Is the current rally sustainable?

“Someone’s sitting in the shade today because someone planted a tree a long time ago”

“Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes because human behavior never changes”
~ Jesse Livermore

Investors, obviously, are forgiving people. Within a period of 18 months, the S&P 500, Dow Jones and Nasdaq reduced investors' portfolios by over 50% and the KLCI by about 40%. At that point, most investors hated the market.
After showing some good will for a comparatively short six months (March – August 2009), investors are once again falling in love with the stock market. Like a crafty mistress, the market has investors wrapped around her fingers once more. The old emotions are coming back – this time it’s mostly regret - for selling their winning investments too soon (and at a loss); for not staying put in the market or worse, for not investing when it was such an opportunity to do. A wasted crisis, as one would put it.
For sure, the performance numbers of especially emerging markets have been capturing investor's attention. Once again, emerging markets are outperforming the U.S. markets by a margin of 30% (since the March lows). The Emerging Markets ETF is up 43% for the year. Looking for greener pastures abroad, investors have poured nearly $11 billion into Emerging Markets.
Emerging markets four months ago
Previously on December 11th, the ETF Profit Strategy Newsletter uncovered an opportunity in China. At the time, the Shanghai Composite was down 60% for 2008. Observing that the Shanghai composite broke out of an eleven month trading channel, the newsletter recommended buying into China, unfortunately most investors did not do anything, and sat on the sidelines because they were too busy “licking their wounds”.
On March 16th, the ETF Profit Strategy Newsletter commented as follows: 'Similar to the U.S., many markets around the globe are in a bottoming process. While emerging markets should move in the same direction as developed markets, they offer more upside potential.
On hindsight, those were the best times to re-enter into the market. Unfortunately, most investors did not take the signal and continued to believe that the rally was temporary and was not sustainable. It has been six months now and sustainable or not, you decide.
One thing’s for sure, the US recession is ending. The recent Fed's decision to leave the funds rate at zero to 0.25 per is a signal that the economy is leveling out, but that the stance on interest rates will remain in place until growth is on a sustainable basis. It made overseas investors very happy with the announcement that the Fed will phase out the purchases of Treasury securities by the end of October this year.
It tells us the Fed believes the recession is basically over. At the same time, it made clear that the need to be certain of a sustainable recovery means we will not be seeing a rate hike soon. That's nothing but a positive for investors.
Investors’ behavior now
It does seem that investors have again forgotten the fundamentals of investing. Emotional decisions – the ones that have been missing out on the markets’ out performance are regretting and the ones who went against the herd are smiling happily to the bank. The markets never change – what goes down must come up and vice versa. Sadly, neither does human behavior change – fear, greed, regret, and herd mentalities always prevail. At this moment, which emotion is controlling your investment decisions?

What seemed like a dead end investment six months ago now seems to be a winner. And what seemed like the end of the world (or ‘end of humanity’ as one has absurdly put it in the midst of panic last year) has turned out to be an absolute distortion of the market. What works then? Again, it’s having an investment philosophy – a statement of why you invest, the timeframe you are willing to sit through the investment, the strategy you need to have with the prevailing investment climate in mind. Many have wasted opportunities during the 1st quarter of 2009, wanting to ‘feel better’ before divesting their money or averaging down their positions and now the very same people are asking - “Is this too late?” My answer is simple: Their questions will never end and they will never make a fortune from the equity market. All they hope is to have a ‘get rich quick scheme’ which never works. What really works is an investment philosophy and an understanding of how markets move in the longer term. Emotional investing never works. Think about it again.

Should I go against the market?

Personal Investing - By Ooi Kok Hwa


AS the stock market continues to move higher, a lot of investors are wondering when it will come down again. Those who have been involved in futures trading may be tempted to short the KL Composite Index (KLCI) futures contracts.

Unfortunately, each time they start shorting the index, the market surges even higher and touches a new high. As a result, they are forced to cover their short positions as the market turns against them. In this article, we will look at how to apply contrarian strategies in the present market conditions.

Contrarian strategy 1: only correct when the market turns around

Investors need to be careful when using contrarian strategies. These strategies are only effective when the market starts to turn around, otherwise, investors will end up being wrong.

Contrarian investors feel that most people in the market tend to get carried away by the market sentiment, so if they keep calm, they will have a better position by taking actions that are the opposite of what others are doing. They believe that they can make big money by betting against popular investment trends.

In the current stock market situation, even though the average daily-trading volume is about one billion shares, we notice that there are not many retail investors. The market is mainly filled with some big fund managers or day traders. Some investors who managed to catch stocks at cheaper prices may have been selling most of their holdings lately.

Unfortunately, the market continues to trade higher than previous selling prices. In such situation, the worst mistake for some retail investors is to abandon their contrarian strategies and start buying back the shares that they disposed off earlier at even higher prices.

Normally, when everyone starts to think that the stock market will continue to go up, that is the signal of an impending market crash. Hence, investors need to be patient to wait for the right prices before buying back those stocks.

There is also the danger that some investors may start accumulating their stocks too early. We believe that “the panic may be over, but not the crisis”. Even though there are signs that the overall economy may be on its way to recovery, we think it will take some time before we can see the real recovery of the stock market.


We need to understand that once the fund managers feel that the stock prices are far above the fundamental of the stocks, they may stop accumulating stocks.

As a result, due to a lack of demand, the market may start dipping lower again with dwindling trading volumes. It may take a long time before the market turns higher again.

We saw this phenomenon in 2000-2001 when the market dipped slowly with very thin volume for a 15-month period, with the KLCI tumbling from about 1,000-level in February 2000 to 550-level in May 2001, a total decline of about 45%.

Investors need to take note that unless they have deep pockets to average down their purchase prices over a long period, they may run out of funds before the market reaches the bottom.

One way to avoid accumulating stocks too early is by adopting the filter rule strategy proposed by Alexander (1961). He proposed that we should only buy stocks when the market touches the lowest point and starts recovering for k% from its low and sell stocks when the market discovers the peak and starts falling for k% from its high.

This strategy may reduce the feeling of regret from selling stocks too early. Given that we may never know when the market touches its peak, it may be a good strategy to let the market find the top and only start selling when the market confirms the declining trends.

Contrarian Strategy 2: Buying neglected firms

Recently, as the result of the merger between main and second board companies into the Main Market, we notice that some second board companies, which have good fundamentals but previously lacked analysts’ coverage, are starting to get the attention of investors.

We believe these companies may provide good buying opportunities for investors who have missed out on the opportunities of accumulating blue chip stocks at cheap prices. Some academic studies have shown that the returns from buying neglected firms, over a long-term period, may be better than investing in “popular” companies.

Received Dividend from PBBANK & hng's portfolio

horse said...
Just gotten my PBBANK dividend :)

August 23, 2009 8:25:00 PM PDT


hng said...
Sold out remaining kfima at 75.5sen, sold partial cenbon at 66-66.5sen, realize most of the paper profit :)


Portfolio for morning session.

OIB 59.8% (aver cost: RM 1.09)
Cenbond 23.7% (aver cost: 62.6sen)
Guniess 15.3% (aver cost: RM 6.26)

How to screen overseas stocks

A VERY GOOD PIECE OF INFORMATION :-

Personal Investing - By ooi Kok Hwa

Four criteria to look at when choosing counters that are suitable for long-term investment


LATELY, interest has grown in overseas stock investment. Given the foreign markets’ relatively high volatility of returns compared with the local market, a lot of retail investors find it more exciting to invest in overseas stocks.

However, a common problem most investors face is how to filter, from among all the listed companies in the respective markets, the right stocks that are suitable for long-term investment.

Market capitalisation

One of the most important selection criteria is buying stocks with big market capitalisation. The market cap of a listed company can be computed by multiplying the number of its outstanding shares with the current share price.

In general, we should buy stocks with big market cap because they are normally well-established blue-chip stocks with higher turnover and widely-accepted products and services.

Even though some academic research shows that buying into small market cap stocks can provide higher returns compared with big market cap companies, unless we are quite familiar with the stocks available in those overseas markets, it is safer to put our money into bigger market cap stocks.


It is not difficult to find out which companies have the largest market cap in any stock exchange.

Such information is available in most major newspapers in that particular country or the stock exchanges themselves.

For example, if we intend to buy some Singapore stocks, we should pay attention to companies that are ranked in the top 30 in terms of market cap. One can get the rankings by market cap for the Singapore Exchange in StarBiz monthly.

Price/earnings ratio

Once we have filtered out the blue-chip stocks, the next selection criteria is the price/earnings ratio (PER), which should be lower than the overall market PER. This is computed by dividing the current stock price by the earnings per share (EPS) of the company. It represents the number of years that we need to get back our money, assuming the company maintains identical earnings throughout the period.

Even though some published PER may use historical audited EPS compared with forecast EPS, given that our key objective is to do stock screening, the PER testing will provide us with a quick check on the top 30 companies – whether they are profitable and selling at reasonable PER compared with the overall market PER.

If we cannot get access to the overall market PER, we may want to consider Benjamin Graham’s suggestion of buying stocks with PER of lower than 15 times.

Dividend yield

A good company should pay dividends. We strongly believe that this is one of the most important ways for the investors to get any returns from the companies that they invest in.

Our rule of thumb is that a good company should have a dividend yield that at least equals or is higher than the risk-free return, which is usually based on the fixed deposit rates.

The dividend yield is computed by dividing the dividend per share by the current share price. In general, most blue-chip stocks do have a fixed dividend payout policy and reward investors with a consistent and growing dividend returns.

Based on our observation, most smaller companies may not be able to pay good dividends as they may need the capital for future expansion programmes.

Price-to-book ratio

Most investors would like to invest at a market price lower than the owners’ costs in the company. The book value of a company represents the owners’ costs invested in it.

In a normal business environment, unless the company has some problems that the general public may not be aware of, it is quite difficult to find stocks selling at a price lower than the book value of the company.

As a result, we may need to purchase at a market price higher than the book value. According to Graham, the maximum price one should pay for any stock is the price which gives a price-to-book ratio no greater than 1.5 times. This means that we should not pay more than 1.5 times the owners’ costs invested in the company.

Lastly, the above four selection criteria are merely a preliminary quick stock screening process. Even though investors may be able to find stocks that fit the criteria, we suggest investors check further the fundamentals of the company, such as the balance sheet strength, its gearing, future business prospects and the quality of the management before deciding to invest.

Receive 30sen cash & shares dividend from BJTOTO

Just received cash dividend of 30sen & shares dividend from BJTOTO.
Genting dividend of 4sen.
Genting Malaysia (Resorts) dividend of 4sen respectively.

Take a look of hng's portfolio below. A real fulltimer and recommendate for one to adopt his strategy as he has proven many time here of his track records, his speed in executing trades, his superd pick of stocks and his ability of best judging in term of timing while executing a stock. Is worth taking a deeper look of his way and approach that adopted by him.

*************************************************************************************

Market manage to mitigate downside.

Today, have accumulating Huaan at 51-51.5sen; OKA at 57-58.5sen, Cenbond at 56-57sen


Portfolio now:

43.9% Huaan
9.1% ARREITs
74.9% OKA (4 sen dividend)
14.7% Cenbond (may propose 4.5sen)
7.2% Complet (3 sen TE dividend)

49.8% is margin line

Coming Soon - Unified Board & Bid Structure

Was The Panic Worth It?

FOR YOUR READING PLEASURE :-

“Someone's sitting in the shade today because someone planted a tree a long time ago”


Make no mistake. The past 12 months have been nothing less than a global market panic.
Freddie Mac and Fannie Mae imploded. Bear Stearns got "rescued," along with AIG and when somehow Lehman Brothers wasn't saved, the panic became a selling mania – a loss of rationality, something close to mass hysteria. These events created a perfect storm where top U.S. banks were eventually bailed out by the Fed. The last two stand-alone investment banks on Wall Street - Goldman Sachs and Morgan Stanley, fled for relief by becoming bank holding companies. The global markets tumbled, erasing the past 12 years of market gains. The Volatility Index (the "fear index") still showed the worse of market uncertainty until March 2009.
The list could go on. The question is – was the panic worth it? Now that global markets seem to have stabilished with higher capital creation and liquidity, are we calm enough to reflect on how have we handled the panic feelings? Have we wasted a totally ‘good crisis’ ?

To help us answer these personal questions, let’s look at the panics of the early 20th century stock market crashes in the U.S. and see if we can draw some similar conclusions.
The last official panic -- the Panic of 1907 -- shook the U.S. economy to its core. Wall Street brokerages failed, depositors ran on banks, well-known companies went under, and the market's liquidity was in question (sounds familiar?). In this instance, J.P. Morgan and friends famously put together US$25 million to keep the market afloat - a role now occupied by the Federal Reserve. By 1909, the Dow Jones index had more than recovered from pre-panic highs.
In 1914, the year the Great War began in Europe, the U.S. stock markets actually closed for nearly four months after foreign investors began pulling their money out of U.S. equities en masse to support the war effort. When it reopened, the market was devalued about 30%, but sustained rallies doubled that opening by the end of 1916.
Then, of course, came the Great Depression -- the single most important economic event in U.S. history which began with the Crash of 1929 and lasted until the U.S. entered World War II in 1941. In 1932, unemployment hit 24.9%, and more than 9,000 banks failed during the 1930s. And there were no federally insured deposits until the Banking Act of 1933 created the FDIC, so when the bank failed, Americans’ hard earned money went with it. In fact, Wall Street's very future, not to mention the economic model of capitalism was in question.
For those investors who had both the money and the courage to invest in the 1930s, it paid off. One man famously borrowed money to buy 104 U.S. stocks trading for less than $1 a share in 1939. Talk about investing at the point of maximum pessimism! Four years later, though, his money had quadrupled. His name, of course, was the late Sir John Templeton.
OK, so what's your point?
We've seen bad markets before. And in every case, the point at which the market has turned irrational or overly pessimistic is precisely the time we long-term investors should have bought equities.
Despite the headlines proclaiming the next Great Depression, the current credit crunch is no Great Depression. However, market conditions can still remain arguably rocky in the short run. Unfortunately, this uncertainty seems to be the right music in the hands of the financial media, whose job is to attract readership by sensationalizing news events, and usually fanning the flames of unnecesary panic. Remember, bad media sells, old boring news don’t.
In reaction to most of these bad media which we sometimes term it as “financial pornography”, we tend to panic and get out at all cost in scary times, realizing our losses. We like to keep up with our neighbors so we behave in a herd-like fashion. We stay up nights extrapolating the most recent trends and expect that they will continue indefinitely. All these tendencies have the ability to work against us and preclude us from reaching our financial goals. It is no wonder most investors end up discouraged with their investing activities, only to lament that it is always a zero sum game.
So, what can Individual investors like us do in times of uncertainty? We should forget the game of short-term trading, and stick to longer time horizons. The media and ‘stock market gamblers’ focus on minutes, hours, and days, while those who are serious about the other areas of their financial life focus on years and decades. Unfortunately, some people waste so much time and effort in predicating the next stock market level, trying to double guess which stocks will soar, that they have entirely neglected the other more important areas of their financial life which are foundations to securing a stable financial future. Time can be better spent following a systematic approach to retirement planning and a conscious effort to accumlating wealth rather than emotional short term trading without a direction and a purpose. On that note, do remember that greed is not a valid purpose.
Back to our 1st question : “Was the panic worth it?”. The answer is : “It depends on what you did.” If you were taken in by the panic – you sold off your positions (realizing your losses) or sat on your position (you did nothing to average down), then you have wasted a good crisis. However, if you had accelerated your longer term wealth accumulation plans during those periods, you have strengthened your financial foundations for the future. And you’ll be glad you did when you look back in a few years’ time.

Revision To The Minimum Bid Structure For Securities Market

Bursa has set 16th July 2009 as a tentative date to implement the new minimum bid structure. This is part of the efforts to improve overall competitiveness and trading efficiency of Bursa Malaysia securities market.

See belows proposed structure :-

Price Range----------Current Tick-----Proposed Tick
Below RM1.00------------0.005------------0.005
RM1.00 to RM2.99--------0.01-------------0.01
RM3.00 to RM4.99--------0.02-------------0.01
RM5.00 to RM9.99--------0.05-------------0.01
RM10.00 to RM24.99------0.10-------------0.02
RM25.00 to RM99.99------0.25-------------0.02
RM100.00 and above------0.50-------------0.10

Do you think this is a bad ideas ??
Previously a tick for RM5 stock to make money, now you would need 5 ticks to achieve that.

Disposal

Oil slide back a bit, likely profit taking set in, however, still remain positive that the oil price will remain high in near term.
I have taken step to reduce some of my holdings to lock in some profit first, amongst the counters disposed today are PANTECH, HUAAN, PANAMY, YUNKONG & remaining HEKTAR.
With the disposal, managed to reduce 15% of my holdings. Would likely channel this fund to other potential counters, however its very much depend on current market sentiment.
Till then, happy trading.

Macroeconomics
· The table was turned yesterday, as all indicators were negative compared to last Friday’s. Crude oil prices eased to USD70.62 compared to USD72.04 a barrel a day earlier, while DJIA fell 2.1% to 8612 points, signaling a still uncertain economic environment.

· In the US, manufacturing activities in the New York region fell at a faster pace to 9.4 points this month compared to 4.5 last month, as sales and inventories declined. The NAHB housing sector index also unexpectedly declined to 15 points compared to 16 last month, indicating a slow recovery from the housing slump.

· Foreign direct investment in China in the first four month of the year contracted by 20.4% to $27.67bn, while price pressure eased further, as showed by the 7.6% YOY fall in wholesale prices. Spending cut by the private sector is somewhat offset by the government’s fiscal stimulus to weather the world’s worst financial crisis since World War II.

· Other unpromising news include a fall in Eurozone’s employment by 0.8% in 1Q, and the contraction in Singapore’s Apr retail sales by 11.7% YOY, mainly due to lower car sales.

China offers 9 pct export tax rebate on steel products

Reuters, Monday June 8 2009

SHANGHAI, June 8 (Reuters) - China is offering a 9 percent value-added tax rebate on exports of several high-end steel products, the Ministry of Finance said on Monday, in what analysts saw as the latest move to support domestic steel mills.
The country, the world's biggest steel maker, will refund the tax on flat-rolled steel products and hot-rolled ferro-alloy products effective from June 1, the ministry said in a statement on its website.
The rebate cuts more than half off the value-added tax rate of 17 percent, giving producers a strong incentive to export the products covered by the rebate.
Chinese steel mills are facing losses this year, as exports have shrunk due to weakened overseas demand and relatively high export costs, since the central government had capped rebates in the past few years to try to restrict production.
"I think many steel mills can take advantage of this. They can apply for rebates on products if minor metals were added during production," said Henry Liu, an analyst at Macquarie Bank in Shanghai.
The China Iron and Steel Association, the industry group that monitors all China's major steel mills, has urged the government to adopt more generous export tax rebates for steel products to bolster the industry.
China has already encountered friction with its trading partners over its steel export tax rebates, including an anti-dumping investigation over steel pipe imports in the United States.
The collapse in export demand cut China's shipments of steel products to the rest of the world by 60 percent in the first four months of the year and left China in an unusual position -- as a net importer of steel products -- in March and April.
Losses at 72 large and mid-sized Chinese steelmakers in the first four months of this year reached 5.18 billion yuan ($758.2 million), compared with 63.40 billion yuan in profit last year. ($1=6.832 Yuan) (Reporting by Alfred Cang and Tom Miles; Editing by Ken Wills)

Commodities help world markets advance

Commodity price rises help world stock markets advance

On Wednesday June 10, 2009, 6:35 am EDT
LONDON (AP) -- World stock markets rose sharply Wednesday amid higher commodity prices and renewed hopes about the state of the U.S. banking sector.

The FTSE 100 index of leading British shares was up 80.44 points, or 1.8 percent, at 4,485.23 with heavyweight mining and oil companies leading the march higher. Germany's DAX spiked 100.09 points, or 2 percent, at 5,097.95 while France's CAC-40 was up 51.87 points, or 1.6 percent, to 3,348.60.

Wall Street futures gained, suggesting a stronger session in the U.S. Dow futures rose 94 points or 1.1 percent, to 8,836 while the broader Standard & Poor's 500 futures climbed 11.3, or 1.2 percent, to 950.90.

Earlier in Asia, stock markets advanced too, with Hong Kong's main index closing 4 percent higher.

After a three-month advance, global markets have showed a lack of direction in recent days as investors fretted about whether the rally would continue through the summer months.

However, the rise in commodity and oil prices has helped mining and oil stocks around the world, while the confirmation from the U.S. Treasury Department that ten of the country's biggest banks will repay nearly $70 billion of bailout money has helped buoy demand for bank shares.

Particularly striking has been the rise in oil prices above $71 a barrel -- a 2009 high -- as investors poured money into crude as a hedge against a weakening U.S. dollar and inflation.

Oil has jumped more than 100 percent in three months as traders have cheered news showing the worst of a severe U.S. recession is likely over, and have brushed off data -- such as a 9.4 percent unemployment rate in May -- that suggest crude demand will remain weak. Even growing inventories have not checked crude's rise.

Benchmark crude for July delivery was up $1.35 at $71.36 a barrel by noon in European electronic trading on the New York Mercantile Exchange. On Tuesday, it jumped $1.92 to close at $70.01.

"There's an overriding hope that the commodity rally is signaling a recovery," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. "But some of the fundamental decay at the core of the economy is still there, so I think investors may be getting ahead of themselves."

Stock markets have rallied strongly over the last three months largely on better than expected economic data, particularly out of the U.S., as well as hopes that the financial sector was stabilizing.

As stocks usually start rising 6 to 9 months before actual recovery emerges in the official economic data, investors have bet that the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.

Despite the improvement in the economic data, concerns linger about the global economy. With interest rates on government bonds edging higher, unemployment continuing to rise and oil prices back near six month highs, investors are concerned about the sustainability of a potential recovery.

As a result, there are worries in the market that if economic data around the world starts to disappoint expectations, then investors may have to revise their recent optimism.

And though the financial system may have been saved from collapse, investors still want more evidence that banks are once again lending to businesses and households. So far, there's very little to show that the lenders are doing anything other than improving their balance sheets.

"Equities are likely to bounce around for the next three months responding to good and bad news on a daily basis before a strong rally in the last quarter," said David Buik, markets analyst at BGC Partners.

Earlier in Asia, Hong Kong's Hang Seng surged 727.17, or 4 percent, to 18,785.66, while Japan's Nikkei 225 stock average gained 204.67 points, or 2.1 percent, to 9,991.49.

Investors in Japan shrugged off news that core machinery orders, a closely watched indicator of corporate capital spending, tumbled to a 22-year low in April as uncertainty about an economic recovery kept companies cautious.

In South Korea, the Kospi advanced 3.1 percent to 1,414.88, Australia's benchmark climbed about 2.3 percent, while Shanghai's main index rose 1 percent.

On Tuesday, the Dow Jones industrial average fell less than 0.1 percent, to 8,763.06, while the S&P 500 rose 0.4 percent to 942.43.

The dollar rose to 97.93 yen from 97.46 yen while the euro climbed to $1.4089 from $1.4053 late Tuesday in New York.

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

Advice: Be extra careful when buying into warrants near maturity

Good Piece of Information from TheStar :-

LATELY, as a result of better stock-market sentiment, investors are starting to pay attention to warrants. With their prices relatively lower than that of mother shares, warrants are viewed as an alternative to achieving higher returns and providing cheaper entry to the mother shares.

What is a warrant?

A warrant is a transferrable option certificate issued by a company that entitles the holder to buy a specific number of shares in that company at a specific price (or exercise price) at a specified time in the future.

Normally, a company issues warrants together with bonds to raise capital. Because investors can detach the warrants and sell them separately to get some returns, the coupon rates for these bonds will be lower.

As a result, we can treat this as a “sweetener” for investors to attract them to buy into lower coupon-rate bonds. Besides, capital raising through warrants will be less disruptive to a company’s earnings as investors are given a certain period to exercise their rights.

The intrinsic value of a warrant is the value that an investor will get if the warrant were to be exercised immediately. It is the difference between the price of the mother share and the exercise price.

A positive intrinsic value means the warrant is “in-the-money” and the investor may exercise his rights now given that he can buy the mother share at a cheaper price. A negative intrinsic value means the warrant is “out-of-money” and the investor will not exercise his rights as he has to pay higher than the current market price for the mother share.

Usually, warrants are traded at a premium because investors are willing to pay extra for the benefits that warrants offer. However, investors need to know the premium that they are paying. Premium can be computed based on the following formula:

PREMIUM (%) = (WARRANT + EXERCISE PRICE – SHARE PRICE)/SHARE PRICE X 100

For example, if Company A’s share price is RM4.50 and the exercise price is RM3.75, Company A’s warrant (Company A-W) price of RM1.36 will imply a premium of 13.6%.

Premium = (1.36 + 3.75 – 4.50)/4.50 x 100 = 13.6%.

For any given warrant, the higher the premium, the more expensive the warrant becomes. If an investor pays a premium to buy a warrant, the underlying share must rise by a percentage equal to the premium before the maturity date to break even.

The main reason for the preference shown by investors in buying warrants instead of their mother shares is the gearing factor. It is computed by dividing the mother share price by warrant price.

Based on the above example, the gearing factor for Company A-W is 3.31 times (4.50/1.36). It means that by buying into Company A-W instead of Company A (with the same amount of investment), the exposure to Company A is 3.31 times larger than investing in Company A (the mother share) itself.

Hence, due to the lower price relative to the price of the mother share, gearing can show how many times a warrant is able to outperform or under-perform versus the mother share.

Capital Fulcrum Point (CFP)

CFP combines premium and time-to-maturity to provide a compound indicator. It can be interpreted as the average percentage increase in the price of the mother share per year assuming all other factors remain constant.

It is computed based on the following formula:

CFP = [{EXERCISE PRICE/(SHARE PRICE – WARRANT PRICE)} ^ (1/Y) – 1] X 100

Where y = the remaining years-to-maturity, ^ means to the power of

Based on the above example, if y = 5.82 years, CFP for Company A-W = [{3.75/(4.50 – 1.36)} ^ (1/5.82) – 1] x 100 = 3.1%.

It means that if Company A is able to grow by at least 3.1% a year, it will be cheaper to buy Company A-W than investing in Company A’s mother share.

In short, we can consider this CFP as taking the premium divided by the remaining time-to-maturity. When we take the above 13.6% premium and divide by 5.82 years, we will get 2.34%. Even though we cannot get the actual CFP, 2.34% can provide us with a close approximation to the correct CFP of 3.10%.

Due to the gearing factor, even though investors can get higher returns by investing in warrants instead of buying the mother shares, we need to understand the risks involved. Investors need to be extra careful when buying into warrants, especially those that are near their maturity.

Investors need to exercise the warrants or sell them into the market before the maturity dates because the warrants will become worthless after those dates.

OIL & GAS FABRICATOR PANTECH GROUP 4QE FEB 2009 NET PROFIT HIGHER

CLASSIFICATION: ACCOUNTING/AUDIT NOTIFICATION/ANALYSIS & BUSINESS PROJECTIONS
TYPE: Short Analysis / Reviews
13 May 2009

OIL & GAS FABRICATOR PANTECH GROUP 4QE FEB 2009 NET PROFIT HIGHER PANTECH GROUP HOLDINGS recorded marginally higher Net Profit of RM8.7m for 4QE Feb 28, 2009 compared with RM8.2m a year earlier despite Revenue surging 84% to RM139.3m from RM75.7m.

The Net Profit included a Provision of Stock Writedown of RM9.2m.

FULL FYE FEB 2009 RESULTS SHOW HIGHER PROFIT
Full FYE Feb 2009 was boosted to RM511.2m from RM313.3m compared with the previous year. PANTECH said Apr 27, 2009 that its full-year Net Profit jumped 75% to RM59.6m from RM34.1m in the previous year due to higher manufacturing output, higher sales volume, better product mix from the trading division and contribution from overseas operation.

FINAL SINGLE-TIER DIVIDEND PROPOSED
The Company proposed a final single-tier dividend of one sen per share totalling RM3.7m, bringing Total Dividend for FYE Feb 2009 to three sen per share. EPS to 15.94 sen from 9.1 sen, while Net Assets per share increased to 53 sen from 39 sen.

PROSPECT FOR 2009
On prospects for the current financial year, the Company said the duration, extent and impact of the persisting global financial meltdown were uncertain.

" .... Therefore, the Board will adopt a cautious approach to monitor the situation and mitigate any negative impact through diligent administration of operation cost controls and cash flows .... In view of the above, the board foresees the next financial year will be a challenging year for the Group ...." it said, adding that the Group's performance for the next financial year would be in line with the overall performance of the oil and gas fabrication and other services sector while the long-term outlook continued to be positive.

TARGET PRICE = 0.85sen

HUAAN result differ!? Computer Glitch on Financial Result ??

There seem to have some problem with the financial result with the online trading system comparing with annoucement from Bursa website :-

Below is captured from my trading system :-


This is from Bursa Website :-


Obviously HUAAN is running into loss of EPS = -2.11 for this quarter but what captured from the trading system is in positive zone. Misleading !!

Likely that this gonna affect the entire financial annoucements, so be careful folk when you searching for financial result, cross check with bursa's website for it accuracy.

Received 10sen Dividend From GUINNESS

Just gotten myself a 10sen tax exempted dividend from GUINNESS. So far never failed to receive dividend from this liquor company.

Sold Maybank at RM5.15 & Received Dividend from CARLSBERG & Maybulk

Sold all my Maybank at RM5.15 again & just received dividend from Carlsbg & Maybulk.

Sold Maybank @ RM5.15

Just sold off all MAYBANK holding at RM5.15 :-


Received BJTOTO's 3rd interim dividend of 5sen. Every quarter i strike a consolation prize on this, hahaha, better than buying 4 ekor...

Bought back MAYBANK at RM5.05 and make intraday gain for the order sold this morning at RM5.15. Still holding same amount of MAYBANK shares at RM5.00.

Bought Back MAYBANK

Bought back Maybank at RM5. Would likely hold this as longterm if market turn south. Playing with bluechip still give me sense of safety than exposing yourself on a much volatile 3rd liners or penny stocks.

Intraday Gain on PBBANK-01

Just manage to make a quick intraday gain on PBBANK-01, bought them at RM8.4 and sold them at RM8.5....


Sold all TM....

Did a quick scalp on Maybank

Bought Maybank early in the morning at RM5 and sold all of them at RM5.10. A quick hit and run while seeing the market surging high. There you go seize the opportunity if you can in this 'bully' bull.....