Dec 12, 2011

ORIENT – Short Term Buy?

SHORT-TERM BUY (TECHNICAL) on dips for ORIENT (stock code 4006), with stop-loss at RM4.48.

ORIENT  reached a  significant  major weekly Wave  4  low at  RM4.30  in  late  November  2011  with  grossly oversold and bullish chart signals. Due to most of its positive indicators, it is likely to surge to its obvious upside Wave 3 and 5 targets (of RM5.17 and RM5.42) and resistance levels above. 

The weekly indicators (like the CCI, DMI, MACD and Stochastic) are firmly positive and now depict the fine indications of ORIENT’s prolonged price strength. We expect ORIENT to remain very firm on any weakness  (or  retracement)  to  its  support  levels  of  RM4.50  and  RM4.88.  It  will  attract  some  minor selling at the key resistance levels of RM5.07 and RM5.48. Our technical upside targets for ORIENT are RM5.17 and RM5.42. Its stop-loss level is at RM4.48.

ORIENT’s share price had made a key daily major Wave-5  low  at  RM4.30  (21  October  2011),  with  grossly oversold and bullish divergent signals. Since that low, it surged up to a recent high of RM5.00 on 7 December 2011  (a  gain  of  16.3%  in  just  over  a  month).  Look  to  buy  ORIENT  on  any  dips  to  its  support  areas  as  the moving averages depict firm daily and weekly up-trends for this stock.

oriental-technical-analyisOriental Holdings Berhad (ORIENT) is an investment holding company whose subsidiaries distribute and assemble motor vehicles, manufacture motor cycles and bicycle components. It also develops properties, processes rubber and oil palm, sells concrete products, electrical components, and motor parts.

The  group  has  diversified its  operations from the  automotive  distribution  business  to  oil  palm  plantation  and property development. Its oil palm plantation business has close to 60,000ha in Indonesia and this  segment
contributed  RM151.07m  (or  47.8%) of the group’s  total profit-before-tax  (PBT).  Recently,  a  daily  local business  newspaper  reported  that  Aberdeen  Asset  Management  now  controls  about  44.62m  shares  (or  a
7.19%)  equity  interest  in  the  company.  Aberdeen  first  surfaced  as  a  substantial  holder  in  September  2010, with 31.06m shares (or 5.01%) equity interest. 
The group registered RM249.59m in net earnings for the financial year ended 31 Dec 2010. For the 9-month period  ended  30  Sep,  ORIENT  recorded  RM179.73m  in  net  profit,  up  almost  44%  from  RM124.85m  in  the same period last year. 
Maybank  IB  does  not  have fundamental coverage  on ORIENT.  Consensus  data  according  to  Bloomberg reveals that no local research houses have coverage on the stock. The indicated dividend yield for the stock is around 1.84%. The stock currently has trades at a PER of 10.7x, while its historical PER high traded at 18.5x and  its  historical PER Low  traded  at  5.9x.  Its  current  traded  PER  range  of  10.7x  suggest  that  ORIENT  is trading  slightly  below  its  historical  average  PER  of  12.2x. Its  last  price  of  RM4.88 is  still  well  below  its  book value/share of RM6.99. This may also make this stock an attractive investment proposition.


by Maybank IB