actively traded counter with 41.99 million shares done. The stock gained 2.5 sen to 26.5 sen.

Other actives included KHSB, JCY, Harvest Court, Focus and Ingenuity Solutions.

Gainers included United Plantations, Petronas Dagangan, Petronas Gas, Harvest Court, BAT, CBIP and Mudajaya.



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HDD counters up on JCY’s profit guidance

KUALA LUMPUR: Spurred by JCY International Bhd’s profit guidance announcement last Thursday, other hard disk drive (HDD) players also saw rising investor interest in their companies, sending share prices higher.

Dufu Technology Corp Bhd, Eng Teknologi Holdings Bhd (EngTek) and Notion VTEC Bhd all saw their share prices end last week on a higher note; in particular, Dufu and EngTek with substantial volumes of shares changing hands.

To recap, JCY guided that its net profit for first quarter ended Dec 31, was expected to see a year-on-year leap of around 1,900%. This was the result of a handful of factors including the strengthening US dollar, better cost management and product mix.

However, the main driver for the improved results was the floods in Thailand last November. While a number of HDD component manufacturers were hit, JCY’s facility was spared.

As a result, there was also a surge in renewed interest in other HDD manufacturers as the industry works to normalise its production output in the wake of the floods.

“The positive sentiment from JCY’s profit guidance has spilled over to the other players. Now with average selling prices higher, it could mean a bump in earnings for other players if they managed to capitalise on the fact,” said an industry observer.

Last Friday, Dufu closed 1.5 sen higher at 36.5 sen with some 2.98 million shares done.

It was a similar story for EngTek, which had traded at around RM1.55 for most of December. EngTek’s share price ended 15 sen higher last Friday at RM1.69, with some 2.85 million shares traded.

However, Notion VTec did not manage to gain as much interest as the other companies although its share price did close higher at RM1.82 last Friday with around 131,500 shares traded. At the beginning of Dec 2011, its share price traded around the RM1.55 mark.

This could have been due to the fact that Notion VTec mostly deals in the manufacturing of camera parts compared to the rest that manufacture parts for other electronic gadgets.

However, the question now is how long the rally in JCY’s share price is expected to continue. In addition, while JCY came out of the affair unscathed, it is uncertain whether Dufu and EngTek would share the same fortunes.

The floods in Thailand had disrupted the HDD supply chain badly, with many analysts opining that the situation would only be resolved in another six months. It resulted in many of the big players writing off not only their inventories but also machines.

In a recent interview, JCY’s non-independent executive director James Wong said that the company expected to see the average selling prices to remain at the current levels for sometime as the supply chain rights itself. In fact, JCY announced that it would be spending around RM300 million over the next 24 months to upgrade its factory and increase production.

However, the real impact on earnings will only be seen in the coming months as the companies announce their results for the last quarter of 2011.


This article appeared in The Edge Financial Daily, January 9, 2012.




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