Sime Made it into the Double Digit

After struggling from corporate fumbles, Sime Darby finally made it to the roost moving beyond RM10.00 in early trading and sustained up to noon.

Volume was heavy for a heavyweight. My best guess is it is local institutional buying or foreign funds may have waded in the snap up shares in Sime.

It is currently trading above RM10.10 and could sustained at this price range until the finish if no weak holders come in to spoil the fun.

The Book or the Movie?

I have read the book, "The Girl with the Dragon Tattoo" just days before I saw the movie.

One thing I can tell you. After reading the book, whatever suspense left in the movie just got lost. Pity that it followed the book too closely. Except for the last part where they decided not to go to Australia and re-write the subplot that Harriet was actually Anita residing in London, the movie lacks plenty after the plot is gone. Nothing in the movie is shocking.

Otherwise, I think Rooney Mara played the role of Lisabeth Salendar to a T. Craig was his usual glummy self, hardly venturing a smile.

UAC-Slightly under the Weather

UAC is what they termed as an old horse counter. As the premier cement board manufacturer, it has seen dwindling fortunes the last few years. As its performance and profits is contingent on the construction industry, its fortune rises and ebbs with the ups and downs of the construction sector.

Let us look at the revenue of UAC for the last few years from 2006 to 2010.

The revenue numbers shows an up and down trend with the best year being 2010. 2006 and 2008 also showed good revenue yield.

For profit before tax, UAC had the best year in 2006 and the worst year in 2008.

For after tax figures, UAC did best in 2006.

Let us now focus on dividend yield.

The best year for dividends was 2008 when UAC gave out a gross of 26 sen plus a non tax 6 sen. Dividend for 2007 was a good 30 sen.

For 2010, it gave out 24 sen gross,a fair dividend given the more challenging construction industry.

So, can we say that UAC is a good dividend counter to invest in?

In effective rate, UAC paid net dividend of 25.5 sen net in 2006;22.5 sen in 2007;16.5 sen in 2008,19,5 sen in 2009 and finally 18 sen in 2010.

On an average basis, if you are holding UAC shares from 2006, you would have secured an average dividend income of 20.4%. This works out to a return of 6.8% per RM1,000 investment.

This is definitely better than putting money into fixed deposits. Then there is that good possibility for capital gains too.

A word of caution, though.

UAC is strictly investor grade and you may not be able to quickly dispose of it in the market as there are very few speculative buyers.

Turning 60

Today, I turn 60.

Well,most people say it is just a number.

For me, it is a milestone number.

A number to reflect upon - the achievements that one can cherished, the joys to relive once more.

Recollection of good times past; of friends who have helped us get this far. And to those we were blessed to help change their lives; sometimes-forever.

May God bless me with good healthy, happy years ahead.

Amen.

"Who's That Girl?" in The Artist

This following description aptly sets the tone for the Best film for 2011,"The Artist"

An enthusiastic fan literally bumps into her silent screen hero outside a movie preview. The gracious reaction of the male hero to the lady fan led Peppy to give a kiss on the cheek of George and a new star of 'the talkie' was born at the behest of the now falling silent movie star.

A black and white silent movie (beautiful background music)that is at once reflective of the ups and downs of life.

Wonderful cast of Jean Dujardin, Berenice Bejo,John Goodman,James Cromwell and that darling of a little dog!

I enjoyed this black and white movie very much.

The Artist really is worthy to win the golden Oscar statute of Best film for 2011.

Can you believe them?

Day in and day out, when the stock market is in an upward direction, we have predictors, forecasters and oraclers telling us their supposedly hindsight 20-20 vision of what target prices a stock should be.

They could be fundamentalists or they could be those chaps operating from waves,candles and charts.

All the same, the have their share of predictions. Could they be believed?

Let us look at some of the stocks they are looking at today and what are their forecasted price in days to come. We must tell ourselves that they are all giving us their forecasts with the grand assumption that the global economic trends remain intact.

Let us look at three investment banks and their forecasts. The banks are Hwang-DBS Vickers,RHB Research and Am Research.

Let us look how they perceived one of South-east Asia's bluest of the blue shares-Sime Darby.

This stock is trading 25 sen up today at RM9.96.

Hwang opines that it will likely go up to RM11.25; RHB Research, being less optimistic, gives it a RM10.55 while Am Research gives it a 5 sen better at RM10.60. If a majority count is made, then Sime should move up to RM10-55-RM10.60. This will be a fair price projection.

Two investment houses recommend Sunway Holdings.

This stock is currently trading at RM2.62. Hwang believes that it can move up to RM3.30 while RHB cautiously reckon it can reach RM3.15.

One other stock is Digi. One investment house(I cannot recall-it could have been CIMB) said it will move up to RM4.40, It is currently settling down at RM4.06. A push of 34 sen and it will have arrived.

Meanwhile, do not expect all these shares to go up like an arrow.

There will be fits and starts, digestion issues, warts and all.

So, be patient!

Shifting Fortunes

Enrich thy neighbour,beggar thy neighbour.

As they say,English is contextual. It depends on the words and the situation that it is applied; to get at its real meaning.

So, in this case, it is clear that the meaning does not exist in a vacuum and not amongst neighbours proferring the same wares.

Reduction of taxes on edible oil by Indonesia is going to upset Malaysia for sure.

Unless Malaysia does the same thing to bring down taxes to an equivalent level, expect lower export yield as even Malaysian refineries may move to neighbouring Indonesia to tap on higher margins.

Will Malaysia put at risk a US20 billion industry?

Remember that foreign investors and smaller palm oil refiners process 60 per cent of the country’s output.US agribusiness Cargill and Japan’s Nisshin Olio operate refineries in Malaysia where the margins have come under severe pressure in recent months.

Malaysia definitely cannot afford to lose the investment already made by non-integrated refineries.The consequence could be catastrophic especially for the smallholders and private millers which are depending on them now to off-load their fresh fruit bunches and crude palm oil.

Currently, Indonesia is offering discounts on processed palm oil to markets in India and Pakistan as they enjoy a price advantage of US$100 per tonne because of lower export taxes.

Malaysia is undoubtedly worried about the 25 new refineries with a combined capacity of 9.6 million tonnes.coming on steam.

Independent Singaporean refiner Mewah, which owns some of the biggest factories in Malaysia, has already said it would delay ongoing plans for a new processor in Malaysia’s Sabah state to focus on building one in Indonesia.

Other existing players may follow Mewah so long as the government keeps an annual tax-free crude palm oil (CPO) export quota of 3 million tonnes, which tightens supply, raises feedstock costs and reduces factory use rates.

Malaysia taxes crude palm oil exports to protect its refining sector where capacity stands at nearly 24 million tonnes but imposes the quota to help firms like Sime Darby and IOI Corp feed their overseas refineries.

The duty free export quota will reduce the average refining capacity utilisation this year to about 68 per cent.

The impact will be more pronounced with the quota estimated to mop up about 15 per cent of Malaysia’s projected crude palm oil output this year of over 19 million tonnes.

Apparently,for some refineries with a refining capacity utilisation rate of less than 60 per cent, it would be difficult to sustain their operations.

The bigger blow for these standalone refiners will come from Indonesia where greater refining capacity use and lower export taxes will see less crude palm oil shipped to Malaysia.

In 2011,Malaysia imported a record 1.3 million tonnes of crude palm oil from Indonesia to keep its refineries running but this year, it could be an entirely different story. as limited imports could be costly and further depress margins.

On a sweeter note, big Malaysian palm oil firms with a huge plantation bank and refineries like Sime, IOI, KL Kepong and United Plantations will still survive,

This, however does not preclude them from investing in Indonesia because they have plantations there. Some have already joint-ventures in Indonesia in the downstream industry.

So, tax people at the Ministry of Finance, what next?