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Tuesday, December 30, 2014

Market Daily Report (30 Dec 2014)

As Brent crude oil prices hit a five and a half year low of nearly US$57 per barrel and the ringgit hit a near five year low of 3.5027 to the dollar, the FBM KLCI also slips 0.09% today and closes at 1,766.830.

FBM KLCI closes at 1,766.830

There were 382 gainers against 402 decliners, while 304 counters remained unchanged.

In our post earlier on the oil price slump, we were of the opinion that Bursa Malaysia would follow suit as per the declining trend of the oil price as we see a sharp drop.

Today's top gainers: Hong Leong Capital Berhad, British American Tobacco Bhd and Apex Healthcare Bhd.

The top decliners: Multi-Usage Holdings Bhd, Press Metal Bhd, and Aeon Co. Bhd.

Hubline Bhd was the most actively traded stock for today.

While the oil price dropped about 1%, the FBM KLCI only decline slightly at about 0.09%. This is most likely because of the support from the local institutional investors.

The holiday season also contribute to one of the reasons why the market did not react in tandem to falling oil prices. 

Regionally, Hong Kong's Hang Seng was down by 1.14%, Japan's Nikkei was 1.57% lower, and South Korea's Kospi was also lower by 0.64%. 

Jack Ma ready to take on the world

Jack Ma is already China's wealthiest man...and now he is ready to take on the world.

Alibaba's Jack Ma is China's wealthiest
Alibaba, named for the Arabian Nights character who uttered "Open sesame" to get into treasure cave did just that. The IPO of Alibaba raised an unprecedented $25 billion, becoming the biggest IPO in history. With that, Ma, who'd once scraped together $20 a month teaching English, joined Warren Buffet, Bill Gates and Mark Zuckerberg among the world's 25 richest individuals. 

Unlike the usual Gates, Jobs or Zuckerberg, Jack Ma portrays himself as computer illiterate. "I've never written one code, never made one sale to a customer." 

It's important to take note that before the New York IPO, the Hong Kong bourse had declined to list Alibaba Group under a structure that gave Ma and his managers control even though he wound up owning less than 8% of the stock after the offering....but that didn't stop the company's good start on the NYSE. Alibaba's $231 billion market cap suddenly made the company that was founded with $60,000 to be more valuable than Facebook and larger than Amazon.com Inc and EBay Inc. combined. Among the tech stocks, only the big three, Apple, Microsoft and Google had larger market values. 

Ma's ambition is obviously beyond China. "In the past, we measure ourselves by how much we changed China. In the future, we will be judged by how much progress we bring to the world."

Alibaba Group connect its business in a variety of ways...Alibaba's Taobao marketplace serves small businesses and individuals. Tmall.com provides electronic shop fronts for Nike, Microsoft and other companies to sell to the Chinese customers. Alibaba.com mainly links the Chinese suppliers to foreign buyers.

While Jack Ma isn't the only billionaire (Robin Li, with search engine Baidu Inc, Ma Huateng, with Tencent Holdings Ltd, the China's top instant messaging service) who made money by tapping into China's web-savvy consumers, he differs because he's determined to look beyond China.

He has created sites in English, Portuguese and Russian. In Brazil and Russia, Alibaba is the leading e-commerce portal. Alibaba is already trading American seafood and cherries in California and Washington and Ma is optimistic of US expansion. 

Jack Ma told Bloomberg Television before the IPO: "We're coming here to help a lot of small businesses"

Alibabaal

While it may not be easy to take on the world, it's obvious that Jack Ma's ambition goes beyond China.

S&P edge up but oil slump continues

The good news is that the stocks continue to edge up with S&P 500 closes 1.80 higher to 2,090.57, a record high.

S&P 500 edge up slightly despite oil price slump and Greece concern

This happened even as there is a flight to safety triggered by a sell-off in Greek bonds, while crude oil prices tumbled after a short-lived bounce. Stocks in Athens plunged as much as 11.3 percent before closing down 3.9 percent, while yields on 10-year Greek bonds touched their highest since September 2013.

On the other hand, the EURO touched the lowest in nearly 29 months against the U.S. dollar. 

As for Dow Jones, there is an average down of 15.48 pts to 18,038.23 while the Nasdaq composite added 0.05 points to 4,806.91.

As for the oil, the slump continues with Brent crude futures fell 2.4 percent to $58 per barrel after hitting a high of $60.43. U.S. crude lost 1.9 percent to $53.72 a barrel. 

Crude oil continues to drop


It is worth to take note that each time the oil market tries to pick itself up, there is another wave of selling. The market concerns on the oversupply will stay for quite a while, even as we move into 2015.

Before the Bursa opens today, it's worth to take note that each time there is a sharp drop in the oil prices, the stock market in Malaysia follow suit. Cautious trading is expected....

Monday, December 29, 2014

Market Daily Report (29 Dec 2014)

FBM KLCI continued to inch slightly higher, as the market closed at 1,768.41 points, up by 3.97 points. 

Market closed slightly higher

This happened despite the fact that the oil prices continued to remain sluggish while the ringgit remains weak. Among the top gainers are Asia File Corporation Bhd, Ibraco Bhd and Kuala Lumpur Kepong Bhd (KLK). On the other hand, Dutch Lady Milk Industries Bhd, Syarikat Takaful Malaysia Bhd and AirAsia were the top decliners. 

As expected, AirAsia was also the top active counter today as the AirAsia Flight QZ8510 went missing.

Many analysts are looking at AirAsia and expect to see some price weakness with the latest news. 

The oil prices remained sluggish although it appeared to have stabilize while the ringgit seems to have near its bottom.

It is important to note that the market lack of movement could be due to the holiday season. Many analysts are expecting to see the year end window dressing.

Regionally, Hong Kong's Hang Seng was up 1.82%,whilst Japan's Nikkei was down 0.5%, while South Korea's Kospi was down 1.04%.

With some fresh gains on Wall Street and also the surge in Chinese shares (thanks to the optimism that the Chinese government would spur lending and continue to spur growth) contributed to Asian's rise in the stock.

Friday, December 26, 2014

Weekly Investment Term #8

Today, we are going to look at one of the technical indicator commonly used by financial analysts....RELATIVE STRENGTH INDEX (RSI)

Some people feel that technical indicator cannot be used alone while others follow the chart and pattern religiously.

Generally, Relative Strength Index (RSI) is a momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. 

The formula is pretty easy for one to remember:

RSI = 100 - 100/(1+RS*), 

where RS* = average of x days up of shares when market close/ average of x days down of shares when market close

The best way to look at the relative strength index is by plotting a graph....


As you can see, the RSI ranges from 0 to 100....an asset is generally deemed to be overbought when the RSI approaches the 70 level (overvalued) while when it dropped to 30, it is viewed as oversold and therefore undervalued.

It is important to take note that large surges and drops in the price of an asset will affect the RSI by creating false buy or sell signals. It is best to used the RSI indicator together with the fundamentals of a company, accompanied by other technical indicators as well....

Tuesday, December 23, 2014

Market Daily Report (23 Dec 2014)

FBM KLCI close slightly higher


Year-end window dressing by fund managers seem to keep FBM KLCI on a slight gain today, an increase by 5 points, 0.29% higher.

The local market is also boosted by the performance in US trade.

Wall Street closed at historic highs while oil prices recouped just a little of the losses suffered when Saudi Arabia dismissed curbing supply.

Top gainers are mainly consumer sector such as British American Tobacco, Dutch Lady  etc.

Across the region, Hong Kong’s Hang Seng declined 0.32% while South Korea’s Kospi was down 0.21%.
Japan markets were closed for a holiday.

Monday, December 22, 2014

Market Daily Report (22 Dec 2014)

Crude oil price seems to have recover and stabilize. 

To a certain extend, this was in line with what we thought on December 13th in regards to the oil near bottom

While I'm blogging this, the crude oil price (WTI) is at USD56.13 while the crude oil (brent) is at USD60.73 per barrel. It has dropped a bit but we personally feel that the oil price will not see any more sharp decrease.

The market probably feels the same way as FBM KLCI climbed 28.06 points or 1.64% as investors bought beaten blue-chip stocks.

FBM KLCI climbed 28.06 points (1.64%) today
However, caution must be taken as there are analysts that feel that the crude oil (brent) might fall below USD60 per barrel, but we're quite close to that mark already anyway.

The top gainers for today are Petronas Gas Bhd and consumers counters like Dutch Lady and Nestle. The top decliners are Icon and Hong Leong Bank Bhd. 

Regionally, Japan's Nikkei 225 and Hong Kong's Hang Seng Index both rose 0.08% and 1.26% higher.

It has been a good day for the FBM KLCI but caution should be taken for tomorrow's trade as the oil price showed some decline movement....things are still very volatile so it'll be difficult to see a strong rally towards 2015.


Wednesday, December 17, 2014

Russia sees pain with higher prices for everything

Well, the oil price drop definitely hurt Russia. 

Then, we have the sanctions.

We also have the sharp drop in the Russia's Rubble currency.



What's next?

HIGHER PRICES FOR EVERYTHING!

The Russians definitely are feeling the pinch now, as they are facing higher prices for everything.

It's more expensive to buy eggs, dairy products, poultry and vegetables now. Apple halted the online store there, just three weeks after an increase in the price of an iPhone 6 for about 25% to 39,990 rubles...even then, the value of that iPhone sales when converted to dollar already has plummeted to about $585 from $847.

The same thing goes to McDonald's. The company increase the price of Big Mac by 2.2% to about 94 rubles....only to see the value drop from $1.77 to $1.35 in the intervening days. 

Renault-brand cars have been increased by 8% in Russia.

Now, most Russians believe they have to snap up consumer goods before prices continue to go up.

The ruble yesterday sank beyond 80 per dollar, a record low, before rebounding after Economy Minister Alexei Ulyukayev denied the government would turn to impose restrictions to stop Russians from converting money into dollars.

Market Daily Report (17 Dec 2014)

There is a sense of relief as FBM KLCI rebound after closing lower for 4 days. It is more of a technical rebound, with the index closed at 1,681.900, increased by 7.96 points.


The technical rebound come as there is sign of stabilization in price of commodities and ringgit.

The rebound is welcomed with a sign of relief after the FBM KLCI Index dropped 35.68 points on Monday (15/12/2014) and another 23.27 points on Tuesday (16/12/2014). The rebound happened as analysts believe the market is in an oversold condition.

On the other hand, the Asian markets were mixed with Japan’s Nikkei rose 0.38%, Hong Kong’s Hang Seng retreated 0.37%, while South Korea’s Kospi fell 0.21%. 

The current financial crisis in Russia, and the sharp decrease in the oil price has negatively impacted the market.


Saturday, December 13, 2014

Weekly Investment Term #7

Today, we gonna go back to basics and talk about one of the most fundamental analysis that we look at in investment of a stock...

EARNINGS PER SHARE (EPS)

This is in fact one of the most carefully followed metrics in investing.



Earnings per share generally means the portion of the company's profit that is allocated to each outstanding share of common stock.

It is what investors look at to gauge the profitability of a company.

EPS = net income - dividend to preferred shareholders
                         average outstanding shares


In practice, the weighted average number of shares is more accurate because the number of shares outstanding can change over time. 

There is also the diluted EPS which takes into consideration of the shares of convertibles or warrants outstanding in the outstanding shares number.

Here is an important note to EPS that we feel readers/investors should look into when talking about EPS.

  • Two companies could generate the same EPS number, but one could do so with less equity, thus the company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company in theory. 
  • Investors need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.



Is Oil Price near bottom?

While the bearish market continue in the market as oil price plunge continue, some analysts are starting to believe the bottom is near. 



It is hard to predict where the bottom is but some forecasters believe the long tumble of crude oil is about to come to an end. 

The average forecast in the latest survey believe that the crude oil to trade at US$64 a barrel at the end of December 2014.

With the crude oil (brent) at US$61.85 per barrel now, some analyst believe the sharp drop is coming to an end.

It is difficult to do a forecast but it is likely for us to see the oil price to trend at this level for the coming weeks.

What say you? Did the analysts get it right this time?  

FBM KLCI falls 11.58 pts

Expect the similar story these days if you are following the market. There isn't much indication of a rebound and with the oil price continue to go down, FBM KLCI continues to fall. 

FBM KLCI drop by 11.58 pts to 1,732.990

Today, the market close at 1,732.99, falls by 11.58 pts. This is also the lowest close for the index in the last 6 months. Reports have emerged that the US crude futures continued to drop, after it has fallen below US$60 a barrel. This is the first time that it happened in 5 years. 

Sapura Kencana Petroleum Malaysia is one of the top decliners. Other top decliners include Astro Malaysia Holdings Bhd, Petronas Gas Bhd, F&N Holdings Bhd, and Selangor Properties Bhd. 

Malaysia Airline System Bhd (MAS) was the top active counter for the day on it's final trading day. Investors scrambled MAS shares, as today offered the last chance for buyers to own the shares, which will entitle them to the 27 sen a share privatisation offer by Khazanah Nasional Bhd. 

On the regional front, Japan's Nikkei rose by 0.66% while Hong Kong's Hang Seng weakened by 0.27%.

Here are the Top 10 Gainers and Top 10 Losers for the day:

Top 10 Gainers

Top 10 Losers


Thursday, December 11, 2014

Market Daily Report (11 Dec 2014)

The FBM KLCI continued the downtrend this week to close at 1744.57.


In comparison to last Friday (05 Dec 2014), the FBM KLCI was at 1749.30. There is still a slight drop in the market as oil price continue to decline.

Bursa Malaysia's top decliners are still the oil & gas related stocks like Petronas Dagangan Bhd and Petronas Gas Bhd.

It is obvious that the market is taking cue from how the movement of oil price is at the moment. The market is still very volatile and it's difficult to foresee how the movement of the stock will go at the moment, but if the oil price were to continue in this decline, it's pretty obvious that's where the stock market will be heading as well.

Across Bursa, there are 629 decliners with only 178 gainers.

Expect the market to remain volatile in this coming few days

Sunday, December 7, 2014

Ringgit crisis?

If you look at the last six months, you will see that the Ringgit (RM) has been the second worst performing currency in Asia, after the yen. 

Ringgit (RM) crisis

Two weeks ago, it breached the 3.4 level against the USD. On Dec 5th, it touched 3.4757 before closing at 3.4713.

From the Ringgit's year high of 3.1463 recorded on August 27, the Ringgit has lost 10.3% of its value against the greenback. Last week alone there is a decline of 2.6%.

While the yen's fall is due to the deliberate policy move by the Bank of Japan to devalue its currency, the ringgit is a victim of a convergence of several factors on both the external and domestic fronts. 

The big question mark that remains: is the currency weakness a reflection of Malaysia's economic's fundamentals or is it a cyclical and temporary weakness?

If you trust the analysts, then Ringgit is expected to continue the downtrend into next year. 

Factors that drive the Ringgit down


Drop in Oil Price



We all know the sharp depreciation of the local currency is mainly affected by the oil prices. In this region, Malaysia is the only country that is negatively impacted by this as Malaysia is a net energy exporter while others are mainly importers.

It is normal for the currencies of net energy exporter to suffer as the oil price drop. The Malaysia Ringgit also has the highest correlation to crude oil price movements. Correlation statistics show that crude oil price is currently the most important driving factor of ringgit price movements so it's easy to expect the downtrend to continue.

US Federal Reserve's QE end

During the US Federal Reserve's quantitative easing era, the foreign inflow into ringgit is based on the attractiveness of both carry and currency returns. 



As the broad US Dollar turns positive and the prospect for the ringgit deteriorate, the risk of foreign debt outflow from Malaysia has risen as well.

Fall in commodity prices

While the drop in oil price is an important factor that drive Ringgit down, the bigger story is the drop in commodity's prices (crude palm oil) and its impact on the country's trade and fiscal balance. 

Correction in the Equity market 

Whoever invested in the oil & gas stock market would definitely feel the pain.

In fact, Bursa Malaysia is one of the worst performers in the region this year, falling 2.4% year to date. In the last three months alone, there is a total outflow of RM2.3 billion while outflow year to date is amounted to RM4 billion.

High foreign ownership of Malaysian bonds and expectation of interest rate increase in US in the second half of 2015.


Well, there are other factors that could lead to this....so how low can Ringgit go? It's difficult to forecast accurately but projections are ranging from 3.5 to 3.6 against the US Dollar in the next year.

The magnitude of the drop is definitely correlated to how much lower commodity prices will fall and whether the market sees a big outflow of foreign funds from bonds and equities. The bigger concern now is on the huge foreign holding of Malaysia bonds. As at October 31st, foreign investors held RM250 billion of Malaysian debt and 45.9% of total Malaysian government securities. And when they do decide to get out, the impact could hit the financial market pretty hard.


Saturday, December 6, 2014

THE FUNDAMENTAL QUESTIONS ON RETIREMENT?

In life, a lot of us are aiming for more wealth, so that we can live a better and more comfortable life, as we work towards our retirement age.

But there was a report, launched on Tuesday, that was commissioned by the United Nations Development Programme (UNDP): revealed that 90% and 86% of rural and urban households, respectively, had no savings, while the majority of households at 88% had zero earnings from their savings.

And because of this, we feel it's important to talk more about RETIREMENT in our upcoming posts, because we believe that's the goal at the end of the day.


RETIREMENT: What's your game plan?


Generally, financial planners look at life in 2 phase:


The 2 phases in Life

In short, the game plan is simple:

1) ACCUMULATE

2) DISTRIBUTE

It is interesting that while the game plan is simple, it is rarely practical in REAL LIFE, unless of course, if you come from a rather wealthy family to start with.

Being someone who studied Statistics, I always remember a simple yet true quote: ALWAYS ACCOUNT FOR VARIABLE CHANGE

Life is definitely full of uncertainty. It leaves a lot of people under saved and there is no cushion to fall back on if you live an exceptionally long life, or a shift in your retirement goals. There might also be the setbacks financially or health issues. The changes in your passion etc. All of these contributing to how much money is needed for retirement.

Most people are in the guessing game, especially if you're in your 30s or 40s. But when you reach the age of 50, reality sets in and it might be a little too late. 

Well, let's get back to basics then...we know the track that we're in. We know to a certain degree the resources that we have and what we could make do with....so while we still have time, maybe it's time to look at adjustments in life. There is time yet to save more, spend less, postpone your retirement date and even reset your expectations.

For those of us who are already on this journey, facing with all these variable changes, here are 2 FUNDAMENTAL QUESTIONS I believe we should ask when we want to talk about retirement.

1) WHAT'S YOUR DREAM?




Everyone has a different dream. Some dream of buying a boat and sailing the high seas when they retire, while others are content spending their days on the golf course or with their family. And what about travel around the world? 

This is where it all start...it's not about thinking of how much you have to save or how to do it; but what you want in life.

Because if you know what your dream is, then the rest of your life will be adjusted in accordance to that dream.

Take for example: if your dream is to spend your days in the golf course and with your family, it make sense to invest more in a good property. Because you will spend a lot of time there. But if your dream is to travel around the world, maybe you might not need such a BIG HOME? By deciding what your dream retirement would look like, you can shape the rest of your plans to make it work.

2) HOW MUCH MONEY DO YOU NEED?

It's always great to have a goal, dream and aim in life, but there is also the need to be realistic:

BACK TO REALITY: HOW MUCH MONEY DO YOU NEED?

HOW MUCH MONEY DO YOU NEED?

Rather than living based on hope, it's better to do your own research. Determine your future expenses and whether you'll have enough money to live comfortably and enjoy your retirement years.

Financial planners have been arguing and trying to come out with the right figure for retirement: some say you'll need 60 to 80% of your pre-retirement income annually in order to maintain your lifestyle. There are others like the Mr Money Moustache who believe in frugal living and aim for early retirement. It doesn't matter which sides you are on, at the end of the day, it's your life and you have to decide....the rest are just estimates. 

If your dream is to travel around the world, you may want to consider the travelling expenses and see if it's enough to pay your bills and other expenses....some adjustment to your dream might have to be made while some expense might have to be reduced....say, maybe a smaller home?

Regardless of what your dream is, look at how much money is needed and how you gonna work towards it.


Honestly, I believe there are more questions that we should ask when it comes to retirement, because the variable changes that come with this planning. But I believe these 2 are the core questions that we should ask ourselves. Only then does it make sense to look at how you gonna work towards these dreams. 

Friday, December 5, 2014

Market Daily Report (05 Dec 2014)

It has been a rather frustrating week for Bursa Malaysia...the negative sentiments of the lower oil prices, weaker Ringgit has been very bad for FBM KLCI. 

But there was some improvement today as the stock market close at 1749.37 points (+3.68 points/0.21% higher).



It was a great relief as the benchmark open with a slight drop.

The rebound is most likely due to the oversold in previous days. 

Of course, many are still wary of the market and predict that the downtrend might continue with the oil price continued to be under pressure.

It is also important to take note of the weaker ringgit against the USD, at 3.4698.

On the other hand, most of the Asian counters rose slightly. China’s Shanghai Composite gained 1.32% while Hong Kong’s Hang Seng Index advanced 0.71%.

Here are the top gainers and top losers:

Top Gainers



Top Losers


Wednesday, December 3, 2014

Market Daily Report (03 Dec 2014)

It has been a bad start to December for Malaysia stock market. 

And this trend is seen to be continued as FBM KLCI dropped by 27.82 points to close at 1758.150. This is largely due to foreign selling amid concerns over the weakening Ringgit.

FBM KLCI close at 1758.150

The Malaysian Ringgit's weakness is seen as the main concern for foreign investors. The Ringgit weakened to 3.4435 against the US Dollar. 

Bursa Malaysia saw 692 decliners and only 179 gainers while 247 counters remain unchanged.

Dutch Lady Milk Industries Bhd, Petronas Dagangan Bhd and Huat Lai Resources Bhd are the top gainers while the top decliners were BAT, PPB Group Bhd and BLD Plantation Bhd.

(source from The Edge Markets)

The drop in the market is largely due to the concerns over the weakening Ringgit and the impact of lower crude oil prices. It is going to be difficult to gauge the bottom of the crude oil price but if this continue, Malaysia will definitely see a bearish end to 2014, going into 2015.



Saturday, November 29, 2014

How Low Can Oil Prices Go?

It may be difficult to believe but as mentioned in my previous post, this is a new era for oil.

And the next question to ask is how low can oil prices go? 



Well, if the analysts were correct, the oil can still go lower...and it might fall a lot more.

OPEC's decision not to cut production was obvious: to put and cause pain to US shale drillers, but it's providing holiday gift for consumers. OPEC members Thursday followed the lead of Saudi Arabia, which has said it did not want to cut production and has made it clear it will defend its market share against other producers.

Those producers include the U.S. shale industry, which has helped boost U.S. production by a million barrels a day in just a year. OPEC member Venezuela sees the world oversupplied by 2 million barrels a day.

And if the US oil production were to continue to increase, the oil prices will definitely fall even lower. This is very likely to happen especially over the next three to four months as shale oil and Gulf of Mexico projects that are underway get completed.

The increase in production is likely to happen because of the investment that has already been made in the Gulf of Mexico. The OPEC's decision will definitely impact the US industry and while US will cut back on existing wells, even then, it will continue to see production growth over the next couple of months even with low prices.

It will no longer be about $70 or $60? Or is it $50? 

New era for Oil

It was difficult to imagine that the oil price will be at 70 per barrel 6 months ago but today, the oil price has plunged to $70.15 per barrel. 




OPEC's decision not to cut production is indirectly a declaration of price war in the crude market and the challenge to US shale drillers. 



Here is a look at why the sharp drop in the oil price.

First, US production has nearly doubled in recent years to 9 million barrels a day and analysts expect the production to rise by more than 1 million next year. And like all commodities and trades, an oversupply will drive the prices down. With this supply, Saudi Arabia and OPEC have essentially surrender to the inevitability of the lower prices from the exploding improvement in the US energy production.

As OPEC maintained their output target, the oil price plunged to a point where some of the shale projects may lose money.

This is a new era, where the market itself will manage supply. Saudi Arabia and OPEC knew it and their decision is a sign of surrender. The markets have changed for many years to come.

To a certain extend, this is a victory to the US energy independence. It is also a victory for the workings of the free market. Greater supply and not government cartel that drives the price down.

The next question that comes into mind is this: HOW LOW CAN THE OIL PRICE GO?

Weekly Investment Term #6

If you have been mixing with people who are into investment, you will probably heard some people talking about buying stocks with good fundamentals or good prospects etc. There are also others who are looking into the technical chart to try and predict the market movement. 




Well, there is a way for you to answer some of the questions like:

a) How is the company being run?

b) Is it generating profits?

c) Is there a growth in the performance?

d) How does the company fare in comparison to the peers?

That way is what some people called: Profitability ratios


Profitability ratios measures the ability of a company to generate profits relative to sales, assets and equity. These ratios are useful to to measure a company's performance over the years and also in comparison to the peers. 

Here are 5 ratios that I would love to share with you today:

1) Gross Profit Margin (GPM) 


Gross Profit Margin (GPM) is calculated with the formula as shown with COGS equal to "Cost of Goods Sold". The GPM is not exactly a good indicator on the price of a stock but it's useful for one to analyze the financial health of the company. With a healthy gross margin, the company will be able to consider the operational cost, other expenses and also the ability to plan for the future. This ratio could be used to compare with other companies. Generally, a company with higher profit margins are viewed as being more efficient.

2) Net Profit Margin (NPM)

As for Net Profit Margin (NPM), one will take the net profit divide by the revenue. One can define this by saying NPM shows how much each dollar earned by a company is being converted into profit.

Generally, net profit = Revenue - COGS - Operating Expenses - Interest & Taxes.

Net profit margin varies from one company to the other but are generally at a certain range for different industry. With this knowledge, one will be able to recognize if a company's revenue is registering a healthy profit to the company or not.

3) Return On Equity (ROE)

Return On Equity (ROE) is defined as the amount of net income returned as a percentage of shareholders' equity.

Mathematically, this is the formula: Net Income/Shareholders' Equity.

ROE is quite an important indicator of a company's financial standing. The ROE is extremely useful especially in comparing other companies in the same industry. 

4) Return On Investment (ROI)

ROI is an important indicator on how efficient an investment is.

A simple calculation would be suffice to get the ROI.


Gain from investment generally refers to the proceeds obtained from selling the investment of interest. ROI is a very popular ratio being used because it's easy to understand and compute. Theoretically, the ROI that is negative are investments that should not be consider. 

5) Return on Assets (ROA)

This ratio is to show how is profitable a company in comparison to the assets of the company. This ratio helps investors to see how well are the assets being utilize to generate profit. 


Friday, November 28, 2014

Market Daily Report (28 Nov 2014)

As mentioned in the morning post on the oil prices plunge, the FBM KLCI continue the downtrend.

The downtrend continues
 
Most shares traded lower at the end of today, as the poor sentiments surrounding around the O&G counter spread to other sectors as well. OPEC's decision not to cut output to stem the falling crude oil prices crushes any hope of a quick rebound for the crude oil prices.

In fact, it's hard to even try to predict the bottom of it at this point of time. 

The FBM KLCI fell 0.5% today, to close the week at 1,820.89 points at market close. However on a week-on-week basis, the KLCI ended the week 11.76 points or 0.65% higher, compared to last Friday’s closing of 1,809.13 points. 

The OPEC's decision might just force the downtrend to continue for a while....as Reuters reported that oil prices, oil-related shares and oil-linked currencies all tumbled in Asia on Friday. 

The huge supply of oil could hurt country like Malaysia and Russia. 

Regionally though, markets were mixed with Hong Kong's Hap Seng and South Korea's Kospi both ending lower while Japan's Nikkei rose 1.23%.

You may check out the fundamentals of some of these stocks that are under the TOP 10 GAINERS and TOP 10 LOSERS today:

Top 10 GAINERS

TOP 10 LOSERS




Oil prices plunge

It's not a good news for the energy shares as they led losses after oil prices plunged. 

Not looking good for oil


After OPEC decides against the cut, Brent crude oil plunged as much as $6.50 a barrel on Thursday, and U.S. crude fell by nearly as much, posting the steepest one-day falls since 2011.

Benchmark Brent futures settled at $72.58 a barrel, down $5.17, after hitting a four-year low of $71.25 earlier in the session. The contract was on track for its biggest monthly fall since 2008.

U.S. crude was last down $4.64 at $69.05 a barrel. 

This is definitely not a good news for oil producing countries like Russia and even Malaysia.

PRICE WAR?

It is going to be a price war. The US crude may even slide to below $65 a barrel in coming weeks and this could be a factor against the economy of the Northern American shale oil production. 

While many were saying the oil price may have hit a bottom, some analysts have a differing point of view.

If it's going into price war, any bottom may just be difficult to predict.

Expect the O&G sector in Malaysia to be affected when the trade starts today.

Market Daily Report (27 Nov 2014)

Just yesterday, we were talking about a good day for FBM KLCI, where the index rose 3.61 points to close at 1842.17.

Well, some analyst will look at the drop for today to 1829.91 (a drop of 12 pts) is a technical correction after consecutive gains for the past 3 days. 



But with the anticipation that Organisation of Petroleum Exporting Countries (OPEC) member nations would not cut output to support prices, it's best that investors be careful in their trade in FBM KLCI. There are some who expect the rebound in oil price in December because of the winter in the northern hemisphere. 

The decline today was mainly due to the blue chips counter like Tenaga, Telekom etc.

Regionally, the markets were mixed with Japan's Nikkei and and Hong Kong's Hang Seng decline while South Korea's Rospi rose for about 0.06%. 

Here are some of the concerns that investors should take note of:

1) How the oil prices will move in the coming months with the OPEC not cutting output to support prices??

2) More stimulus in China and Europe? And how this will affect the market moving forward.


Wednesday, November 26, 2014

Market Daily Report (26 Nov 2014)

It's a good day for FBM KLCI, as it closed higher for its third consecutive day, after the US revised higher its third quarter economic growth. Malaysian shares rose in line with most Asian markets.

Positive for FBM KLCI

At 5pm today, KLCI rose 3.61 points to close at 1842.17. (it's 0.2% increase), thanks to gain from stocks such as Maybank, Tenaga as well as British American Tobacco (BAT). The KLCI is supported by the regional positive sentiment especially after Reuters reported the US government upgraded its reading on third quarter gross domestic product (GDP) growth to 3.9 percent on Tuesday, from 3.5 percent reported last month. 

BAT is the top gainer while Dutch Lady Milk Industries Bhd is a top loser. 

In the region, the markets were mostly up, while Hong Kong’s Hang Seng rose 1.12%, while South Korea’s Kospi gained 0.03%.

Friday, November 21, 2014

Compare the "mddle class" today and 10 years ago

The term "middle class" was a word that signifies progress, and it also mean stability. The "middle class" used to mean a family with a nice place call Home, drives a Volvo or vehicle of that class, goes on yearly vacation and send their kids to college. 

But those were the days. Because the middle class today varies so much in comparison to 10 years ago.

In Malaysia, the "middle class" group generally includes people who earn RM3,000 above. Between RM3,000 to RM4,999 a month, it's normally the lower middle income while the upper income earns RM5,000 above. In our country, our government data in 2012 shows that 27.8% household income was at the lower middle income while 33.6% household earn RM5,000 and above. 

Even though there is a stead increase in income in the country, the increase barely offset the country's soaring inflation rate....the rising living cost. 

Here are some of the significant items that one should compare between now and 10 years ago to gauge how the "middle class" looks like today:

A) FUEL PRICES

Petrol increase is one of the biggest burden to the "middle class"

We all know that the fuel price dropped recently in the world market but Malaysians are paying RM2.30 per litre for RON95. In 2004, it was only RM1.38 per litre (RON92). Diesel was RM0.83 per litre but today, it's at RM2.20 per litre. 

Chart showing a big jump in price from 2004 to 2014

A simple calculation will let you know that you are paying 60% more for petrol while about 165% for diesel. 

This become worse when more people are staying far away from their work place. The jam is not helping the middle income either. Of course, for those who are staying near to the LRT (which is not many at the moment), there is an option to consider the public transport. But on average, most middle income earners will have to fork out 60% more for fuel alone.

B) PROPERTY PRICE

This is also another important factor to consider....the property price today is no longer affordable. Middle income earners will definitely notice the drastic jump in the price.



Taking Klang Valley alone, you will notice this trend: 15% to 18% increase per annum. 

Today, a condominium of 1000 sqft at RM500k and above is considered reasonable. Back in 2004, for the same amount of money, you could probably get a 2,500 sqft double storey terrace. That's about RM2,100 a month for installment. If you are the lower middle income group, that's already about half of your salary. 

C) ELECTRICITY TARIFFS

Another important part of our lives....electricity...but now we have to save. That's what middle class means today. Savings, managing our increase of living cost. 

Power tariffs rose by an average of 15% effective January 1 this year, after Putrajaya announced in December 2013 that it had approved the increase by utility firm Tenaga Nasional Berhad (TNB).

The rates were purportedly raised as a measure to reduce Government subsidy and to boost development spending.



Consequently, the average electricity tariff in Peninsular Malaysia went up by 4.99% per kWh or 14.89% from the 2011 average rate of 33.54 sen/kwH.


UP NEXT: FOOD? Alright...I'm not going to talk about that....because this is already depressing enough. What I can conclude from these simple examples is this: a middle-class family today may be spending well over RM3,065 a month just on these basic essential items...these days, it's no longer about stability for middle income...it's more like sufficient for a day to day survival. 

Welcome to the middle income family!!