Benign local trading - MYEG

by **Cals** Fri 05 Jul 2013, 10:58

Benign local trading
Business & Markets 2013
Written by Lee Cheng Hooi
Friday, 05 July 2013 10:47

MARIO Draghi may need to give investors a better peek at his policy road map as bond yields in Europe rise once again. With Portugal's 10-year yield climbing above 8% on Tuesday for the first time since November and the US Federal Reserve signalling it may remove monetary stimulus, investors are now seeking assurance from the European Central Bank (ECB) president that it has no plans to end its current accommodative stance. With some economic indicators showing an improvement, his challenge now is to pledge that the ECB will keep rates low without compromising its inflation goal.
The Dow Jones Industrial Average rose 56.14 points to 14,988.55 on Wednesday. The FBM KLCI traded in a narrow sideward range of 9.56 points for the week with modestly high volumes of 1.10 billion to 1.25 billion done. The index closed at 1,771.34 yesterday, up 2.13 points from the previous day as blue-chip stocks like BRITISH AMERICAN TOBACCO (M) [] Bhd, CIMB Group Holdings Bhd, HONG LEONG BANK BHD [], KUALA LUMPUR KEPONG BHD [] and PUBLIC BANK BHD [] caused the index to rise on some miniscule bargain hunting.
The KLCI's recent key swings were 1,590.67 (low), 1,699.68 (high), 1,597 (low), 1,664.39 (high), 1,613.94 (low) and 1,826.22 (high). The index surged to a fresh post-election all-time high of 1,826.22 on May 6. From the close of 1,694.77 on May 3 (just before the election), there now exist two obvious gap-up areas of 1,712.03 and 1,718.44 on the chart. The break below the critical support of 1,764.97 (on June 13) opened up possibilities for the downward gap filling. However, the price gap was only not entirely filled with the decline to the 1,723.74 low (June 25).
The current rebound rally from the 801.27 low (October 2008) to the 1,826.22 all-time high represents an extended Elliott Wave “Flat" rebound in a “Pseudo-Bull" rise. Tactically, investors may liquidate on rallies due to the index's ample long-term bearish divergence signals as well as the gap-up moves mentioned. Continue to take profit on any price rallies, as the divergent longer-term technical signals are very obvious and over-extended for 57 months now. Overlapping support and resistance levels at 1,664.39 and 1,635.55 also indicate the “bluff" nature of this current index rise.

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Its moving averages depict a triple time frame uptrend (daily, weekly and monthly). Despite its positive signs, we believe investors should take a short-term investment philosophy as the index remains benign at lofty and overbought levels for now. Its daily CCI, DMI, Oscillator, MACD and Stochastic indicators have turned marginally positive for now.
The index's key support levels are seen at the 1,723, 1,753 and 1,771 levels, while the resistances of 1,777 and 1,795 as well as the all-time high of 1,826 will offer heavy selling activities.
Despite the benign tone of the KLCI, we are recommending a “buy" on MyEG Services Bhd. MyEG reported revenue of RM20.4 million and profit after tax (PAT) of RM9.5 million for the third quarter of 2013 financial year (3QFY13) compared with RM18.3 million and RM7.2 million for 3QFY12. The increase in revenue and PAT was mainly due to continued strong growth the online renewal of insurance and road tax transactions and generally higher volumes from all JPJ services.
Going forward, MyEG's existing services will continue to contribute to revenue. New services for online vehicle ownership transfer and online renewal of foreign workers permits under the Immigration Department has been well-received. Furthermore, MyEG will focus on completing the implementation of its online service tax monitoring project. Management is optimistic the business will continue to grow as new services continue to be rolled out this financial year.
Maybank IB does not have fundamental coverage on MyEG. A check on Bloomberg consensus reveals that there is only one research house with a “buy" call. MyEG is currently trading at a high price-earnings ratio of 31.1 times with an indicative low dividend yield of 0.83%.
MyEG's share price made an obvious surge since its daily Wave 2 low of 68 sen on Nov 27, 2012. Since that major low, MyEG has surged on a very firm daily upward Wave 3 move to its recent all-time high of RM1.76 in early July this year. MyEG has moved into daily, weekly and monthly uptrends since that low of 68 sen. As it broke above its recent key critical resistance levels of RM1.40 and RM1.42, look to buy MyEG on any dips to its support areas as the moving averages depict very firm short- to long-term uptrends for this stock.
The daily, weekly and monthly indicators (like the CCI, DMI, Oscillator and Stochastic) are firmly positive and now depict the obvious indications of MyEG's eventual surge to much higher levels. We expect MyEG to remain very firm towards its support levels of RM1.40, RM1.51 and RM1.72. It will attract light selling activities at its resistance level of RM1.74 and its all-time high of RM1.76. Its upside targets are now located at RM1.92, RM2.08 and RM2.47.
Lee Cheng Hooi is head of retail research at Maybank Investment Bank. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgment or seek professional advice for your investment decisions. Technical report appears every Wednesday and Friday.

This article first appeared in The Edge Financial Daily, on July 5, 2013.