Morning Call | 6 Feb 2013

FLOWS

Tuesday, 5 February, 2013

BUY

GENTING, GAMUDA, SPSETIA

SELL

TENAGA, SIME, MAYBANK

STOCK ALERT

STOCK NAME

DATE

PRICE

BUY/SELL

TARGET PRICE

TOPGLOV(7113)

5/2/2013

RM5.44

SELL

RM4.80

Topglove(5.44) – technically, the long term chart has fulfilled its wave count and peaked in July 2010 together with the supernormal profits from the H1N1 pandemic. This is followed by a correction until May 2012 before it rebounded due to better results from lower natural rubber prices. Natural rubber prices increased 47% in FY8/2011 from FY8/2010 causing profits to plunge 46%. It then dropped 7% & 16% in FY8/2012  & Q1 FY13 respectively causing a rebound in profits. However Q2 FY13 will see a fall in profits again as rubber prices have rebounded by 12% in Q2  due to strong global auto sales resulting in demand in tires which accounts for 70% of rubber consumption. Rubber prices traded in Tokyo Commodity Exchange, a leading indicator for Malaysian natural rubber prices, rose even more, +30% in Q2.  This is negative for Topglove as it has been showing 6 consecutive quarters of improving profits. In addition, margins will be further hit as selling prices adjust with a lag of 1 to 2 quarters hence Topglove would face a scenario of falling selling prices (pegged to lower rubber prices earlier) and rising current raw material costs. This is further exacerbated by potential higher labour cost from the impending implementation of minimum wage policy. The potential demand pull factor of a SARS/H1N1/flu epidemic seems also to be disappearing as with the Northern Hemisphere being in the peak or just past the peak of winter, there seems to be little signs of this happening. The current bounce is the best opportunity to sell the stock. Sell (PT)

GENM (4715)

5/2/2013

RM3.76

Trading SELL

RM3.40

Genm(3.76) – take profit as it is currently trading near its  top of the trading range coupled with heightened perceived political risk with general elections imminent and the potential rumour mongering of PAS doing well in the elections and especially in Pahang state, hence an issue with license renewal. Other risk is the high foreign shareholding which will exaggerate volatility in uncertain markets. In the near term, there will also be limited catalyst with New York City casino dream put on hold because of the New York State’s recent proposal and the next date of any change only coming towards the end of the year when the voters’ referendum and the constitutional amendment will take place. Trading sell (PT)

Calls for JAN WEEK 3/WEEK 4

STOCK

Initiation Dates

Initiation price

BUY/SELL

TARGET PRICE

LAST PRICE

% Change since Initiated

MEDIA (4502)

23/1/2013

RM2.17

BUY

RM2.40

RM2.23

+3.0%

PADINI (1052)

23/1/2013

RM1.73

BUY

RM2.00

RM1.81

+4.5%

GASMSIA(5209)

25/1/2013

RM2.62

DEFENSIVE ACCUMULATE

RM2.53 >

RM2.63

+0.4%

PMETAL (8869)

25/1/2013

RM1.87

ACCUMULATE on weakness

RM1.87 >

RM1.82

-2.7%

AIRASIA (5099)

30/1/2013

RM2.78

BUY

RM3.40

RM2.75

+1.3%

WCT (9679)

30/1/2013

RM2.26

Long Term BUY

RM2.90

RM2.16

-4.6%

KLK (2445)

31/1/2013

RM21.74

SELL

RM20.50

RM21.66

-0.5%

ALAM (5115)

31/1/2013

RM0.84

Trading SELL

RM0.65-70

RM0.82

-2.5%

P&O(6009)

4/2/2013

RM1.26

BUY

RM1.80

RM1.26

0.00%

HUAYANG (5062)

4/2/2013

RM1.60

BUY

RM2.60

RM1.62

+1.6%