Saturday, August 21, 2010

STI Technical Outlook -dbsv

STI Technical Outlook (August 17 Level: 2935)
We peg a range from 2790 (major support) to 3100 (major resistance) in coming months. Investors should capitalize on this by buying near 2790 while selling near 3100.
Firstly, a brief recap that we had called for a short-term rebound at 2650 in late May and over the past 2 months lifted the rebound objective to 2950 (maximal 3000) with the risk of turning down again for a re-test of 2650.

The upside break above Jan10 high of 2933 last month is significant because it invalidates a bearish ‘head & shoulders’ top formation. The STI maintains its major uptrend (by staying above the 200-day exponential moving average), albeit at gradual pace and interrupted by periods of volatility. Eight months into the year, the index action YTD becomes clearer. STI has been tackling the major congestion area formed during 1H08 at 2790 to 3250, which is seen long-term resistance zone. The lower end currently coincides with the 200-day exponential moving average support.

We believe that this is the range where the index should continue to move in the month(s) ahead. We peg a range from 2790-3100 in coming months. Within this range, the other 2 support/resistance levels that short-term traders should note are 2890 and 2995.

Stock Picks & Earning Revision- dbsv

YTD_Market Performance

Source: ecm

Malaysia Stock Pick -ecm

Singapore Stock Pick -ecm

Friday, August 20, 2010

Reading the VIX: What the 'Fear Index' Is Saying Now

Reading the VIX: What the 'Fear Index' Is Saying Now

"When the VIX is high, it's time to buy. When the VIX is low, it's time to go."

That Wall Street truism led to my April 25 report that suggested the extreme low in the VIX index ($VIX) might be signaling a top in stocks. While the VIX didn't "ring a bell at the top," the market did roll over within a week and begin a long decline to its July lows.

Those who sold speculative positions in late April when the VIX was low and bought back in late June when the VIX spiked up (and the market hit bottom) were rewarded for paying attention to the VIX.

Why is the VIX a staple of Wall Street traders? The VIX is the Chicago Board Options Exchange's (CBOE) Volatility Index, and it measures the volatility of S&P 500 index options. When the demand for puts -- options that rise in value if the market falls -- rises sharply, that's a reflection of fear or uncertainty. Hence, the VIX's nickname as "the fear index."

Is the News Expected or a Surprise?

One way to interpret the VIX is to view the market as a discounting mechanism. When all the good news is reflected in the market price, then the market is set up to respond with surprise and uncertainty to unexpected bad news.

When the market has absorbed all the bad news, in effect discounting it by dropping to lows, then it's set up to be surprised by unexpectedly good news.

In late April, the bad news about the Eurozone's sovereign debt issues was discounted. The market reflected a general confidence that the situation was under control, and the VIX remained subdued. When it became clear that Greek debts were a potentially major problem to Eurozone banks and financial stability, this "unexpected bad news" sent the VIX skyward and made the markets tumble.

Let's look at a current chart of the VIX and see what insights it offers. The chart may look cluttered, but we'll examine each piece separately.

What pops out of this chart first is the big spike up in May as the U.S. stock market grasped the deeply negative consequences of the European sovereign debt crisis. When news spooks the market, the VIX tends to "gap up," that is, open much higher than its level on the previous day. I've drawn rectangles around the big gap-ups.

Note the big gaps that opened up as the Eurozone banking crisis exploded in late April and May. But since topping out in mid-May, ensuing gap-ups have reversed in two or three days. Rather than announce the beginning of a new trend, these are classic spikes of sudden jitters that quickly dissipate.

Becoming Comfortably Numb?

Despite a steady drumbeat of negative economic news, the VIX has been in a downtrend since mid-May. Sharp drops in the stock market have not sent the VIX into the same nosebleed territory it reached in mid-May. It's as if the market drops that have been occurring with great frequency in the past few months no longer elicit much fear.

This suggests that either the market is becoming numb to "negative surprises" or that bad news is now "old news." Whatever the explanation, the VIX has been sliding even as the economic news continues to be unsettling.

Since June, the VIX's spikes have followed a specific pattern: Some bit of news sends the market into a tizzy of doubt and fear, and the VIX gaps up. But two or three days later, the index reverses course and drops back into its gradual downtrend.

Bollinger Bands offer another charting tool to assess market volatility and extremes of sentiment. In late June, the VIX leaped up to the upper Bollinger Band, signifying an extreme of volatility. That spike tracked the market bottom: "When the VIX is high, it's time to buy."

The VIX gapped up strongly on Aug. 11, and then broke through the upper Bollinger Band. If this is a repeat of the June and July pattern, it would signify a buying opportunity. On the other hand, if the VIX doesn't quickly reverse course and drop back down to its lows within a few days, then it might be the harbinger of a new trend: up in the VIX and down in the stock market.

Ready to Enter New Territory?

For clues, we can look at the recent highs in the VIX. Did this latest spike of fear exceed the highs of July? No, it reached the same level, around 27. That suggests the current uncertainty is roughly equivalent to the levels experienced in the last month.

But some evidence also hints that the VIX might be signaling a longer-term trend change. The spike up this week has broken the downtrend since May, and the trend indicators of MACD (moving average convergence-divergence) and stochastics are turned upward.

Put all this together, and it suggests that if the VIX falls back to the low 20s early next week, the market has absorbed and discounted the latest "bad news" as not very surprising or very important. But if the VIX remains stubbornly high, or gaps even higher, that would suggest the market perceives greater risk ahead. That would not be a buy signal, but rather a warning light of caution.

The VIX isn't a perfect indicator that rings a bell at the top or bottom, but it does reflect extremes of sentiment that tend to mark tops and bottoms, and general trends of market sentiment. Both are useful bits of information to investors and traders alike

Wednesday, August 18, 2010

Malaysian Airline System Bhd -midf

Malaysia Airlines – 1H10 Results Review
Maintain NEUTRAL
Revised Target Price (TP): RM2.50 (from RM2.10)
Derivative loss and higher fuel cost spoil the flights


• MAS’ posted a revenue of RM13,036m for 1H10 which is slightly below ours and consensus expectations. It is 46.6% of our full year estimates. Revenue in 2Q10 was RM3,159.8m.

• The 1H10 revenue grew 17.6%yoy on the back of 18.0%yoy growth of its passengers measured in RPK (Revenue Passenger KM). MAS had a RPK of 17,867.0 mil km and a load factor of 74.4% for 1H10.

• MAS’ 1H10 net profits are significantly below ours and consensus expectations, where it is 4.1x and 1.7x below full year estimates respectively, where it registered a net loss of RM224.7m

• The variance is due to the higher fuel cost and a mark to market (MTM) derivative loss in 2Q10. Fuel cost grew by 44.2%yoy and 9.1%qoq, while MAS also posted a derivative loss of RM217.2m.

• Yield increased slightly by 2% to 23.9 sen/RPK. However, comparing to its peers, where Cathay Pacific and Singapore Airlines increased its yields by 18% and 15% respectively, MAS’ increased yields were minimal. Management indicated that it is addressing this issue going forwards.

• Maintain NEUTRAL recommendation with a revised target price of RM2.50, as we roll our valuation to FY11. We are revising downwards our FY10 net earnings by 54.7% to better reflect the higher fuel cost and likely derivative loss for MAS. However, we like that fact that MAS will be focusing on increasing its yields which would offset any fuel price increase and we expect that MAS will benefit from its network expansions, especially on its newly introduced Eastern hub in

Sabah. Our target price is based on PER of 10.5x, which is the mean PER of its peers.

Tuesday, August 17, 2010

Malaysian Airline System Bhd -HwangDBS

Malaysian Airlines


Price Target : 12 m RM 1.90

2Q10 still in red

• 2Q10 core net loss ballooned to RM425.6m, below ours and consensus expectations

• MAS was hit by higher non-fuel costs and more fuel hedging losses

• Maintain Hold and RM1.90 TP based on 15x CY11F EPS

2Q10 core net loss ballooned to RM425.6m, 72% larger than RM248.0m loss recorded in 1Q10. Although passenger RPK and yield (passenger rev/ASK) rose by 4% and 2% respectively in 2Q10, these could not offset the 8% increase in cost/ASK. While fuel cost/ASK was relatively flat q-o-q (at 10.3 sen), non-fuel cost/ASK (c.65% of total cost) jumped 14% to 19.5sen. This was due to higher maintenance costs and sales incentives. MAS also reported RM158.0m combined net cash settlement on derivatives and premium paid on derivatives.

Outlook for MAS. Going forward, we expect higher yields with recovering air travel demand. Yields continued to improve with 16% y-o-y growth in 2Q10 vs 22% y-o-y

decline in 2Q109. Although costs/ASK may improve with higher efficiencies as new aircraft are delivered from 4Q10 onwards, earnings may still be hit by fuel hedging losses. As of end-2Q10, MAS has hedged 60% of its fuel requirement at US$100/ bbl WTI for the rest of FY10, and 40% at US$100/bbl for FY11.

Maintain Hold. We look to cut FY10F earnings by 44% given that 1H10 core net loss of RM673.6m already accounted for 88% of our full year forecast. We maintain

our RM1.90 TP based on 15x CY11F EPS. We also maintain our Hold call considering the expected longerterm earnings turnaround in FY11. We believe FY10 remains challenging for MAS due to increasing pressures on yield.

Malaysian Airline System Bhd -rhb

M’sian Airline System
Still In The Red In 2QFY12/10
Share Price : RM2.28
Fair Value : RM1.94
Recom : Underperform (Maintained)

♦ Remained in the red in 2QFY12/10. Normalised net loss widened substantially to RM317.6m in 2QFY12/10 (excluding RM217.2m derivative losses), from RM75.6m in 1QFY12/10 (excluding RM329m A380 compensation and RM56.7m derivative gains). Cumulatively, normalised 1HFY12/10 net loss of RM393.2m came in much worse than our full-year net profit forecast of RM381.4m and the full-year market consensus of RM118.1m net profit. We believe the key variance against our forecast came

largely from the lower-than-expected recovery in yields.

♦ Fuel hedge positions. As at 30 Jun 2010, MAS effectively hedged forward 60% of its 2HFY12/10 fuel requirement and 40% of its FY12/11 fuel requirement at about US$100/bbl WTI.

♦ Fleet renewal plan not a re-rating catalyst. We are more inclined not to see MAS’s fleet renewal plan as a re-rating catalyst. MAS did acknowledge during its recent annual Investors Day in Apr 2010 that the move is not pre-emptive but to pace itself with its competitors. To recap, under the plan, MAS will gradually phase out its existing leased older generation B747-400, A330-200, B737-400, and used new generation A330-300 and B737-800 aircraft, replacing them with new generation A380-800 and brand new A330-300 and B737-800 aircraft (see Table 6).

♦ Forecasts. We now project MAS to report RM141.1m net loss in FY12/10 while FY12/11-12 net profit forecasts are trimmed by 4%, having reduced our assumptions on yields.

♦ Risks to our view. These include: (1) Stronger-than-expected yields and load factors; (2) Lower jet fuel cost; and (3) Effective containment of outbreaks of pandemic diseases.

♦ Maintain Underperform. We believe the airline sector is poised for improved prospects over the medium term in line with the recovery in the global economy. However, we remain cautious on MAS as: (1) It is still saddled with fuel hedges at high prices; (2) Its quarterly operating results remain volatile with losses during the latest two quarters; and (3) The RM18bn funding (based on our estimated) for its fleet renewal programme in 2010-2015 (see Table 7) may mean more cash calls down the road.

Indicative fair value is cut by 3% from RM2.01 to RM1.94 based on 14x revised FY12/11 EPS, in line with its nearest comparable issue Singapore Airlines Ltd

Malaysian Airline System Bhd -ecm

Malaysia Airlines
(RM2.28 MAS MK)Hold
Target Price: RM2.08

2QFY10: Another round of losses

· Derivative loss upsets earnings

For 2QFY10, MAS recorded a RM534.7m net loss mainly due to mark-tomarket derivative losses of RM217.2m on its fuel and interest rate hedging contracts. For 1HFY10, adjusted net loss (excluding compensation for aircraft delivery delay in 1QFY10) of RM553.7m. The disappointing results came in below our and market expectations.

· Volume continued to improve but not revenue yield

Despite the losses, 2Q saw improvement in traffic volume and load factor. Number of passengers carried grew by 14.7% y-o-y, 4.0% q-o-q to 3.2m passengers reflecting a recovery in demand for air travel, while load factor rose 8.3 ppt y-o-y to 74%. Correspondingly, revenue for 2QFY10 rose 26.6% y-o-y, 8.6% q-o-q to RM3.2m. However, revenue yield continued to be depressed as it inched up just 0.4 sen y-o-y to 23.9 sen/RPK following higher surcharges. Meanwhile, cost/ASK escalated by 11.8% y-o-y, 10.8% q-o-q to 28.5 sen/ASK due to higher fuel prices and non-fuel operating expenses which includes RM240m of one-off provisions for maintenance, land rental, incentive payments and unrealised forex loss.

· Cargo segment profitable

During the quarter, MASkargo operations performed better than its passenger’s segment. Cargo revenue rose 74% y-o-y to RM538m resulting in increased yield of 85 sen/LTK, up 21% y-o-y. Capacity was up 23% y-o-y (+13.2% q-o-q) while load factor increased by 11 ppt y-o-y (+1.5 ppt q-o-q) to 76%.

· Maintain HOLD, target price reduced to RM2.08

The lack of traction in raising fares so far has dampened our expectation of revenue yield recovery in FY10. MAS yield is considerably low compared to peers such as Cathay Pacific and Singapore Airlines possibly because MAS did not increase its fares much earlier in order to boost load factor. As such, we have lowered our FY10 expectations on MAS and cut FY10 earnings from RM56.8m to a loss of RM542.9m, but increased FY11-12 earnings by 45% and 27%, respectively after factoring in added capacity from the delivery of new aircrafts later this year. We maintain the stock a HOLD, with target price revised down to RM2.08 pegged against 6.0x EV/EBITDAR target (based on regional peers’ average).

Malaysian Airline System Bhd -CIMB

Malaysian Airline System Bhd
RM2.28 Target: RM3.00
Transformation pains

• 1H below; maintain OUTPERFORM and RM3 target. 2Q10 was a disappointing quarter as MAS suffered a core net loss of RM465m, which took cumulative losses to 67% of our full-year forecast of RM1bn loss. Although the 2Q loss was 42% lower yoy, it was more than double 1Q’s loss which surprised us as we had anticipated a sequential reduction in losses. The culprits were catch-up maintenance and other lumpy provisions which more than offset higher cargo profits and the recovering passenger topline. As a result of these provisions, we cut our FY10-11 EPS by 10- 14% but retain our FY12 estimate. We also maintain our target price of RM3, pegged to an unchanged 6x CY12 core EPS. The stock remains an OUTPERFORM given the potential catalysts of a global yield recovery and a structural cost reduction from FY11 onwards. Investors should accumulate on any price weakness.

• MAS reported a net loss of RM535m in 2Q mainly due to the RM217m MTM losses as spot/forward oil prices dropped between 31 March and 30 June 2010, in contrast to the RM1.3bn MTM gains posted last year when oil prices rose in 2Q09. • What’s behind the higher costs in 2Q? We were taken by surprise by the qoq cost increase of almost RM500m, ahead of the RM250m qoq revenue rise. The main component was the catch-up provision for maintenance of 18 leased aircraft which MAS intends to return to the lessor. MAS had underprovided for costs as spare parts and labour charges have since increased. Given that a further 13 leased aircraft may be similarly returned, another catch-up provision is likely in 2011. We have imputed this into our revised forecasts.

• MAS did very well in cargo, with 2Q revenue rising 73% yoy on the back of a 44% increase in demand and 21% rise in cargo yield. Cargo profits almost doubled qoq to RM49m and turned around from the RM48m loss last year.

• Passenger yield anaemic so far. 2Q pax revenue only rose 15% yoy, with RPK demand up 18% yoy but pax yield still 2.2% lower yoy. Over the past three quarters, MAS’s pax yield has barely budged from its lows whereas SIA’s yield has recovered a cumulative 19% due to its higher business mix. MAS will make yield recovery a more urgent task for 2H. It underperformance vis-à-vis SIA is not unexpected and does not dampen our enthusiasm for the fleet renewal story.

Highlights from conference call

Focus on yield improvement in the 2H. MAS admitted that it had not seen the same level of yield improvement as industry heavyweights Cathay Pacific (293 HK) and Singapore Airlines (SIA SP). Business traffic into Malaysia had not recovered to the same extent as business traffic into Hong Kong/China and Singapore, reflecting in our view, the more dynamic city-state economies and the less robust Malaysian economic growth. Also, despite the high passenger load factors, MAS had been more cautious in raising fares, worried that customers may baulk and abandon the airline in favour of cheaper alternatives. Based on MAS’s presentation slides, passenger yield recovered 2% yoy in 2Q whereas based on our internal computations, yield remained 2.2% lower yoy. MAS intends to pay more attention to yield recovery in 2H and work to pass through higher fuel surcharges. We are forecasting a full-year passenger yield decline of 1.2% this year, followed by 9% annual yield improvement in 2011 and 2012

Lumpy cost provisions in 2Q. MAS said that it provided RM240m in extra costs during 2Q, which helped to explain why the profit performance was so poor despite the stronger revenue. Among these costs are RM110m in catch-up maintenance provisions and RM50m in unrealised foreign exchange translation losses on euro and British pound financial assets. The maintenance provisions relate to 18 leased aircraft which MAS intends to return to the lessors. Before their return, the aircraft will have to undergo D-checks, which may have to be done sooner than if it continues to employ the aircraft. Also, there was an element of underprovision in the past due to the escalating cost of spare parts and labour charges, which MAS may not have adequately taken account of previously. A further 31 leased aircraft may also be returned to their lessors though a final decision is still pending. Should this decision be made, another set of catch-up maintenance provisions would have to be made, probably in 2011

Cambridge Industrial Trust -phillip

Cambridge Industrial Trust – Acquires 2 properties
Hold (Unchanged)
Closing Price S$0.51
Target Price S$0.52 (+2.0%)
52w k High (4/23/2010) 0.52 - 52w k Low (8/17/2009) 0.40

• Acquires 2 properties for $37.1 million.
• Private placement to raise gross proceeds of $40.0 million
• Maintain hold and fair value of $0.52

Cambridge announced the acquisition of 2 properties at a consideration of $37.1 million. The purchase is at a slight discount to the appraised value of $37.2 million. The property located at 22 Chin Bee Drive has a lease term of 7 years and the initial yield is 9.0%, and there is a rent escalation component of 5% on the 3rd, 5th and 7th year. The property located at 1&2 Changi North St 2 has a lease term of 7 years with an option to renew of another 7 years and the initial yield is 8.01% with annual rent escalation of 1.5%. The total acquisition cost is approximately $37.7 million and will be partly funded with $24.7 million from the private placement proceeds and the remaining $13 million through debt

Private placement
The private placement consists of 83,683,000 new units which will be placed out to two groups of investor. The first group consists of institutional and other investors and the new units are priced at an issue price $0.478. The second group consists of the Oxley Group and Mitsui & Co Ltd and the new units are prices at $0.503. The private placement is fully underwritten and will raise gross proceeds of $40.0 million and net proceeds of $37.6 million. Part of the net proceeds is used to fund the acquisition while the remaining proceeds will be used for future acquisitions.

Gearing is expected to reduce from 42.3% to 41.5% post the acquisition. The REIT will also be repaying $32 million of the existing loan from the divestment proceeds and gearing is expected to further reduce to 39.5%. In relation to the acquisition, Cambridge has secured a $50 million term loan facility and a $20 million revolving credit facility on a 3 year tenor. The term loan facility has an all-in 3.05% interest cost and $13 million will be drawn down to part finance the acquisition.

Advance distribution
Due to the issuance of new units, Cambridge will pay out advance distribution to existing unitholders prior to the issuance of the new units. Management guided the advance payout to be between 0.6 to 0.7 cents. We estimate this to be 0.674 cents and 3Q10 DPU inclusive of the advance distribution to be 1.169 cents.

We see this acquisition as a multi-prong approach by management to gradually bring the financial position of the REIT back to a comfortable level, while minimizing the erosion of DPU. We believe the strategy management is adopting is
1. divest non-core assets and using the proceeds to repay debt
2. replace these assets with better yielding assets
3. fund these purchases with a mix of equity & debt
4. replace high cost debt with low cost debt

We are seeing all of these slowly taking places. Gearing is expected to reduce to just slightly below 40%, and the new term loan charges almost half the interest cost of the existing loan of 5.9% compared to 3.05%. In our view, the main dilemma facing Cambridge is the gearing level. At 40%, it limits acquisition to utilizing equity and this might result in dilution of existing DPU.

We adjusted our projections to factor in the acquisitions and also the dilution from the new units. This results in changes to our FY10E – FY14E DPU decreasing by 2.6% - 4%. We are rolling over our DCF valuation to FY11E which gives us a fair value of $0.52 and we are maintaining our Hold recommendation.

Monday, August 16, 2010


Publish date:16/08/2010

Cambridge Industrial Trust-DBS

Cambridge Industrial Trust
HOLD S$0.51
Downgrade from BUY
Price Target : 12-Month S$ 0.51 (Prev S$ 0.54)

Earnings dilutive acquisitions
• Acquisition of 2 assets worth S$37.1m; part-funded by placement of 83.6m new units
• Lowered earnings by 2-6% in FY10-11F
• Downgrade to HOLD, TP S$0.51.

Looking towards growth. Cambridge REIT acquired 2 industrial properties for S$37.7m, yielding c8.0%. Income from these properties is backed by long-term leases of over 7 years with periodic step-ups. The acquisition is expected to complete in Sept 2010.

Private placement 83.6m new units to raise S$40m gross proceeds; new 3-year debt facility secured. The acquisition will be funded through (i) S$23.7m from private placement proceeds, (ii) S$13m drawn down from its debt facility at estimated c3.05% cost. The remaining placement proceeds of cS$15m will be used for future acquisitions or fund its planned asset enhancement initiatives. Gearing post acquisition is expected to head down to 41.5% from 42.3% as of 30th Jun 2010.

Dilutive to earnings, DPU adjusted downwards by 2- 6%. Expect earnings dilution since placement price implies a yield of 10% against the asset yield of c8%. Our DPU estimates are adjusted downwards to 5.0 – 4.8 Scts in FY10-11F, reflecting the transaction.

Downgrade to HOLD, TP adjusted to S$0.51. We are somewhat surprised at management’s decision to acquire assets that are earnings dilutive. We remain on look out for

future initiatives (AEI plans) that would grow earnings to offset the dilution. Given limited upside to our TP of S$0.51, we downgrade the stock to HOLD
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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