MREITs slightly enhanced earnings in average

Up to this week, most MREITs has performed slightly better in their earnings except TWREIT and AHP. Others are on path to our long term growth of 5 to 10% capital growth. Average yield of 7% to 8% after 10% tax. Most MREITs are within our expectation even we still like TOWEREIT. But we suggest not to add on AHP due to its sluggish performance for several quarters. We are satisfied with the results and continue to build up our income portfolio at this level.

Hovid – reached pricy level faster than we expect – selling soft

We have started holding HOVID months ago with a mid to long term target at RM 0.500. However, rumours and profits increased triggered activities. The price has since trading at now RM 0.460 above which is more than 20 times PE. We decided to reap this quick profit. As the upward trend persist, we will sell slowly from this level.

We disposed some Spritzer for Qcapita

Speculation on dry season will drive to be announced Spritzer earning top estimate.   Spritzer has added more than 10% in recent 2 weeks.  We also see buying by its major share holder.  However, it has traded above our prefer price earnings ratio.  Though we believe the upcoming result may be better.  We have sold some and switched to Qcapita.

MAS – my view of next action plan post MH17 incident

After years of challenges to be profitable when the world aviation industry changed its landscape with low cost air lines emerged. MAS is now facing even a more tough uphill task after MH370. MAS still has its brand value after years of excellent services and awards. Problem is the challenges to be profitable.

Things already happened and there is no turning back. Personally, to pump more money into MAS looking for immediate turn back to black is highly challenging. Be it the confidence is still with MAS from its customers. The impact and resources to be included for both MH370 and MH17 are going to be huge and possibly prolonged.

We believe the best option for the moment is to immediately downsize. Reducing the size but carefully settle its Unions members. Help them to relocate jobs or with reasonable compensation. Clear of all debts and restart from zero. Maintaining the brand and wait for the right time to expand again. Be it into low cost air lines segment or highly luxurious market segment. MAS just need to be paused for a moment. Don’t listen to any new corporate plan or proposal. You need to take a rest before decide again.

If MAS not intend to maintain its listing status. Give a reasonable exit plan for minority share holder. Keep OPEX low and wait for the right chance again. Sometimes the best strategy is to do nothing and wait. But I still have a strong believe in the branding of MAS.

My heart is with the victims of MH17.

Our heart is heavy on MH 17 but we will long on dip

Another sad incident that cause us a very sad day.  Our heart is also with all MH 17 passengers, families & friends of those on board. 

Market will react negatively to the incident. Perhaps MAS and insurance related companies again.  Fundamentally, we will long the market when dip.  Emotionally we will support the market from our part by buying into the market.

Support of KLCI at 1870 and buying into any dip of insurance company again namely MNRB and Alliance.

Undervalued stocks are gathering attention

While majority stocks in the market is moving towards market 15 to 16 times on average trading price.  Many non active and undervalued stock in term of PE and trading below NTA are getting attention.

Cheetah, Lay Hong and Success for example are getting more activities lately.  We believe the prolong bull will extend to at least 2015.  Thus, many of this categories stocks may perform well in coming months. 

Others like Tomei, Poh Kong, Innity, FocusP, Analabs may attract gathering interest ahead.

Land & General (L&G) – we are re-looking it with a buy call with TP at RM 0.80

With recent sustained profitable quarters with a EPS above 12 cents. This give a PE less than 5 times at the moment and NTAB above RM 0.70. Macro view on local industry does not favour a super charge on property industry perhaps even more curbs from government is expected.

However, with project on hands and a few new launches in next 12 months. We believe L&G can continue create sustain stable revenues and profits in 2014 and 2015. Thus, we reiterate also a buy call on L&G with a min target price at RM 0.80. Gradual accumulation is recommended with modest investment ratio only.

Affin and AFG the remaining target of M&A?

If BNM likes to see more merger into giant entity for the local market and competing regionally. The most likely remaining target for M&A should be Affin and AFG in term of size and relevancy. Unlike Aeon Credit where there is a co-survive focus market due to Aeon Co and motorcycles industry.

With Affin taken over Hwang DBS in the recent M&A exercise. We believe it will be challenging to immediately take on another M&A in near term. However, this create a good chance for accumulation. In term of market price and its NTA. Affin has an edge over AFG on pricing if base on the 1.75 book ratio suggested by market analysts.

With a M&A potentially 6 months to 12 months ahead (if). We believe now Affin should have a target of at least RM 5.00 base on 1.75 times of book ratio. We did not go for its right issue at that time due to our view of over price on Hwang DBS. But with the wave of financial M&A triggered again. We will add on back Affin in months to come.

OSK can be the potential biggest winner of the CIMB, RHBCAP & MBSB merger

If base on 1.75 to 2 times book ratio for CIMB to acquire MBSB and RHBCAP. OSK will have a NTA of 25% adjusted upward easily above RM 3.30. OSK can be the ultimate winner if base on its price from RM 1.750. However, we do not like OSK too much due to its major shareholder historical attitude towards its minority share holders. We recommend gradual selling OSK from RM 2.20 upwards. Do not wait for the highest price to sell off.

BNM raised OPR 25 basis points to 3.25%

We believe it is a moderate move which can be effective on inflation and debts. I agree this is a good time when economy growing healthy both locally and worldwide. We also need a stronger currency in anticipation of reverse US FED rates policy. However moderate negative impact will be on property and auto industries.

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