Pre-December local buying support

Pre-December local buying support
Business & Markets 2013
Written by Lee Cheng Hooi  
Friday, 29 November 2013 10:37

ASIAN SHARE MARKETS rose yesterday as US bourses inched to new all-time highs and the US dollar gained ground against the yen, reaching a six-month high. Asian exporter stocks gained as US jobless claims data fell and consumer confidence exceeded estimates. The SP500 rose 4.48 points to close at 1,807.23 points whilst the Dow tagged on 24.53 points to end at 16,097.33 on Wednesday night.

In Malaysia, the FBM KLCI index traded in a sideward range of 15.39 points for the week with volumes of 1.29 bllion to 2.13 billion done. The index closed at 1,807.60 on Nov 28, up 9.14 points from the previous day as blue chip stocks such as Axiata Bhd, Malayan Banking Bhd, Petronas Gas Bhd and PPB Group Bhd caused the index to rise on some persistent local buying activities yesterday ahead of the December window-dressing period.

The index rose on a rally from the 801.27 low (October  2008) to the 1,826.22 all-time high (May 2013) and it represents an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. Following May 2013, the next few months’ index price movements were trapped in a rangy consolidation with key swings of 1,723.74 (low), 1,811.65 (high), 1,660.39 (low), 1,805.15 (high), 1,759.66 (low) and 1,822.17 (high).

The index’s daily MACD and Oscillator indicators have turned negative recently. However, the CCI, DMI and Stochastic are positive though. As such, the index’s obvious support levels are seen at the 1,764, 1,780 and 1,807 levels, while the firm resistance areas of 1,811, 1,822 and 1,826 will witness heavy liquidation activities.

Its simple moving averages (MA) depict a triple time frame (daily, weekly and monthly) uptrend for now. Due to its mixed signals, we believe investors may adopt a “Range Trading” philosophy as the KLCI index remains at fairly lofty levels with bearish divergent signals for now. Some nibbling on weakness may also be prevalent ahead of the mid-December window-dressing period.

Despite the lofty tone of the KLCI index, we are recommending a chart “buy” on TAS Offshore Bhd. TAS is one of the smaller ship builders listed on Bursa Malaysia with a RM196.9 million market capitalisation. It has return on equity of 12.3% while its 12- month trailing net profit margin is at 28.8%.

The company announced its first quarter ended Aug 31 of 2014 financial year (1QFY14)results in October, which saw its profit before tax (PBT) for the period rising to RM10.2 million from RM3.3 million in 1QFY13, despite recording lower revenue of only RM29.6 million from RM48.4 million previously. According to the company, the improved profitability was attributed to the reversal of impairment loss on trade receivable and foreign exchange gains. The weaker revenue for 1QFY14 was due to higher revenue recorded in 1QFY13 which recognised a sale of a single anchor handling supply vessel.    

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Maybank-IB does not have fundamental coverage on TAS. A check on Bloomberg consensus reveals that only a single broker has coverage on the stock. The stock is currently trading at a low historical price-earnings ratio of 10.3 times and a price-to-book value of 1.3 times. TAS’ indicated gross dividend yield is 1.8%.

Its chart trends on the daily, weekly and monthly time frames are very strong indeed. TAS’ share price made an obvious surge since its weekly Wave-2 low of RM0.44 in August 2013. Since then, TAS surged to its recent October 2013 all-time high of RM1.26.

Its chart has moved into very strong daily, weekly and monthly uptrends to its recent high of RM1.26. As it broke above its recent key critical resistances of 93 sen and RM1.00, look to buy TAS 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 (such as the CCI, DMI and Oscillator) are very strong and now depict the obvious indications of TAS’ eventual surge to much higher levels. We expect TAS to remain very firm towards its support levels of 93 sen, RM1.00 and RM1.12. It will attract minor profit-taking activities at the resistance levels of RM1.15, RM1.20 and RM1.26. Its upside targets are now located at RM1.33, RM1.50 and RM1.83.


Lee Cheng Hooi is the regional chartist at Maybank Kim Eng. 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 November 29, 2013.