From time to time Investment Banks give out Research Details on Stocks. Some are informative. But most , I think, are detrimental to the Investment fraternity. Why do I say so?
BECAUSE THEY FEAR AT THE WRONG TIME AND SO MADE THE WRONG CALL. AND BY HAVING HEARD MENTALITY THEY FOLLOW EACH OTHER OVER THE HEEL TO GIVE OUT WRONG FORECASTS.
NO WONDER THE CROWD FOLLOWING INVESTMENT BANKS BLIND FORECASTS HAVE BEEN LOSING MONIES 90% OF THE TIME. MORE SO IN MALAYSIA. AS THE MAJORITY OF THE PEOPLE SHUN THE STOCK MARKET
THIS IS CAUSED BY THE HERD MENTALITY OF INVESTMENT IB OF MALAYSIA
EXAMPLE OF RCECAP
SOME YEARS AGO RCECAP WAS TRADED AT 27.5 SEN WHEN IT GAVE OUT A CAPITAL REDUCTION OF 4 TO 1 SHARE WITH CASH PAYOUT OF 7.5 SEN
CALVIN CALLED FOR A BUY WHILE TA SECURITIES DOWNGRADED RCECAP FOR A SELL
CALVIN & JOHOR BUDDIES LOADED UP ON RCECAP AS WE SAW DATUK HASHIM, AMBANK BOSS, ALSO BUYING
AND WE WERE CHUN CHUN. AFTER GIVING OUT 7.5 SEN CASH THE 4 SHARES CONSOLIDATED INTO ONE SHARE OF 80 SEN.
THEN RCECAP POWERED UP OVER RM1.60 FOR A 100% PROFIT CHUN CHUN!!
EXAMPLE OF LAFARGE
WHEN CALVIN TAN RESEARCH CALLED FOR A BUY ON LAFARGE AT RM2.25
THESE INVESTMENT IB CALLED FOR A SELL
SEE KENANGA IB GAVE A TARGET PRICE FOR LAFARGE AT ONLY RM1.85
FY18 CNL of RM318m is within our CNL estimate of RM333m but missed consensus CNL forecast of RM292m. No dividends declared as expected. Post results, we narrowed our FY19E CNL to RM241m (from RM251m) after increasing utilisation rate on higher export cement sales. We also introduce our FY20E CNL of RM204m. Upgrade to MARKET PERFORM (from UNDERPERFORM) on LAFMSIA with unchanged TP of RM1.85.
FROM HONG LEONG INVEST DOWNGRADE LAFARGE TO RM1.81
Lafarge’s share price surged yesterday to hit limit-up at RM2.60 (+30%) by mid day, before subsequently easing to close at RM2.35 (+17.5%). This may be due to investor’s speculation related to Lafarge’s parent company activity in the region recently which divested its business Indonesia and Philippines. In addition, the announcement of ECRL’s possible revival may have also assisted the share price run. With nothing concrete to justify yesterday’s share price performance, we feel that investor’s should take this opportunity to sell into strength. Downgrade to SELL (from Hold) with unchanged TP of RM1.81.
TODAY WE KNOW THAT YTL HAS OFFERED TO TAKE LAFARGE PRIVATE AT RM3.75 (MORE THAN DOUBLE THESE 2 IB FORECASTED)
SO THOSE WHO HAD FOLLOWED THEM HAVE MISSED A 100% UPSIDE.
NOW CALVIN TAN RESEARCH ISSUED BUY CALL FOR UZMA AT 80.5 SEN (UP SIDE RM1.60)
3 INVESTMENT IB DOWNGRADED UZMA DUE THIS QUARTER SEEMING POOR RESULT
FROM HL INVEST TP IS 70 SEN
At only 9% of HLIB/consensus full year estimates, 9MFY19 core profit of RM2.5m came below expectations largely due to higher-than-expected operating cost and lower-than-expected work orders. Despite management being bullish on 2HFY19, 9MFY19 core earnings plunged -89% on higher cost, tax expense and finance cost. With that, we slashed our FY19/20/21 earnings by 62%/28%/27%. Downgrade to SELL recommendation with lower TP of RM0.70 (from RM0.98) pegged to 9x FY20 PER.
KENANGA RESEARCH GAVE A TP OF 69 SEN
3Q19 results came in drastically below expectations as it plunged into losses, dragged by unusually high operating costs. While we view UZMA as a conceptual beneficiary of increased brownfield activities locally, continued earnings under-delivery have prompted us to re-evaluate our stance. Hence, we downgrade its rating to UP with a lowered TP of RM0.69.
OF THE 3 PUBLICINVEST IS A TERROR AT 57 SEN
Uzma reported a 5.6% QoQ improvement in revenue to RM111.4m for 3QFY19. It reported a significant drop in its earnings by almost 100% to RM0.4m only however, despite gross profit margins remaining stable at c. 35%. Cumulatively, 9MFY19 revenue and core earnings are only RM304.5m and RM8.0m respectively, missing our and consensus estimates at only 27% and 32% of full-year forecast. The drag this current quarter was mainly due to lower contribution from the Group’s technology and production services segment which saw declines of 47.2% and 24.6% QoQ respectively. In light of the slower-than-expected recoveries being seen, we are lowering our FY19 - 21 earnings estimates by an average 50.4%. Our call is consequently downgraded to Underperform with a much lower TP of RM0.57 (RM1.12 previously) based on 10x multiple to FY20 EPS. Uzma’s earnings outlook is less exciting at this juncture.
NOW ALL 3 IN HERD MENTALITY GETTING BOLDER IN THEIR SELL CALLS
AND I THINK ALL 3 ARE WRONG! DEAD WRONG!!
JUST AS KENANGA IB & HLINVEST WRONGLY DOWBGRADED LAFARGE TO RM1.85 & RM1.81 CALVIN THINKS UZMA WILL PERFORM MUCH BETTER THAN THEIR SELL CALLS
THESE ARE MY REASONS
1) JAN TO MARCH MONTHS ARE MONSOON SEASON. THERE ARE 22 OIL WELLS SCATTERED IN A VAST OPEN SEA
AND TRUE ENOUGH SEE
Recovery may take longer than expected. The discrepancy in our forecast versus reported numbers are actually due to the Pulai A Plug & Abandonment project. Although contributions improved this current quarter, recognition was below expectations. This is mainly due to the extension of the contract’s lifespan to Sept 2020 from June 2019 initially. Hence, earnings contribution will be spread over up to 1QFY21. While it is making good progress, works are taking longer than expected, with 30 days spent per well from the previously guided of 17 days/well. Uzma is currently working on well #7 from a total of 22. Total Group orderbook currently stands at RM1.3bn, with RM800m in firm contracts and estimated RM500m likely from umbrella contracts. Tender book remains healthy at RM3bn.
Source: PublicInvest Research - 30 May 2019
LOOK AT WHAT PUBLICINVEST RESEARCH HAS REVEALED
Although contributions improved this current quarter, recognition was below expectations. This is mainly due to the extension of the contract’s lifespan to Sept 2020 from June 2019 initially. Hence, earnings contribution will be spread over up to 1QFY21.
22 well decommissioning jobs supposed to be completed from July 2018 to July 2019.
NOW THERE IS A DELAY UNTIL SEPTEMBER 2020 (Another 14 months for total completion of 22 Oil Wells dismantling)
THIS IS ACTUALLY GOOD NEWS (BECAUSE THE JOB IS PAID BY REAL TIME SPENT ON EACH WELL.
IF 14 DAYS THEN UZMA GETS 14 DAY PAYMENT. IF 30 DAYS? BETTER STILL NOW UZMA GET PAID FOR EXTRA 16 DAYS FOR EXTENDED WORK
While it is making good progress, works are taking longer than expected, with 30 days spent per well from the previously guided of 17 days/well. Uzma is currently working on well #7 from a total of 22
DID YOU READ THAT?
UZMA BY MAY 30TH 2019 HAS COMPLETED ONLY 6 WELLS
CURRENTLY WORKING ON WELL #7
THAT MEANS THAT THERE ARE 16 MORE WELLS TO GO
AND IF TIME LENGTH EXTENDED TO 30 DAYS PER WELL THAT MEANS THAT UZMA STANDS TO REAP EVEN MORE REVENUE (MORE THAN DOUBLE ITS PROFITS!!)
SO NOTHING IS SET IN STONE
JUST AS IN LAFARGE
AFTER YTL TOOK OVER LAFARGE CEMENT PRICES HAVE BEEN RAISED BY UP TO 20% PER BAG!!!
SO THE UNEXPECTED DELAY HAS INCREASED UZMA'S BOTTOM LINE
NOW THE SELL DOWN WAS BASED ON DEFECTIVE KNOWLEDGE OF PUBLIC, HONG LEONG & KENANGA IB
IF YOU LISTEN TO THEM YOU WILL GO JOIN THE 90% OF THOSE WHO EVENTUALLY LOSE MONEY IN THE SHARE MARKET (WHEN THEY SAY SELL YOU SHOULD BE BUYING)
LISTEN! LISTEN!! LISTEN!!
TO SUCCEED YOU CANNOT FOLLOW THE CROWD. YOU MUST DO INDEPENDENT THINKING
JUST LIKE WARREN BUFFET LIVED FAR AWAY FROM WALL STREET IN QUIET OMAHA. WHERE HE IS ABLE TO THINK
AND THINK CLEARLY!!
Calvin Tan Research