Wednesday 11 June 2015-KLCI - Index Turned BULLISH After Close Above 1870 points

KLCI - Index Turned BULLISH After Close Above 1870 points The KLC has broken out from its sideways correction mode. The trend is technically bullish as the index is above the increasing short term 30 day MA. The index is also above the up trend line support level. This shows that market confidence is increasing as it is able to move higher from the average/support level. The close above 1870 points indicates that the market is geared to take higher risks. The breakout on 10 June 2014 indicates that the weak momentum is turning strong. Indicators like the RSI and Momentum Oscillator are starting to increase. Furthermore, the index has also climbed above the mid band of the Bollinger Bands but does not show strong buying strength unless the index breaks above the top band at 1887 points. The technical indicators are still indicating a sideways correction for the KLCI as there is still a resistance at 1880 points but the bias has turned bullish. The breakout above the resistance level at 1870 points indicates that the index is set to test the historical high at 1887 points. However the breakout was on low volume and this may not create a strong momentum. Therefore, if the KLCI fails to stay above the 1870 points then expect further sideways correction.

UZMA: An oil and gas upstream services provider is looking to acquire two or three more companies in 2014 to strengthen its foothold in the crude oil and natural gas production industry, following its successful acquisition of Thai based MMSVS Group Holdings Co Ltd.

The acquisitions will be financed via a combination of internal funds and bank borrowings. It will affect the group’s gearing ratio which currently (June 2014) stands at 0.2%.

It had also proposed a rights issue to raise up to rm100 million.

The newly acquired MMSVS will contribute USD18 million to the group’s revenue in 2014. The acquisition is USD29.7 million.

UZMA’s order book stands at rm1.8 billion which will be able to sustain its earnings till 2017.

In March 2014 it had bagged a risk service contract from Petronas Nasional Bhd for the development and production of petroleum at Tanjung Baram field in Sarawak.

Brahims: It would be impacted at most by -22.5% assuming MAS cuts its capacity by 30%. However this is unlikely given that travelers would opt for other airlines, which are likely Brahims’ existing customers.

Concern on sugar venture. Despite MSM’s announcement on its JV with Al Khaleei Intl Ltd to build a plant in Tanjung Pelepas, Johor, Barhim’s sugar venture in Sarawak is still intact. At this juncture, it is still in the early days to determine whether Brahim’s would be disadvantaged by the new venture.

However the construction of the refinery plant in Demak Laut, Sarawak is still ongoing. Contribution from the venture will only kick in in financial year 2016.

Going forward, its venture in Mecca will start to contribute significantly in FY2015 to FY2016 with circa rm4 million and rm7 million and rm8 million respectively.

SKPetro: The gas discoveries are positive for SKPetro as they ensure continuous recurring income from their upstream investments. Estimate a 24 to 36 months time from June 2014 lag or more before production from these new discoveries can commence.

Its outlook remains positive with its earnings trajectory backed by rm27 billion order book and recurring income from its upstream assets. More contract flow is to be expected in coming months from June 2014.