US markets ended slightly lower on Wednesday after a poorer set of March ADP payrolls and ISM (Institute of Supply Management) factory figures were released. Ahead of the coming long Easter holiday weekend, the S&P 500 Index declined 8.2 points to 2,059.69 points whilst the Dow fell 78.11 points to end at 17,698.01.
In Malaysia, the FBM KLCI moved in a narrow range of 17.83 points for the week with higher volumes of 1.92 billion to 2.91 billion traded. The index closed at 1,831.97 yesterday, up 5.66 points from the previous day as blue-chip stocks like British American Tobacco (M) Bhd, Genting (M) Bhd, Genting Bhd, Public Bank Bhd and UMW Holdings Bhd caused the index to rise on some bargain-hunting activities. The ringgit was marginally firmer against the US dollar at 3.671 as Brent crude oil remained steady at US$55.95 (RM205.34) per barrel.
The index rose on a rally from the 801.27 low (October 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 had 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) and 1,774.30 (low).
All the index’s daily signals are positive at the moment, with its CCI, DMI, MACD, Oscillator and Stochastic indicators showing upbeat readings. As such, the index’s obvious support levels are seen at 1,774, 1,800 and 1,831, whilst the resistance areas of 1,833, 1,858 and 1,896 will cap any index rebound.
The KLCI’s 18 and 40 simple moving averages (SMAs) depict an emerging uptrend for its daily chart. The recent price bars of the index are now also above the 50 and 200 SMAs and is also positive on that front. With this, the index has taken on a more positive tone in the near term.
Due to the rebound tone for the KLCI, we are recommending a chart “buy” on Super Enterprise (Super). Super was suspended on Tuesday and resumed trading yesterday after it received a non-binding indication of interest from Multi-Color Corp (MCC), United States, to explore a potential transaction involving Super shares.
MCC is a public company traded on the Nasdaq Global Market Exchange with a market capitalisation of US$1.15 billion. In the announcement, MCC requires a due diligence exercise before it can proceed to the stage of making a definitive offer. Super’s board has agreed to MCC undertaking the due diligence exercise.
Looking at the most recent third quarter of financial year 2015 (3QFY15) result announcement, the group recorded a higher profit before taxation of RM4.2 million for the current quarter compared with the corresponding figure of RM1.8 million in 3QFY14. The improved profitability can be attributed to two operating segments, namely the labels segment and nameplates/in-mould decorating products segment. Both these segments reported increased orders, effective cost control measures and forex gains as a result of the strong US dollar.
A check of the Bloomberg consensus reveals that no research house covers the stock. This stock currently trades at a low historical price-earnings ratio of 12.7 times while its price-to-book value ratio of 1.26 times indicates that its share price is trading at a minor premium to its book value.
Super’s chart trend on the daily, weekly and monthly time frame is very firmly up. Its share price made a good surge since its major weekly Wave-2 low of 97 sen in September 2013. Since that 97 sen low, Super surged to its March 2015 recent high of RM3.08.
As prices broke above its recent key critical resistance levels of RM2.13 and RM2.56, look to buy Super on any dips to its support areas as the moving averages depict very firm short- to long-term uptrends for this stock.
The daily, weekly and monthly indicators (like the CCI, DMI, MACD and Oscillator) have issued buy signals and now depict very firm indications of Super’s eventual surge towards much higher levels. It would attract firm buying activities at the support levels of RM2.13, RM2.56 and RM2.91. We expect Super to witness some profit-taking at its resistance areas of RM3.08, RM3.30 and RM3.70. Its upside targets are located at RM3.44, RM4, RM4.98 and RM5.97.
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.
This article first appeared in The Edge Financial Daily, on April 3, 2015.