Price

Fund Flow

Thursday, 20 June 2019

Indofood Agri (SGX:5JS)

Disclaimer: I have long positions in Indofood Agri (SGX:5JS), this is not a recommedation to buy, illisutrated for education purpose to share with the members of the public mostly misinformed retail investors comprising in the marketplace, I am also a small retail investor but specialise in fund flow analysis.

As an investor of Indofood Agri Ltd, i am surprised and disappointed by the voluntarily conditional takeover offer by Salim Group, tycoon of Indonesia of Indomie, because the takeover price is too low at SGD $0.28 (first offer) and $0.3275 (latest second offer), objective for their takeover understood is to delist and privatise Indofood Agri Ltd. Indofood Agri Ltd also emphasize on remaining cautious on its earnings momentum and its ability to return to pre 2017 earnings level although share price performance and valuations were undemanding.

So Indofood Agri Ltd Directors recommend retail investor to accept the offer unless they are able to obtain a higher valuation price than the offer price on the open market after accounting for brokerage and related costs. IFA quote the offer price not fair but reasonable.

The timing for takeover to delist Indofood Agri comes at the backdrop of global economy currently undergoing an expansion phase where the bull run is likely to continue for another few years to go. If Salim Group decide to force the takeover deal through, as an small retail investor, i have no control of but to accept the fate, when it comes to any future investment decision of mine to invest in any particular company, i would avoid Salim Group and its subsidiary as the major shareholder of any public listed company because retail investors are mostly value investor that stays loyal to the public listed company in good times and in bad times in any capital fund raising activity, and they are deprived of any growth opportunities of staying loyal to the public listed company. I really hope Salim Group can reconsider the delisting option, maintain listing in SGX so that investors can participate in the growth potential for Indfood Agri Ltd.

https://www.businesstimes.com.sg/companies-markets/indomie-maker%E2%80%99s-buyout-offer-for-indofood-agri-%E2%80%98not-fair-but-reasonable%E2%80%99-says-ifa

I observed Indofood Agri Ltd to be a slightly high beta stock, obtain the data source from Yahoo Finance, its reading is 1.30X in Beta as compare to market average of 1.0X as the benchmark as explained by Stockopedia.

High Beta stock theoretically tend to be violatile in nature hence riskier but it provide the potential for higher returns through higher returns.

As explained by Investopedia, Beta's definition is a reading of that is greater than 1.0 indicates that the security's price is theorectically more violatile than the market. For example, if a stock's beta is 1.20, it is assumed to be 20% more violatile than the market.

https://sg.finance.yahoo.com/quote/5JS.SI/

https://www.dbs.com.sg/treasures/aics/templatedata/article/equity/data/en/DBSV/012014/IFAR_SP.xml

https://www.stockopedia.com/ratios/beta-stock-5114/


https://www.investopedia.com/terms/b/beta.asp

So let's take a look at the Chart of Indofood Agri Ltd

Monthly Timeframe













Technical Analysis Part 1












Based on above chart although price is oscilliate in a downtrend movement but it had broke out of downtrending line resistance. An inverted fan is illustrated act as a resistance and support line touching all the peaks and troughs.

Applying technical analysis to determine overvalue, fair value and undervalue, there is an approach taught by Asian Investment Guru, Mr. Hu Li Yang, on his halving valuation method simply take the peak price as the range of overvalue, peak price divde by 2 halving method gives your fair value and further reduction of halving gives you undervalue region.

Indofood Agri Ltd all time high price of 2.93 in year 2007 applying halving valuation method would see fair value range at 1.465 and undervalue value range at 0.73 below price level. Hence it is considered that the takeover price of S$0.3275 price is at the extremely undervalue range but a premium considered at the all time low price of S$0.181 in year 2019.


Technical Analysis Part 2












Above Chart pattern suggest price channel movement upper orange color lines, median green color line and lower orange color lines drawn, so price is anticipated to reach the upper orange color lines connecting all the peaks as resistance and lower orange color lines connecting all the troughs as support.

There is a falling wedge pattern observed as the bullish chart pattern.

Fundamental on Maecro Outlook of Palm Oil

Indonesia is the largest producer of Palm Oil with Malaysia the second largest producer.

There are positive reports on the demand for Palm Oil, where the demand for Palm Oil is influence by the strength of US dollar, where ususally commodities is priced in USD for trade settlement. The stronger US Dollar has developed an inverse relationship to the demand of the commodities in particular. USD strength result in lower demand for commodities and weaker USD result in higher demand for commodities.

Based on Fund Flow USD (DXY) spot index has reach its peak hence more downward price pressure is anticipated hence boosting demand for commodities and other currencies. USD is pegged to quite a few asian currencies like Hong Kong Dollar (HKD) and Chinese Yuan (CNH), weaker USD suggest strengthening of Chinese Yuan (CNH) weakening Hong Kong Dollar (HKD).

https://www.hellenicshippingnews.com/bumper-year-ahead-for-palm-oil-imports-in-china/

https://www.ofimagazine.com/news/palm-oil-based-biodiesel-exports-to-china-and-eu-surge-in-first-quarter-201

https://www.thestar.com.my/business/business-news/2018/12/21/chinas-palm-fuel-imports-soar-to-record/

SWOT Analysis (Micro on Palm Oil Sector)

Below article by David Dodwell on his opinion on future demand of Palm Oil is worth a read highlighting the environmental concerns affecting the demand of Palm Oil.

"Outside In by David Dodwell

Is the palm oil industry going up in smoke as market forces and environmental concerns collide?

  • Malaysia and Indonesia are grappling with an impending European Union ban on palm oil in biofuel combined with uncertain demand from the food industry, declining global oil prices and questions about the credibility of ‘sustainable’ plantations"
https://www.scmp.com/comment/insight-opinion/article/3010629/palm-oil-industry-going-smoke-market-forces-and


Fund Flow Analysis

Smart monies are long bias in Palm Oil Futures, with swap dealers and large speculators seen reducing and accumulating.





Disclaimer: All news, information and charts shared is purely by my research and personal views only. This is not a trading recommendation or advice but on the basis of sharing information and educating the investment community. Different traders and investors adopt different trading strategies and risk management approach hence if in doubt please approach or seek clarifications with your Financial Adviser, Broker and Banker.

Tuesday, 4 June 2019

KLCI Index Chart Analysis

Malaysia KLCI Index Analysis

I would like to touch on the outlook of the Malaysia KLCI index market after much cross examine and cross asset class analysis, that conclusion is KLCI is still bullish based on the principle of Fundamental Analysis, Technical Analysis and Fund Flow Analysis perspective.

Fundamental Analysis

Malaysia's economy is mainly export driven where it exports semiconductor & electronic products, palm oil, liquefied natural gas, petroleum, chemicals, machinery, vehicles, optical & scientific equipment, metals, rubber and woods at a value of 263 Billion in revenuemost to countries in descending order like China (16%), Singapore (14%), USA (13%), Japan (6.7%), Hong Kong (5.2%) and Thailand (4.1%).

please refer to the below link for more information.

https://en.wikipedia.org/wiki/Economy_of_Malaysia

Next we look at Trading Economics for Malaysia Economic Indicators, it is observed that USDMYR is currently trading at 4.18 level weaker than expected, recent high for USDMYR is 4.20 in November 2018. weaker currency boost exports couple with the fact that Malaysia Central Bank just cut interest rate from 3.25% to 3% in May 2019, a signals to boost economic activity through lower montary policy making to achieve higher exports objective. As an investor based on the fact that Malaysia Central Bank cut interest rate, investor could take a look at resource based sector and financial sector to position and include in their portfolio. resource based sector could see more exports and financial sector could see an increase in business lending activity. A weakening currency will result in an immense inflationary pressure felt by the Malaysians hence dampening more consumption. It is not surprising to see GDP growth rate fell slightly probably due to and influence by maecro economic conditions of Trade War impact between USA and China. A weakening currency tend to boost tourism activity in Malaysia to Genting Highlands Casino.

























Current Palm oil price is traded at 2069 RM at 31 May 2019.

Please refer to the below link for updated daily Palm Oil settlement price

http://www.mpoc.org.my/Daily_Palm_Oil_Prices.aspx

Technical Analysis

Asian Investment Guru Mr. Hu Li Yang once said that stock market is the window to economic growth and not vice versa, a booming stock market where investors made profits from tend to boost demand consumption in real economy, a faltering stock market would not be able to boost demand consumption. So lets take a look at Technical Charts of Bursa (1818)

Monthly Chart Historical 












Monthly Chart Historical  With Technical Analysis












Charts of Bursa is bullish with big ascending triangle chart formation seen using orange color and green color lines drawn. a profitable stock market signals investor are investing in Malaysia stock markets.if KLCI rise every investor makes profit hence would translate into capital expenditure spending. Price is observed to oscilliate between green color upper and lower lines known as price channel formation. Investor could consider to buy on dips touching lower green color lines as support. Price just broke November 2007 high of 7.425 and register all time high in May 2018 with 7.844 price level when global economies are in a rough patch resulting in USA and China Trade War tension. Price is expected to challenge 10 RM psychology level for Bursa (1818) and subsequently challenge 13 RM with simple mathematics formula using year 2007 high 7.42 - year 2009 low 1.91 = 5.51 difference in price + 7.42 year 2007 high with aprice target of 12.93.


Dow Jones Malaysia Stock Index Monthly Chart





















Dow Jones Malaysia Stock Index Monthly Chart with Technical Analysis




















Dow Jones Malaysia Stock Index is observed to be bullish with various bullish chart formation displayed
1) Upper and Lower Orange Green color lines drawn - Price Channel
2) Price Channel, Rectangle and Bull Pennant.
3) Ascending Triangle Chart Formation with an upside price target of 444 and 509 points respectively using simple mathematic formula year 2008 high of 295 - year 2009 low of 146 = difference of 149 points + year 2008 high 295 = 444 points first target and using year 2014 high 360 points - year 2009 low 146 = diffference of 214 points + year 2008 high 295 points = 509 points as second target.


Ishares MSCI Malaysia ETF Monthly Chart


















Ishares MSCI Malaysia ETF Monthly Chart with Technical Analysis


















Ishares MSCI Malaysia ETF is observed to be bullish with various bullish chart formation displayed
1) Upper and Lower Green color lines drawn - Price Channel
2) Price Channel, Rectangle and Bull Pennant.
3) Ascending Triangle Chart Formation with an upside price target of 55 to 56.


KLCI Index Monthly Histroical Chart Yahoo Finance













KLCI Index Monthly Histroical Chart Yahoo Finance with Technical Analysis













KLCI is observed to be bullish with various bullish chart formation displayed
1) Dark Blue Color lines drawn - Falling Wedge Chart Formation
2) Upper and Lower Light Blue color lines drawn - Price Channel
3) Orange color lines drawn - Price Channel, Rectangle and Bull Pennant.
4) Ascending Triangle Chart Formation with an upside points target of 2450 points or possibly 3000 psychology resistance points target for secular bull market.


Fund Flow Analysis

Smart monies are bullish bias having accumulate large position of long futures.





Disclaimer: All news, information and charts shared is purely by my research and personal views only. This is not a trading recommendation or advice but on the basis of sharing information and educating the investment community. Different traders and investors adopt different trading strategies and risk management approach hence if in doubt please approach or seek clarifications with your Financial Adviser, Broker and Banker.