Bursar KL Stocks are No Longer Cheap!

Most leading Malaysian firms, led by the big banks, posted robust growth in profits in the three months ended June 30, with quite a few exceeding forecasts.

But a surge of funds flowing into the market in recent months means stock valuations on a price/earnings basis are not getting any cheaper.

In fact, stocks remained expensive compared to their historical price/earnings ratio (PER) average, according to a report by RHB Research Institute yesterday.

“The stronger trading values of the top 100 stocks on a one-month and three-month basis suggests that investors are already looking beyond the relatively expensive 2010 PER valuation,” it said.

RHB Research calculated that local stocks are priced at 16.7 times based on projected earnings this year. This was higher than the post Asian financial crisis mean PER of 16 times and one-year forward PER value of 15 times.
The firm’s forecast put the PER for 2011 at 14.7 times and a normalised earnings growth of 14.5%.

“Our corporate earnings forecast have largely taken into account the anticipated slowdown in the Malaysian economy to 5% in 2011 from 7.3% in 2010,” it said.

The firm said banks and plantation companies attracted the biggest inflow of funds in August. There was a net inflow of US$308mil into local equities from foreign funds in July.

CIMB Research, in a report dated Aug 26, predicted foreign funds to remain as net buyers in August as the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) has scaled to new highs. The ringgit has also reached a 13-year high against the US dollar.

“The excellent performance in August was driven by fundamentals, including the excellent results by blue chips like banks, Axiata Group Bhd and Genting Bhd,” OSK Research’s head Chris Eng said in a note yesterday.

He advised investors to keep buying big capitalised stocks and listed down the firm’s top picks as Malayan Banking Bhd, CIMB Group Holdings Bhd, Axiata, Tenaga Nasional Bhd and SP Setia Bhd.

Shares in Maybank jumped 10 sen yesterday to a new 30-month high of RM8.49, lifting its market capitalisation to RM60bil.

Rival CIMB was unchanged at RM7.80, with its market value standing at RM57.3bil. Shares in Maybank had gained 10.8% over the past two weeks, faster than CIMB’s 6.4% rise over the same period.

“We expect growth in the banking sector to continue to outperform other sectors,” said JF Apex Securities head of research Norhashmilaidi Hashim.

The FBM KLCI climbed 9.47 points, or 0.7%, to 1,431.96 points yesterday. The index had gone up 4.5% over the past two weeks.

So are you fully invested?

PPB: Capacity Expansion

Robert Kuok's PPB Group plans to expand its flour/feed milling division with another two mills, one in Indonesia and one in Vietnam.

Managing director Tan Gee Sooi said at a press briefing today that the company was in talks with landowners in both countries for the flour mill sites.

He said the company was negotiating for a site in Indonesia with the landowner.

Tan added that the company had identified several locations in Vietnam and started tentative talks but nothing concrete has been decided.

He said the site would likely be located in Northern Vietnam.

The company has five mills in Malaysia.

Tan said future expansion for the division would be abroad.

PPB current has a 51% stake in two 500-tonne capacity mills in Indonesia.

PPB Group Bhd also indicated plans to diversify into the bakery business and expand its land bank and cinema operations after selling its sugar refining business, according to a company presentation in Kuala Lumpur today so says  Bloomberg.

So, can you see the picture now?  PPB is going  local and global aw well!

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CIMB IB Downgrades Maxis

Yes, Maxis has been downgraded by CIMB Investment Bank.

It is now is given  the tag of 'underperform' from 'neutral' as its first-half earnings came in below the brokerage’s estimates.

The share price estimate was reduced to RM4.80 from RM5.50, CIMB said in a report today.

Meanwhile, Maxis had its stock downgraded as well to “hold” from “buy” at ECM Libra Capital.
Its stock forecast was maintained at RM5.90.

So let us see how the market will react to this advice from CIMB since ECB Libra is ambivalent on the half year performance of Maxis.

Melissa M Chen Sells EIG Shares

This is the actual report as discussed in the earlier posting. It was taken from the STAR.

Esthetics International Group Bhd’s (EIG) substantial shareholder Melissa M. Chen has sold her stake and ceased to be a substantial shareholder in the company.

According to filings with Bursa Malaysia last Friday, Chen, who is EIG executive director business development and founder, sold 26.85 million shares, or 20.35% stake, in EIG via off-market transactions.

In the group’s latest annual report, Chen was listed as the second largest shareholder with a 20.35% stake after group managing director Lim Yee Soon with a 24.66% stake. Chen is Lim’s spouse.

At the time of writing, Lim’s office had not returned StarBiz queries while attempts to contact other EIG officials were unsuccessful.

EIG is involved in the wellness and beauty industry. The group manages and distributes skincare and wellness brands such as Averine, Bioxil, Clinelle, Dermalogica and EfiSlim.

Chen started Head to Toe Beauty Centre in 1984. She became interested in skincare brand Dermalogica in 1988 and four years later launched the first Leonard Drake centre in the country.

For the first quarter ended June 30, EIG reported a net loss of RM3.2mil against a net profit of RM1.02mil a year earlier. Revenue, however, rose slightly to RM39.9mil from RM37.8mil previously.

Concurrently, Providence Capital Sdn Bhd, in which EIG chairman Eddy Chieng Ing Huong has a stake, acquired 28.5 million EIG shares via off-market transactions.

With this acquisition, Providence Capital is currently EIG’s largest substantial shareholder with 42.2 million shares, or 31.97% equity.

Meanwhile, Kan Kok Chee, whose 10.04% stake as at June 30 made him the fourth largest shareholder in EIG, has disposed of his entire holding of 13.26 million shares.

Gambir Capital Sdn Bhd, in which independent non-executive director Felicia Lim Chang Ching has an interest, has acquired 11.6 million EIG shares, upping its stake to 18.04 million shares, or 13.67%, from 4.87% as at June 30. i suspect Gambir Capital could be linked to Lim.

EIG-Quo Vadis?

I thought it was not really a harrowing experience for the Board at the last AGM. I felt throughout the meeting that they could parried any the questions posed to them most convincingly.

Compared to the earlier AGM, this was the pits as their profit has frittered to less than RM700,000. The Chaiman who is incidentally the head honcho of Selangor Dredging was adept in his responses. I have mulled over the reasons for the diminution of the profit and they are plausible.

The one division they did not do well was in the Wellness sector. Their operations in Thailand  was a real loss situation given the civil unrest there that last for more than a few months.

Secondly, they were trying to promote their own brands rather then be a seller of licensed products.

What is interesting was there was a big share sale from a majority shareholder (Melissa) and another substantial seller. What piqued my interest is all the sales were mostly bought over by Chairman Chieng and another shareholder Jessica whom I believe is related to Melissa and Lim, the Deputy Chairman of EIG.

So what do you think he will do with EIG now that the top beautician R&D and developer has exited the scene?

The share is currently trading below 60 sen and interest is scant.

The Yea-Sayers- Are They Right or Guessing Again?

Yvonne Tan write this in the Malaysian Insider. Are you persuaded?


With most companies having reported their second-quarter results, traders and investors would do well to be conservative given the looming threat of a double-dip in the world’s largest economies, analysts said.

“Near-term catalysts are lacking now with the results season over, and certainly there will be some spillover effects from the overseas markets. We advise sticking to defensive and blue-chip stocks,” a senior equity analyst with Hong Leong Research said.

Recent data from the world’s biggest economies have been less than cheerful, resulting in renewed worries on the growth momentum of these countries.

In the United States, a record plunge in home sales was recently reported. And in Japan, which has been overtaken by China as the world’s second biggest economy, export growth is showing no clear signs of picking up.  

Nevertheless, the local bourse has been fairly insulated, thanks to a positive earnings season together with a stronger ringgit – a key factor for foreign interest but with less strong catalysts now, any profits could very well be capped. “Add this to the uncertainties in global economies, which could spill over to markets and cause volatility, it pays to exercise caution,” the analyst said.

From a technical perspective, however, things appear to be still looking good for Bursa Malaysia, according to a senior technical analyst.

“The bulls had over the past couple of weeks demonstrated their power and determination to investors by outperforming their regional peers.

“With the daily and weekly moving-average convergence/divergence indicators continuing to expand positively against their respective signal line, they suggest more upside can be expected going forward,” the technical analyst said.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) has chalked up gains of more than 3% in the past two weeks compared with Japan’s Nikkei 225 which lost 3.55%, Hong Kong’s Hang Seng which shed 2.7% and China’s Shanghai Composite Index which is down 0.87%.

On Monday, the local 30-stock gauge finished 11.44 points or 0.81% up at 1,422.49.

Meanwhile, of the sea of blue-chip and defensive stocks, the Hong Leong Research analyst likes the banking and telco sectors which reported a good set of results in the quarter just ended.

OSK Research also likes banks, which are seen to be the first proxies to a recovery in Malaysia’s economy. In a second-quarter results update on Aug 24, the research house said banks led the strong corporate results posted by big-cap companies during the three-month period.

Among the big caps, 26% exceeded expectations while only 16% underperformed, it said in its analysis.