No May blues so far

by **Cals** Fri 16 May 2014, 17:31

No May blues so far

Business & Markets 2014

Written by Lee Cheng Hooi

Friday, 16 May 2014 09:56

FINANCIAL companies led the equity declines in Tokyo after the three largest Japanese lenders projected lower profits even as the economy expanded at its fastest pace since 2011.

However, the Hong Kong market rose yesterday as Tencent Holdings (a key component of the Hang Seng Index) surged after its first quarter revenue surged from online games and advertising through its messaging services.

In the US on Wednesday, the SP500 and the Dow Jones Industrial Average indices fell after a weaker tone for the small cap and Internet shares led to selling in the mid cap and blue-chip shares.

The SP500 index fell 8.92 points to close at 1,888.53 points while the Dow declined 101.47 points to end at 16,613.97.

In Malaysia, the FBM KLCI traded in a wider range of 17.95 points for the week with lower volumes of 1.57 billion to 1.83 billion shares done. The index closed at 1,879.83 yesterday, up 0.63 points from the previous day as blue chip stocks such as AMMB Holdings Bhd, IHH Healthcare Bhd, IOI Corp Bhd, Petronas Gas Bhd and Sime Darby Bhd caused the index to rise on some buying activities.

The index rose on a rally from the 801.27 low (October 2008) to the previous 1,826.22 all-time high (May 2013) and it represented an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. The index’s price movements in the next few months following May 2013 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), 1,882.20 (high), 1,769.80 (low), 1,838.69 (high) and 1,802.88 (low).

The index’s daily signals are all positive, with upbeat DMI, Oscillator, CCI, MACD and Stochastic readings. As such, its obvious support levels are seen at the 1,802, 1,853 and 1,879 levels, while the resistance and all-time high of 1,882 may offer some token profit-taking activities.

Should the index surpass 1,882.20, we believe a move to the next two upside targets of 1,888 and 1,918 for the KLCI may be possible.

Its simple moving averages depict an uptrend for its daily, weekly and monthly charts, albeit with very obvious bearish divergence signals. Due to its positive chart signals, we believe investors would adopt a “nibble on dips” tone for the KLCI.

Due to the KLCI’s better tone for now, we are recommending a chart “buy” on Mitrajaya Holdings Bhd, which is expected to announce its results for the first quarter ended March 31 of financial year 2014 (1QFY14) at the end of May.

As for its 4QFY13 results, the group’s revenue increased significantly by 39.1% year-on-year (y-o-y) to RM123.8 million from RM89.0 million in 4QFY12. Its profit before tax also rose correspondingly by 40.6% y-o-y to RM19.4 million from RM13.8 million in 4QFY12.

The higher profitability was attributed to overall improvement in all its divisions, mainly construction, property development and healthcare.

Going forward, Mitrajaya’s order book rose to RM889.8 million after it secured a RM427.9 million building project from Putrajaya Holdings Sdn Bhd at the end of 2013.

A check of Bloomberg consensus reveals that no research house covers Mitrajaya. The stock is currently trading at a low historical price-earnings ratio of 11.6 times and at a fair price-to-book value ratio of 1.01 times.

Looking at the current reported shareholding changes on Bloomberg, we observed that no major buying or selling was transacted by its top 30 shareholders recently.

Mitrajaya’s chart trend looks very strong. Its share price made an obvious rise since its weekly Wave-2 low of 43 sen in August 2013. Since that 43 sen low, it surged to its recent May 2014 high of 87.5 sen.

Mitrajaya’s chart has moved into strong daily, weekly and monthly downtrends to its recent May 2014 high of 87.5 sen. As it broke above its recent key critical resistance levels of 65 sen and 74 sen, look to buy Mitrajaya on any dips to its support areas as the moving averages depict very firm short to medium term uptrends for this stock.

The daily indicators (such as the CCI, DMI, MACD, Stochastic and Oscillator) are very firm and now depict firm indications of Mitrajaya’s eventual move towards much higher levels.

We expect the company to attract heavy buying towards its support levels of 65 sen, 74 sen and 86 sen. It will attract minor profit-taking activities at the resistance levels of 87.5 sen, 91 sen and RM1.10. Its upside targets are now located at 91 sen, RM1.17, RM1.22 and RM1.45.

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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 May 16, 2014.[/color][/size]