Current State Of Malaysian Furniture Makers

The share price of listed Malaysian furniture makers had risen in tandem with the fall of the Malaysian Ringgit over the last two years ago. A weaker Ringgit is expected to boost the export revenue of these Malaysian furniture makers.

USDMYR vs Furniture Stocks.png

What about the current situation, given the current strength of the Ringgit?

Strictly For Illustrative Purposes Only

Latitud Tree

Correlation is reasonable at R-squared of 0.67. It appears that based on the regression relationship between USDMYR and share price of Latitud, the Company appears to be trading at discount to its forecast value. Nevertheless, its current share price is the range of the 95%-confidence intervals.

Latitud.png

Poh Huat Resources

Correlation is 93quite high at R-squared of 0.67. It appears that based on the regression relationship, Poh Huat appears to be trading at premium to its forecast value and slightly above the 95%-upper interval.

PohHuat.png

Focus Lumber

Correlation is lowest if compared to the peers. Based on the regression relationship, it appears to be in an oversold position (trading at a significant discount to its forecast value). Nevertheless, the current price is in between its 95%-upper / lower bounds.

FL.png

Lii Hien

Correlation is considered high at 0.88 (r-squared). Based on the regression relationship, it appears to be trading at a premium to its forecast value and above its 95%-upper bound of forecast range.

LH.png

Homeritz

Correlation is reasonably significant at 0.84 (r-squared). Currently, Homeritz appears to be fairly valued if compared to its forecast value and range.

Homeritz.png

 

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

A Simple Company

Company Background: 
AWC is the premier provider of total asset management and provides “one stop” integrated facilities management services to building facilities owners, our hallmark is commitment to quality, consistency and safety. AWC provides integration of key facility systems that manage electrical distribution, lighting, air-conditioning and security. AWC’s proprietary brand STREAM uses the breakthrough pneumatic technology for waste collection. Its pneumatic waste conveying system transports municipal or household waste at high speeds via reticulated pipes to a central handling facility. AWC provides pro-environment solutions in refrigeration, air-conditioning, light and energy management and control device for time, pressure, humidity and temperature for a variety of businesses and industries.

Continue reading “A Simple Company”

Year End Window Dressing

Window dressing is a strategy used by mutual fund and other portfolio managers near the year or quarter end to improve the appearance of a fund’s performance before presenting it to clients or shareholders. To window dress, the fund manager sells stocks with large losses and purchases high-flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings. Source – Investopedia

Does this phenomena apply to the Malaysian stock market?

My personal view is that fund managers usually do their typical window dressing in the month of December. I have decided to analyse the FBMKLCI December data from year 1994.

Step 1 : Tabulation of December FBMKLCI Data (since 1994)

On average, the number of trading days in the month of December is up to twenty (20) days. To ensure consistency in the comparison, it is assumed that every year’s December has a total trading days of 20. As such, we fill the gaps (i.e shaded in orange) with the last available trading index number for December of the particular year.

FBMKLCI_1994-2017 trading data december

Step 2 : Averaging Process

For each year:

  1. We divide index price for each trading day by the last trading day’s index price
  2. We perform a simple averaging of the computed ratios (1994 – 2016), as shown below:

FBMKLCI_1994-2017 trading data december (ratio).png

Based on the averaging process, it appears that from 1994 till 2016, there seems to be a “consistent pattern” whereby there was a 1% oscillation in the index between 1st day till the 12th trading day,  to be followed by a significant spike in the index from 12th trading day till the end of the month. I will consider the 12th trading day as the most probable date for the commencement of window dressing activities.

Dec Graph.png

Based on this method, what will be the possible end target for the FBMKLCI FYE 2017?

We may potentially see the index ending at 1,740 (only time will tell whether I am right or wrong?)

Forecast Dec 2017

Key Risks To My Analysis

This rather simple desktop analysis assumes no occurrence of unexpected major events (including black swans) in the month of December. This assumption may appear unrealistic given the uncertainties associated with the financial markets.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

IJM vs Gamuda

In an earlier post (read this), there was a brief discussion on KLCI constituents / blue chips that could have fallen fair a bit from their historical highs. It was mentioned that the Malaysian-listed construction giant, IJM Corporation Berhad will be removed from the KLCI index starting this month (read this) as there was significant decline in its market capitalisation. Is IJM really in an oversold position? Continue reading “IJM vs Gamuda”

Fallen Blue Chips

The following graph shows the relative YTD performance for both FBMKLCI and FBM70 . We continue to see a performance divergence whereby the mid-cap stocks continue to outperform the larger cap stocks. One possible reason for such divergence could be possibly attributable to the recent intensification in the foreign funds outflow. These foreign funds have significant positions in larger cap stocks. As such, could there be value emerging in larger cap stocks? What is the possible first step in finding the ‘fallen blue chips’?

GraphComparison.png

So, who are the ‘fallen blue chip stocks’ of FBMKLCI?

Using historical prices:

  1. Benchmark its last done price (as of 30 Nov 2017) against 26W / 52W / 3Year High & Low of the security (in percentage form)
  2. A security may be considered as ‘fallen blue chip’ if its computed ratio is lower than the FBMKLCI median high / low ratio for the 3 time periods

Dec17_fallen.png

Which KLCI stocks could potentially be considered as ‘fallen blue chips’?

PetGas, RHB Bank, MISC, AmBank and Westports – these securities have achieved lower ratio than the median in all time periods

Which KLCI stocks could potentially appear on the higher side of valuation?

Tenaga, PetDagang, PChem and Hap Seng – these securities have achieved higher ratio than the median in all time periods

The above desktop analysis has been limited to analysis of historical prices of the securities without reference to any fundamental factor. Detailed fundamental analysis shall be required to ascertain whether a security is overvalued or undervalued. There are numerous  reasons as to why a stock price has fallen significantly. Kindly note that the above table has not factored the recent KLCI index adjustment of which Nestle / Press Metal will replace BAT / IJM as well as the de-merger of Sime Darby.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Will We See A Better December?

KUALA LUMPUR (Nov 30): The FBM KLCI fell 2.52 points or 0.1% after a sharp drop in the last few minutes of trade, weighed down by Genting Bhd, Petronas Gas Bhd and Public Bank Bhd share losses. At 5pm, the KLCI closed at 1,717.86 points. Genting declined 13 sen to RM8.80, Petronas Gas dropped 28 sen to RM15.88 while Public Bank fell 36 sen to RM19.90. Public Bank and Petronas Gas were Bursa Malaysia’s fifth and ninth largest decliners respectively. Across Bursa Malaysia, 2.47 billion shares worth RM6.03 billion were traded. Decliners outpaced gainers at 461 to 340 respectively. Yesterday, the bourse registered a volume of 1.96 billion shares valued at RM2.8 billion.

Today, analysts said banking stocks were in the spotlight. “There may be some added concern over the (financial) results of banks,” said Kenny Yee, head of research at Rakuten Trade Sdn Bhd. Yee said this as Malaysia’s corporate financial reporting season for the July-to-September quarter concludes today. Tomorrow (Dec 1), Malaysian markets will be closed for a public holiday in conjunction with Prophet Muhammad’s birthday.

So, will we see a better December?

I have done a quick desktop analysis and make a very wild guess as to the year end number for the FBMKLCI.

My thoughts are as follows (I may be wrong):

  • Historically, >90% of the December months registered a m-o-m positive movement (since 2005)
  • Average m-o-m movement for December is approx. 1.75%, with max of 4.85% and min of negative 3.28%
  • My wild guess: Based on a probability of 90.9% of achieving a positive m-o-m movement (historical average of +1.75%) and probability of 9.1% of negative m-o-m movement (negative 3.28%, being the lowest historical m-o-m movement %), I expect that FBMKLCI to record approx. 1.30% positive m-o-m movement for the month of December. With that, I expect the FBMKLCI to end around 1,740 for 2017. Upper bound: 1,801 and lower bound: 1,661.

Dec 17 - seasonality & analysis.png

Using the Macquarie warrants website, I simulated one of the listed structured call warrant s(underlying FBMKLCI) based on my wild guess, of which the expected warrant price ($0.035) is expected to be relatively higher than the current warrant price ($0.03) (strictly for illustrative purpose only):

Simulated Results.png

The implied volatility used in the simulation is relatively lower than the historical volatility of FBMKLCI.

HVOL_KLCI_30 Nov 2017.png

 

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Week In Review: 26 Nov 2017

The following hourly chart of FBMKLCI shows that there are some level of support @ 1,716. Last Friday, the index managed to close just above the support line. Any further dip below 1,716 will reinforce a bearish theme for the Malaysian index.

KLCI

The following hourly chart of SAPNRG has shown that the stock has stayed below its key resistance point of $1.38. Immediate positive or negative catalyst will be the outcome of the OPEC meeting to be held on 30 Nov 2017.

SAPNRG_26112017.jpeg

If there is no further commitment for production cut by the OPEC, the Brent may appear to be in an ‘overbought’ (or “overextended) position.

BRENT_NYMEX.WLD.jpeg

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.