In Malaysia, the FBM KLCI index moved in a wider range of 30.16 points for the week with higher volumes of 1.92 billion to 2.45 billion traded. The index closed at 1,795.04 yesterday, down 15.07 points from the previous day as blue chip stocks like Axiata Group Bhd , CIMB Group Holdings , DiGi.Com Bhd , IHH Healthcare Bhd and SapuraKencana Petroleum Bhd caused the index to decline on some obvious liquidation activities. The ringgit was a touch weaker against the US dollar at 3.6020 as Brent crude oil turned weaker at US$64.70 (RM232.92) per barrel.
The index rose on a rally from the 801.27 low (Oct 2008) to its 1,896.23 all-time high (July 2014) and it represents an extended Elliott Wave “Flat” rebound in a “Pseudo-Bull” rise completed. The next few months’ index price movements since July 2014 comprised key swings of 1,837.28 (low), 1,879.62 (high), 1,766.22 (low), 1,858.09 (high), 1,671.82 (low), 1,810.21 (high), 1,706.18 (low), 1,831.41 (high), 1,774.30 (low) and 1,867.53 (high).
All the index’s daily signals are negative for now, with its CCI, DMI, MACD, Stochastic and Oscillator indicators showing much weaker readings. As such, the index’s weaker support levels are seen at the 1,770, 1,774 and 1,793 levels, while the resistance areas of 1,795, 1,823 and 1,867 will cap any index rebound.
The KLCI’s 18 and 40 simple moving averages (SMA) depict an emerging downtrend with a “Dead Cross” for its daily chart. The recent price bars of the index have just turned below the 50 and 200 SMA. As such, the index remains on its downturn from its recent 1,867.53 high in late April. Upon a break of the critical intermediate support of 1,795, the index may head towards its next downside targets of 1,780, 1,764 and 1,727.
Due to the poorer tone for the KLCI index, we are recommending a chart “sell” on UEM Sunrise Bhd (UEMS). Looking at the most recent fourth quarter financial year 2014 (4QFY14) result announcement, the group recorded higher revenues compared with the preceding year in the same quarter to RM1.341 billion from RM573.1 million in 4QFY13. Gerbang land sales to FASTrack Iskandar Sdn Bhd of RM248 million and Scope Energy Sdn Bhd of RM522.7 million contributed to the higher revenue.
Correspondingly, profit before tax was also higher in 4QFY14 compared with 4QFY13. Looking at the full 12 months financial year 2014 estimate (12MFY14E) compared with 12MFY13E, profit before tax was lower due to lower margins from land sales despite better revenues generated. However, this was mitigated by higher profits from property development.
A check on the Bloomberg consensus reveals that 20 research houses cover the stock. Of the 20 reports, there are six “buy”, 12 “hold” and two “sell” calls on UEMS. The stock currently trades at a reasonable and low historical price earnings ratio of 11 times. Its price-to-book value ratio of 0.83 times indicates that its share price is trading at a discount to its book value while UEMS has an indicative dividend yield of 2.45%.
UEMS’s chart trends on the daily, weekly and monthly timeframes are very firmly down. Its share price made an obvious plunge since its major weekly Wave-2 high of RM3.09 on July 19, 2013. Since that high, UEMS has tumbled to its May 2015 recent low of RM1.16.
As prices broke above its recent key critical support levels of RM1.44 and RM1.29, look to sell UEMS on any rallies to its resistance areas as the moving averages depict a very firm short-to-longer term down-trend for this stock.
The daily, weekly and monthly indicators (like the CCI, DMI, MACD, Oscillator and Stochastic) have issued clear sell signals and now depict firm indications of UEMS’s eventual plunge towards lower levels. It would attract firm selling activities at the resistance levels of RM1.16, RM1.29 and RM1.44. We expect UEMS to witness weaker buying at its support areas of RM0.89, RM1.05 and RM1.14. Its downside targets are located at RM0.93, RM0.78 and RM0.44.
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.
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