Key take away from Maybank Investment Bank on TELCOs RESEARCH TALK 25/6/2013

Summary 
~ Telcos stock had not been doing well this year (at least for now)
~ Low EBITDA growth
~ Regional Telcos stocks are dropping from the peak on May 2013
~ The bond yield had rose recently, which going to attract funds flowing to bond rather than telcos stock
~ ARPU is trending down!
  
Telcos stocks are not exactly defensive for now:
   - 2012 rally was due to liquidity rather than fundamentals.
   - current  valuations are substantially above the previous years mean
   - Industry development (such as LTE deployment) taking a back seat
   - Potentialy prone to profit taking

Analysis
Market Share for Prepaid
 ~ Maxis is trying to address their prepaid subscriber share
 ~ Celcom showing success at competing outsider price
 ~ Digi had a poor 1Q13
Winner for this segment is Celcom a.k.a AXIATA

Market Share for Postpaid
 ~ ARPU for 1Q is seasonally lower
 ~ Steady operating trend for all Telcos

Views on Stocks
AXIATA (Hold, TP: RM6.55, P/E:20.47, EPS: RM0.32)
~ Eperiencing substantial margin compression in 1Q2013 mainly due to XL in Indonesia
~ Challenge lies in raising XL's utilisation amid a still very competitive landscape
~ Implied valuation of celcom is very high!
~ Regarding the Tower REITs, its unlikely to go through as the analyst thinks that Axiata still loaded and don't need money and this REITs still hard to create value for AXIATA
 
p/s: Personally thinks that Axiata might do the Tower REITs if they win the license of operating in Myanmar coz they need to invest heavily, but I think the chances of winning is low as we don't have any other prominent partner for the bidding 


DIGI (Hold, TP:RM4.85, P/E:20.9, EPS:RM0.22)
~ The business trust is still ongoing and should be completed by end of 2013
~ The management needs to address subscriber loss
~ Earnings trending up with the normalisation of depreciation
~ Don't think they will give good dividend as they have already stressed up their retain earning, and that's the reason why they wanna create a Business trust, so that they can distribute their Free cash Flow that generate from operations.

Maxis (Hold, TP:RM7.20, P/E:24.8, EPS:RM0.27)
~ Dividends in Excess of FCF!!!
~ Market might attracted due to high div
~ Restructuring, Saw 8 business units streamlined into 4. Might be more efficient.

Telekom Malaysia (Hold,TP:RM5.30, P/E:24.8, EPS:RM0.22)
~ Competition is heating up on HSBB and IPTV, this was due to the new launch of Maxis-Astro IPTV service in early May 2013 (10,000 bookings withing a week)
~ UNIFI remain a small revenue contributor to TM(11%) and it has been a major source of revenue growth
~ FCF decline after exhausting the goverment grant

Other than those big Telcos, there are some questions regarding small Telcos are being asked and lets see what the analyst had said.

Time Dot Com 
~ Their biz is like telecome just that they don't have voice data.
~ Its trading below its Piers
~ Should have 10-20% upside

Redtone
~ There are numbers of catalyst such as :
   > Tendering for DTTB 
   > The new SHH like Vincent Tan and the Sultan
   > Sharing Spectrum with big telcos (Loryau forgotten whether is Maxis or Celcom d) 
~ As a result, he think there will be a spike in profit, but the analyst thinks that the price had been reflected hence not much upside.

Loryau thoughts:
~ The analyst is feeling that the industry is a bit overvalued (Well supported by the Syariah Funds)
~ The rose of the bond yield gonna attract some funds to go away
~ The Telcos is not spending much on CAPEX which means tower builder and hardware supplier such as OCK and INSTACO wouldn't have much project to do, hence no surprise in profit.
~ In short, AVOID FRESH BUYING in this INDUSTRY NOW. Hold it if you bought at low level but definitely not a good time to buy now!


Disclaimer: No information should be concluded as buy or sell, please consult your personal remisier for your personal investment decision.
 

Morning Fix by Maybank Investment

Maybank Investment had been putting quite a lots of effort in order to attract more customers to trade and increase the trade volume. As a result, they have research talk almost every week and they did have a radio programme name Morning Fix that broadcast on BFM by every morning 0750- 0800.

This Morning Fix will interview most of the prominent research analyst across the SE Asia, they will give u their point of view from Macro to Micro and review on their company too. 

As some of the investors might missed the Morning Fix, I've got another place for you to read whether what's been discussed and what's are they recommending. For those who are interested, you can click the link below and make it as your favourite for the market research. 

Loryau @ Morning Fix 

or u can just go to --> www.loryaumorning.blogspot.com

Hope you would enjoy it! Huat ah! 

Key take away from MAYBANK INVESTMENT BANK PLANTATION RESEARCH TALK 18/6/2013

1st and foremost would like to thank MAYBANK for organising such an event to share us knowledge about their research.

The key drivers for Plantation counter

1. Prices of CPO 
-higher prices will benefit the producer as they have more margin from their production

2. Operating cost 
- lower cost to get higher margin

3. Production of FFB
- the more you produce the more u able to sell and make, but need to be aware of the CPO price also.

These 3 factors are the main drivers for the P&L of a plantation company

The analyst pointed out that, its not easy to get a cheap and undervalue plantation stock in malaysia as the CPO price had drop from the highest level but the Plantation index is still remain at high level.
This is due to those syariah fund(a big chunk of money in msia) can't really invest into non-syariah compliance counter, hence, telcos and plantation is where they invested heavily. As a result, plantation is well supported.

The analyst also told us that those company that has younger tree profile will tend to have higher cost as the extraction rate of palm oil is quite low.  On the other hand, he thinks that the demand for oil palm will grow and able to cater the grow in supply.

Stock pick

1. Genting Plantation (Top pick, TP10.10) (price today RM9.46)
- This counter has quite a lot of land at JOHOR which is around the Johor Premium Outlet. 
- They r the 2nd largest land owner in Johor after UEM Sunrise   
- They have a big piece of land around KLIA too.
- The grow rate of the plantation company is 10% which is quite high and can consider as a grow stock

2. TSH Plantation (price today RM2.40)
- This counter has lots of young tree
- Going to have more production soon as the palm tree mature
- Grow rate of this company is 18% 
- Will be strongly benefited if the CPO price continue to rise

3. Ta Ann (price today RM3.90)
-New venture into plantation but has some issue with their logging concession in Australia
- Might get compensation for some logging issue
- Lots of young tree, gonna have yield soon
- Very high risk counter, only for risk taker     

4. First Resources (SGX) (price today SGD1.855)
- Have good management

5. Bumitama  (SGX) (price today SGD1.01)
- A subsidiary of IOI
- He has a feeling that this is a duplication of IOI in the 1990's

The analyst do think that WILMAR (SGX) (price today SGD3.30) is also a good bet and the company will always buy back their shares at SGD3 which indicates that the company see good values at that price.

 p/s: To those who are interested to join Maybank Research talk, U may contact me through yzchoy@hotmail.com. The Research talk will held in Dataran Bangsar and the next talk will be determine soon. Pls do not hesitate to contact me for more information. Thanks!

  
 

Review on the "Hindenburgh Omen"

As of the post on 4th of June which points out about the Hindenburgh Omen, I've pointed out that the US market is heading to a big correction or even a CRASH. But as thing changed rapidly, I will have to go against my comment again just like what I did  to the Nikkei Post.

For those who hasn't read anything about the Hindenburgh Omen, U could take a look on this.

" The Hindenburgh Omen" on US market."

Why do I change my view again?  

Before telling you the reason why, let's see how one of the "Hindenburgh Omen" failed. 

As we can see, the last "Hindenburgh Omen" happen in August of year 2010 and it had failed. The reason behind that the "Hindenburgh Omen" failed was due to the FED had introduced and wanted to implement QE2 which we deem as a catalyst to push the market. Its obvious isn't it? 

As on the past friday , we had see that the statistic being released by the US was 
" The May payrolls increase fell short of 200,000. The Labor Department said today that payrolls rose 175,000 last month, while April’s gain was revised lower to 149,000. The jobless rate rose to 7.6 percent from 7.5 percent as more people entered the workforce." (quoted from bloomberg)

1.) As we can see, the Unemployment rate had rose by 0.1% from 7.5% to 7.6% while this had implies that the FED ain't going to raise their interest rate until unemployment rate falls to 6.5%.
So, we are still far from it and this had bring a knee jerk effect to Dow Jones by rising 1.38% or 208 points to settle at 15248 . The Dow is backat  above 15,000 points which is a level of confident to investors.

2.) Chairman Ben S. Bernanke needs to see four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases, according to Vincent Reinhart, a former director of the Fed’s Division of Monetary Affairs. Roberto Perli, a former researcher in the division, said the central bank would need to see that pace “through the summer.”

“They would see that as confirmation that the economy is on a self-sustaining trajectory and they would thus be confident that they could reduce the pace” of quantitative easing, said Perli, a partner at Cornerstone Macro LP in Washington.

The figure helps provide clarity as investors seek to determine when the Fed will start to pare back the $85 billion in monthly bond purchases that kept borrowing costs low and fueled a stock-market rally. Yields on 10-year Treasury notes are near a one-year high on speculation tapering is imminent.  (quoted from bloomberg)

 

Obviously, The FED will have to ensure that the US economy will continue to grow and wouldn't do anything which could derail the economy recovery. (We should be happy when they think about slowing down QE, because its a good sign showing that US is back again.)

Both of the point above had shown us 1 thing, that is the economy of US is still unstable though there are positive sign and if FED slowing down the purchase of Bonds too quickly will surely dampen the growth. In short, the data that being released by US last friday is a SIGN of saying, the slowing down of Bond purchasing wouldn't be so soon and this will remain until we there are 4 consecutive months of 200,000 job growth to justify that the slowing bond purchasing measure wouldn't damper the growth. 

As a result, I think I will call for a Short Term Bull market until the data is strong enough to indicates and allow FED to slow down the asset purchasing measure. 

 
p/s: I'm sorry for doing this, but as U know, the market changes rapidly to what is happening and human will always do something to change the situation from worst to better.  As a result, we will have to change our opinion and decision as quickly as we can to respond from changes of environment.
 

JAPAN From ABENOMICS to ABEGEDDON and what's next?

In the previous post, I've said that the Nikkei is going to have a massive correction. Those who haven't view it, you can find it here.

71.43% that the Japanese Nikkei gonna have massive correction!

 As for your info, some of my friends claim that I've posted it much more earlier as the Nikkei had drop about 14% when I posted it, but it wasn't too late as the Nikkei had continue to drop for another 1778 points from 14326 pts til the lowest by this morning which is 12548 pts. So that call was not too bad isn't it?

This was still right and holds until 1200pm 7th June 2013.
Why do I said so?

As at 12pm just now, I had saw a very interesting breaking news from Marketwatch.com and this is what I saw in that post.

Soros shorting yen, buying Japan stocks: report

This is interesting and below is the article from the website. 

HONG KONG (MarketWatch) -- A hedge fund run by billionaire investor George Soros was back placing bets in Japan, shorting the yen and snapping up local stocks, according to a Dow Jones Newswires report Friday, citing a source close to the matter. Soros returned to the market following some signs of stability in the Japanese bond market, the source was cited as saying in the report. The person said that while the sharp recent fall in Japanese equities was a "surprise," the current level of stocks was "very attractive" as economic data and earnings were expected to pick up, Dow Jones reported. The Nikkei Stock Average JP:NIK -0.16% fell 2.1% in Friday's afternoon trading, and had entered a so-called bear market after dropping more than 20% from its 52-week peak reached on May 23. The U.S. dollar USDJPY -0.44% , meanwhile, was trading at ¥96.34, also sharply down from its May highs above ¥103.

 Ain't this interesting?

As I was thinking that the market gonna crash, this Soros had came in and told me not to worry and stay calm. Why? Because, he will save the market ! LOL!

Haha.. FYI, I'm "worship" Soros even he used to get blame as the culprit for causing the financial crisis in 1998. Talking about this, if a person can really causes such a crisis that's mean he is freaking smart isn't it? Other than that, some newspaper did also mentioned that he made billions for short selling the yen recently and also short selling the pounds years ago. How can he do that if he is not smart? Maybe Jim Rogers will have his own explanation to his old partner. 

Ok, enough of crap. I've changed my view that Japan is going to have a sharp rebound soon instead crashing more. WHY? As I said, SOROS IS SMART! He won't do anything stupid and he must have saw something that we didn't! On the other hand, I think I'm not the one who only "worship" SOROS, and there are lots more syndicate or investors that deem SOROS as the smart money and will follow what SOROS did.

As a result, the movement of SOROS is a call of confidence towards ABENOMICS at least for now. The spill over effect of his act will also well buoy the NIKKEI!  

This is because SOROS is a call of confident! and Confident breeds Confidences!

The best indication is that the NIKKEI had came back from its lowest point of 12548pts and close at 12877.53pts by dropping 0.2% or 26 pts for today. It had even touches the highest point of 13106pts at 130pm. 

 I was thinking that, our Malaysia market ain't going to do well if U.S. and Japan is not doing well, but once Japan's situation had changed and the data from U.S tonight is not good which signals no slow down of QE, then our market gonna be good again. Happy trading and HUAT AH!

 p/s: Soros is one of the most successful investor that I love a lot.

  

71.43% that the Japanese Nikkei gonna have massive correction!

A few days ago Michael Cembalest whom is Global Head of Investment Strategy in J.P. Morgan had did some research about Nikkei regarding their sharp rising from 9000 points in November 2012 til 15600points in May 2013 which is also 73.33% increment within half year and I would share some points that he pointed out there.  

What happened in Japan last week (a 14% decline after a 85% rally since last fall)

How much optimism was priced into the success of Japan’s monetary policy bazooka? As JPMorgan's Michael Cembalest notes, P/E multiples rose from 11x to 17x since last Labor Day, and breakeven inflation implied by (admittedly thin) Japanese JGB-i bond markets rose to 2%, a level Japan has not seen consistently since 1990. On top of that, net long positions on the Tokyo Stock exchange were close to the highest levels in 20 years, and foreign participation in Japanese equity markets was also elevated. It did not take much detailed market research to see that Japan had become a crowded and popular trade.
But what happens next? After a 70% run-up over 6 months, how have stocks performed? The answer may surprise many...

Out of 14 times in histiory, 10 of it had shown the market reversed and even crashed.
Eg: the HangSeng in 1980, rose from 800 to 1600 in half year time and it drops back to 1200 within 6 months which is about a 25% correction.

The Kospi had rose from 500 pts in 1999 til 1000 pts and it fell backed to 500pts in year 2000, despite it's a 50% correction but it had came back to where it used to be and I believe that its already enough to KILL.

Why is it 71.43% ???
This is because 10/14 equals to 71.463%.

Some may find that this is superstitious but what I could say is " The history will repeat itself." As a result, this is another point that again shows that we should sell stock now as the market in Malaysia wouldn't be good if U.S and Japan and even our ASEAN market is not doing well. 

Up til today 5th June 2013, Nikkei had drop another 3.26% to 13093pts. The Nikkei had drops about 19.14%. 

I'm so sorry for Abe even I think the Abenomics gonna work this time, but this correction really gonna affect his plan. So as an investor, what is your next move?

The Hindenburg Omen... Accurate? Superstitious?

Have read about the Hindenburg Omen on NanYang Siang Pau yesterday and this is a close look up on the "sign". This is an article taken from the http://www.marketwatch.com/. 

And the reason it’s been getting so much chatter lately is that the stars have already aligned, just as they did in October 2007.

But exactly what are the signs of the Hindenburg Omen? Well, a series of market breadth indicators need to occur twice within 36 trading days of each other to portend a serious market decline within the next 40 days.

• Both the daily number of 52-week highs and 52-week lows on the New York Stock Exchange are equal or greater than 2.2% of NYSE stocks that day.

• The 10-week (or 50-day) moving average is rising.

• The McClellan Oscillator, a measure of market breadth based on exponential moving averages of advancing and declining stocks, must be negative, or bearish.

• New 52-week highs are not more than twice the number of 52-week lows.

All four of those conditions were met on April 15 and May 29, according to Jonathan Krinsky, chief technical market analyst at Miller Tabak & Co. On April 15, there were 70 new 52-week highs and 77 new 52-week lows, exceeding 2.2% of issues, while on May 29th there were 58 new 52-week highs and 104 new 52-week lows.

“According to Bloomberg, the last ‘confirmed’ omen was in October 2007,” Krinsky wrote in a recent note. “It makes some sense given the dispersion between new 52 week highs and lows. Therefore, it is always good to be aware of it, even if it proves to be nothing more than a silly topic to bring up at your next cocktail party.”

The Hindenburg Omen (HO), however, has garnered a fair amount of savagecriticism. While the HO preceded market downturns in 2008 and 1987, critics point out that stock market declines occurred only 25% of the time after conditions of the HO were met.

Chief Investment Officer Adam Grimes at Waverly Advisors called the HO “an example of the worst kind of ‘technical analysis’—a market signal essentially designed for media soundbites,” in emailed comment Monday.

“This signal was created in a different market environment, and we might reasonably ask if the NYSE, which represents roughly 10% of the total U.S. market, is actually the best representation today,” Grimes said.

Still, the creator of the HO, Jim Miekka, told WSJ’s MoneyBeat blog he’s preparing to bail out of the market. Then again, Miekka also said much the same thing in mid-August 2010, when the S&P 500 Index SPX +0.59% was around 1,079. By the end of the month, the S&P 500 had slipped nearly 4% to 1,040. It followed that up by rising 30%  to 1,347 over the next 11 months.

According to Wikipedia,
From historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77% [The Wall Street Journal 8/23/2010 article cited below states that accuracy is 25%, looking at period from 1985], and usually takes place within the next forty days. The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. Though the Omen does not have a 100% success rate, every NYSE crash since 1985 has been preceded by a Hindenburg Omen. Of the previous 25 confirmed signals only two (8%) have failed to predict at least mild (2.0% to 4.9%) declines.
Because of the specific and seemingly random nature of the Hindenburg Omen criteria, the phenomenon may be simply a case of overfitting. That is, by backtesting through a large data set with many different variables, correlations can be found that do not really have predictive significance. The Omen is at best an imperfect technical indicator that is a work in progress.

As what we can see here, you gotta clean your position within this forty days. But will this get our Bursa Malaysia affected? I think its likely as the foreign funds are the net seller right now. On the other hand, this correction gonna be the best time for us to accumulate good fundamental stocks again. 

Another reason for Selling in MAY and go AWAY... 
p/s: It's still not too late to sell now...