Bearish On SP Setia, Sime Darby, Eco World and E&O Because Of Brexit?

"Malaysia’s property firms that are undertaking development projects in the UK claimed they will not be “negatively” impacted by Britain’s decision to leave the European Union (EU)". This is the news we had read. However, would you believe them?

E&O, SP Setia Bhd, Sime Darby Bhd and Eco World Development Group Bhd are local property developers who had gambled their fortune on the island nation but are caught in the Brexit conundrum.

From RHB research note, markets are already predicting slower property sales in the UK as local and foreign buyers will take a more cautious stand and delay their property purchases due to the uncertainties. The UK’s property market was already stalling before the Brexit referendum. News reports suggested property prices are already down 3.5% post-Brexit. Oversupply, driven by a surge in interest by foreign investors, had contributed to the stalling of the market.

So I do not think those local property developers who claimed they will not affected negatively is true. Here is a brief analysis through technical analysis on these 4 companies: Eco World, Sime Darby, SP Setia and E&O.

ECO WORLD
This chart is a typical head and shoulder pattern. Once the neckline has been broken, this is a bearish signal. But there is a one thing need to bear in mind is the neckline cannot be break. This mean when price break the neckline (RM1.6 in this chart) and below neckline. This neckline is still valid if price do not rally and stand above the neckline. In other words, price cannot rally and stand above of RM1.6. We assume that this head and shoulder pattern is not breakable, the target price of Eco World is drop to RM0.9. There is nothing 100% in both fundamental analysis and technical analysis but we can our own assessment.

Sime Darby

There is no any pattern for this company yet, but i dont think there is any buy signal too. Instead, I found there are 2 necklines and 1 have broken (the red colour arrow) and price still stand above another one (the blue colour arrow). If price fall below the blue arrow neckline, this is even worse.

SP Setia

There is a neckline (about RM 2.5) and this is crucial. I believe the possibility of share price decline is higher than rally. Hence the pattern is forming now. If the price have fall below RM 2.5, then price will be fall to RM 1.6 eventually. 

E&O

This is an interesting chart. I am bearish for E&O in the long term outlook but bullish in the short term. Why is that? Because there is a head and shoulder pattern and the price is seems unlikely stand above the neckline again. If this pattern is valid, the price of E&O will fall to RM 1.00. This is bearish in the long term.

However why I said bullish in the short term is because of there is a smaller bullish signal pattern, we call it W pattern. W pattern which have start forming from July 2015 and the price have break the resistant neckline, this is a bullish signal when price break above the resistant neckline. This W pattern will be invalid if price drop below the resistant neckline. If valid, the target price will be around RM 2.1.

**This blog only serves as reference information and does not constitute a buy or sell call. Make your own assessment before deciding to buy or sell any stock.

Malaysia Market Outlook on 21 July 2016

Malaysia KLCI index has dropped from 1900 to 1660 (This is approximate on the press time) recently.1505 was the bottom of this significant drop which was about 21% of wealth disappear since one of the functions of an index is a proxy for the stock market. Your wealth investing in the stock market may not exactly lose 21% same as KLCI Index but I believe most of the investor have lost some if they were investing when the market started to a downturn trend on July 2014.

Malaysia stock market started to be downturn trend resulted by lots of factors. Most common factors as we know are 1MDB, crude oil Price dropped, US FED started to hike the interest rate on the US. Presently, the possibility of US FED to hike the interest rate is low because Brexit causes the uncertainty of  the global economy. In addition, the oil price has affected Malaysia economy badly. However, I believe the worst of crude oil price have over (if you stand on the view of O&G sector, not from car owner view), but it will stay on 60 to 40 per barrel for the short term and it is hard to hit above 100 like few years ago. Lastly, 1MDB, it is a sensitive topic and only the government and relevant parties can solve this.

Where will KLCI heading to? Right now, KLCI stands on 1660 and sideway move. Although this is a huge discount from the top but the market believes that the trend will continue to be a downturn and we are waiting for the next bomb to start a new downturn from 1660 to another lowest point. I believe the lowest point of KLCI is about 1300-1200. It is the best offer and all company share price is good to buy at a low price.

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KLCI 指数从最高的1900跌到截稿时间的1660点，在这波下降趋势中，最低点一度来到1505点。以1505 点来计算的话，股市跌掉了21%，股市指数的其中一个作用是个股的代表作，虽然21%的下跌不代表个股的价格也以下降21%，但是这代表着如果你在1900 （2014年7月）点还进场的话，多数人都被套牢着了。

马来西亚股市下跌原因很多，主要大家的都知道就是1MDB，原油价格的重挫，还有美国联邦储备局（FED）的升息动作。 目前市场预期美国FED 的升息动作已经停止了因为英国退欧加剧了全球经济的不确定性。另一个因素就是油价了，当时油价的急跌对马来西亚影响很大。但是我相信油价其实早已止跌了，最坏的已过去了（如果站在油气股的角度，不是我们这些去油站打油的车主），相信油价短期内会在60到40之间徘徊，而未来也应该很难在回去100以上的繁荣时代了。最后一个因素影响马来西亚股市的就是1MDB，这是敏感课题，只有政府或相关单位才能解决，接下来故事怎么发展，敬请留守每天的报纸。

所以KLCI会去到哪里呢？目前都在1660这区间徘徊，但是相信这不是最好的买点，而我们也必须等待下一个黑天鹅（意思相当于炸弹爆炸），到时候就会从1660这区间直接另一波的下杀。我相信目前以结构图来看的话，1300到1200点为最佳的买点，到时候的股市就像个跳蚤市场一样，价廉物美。

                           

Analysis of OpenSys

OpenSys (M) Berhad (code: 0040), engaged in providing solutions to the financial services industry in the areas of self-service machines and universal delivery systems and information technology (IT) services such as cheque deposit machines (CQM), automated teller machines (ATM) and cash deposit machines (CDM).

On 29 April, This Company has released The Annual Report of 2015. One of the most attractive product of Opensys is supply and maintains cash recycler machines (CRM). CRMs can accept cash from depositors and re-dispense them to withdrawers so that the cash is essentially “recycled”, resulting in a lower cost of ownership for the banks, which is about 25 to 30 percent in capital and operational expenditure. Banks branches can replace two ATMs/CDMs with one CRM. Going forward, there is a huge latent demand for CRMs in Malaysia. ATMs or CDMs which are typically can operate with 8 to 10 years. Hence, Banks are expected to replace ATMs or CDMs by CRMs. Currently, the penetration rate of CRMs is a mere 6 percent of the total installed base. If the banks in Malaysia start to install CRMs at their new branches or replace their older ATMs and CDMs for CRMs, Opensys is in a prime position to profit from it.

Besides CRM, Opensys provides business process outsourcing (BPO) for bill payment kiosks to utility, insurance and telecommunication companies in Malaysia. This bill payment kiosk allows customers to pay bills, reload prepaid cards and renew insurance premiums. In return for managing the infrastructure for these organizations, Opensys charges a fee for each payment transaction performed by their customers, resulting in steady recurring income for their Company.

For the financial year ended 31 December 2015, Opensys’s revenue and profit before tax surged 60 percent and 41 percent to RM72.51 million and RM10.65 million respectively from the corresponding period in 2014, largely due to robust sales of CRMs and more transaction volume of BPO business. The profit before tax could be better if the cost of revenue had not been impacted by the weakening of the ringgit. To noted that, the cost of material for kiosk are imported. So the depreciated of MYR will affect cost negatively.

Opensys registered revenue of RM 72.5 million for financial year 2015. In Year 2011, it was RM 29 million, representing a 25.7% CAGR for a 5-year period. In addition, liquidity is important for this kind of relatively small market capitalization company. For Opensys, the current ratio is higher than past few years. In FY2011, it is about 2.25 and increase to 2.61. For quick ratio, Opensys improved vastly from 0.95 in FY2011 to 1.6 in FY2015. This indicates the ability to meet its short-term obligation has been improved significantly. Furthermore, examine debt ratio (Total Liabilities/ Total Asset) can shun from a bad financial position. Currently, it is only 0.35 percent of capital are through debt, which is reasonable and considered healthy.

To conclude, this company is doing well and prospective earning is huge due to the low penetration of CRM. On 27 May, the FY2016 Q1 financial report has been released. The revenues have dropped significantly compared with FY2015 Q1 but one thing which was pointed out by Management is that order book for CRM remains robust. In the first quarter of this year alone, the order book for CRM has exceeded that for the whole of last year. This is expected to reverse the poor performance of FY2016 Q1.

From technical analysis, OPENSYS is currently in a sideway moving. RM0.20 is critical support point. So far, it does not buy signal yet. The best bargain price to buy this company is about RM0.22 from both technical analysis and valuation (Using FCF Discount model) view.

**This blog only serves as reference information and does not constitute a buy or sell call. Make your own assessment before deciding to buy or sell any stock.

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OpenSys (傲奔，代号：0040), 此公司专门提供机器例如ATM， CDM (cash deposit machines），CQM (cheque deposit machines)给银行。

4月29日，2015年度财报出炉，一样最吸引大家眼球的就是CRM (cash recycler machines)。CRM功能就是从我们这些小散户所存起来的钞票再重新分配给提款者。其实CRM此机器就是ATM 和CDM 的结合。这个CRM 重点在于能够为银行业者省下25%到30%的支出，因为银行能够用CRM 代替ATM 和CDM。CRM 前景受到看好因为ATM 或CDM 一般上寿命只有8到10年。而目前CRM在本地的渗透率只有6%，想象一下如果银行在全国各地的分行都用CRM 来替换ATM 和CDM，相信Opensys可以轻易获利。

除了CRM，另一项产品是BPO (business process outsourcing)。这是一个能让我们还些保单，账单和手机盈余价额服务等等。Opensys可以从中有个稳定的收入因为公司会根据机器的被使用的volume向那些公司来征收费用。

根据2015年度财报，Opensys的营业额上升了60%而EBIT则上升了41%，这归功于CRM的销售额增加和BPO的被使用的volume 增加。营业额增加了60%，EBIT却只有41%，这是因为马币的弱势引起的。此公司的材料都来自外国，所以都是成本都以外国货币作为结算单位。

营业额的5年CAGR(复合年均增长率)为25.7%。对于这种创业板股市，流动性和偿还负债的能力是相当重要。Current Ratio从2011年的2.25 增加到2.61。 Quick ratio，扣除了Inventory 的ratio，也是一个流动性指标。此公司Quick ratio 也从2011 年的0.95 上升到2015年的1.6，这证明流动性能力增加。另外，他们的debt ratio 也只有0.35，意味着每1块钱的资本，3毛5分是从debt 得来的，也算是健康的公司。

FY2016 第一季的财报也出来了，revenue 与FY2015 的第一季相比较，跌得很重。但是管理层也表示CRM的订单单单在第一季就超过了2015年一整年的订单量了。这绝对是好事。

从技术分析来看，目前没有什么买点，股价也相信暂时会继续以整盘的形式。RM0.20 是个支撑点。从技术分析和通过Free Cash Flow 的估价方法来计算的话，此公司最好的买点就是RM0.22左右了，这是最安全的价格了。

**此部落格只能以参考为目的，不是买或卖的指标。投资有风险，量力而为最保险。