E&O poised to rise

Well, with so many property friendly news recently property counters certainly has not moved abit.... but things are going to be different going forward...In Q4 alone I expect property sector to gain at least 15% from Q3 and just take a look at E&O which certainly look promising from chart perspective and if the stock continue to climb and break above the zero line with volume, i think this will trigger a property rally most certainly.

You can certainly cross check with the heavyweight SP Setia which gain almost 30 sen today.

Immediate recommendation for those with stocks in property...."Let it ride"

Morgan Stanley or S&P 500?

Many people follows what most analyst are reporting blindly but the number is reducing these days... most people review the data and make the decision after some analysis on their own... While it serves as a guidance to some, many falls as victims of confirmation bias.

I personally have review so many analyst reports in the past and one particular guidance that I find rather reliable in the sense that the projection mostly materialize itself is the S&P stock price guidance, in fact I would say most of them are rather conservative in nature.
Here's the link.

http://www.bloomberg.com/news/2010-10-25/s-p-500-analyst-target-price-changes-for-oct-25-table-.html?cmpid=yhoo
A quick snap shot, Altera and Xilinx both from the FPGA industry is targeted to be $33 and $29 respectively... similar to my earlier Oct 18th posting on these 2 companies.
Well you be the judge who to follow...

Altera Q3 net income almost quadruples!

Well the results of Altera 3rd quarter earning is stellar comparing to what the company fares a year ago... the company's net income nearly quadruples mainly driven by strong sales from telecommunication and wireless equipment makers. The company reported earning of $217.5mil or 69 cents per share versus $56.7mil, or 19 cents per share a year ago. Analyst had expected 65 cents per share. Revenue rose 84% to a record 527.5mil.

Altera outlook calls for the 4th quarter revenue to grow 3-6% over the 3rd quarter which implies a maximum of $559.2mil compares to what analyst have in mind that is $512mil..

Surprisingly today Morgan Stanley gave a underweight rating on the company with a target share price of $24. Bear in mind that the share is now trading at $29.13 at the point of writing.
Just why are these so called analysts giving a negative outlook on the company when the results clearly shows the opposite??

My comment is simple, these people could have taken a large short position on Altera and Xilinx and are banking that the stock price will go down after hitting a high of $30.50 a few weeks ago. Or perhaps these analysts have more insider information that the rest of us which makes them believe that the stock price will plummet from here on.

From now to $24 that is almost a 25% market cap reduction. At the same time, at current price with the earnings combined so far from all 3 quarters (~$2 per share), Altera will trade at a PE of barely 15. and that is without Q4 result. Assuming Q4 the earning is conservative 50 cents per share, that woull translate to a $2.5 earning per share. with $29.3, the PE will be 11.8.

Personally, I think the comments givent by these bunch of analysts are pure speculation and without any basis to support, at the same time the target price are definitely questionable and I would call for all investors to look into the integrity such negative calls made by these so called analysts purely based on nothing concrete but speculative in nature and definitely with lots of hidden agenda.
Such calls are irresponsible and definitely a joke especially when they are coming from big financial institutions in the US. It is apparent that these people have yet to learn from the mortgage crisis that hit them a couple of years back... Let us all live to witness if these people are real analysts or just a bunch or crappy anal-ysts.

We shall see....

Upgrades for Altera and Xilinx...

Well, this is just a follow up of what I have posted earlier... today we receives another downgrade on Altera which is a FPGA company which has overtaken its primary rival Xilinx in stock price but keeps getting downgrades from analysts...earlier it was Morgan Stanley, now its RBC Capital.

Reason cited were likely lower orders in China's telecommunication equipment makers. Such expectation are typical ones you expect from analysts since the stocks have rallied more than 15% from the beginning of Q3 this year.

From the chart, fundamental, telecommunication market in Asia, US dollar and the RMB valuation... I think the volume from the chinese companies will increase in 2011.

Therefore with all the above, I declare an upgrade of Altera and Xilinx to outperform Target share price USD33 and USD29 respectively.

Property counters... so what now?

Well, with all the hoo haa about reducing the property loan to value ratio and requiring higher amount of downpayment for property buyer, RGPT, etc... you name it... that's before the Malaysia 2011 budget...

After the budget...
- 100% loan for those with household income of <=RM3000.
- 50% discount on the stamp duty on loan agreements for residential property less than RM350k.

Gee, the opposite of all the rumour and all unnecessary discussion, comments and concerns put up are totally uncalled for... why such a mismatch in expectation.... not like we're talking about NYSE here but KLCI, come on....

well, personally I find it funny when i heard about the plan to build a RM5bil tower... for what? I thought we still have lots of vacant space in petronas twin towers? Anyway, I think overall the budget is "friendly" towards property sector since there is no downside to stop the momentum of the property sales as well as to cap the value of these properties.

L&G, IJMLAND, E&O and Mah Sing are top picks for me.

Malaysia's 2011 Budget,,, "light at the end of the tunnel"?

The highly anticipated announcement of Q4 2011....well as usual there are quite a number of large and heavy projects being lined up for major GLCs to benefit from.... Malaysia PM's noble intention is to bring Malaysia out of the middle income trap towards a high income nation, and certainly if at least 80% these projects materialized and were well executed.... it would likely help the country gain closer to its goal above.

However, being a skeptic since I have been following the budget for years now and let me tell you what, it does not take a lot of brains for us to discover that the problem may not lie in not having the right projects but rather how the governement actually follow through those projects and get the receipients of these big contracts to honour their word and complete the projects on time and within the expectation in terms of quality at the very least (we haven't talk about value add that comes from giving these projects to those GLCs).

Regardless, my opinion is this. Having great projects are essential but not a necessity for success. It requires holistic planning and excellent project managers to really drive these projects and ensure they meet the expected completion timeline. When I say excellent, it means commited, well connected, honest, noble and competent. At the same time, the subcontractors who were assigns to work on the projects are also required to possess these values, integrity, competent and well connected.

In summary, the government needs to really look into those the performance of those contractors in the past projects and evaluate if the country should continue to engage them or source new contractors. Bottomline, we need to build a country with quality people to maintain it if we are to achieve a high income nation and a successful one in the future. There is certainly no point in having 1st class infrastructure in the world but living with a 3rd world human capital and mentality.

Lastly, I think its time to sell the stocks in KLCI that have raked in gains. Not like its going to be a double dip in the world economy but rather simple, whatever that goes up will eventually come down before going up again.

Morgan Stanley are you sure?

While a few among us are guessing Fed's next move... there are many people who are placing high hopes that the Fed will introduce more stimulus package. One interesting comment catch my attention that is Morgan Stanley actually downgraded 2 leaders in FPGA industry.

Well I am not sure how many would concur with that view but personally since I know one of the company relatively well, I am going to say that what Morgan Stanley did was either a great mistake or at least the timing of such report is definitely questionable hence it goes back to the objective of publishing such article and making the downgrade on both Altera and Xilinx.

Reason given are simple: Potential weakness in Asia telecommunication sector. In fact this financial giant actually quote that "visits to telecommunication and original equipment manufacturers in China and India "reveal slower growth in 3G subscribers in China and a much lower profitability in India", which could lead to near term decline in orders from these 2 companies.

Well, first of all in my opinion while the 3G subscribers may decline the infrastructure development will still proceed. When we talk about decline, what's the rate that we are talking about here? Second, how on earth did Morgan Stanley measure the potential decline due to the lower profitability in India? The pressure on gross margin is not so much on Altera but on its customers selling products made from Altera chips to the people of India... similarly goes to Xilinx.

At the same time, allow me to share some of the facts of one of the company, let's take Altera for example.

Stellar financial results for both quarters in 2010 with impressive y-on-y revenue and earning growth, ROE is ~40% and operating margin of close to 37%. Company is on track to gain more market share with its Stratix IVGX family leading the way to market share gain and securing more new sockets from customers who used to be hardcore fans of its main competitor.

In short, it seems that the company is hitting everything right at this point of time, with the chinese government keen on expanding the infrastructure system in China, I don't think the slow down anticipated in China's voracious chip consumption is going to be of any material impact at least not in the short term. When I say short term, that's 3-6 months period.

Chart wise, no matter how pessimistic I could possibly be the stock just appear to be heading north with a target price of USD32.90 at least. That's easily a 3 dollar gain which translate to >10% return. I say BUY since the Q3 earning report is still to be published.