Monday, 28 February 2011

Nestle 4Q net profit falls 54pct to RM39.26m as margins squeezed

Nestle 4Q net profit falls 54pct to RM39.26m as margins squeezed
Written by Surin Murugiah of
Thursday, 24 February 2011 19:36

KUALA LUMPUR: Nestle (Malaysia) Bhd’s net profit fell 54.5% to RM39.26 million in the fourth quarter ended Dec 31, 2010 from RM86.22 million a year ago, as its profit margin was squeezed mainly by higher investments in brand building, overhead expenses and increase in commodity costs.

Nestle had on Thursday, Feb 24, said its revenue for the quarter rose to RM963.89 million from RM950.63 million. Earnings per share were 16.74 sen while net assets per share was RM2.62.

It proposed a final dividend of RM1.15 per share, under the single-tier system.

For the financial year ended Dec 31, Nestle's net profit rose 11.25% to RM391.39 million from RM351.79 million in 2009, while revenue rose to RM4.03 from RM3.74 billion.

Nestle said the higher revenue to the positive developments in both the local and global economies.

“With the improvement of the Malaysian economy, most of the domestic product categories continued to perform well. This was quite evident for Nestle liquid drinks and chilled dairy which achieved double digit growth.

"From a channel perspective, both retail and out of home sales enjoyed good growth," it said.

On its current year prospects, Nestle said that after an encouraging 2010, the local economy was expected to grow further, leveraging on the government's Economic Transformation Plan.

Nestle said the sharp increase in the global commodity prices and the government's gradual reduction in food and fuel subsidies which put pressure on its input costs remained a concern.

"The group will continue to closely monitor the development of commodity prices, evaluate and adjust its pricing policy accordingly.

"Where possible the group will leverage operational efficiencies and cost savings initiatives to avoid passing on price increases to consumers," it said.

Carlsberg 4Q net profit up 51.8% to RM30.49m

Carlsberg 4Q net profit up 51.8% to RM30.49m
Written by Surin Murugiah of
Thursday, 24 February 2011 20:13

KUALA LUMPUR: CARLSBERG BREWERY MALAYSIA BHD []’s net profit rose 51.8% to RM30.49 million in the fourth quarter ended Dec 31, 2010 from RM20.09 million a year ago, driven by higher export and contract manufacturing sales.

It said on Thursday, Feb 24 revenue rose to RM326.06 million from RM300.40 million in 2009. Earnings per share were 9.97 sen while net asset per share was RM1.93. It announced a final gross dividend of 7.5 sen per and special gross dividend of 43 sen share.

For the financial year ended Dec 31, 2010 Carlsberg's net profit surged to RM133.24 million from RM76.14 million in 2009, on the back of revenue RM1.37 billion in FY10 from RM1.05 billion in FY09.

Carlsberg said the increased in profit was due to

  • higher domestic sales, 
  • the synergies arising from the acquisition of Carlsberg Singapore Pte Ltd and 
  • the good performance in the super premium segment through its subsidiary Luen Heng F&B Sdn Bhd.

On its current year prospects, Carlsberg said the move by the government not to raise excise duties for beer and stout products in Budget 2011 was a clear indication that the government was sensitive to the industry and the public as Malaysia was already the second highest excise duty paying country in the world after Norway.

"In line with this, we expect the domestic beer market to grow moderately in 2011," it said.

Insas associate Inari gets Bursa Securities nod to list on ACE Market

Insas associate Inari gets Bursa Securities nod to list on ACE Market
Written by Surin Murugiah of
Friday, 25 February 2011 11:17

KUALA LUMPUR: Inari Bhd, an electronic manufacturing services (EMS) provider in the semiconductor industry, has been given the nod by Bursa Malaysia Securities Bhd to list on the ACE Market.

In a statement on Friday, Feb 25, Inari said it was expected to list in the second quarter on 2011. Inari is a 44% associated company of Main Market-listed INSAS BHD [].

Its managing director Dr Tan Seng Chuan said since the company’s inception in 2006, it had not only positioned itself as a leading EMS player in the RF segment of the semiconductor industry, but also grown rapidly in capacity and revenue.

“The group’s strong growth necessitates our listing exercise to raise funds for future expansion,” said Tan.

The company provides semiconductor packaging services for global players in radio frequency (RF) mobile industry, which include backend wafer processing and RF testing.

Its finished products are System in Package (SiP) and Quad Flat No-Lead (QFN), key components used in the manufacturing of a wide range of electronic products

Inari said its products were used mainly in the wireless telecommunications, including smartphones and medical sectors, with its customer base including Avago Technologies Trading Limited, Vigsys Sdn Bhd, Ceedtec Sdn Bhd and Newict (M) Sdn Bhd.

Paramount advances after 4Q strong earnings, boost from Jerneh Insurance sale

Paramount advances after 4Q strong earnings, boost from Jerneh Insurance sale
Written by Joseph Chin of
Friday, 25 February 2011 11:33

KUALA LUMPUR: Shares of Paramount Corp Bhd was among the top gainers in the morning on Friday, Feb 25 after it announced a strong set of earnings, which were boosted by the 20% equity in Jerneh Insurance Bhd and higher margins achieved in property development.

At 11.28am, Paramount rose 34 sen to RM4.85 with 345,200 shares done.

The FBM KLCI rose 2.98 points to 1,492.85, off the early high of 1,499. Turnover was 522.46 million shares valued at RM620.44 million. There were 386 gainers, 278 losers and 248 stocks unchanged.

On Thursday, Paramount said while 4QFY10 revenue was at RM102.9 million, a slight decline from RM104.5 million a year ago, profit before tax of RM87.1 million was substantially higher compared with RM22.0 million a year ago.

This 296% increase was attributed to a gain of RM60.8 million recognized on the disposal of the Group’s 20% equity in Jerneh Insurance and higher margins achieved in property development.

It also said FY10 revenue grew by 7% to RM432.3 million from RM404.9 million recorded in FY09 the previous year while profit before tax grew by 123% to RM177.1 million from RM79.3 million in FY09.

Discounting the gain from the disposal of Jerneh Insurance, it said the group’s core businesses, that is property development, CONSTRUCTION [] and educational services contributed to 47% of the growth in profits.

Boustead 4Q net profit up 41% to RM208.9m, declares 12c dividend

Boustead 4Q net profit up 41% to RM208.9m, declares 12c dividend
Tags: Boustead Holdings Bhd

Written by Surin Murugiah of
Friday, 25 February 2011 14:21

KUALA LUMPUR: BOUSTEAD HOLDINGS BHD []'s net profit rose 41.4% to RM208.9 million for the fourth quarter ended Dec 31, 2010 from RM147.7 million a year ago due mainly to notable increase in revenue from both the PLANTATION [] and trading divisions.

It said on Friday, Feb 25 revenue for the quarter rose to RM1.69 billion from RM1.48 billion. Earnings per share were 22.22 sen while net assets per share was RM4.50. It declared a fourth interim single tier dividend of 12 sen per share, to be paid on March 31 this year.

For the year ended Dec 31, 2010 Boustead’s net profit jumped 57.3% to RM537.5 million from RM341.6 million in 2009, while revenue grew to RM6.18 billion from RM5.39 billion.

Commenting on its prospects, Boustead said although the Malaysian economy was projected to grow at a steady pace in 2011, and the outlook for the other regional economies was also expected to be favourable, it was bracing itself for yet another challenging year ahead, as the global economies may be badly hit in the event of a large sovereign debt default in Europe in addition to the short-term monetary policies tightening by China and India.

It said plantation's earnings will very much be dependent on palm oil prices which are expected to stay at attractive levels in 2011, largely due to the low supply situation brought on by adverse weather conditions and the expected increase in demand.

It said the heavy industries division's prospects would be underpinned by contracts on hand, and the finalisation of the value and duration of the project to construct six naval vessels will be positive for earnings.

“The property division can look forward to stable recurring income from its portfolio of commercial and retail PROPERTIES [] and the expansion of the hotel operations.

“The addition of PHARMANIAGA BHD [] in the coming year will enable the group to take advantage of the Pharmaniaga brand and infrastructure to grow revenue and profit in the lucrative pharmaceutical business. The other divisions are expected to perform satisfactorily in 2011,” it said.

Lonpac to focus on S'pore, Cambodia ops

Lonpac to focus on S'pore, Cambodia ops
By Rupinder SinghPublished: 2011/02/28

GENERAL insurer Lonpac Insurance Bhd is putting on hold its plans to venture into other overseas countries to focus on growing its operations in Cambodia as well as Singapore.

A wholly-owned subsidiary of LPI Capital Bhd (8621), Lonpac currently has operations in Singapore and Cambodia.

"Cambodia has been a success story and represented a learning curve for us. The challenge now for us to build our market share in Cambodia further," Lonpac's adviser Tee Choon Yeow told Business Times.

In three years since it started business in Cambodia, the insurer has gained 20 per cent market share where the total industry gross premium is only US$20 million (RM61 million) shared among six insurers.
Lonpac aims to capture a 35 per cent market share in Cambodia in the next five years while generating a return on equity of 25 per cent.

Lonpac has consecutively made underwriting profits from the first year in Cambodia and therefore sees a lot of potential in the kingdom.

In 2010, Lonpac's regional business in Cambodia contributed a net profit share of RM743,000.

Domestic operations contributed 98.9 per cent of the group's profit before tax last year.

LPI Capital and Public Bank Bhd (PBB) have a common shareholder in Tan Sri Teh Hong Piow, who is also chairman of PBB and non-executive chairman of LPI Capital.

Lonpac operations in Cambodia is via Campubank Lonpac Insurance Plc, a joint venture company with PBB.

Lonpac is planning to open another branch in Siem Reap this year when business volume is big enough and aims to tap into PBB's customer base.

PBB unit Cambodian Public Bank plc has carried out commercial banking business in Cambodia since May 1992 and currently has 20 branches strategically located in the country.

For its Singapore branch, he said its business portfolio had been restructured to underwrite more personal lines businesses from the volatile motor insurance previously.

The move is expected to help the Singapore unit to break even and show a small underwriting profit.

Although the Cambodia and Singapore units are still not a significant contributors, Tee expects both ventures to contribute 20 per cent to the group in five years. - By Rupinder Singh

Friday, 25 February 2011

'Expensive' shares: Do not look at how high the share price is. It is the valuation that counts.

Quick Comment: 'Expensive' shares

Some time ago, I had a conversation with my ASX remisier based in Australia and I think some of his comments are worth sharing.

*Me refers to myself when I was speaking to him.
*Investssmart is also myself but from my point of view now.

Me: Good shares in Malaysia are expensive.
Remisier: What do you mean by expensive? When you say expensive, do you mean in absolute terms or in terms of valuation? When I say it is expensive, it normally means overvalued or fully valued. Some companies can trade at $30 but we still call them cheap.
Investssmart: This is very true. The word expensive should be used more carefully when talking about shares. The absolute value does not really count. A Mercedes for $100k is 'cheaper' than a Waja for $60k. It is the value that counts.

Me: Malaysians' perception is that the higher the share price is, the more it can drop.
Remisier: That happens all the time. It is important to remember that we should look at the movements in terms of percentage. If a $50 company can drop to $5, a $5 company can drop to 5c as well. The important thing is to fix the absolute amount you invest. Purchasing 100 shares in a $50 company is the same as purchasing 1000 shares in a $5 company. If both rise by 10%, you will still earn the same amount of $500 no matter which company you invest it. 
Investssmart: We should not be put off by the share price. It is the valuation that we should worry about. The chances of IRIS to drop from 90c to 20c is higher than the chances of BKAWAN dropping from $7.80 to $2. But somehow, if you give investors just these two choices, many would rather invest in IRIS because they think it is 'cheaper'!

Remisier: Do you remember me recommending you Rio Tinto ($30), BHP ($15), Woodside ($20) and Cochlear ($25)? You did not purchase any either! Perhaps, this changed your view on 'expensive' stocks!
Investssmart: These four stocks have skyrocketed since his recommendation. They are now about $75, $30, $45 and $50 respectively. Never say that upside of highly priced shares are limited. There is no such thing. Upside of overvalued/expensive shares is limited but upside of highly priced shares is not. Although I did not purchase these shares, it was not because I was scared of the high prices. It was mainly because I did not have the strong confidence in the commodity bull and sadly, I was proven to be wrong. Could have made tonnes more from the ASX. Nevertheless, in a bull market, almost everything on the ASX rose.

Me: I did not buy those few but I still bought some highly priced ones. What would I be trading if I don't buy any highly priced shares? I don't remember you ever recommending me any penny stocks!
Remisier: Good stocks are normally highly priced because the demand for good stocks is very strong. Lowly priced shares are normally those that are speculative or not performing. 

Investssmart: It is strange but true to a certain extent. Of course, it does not apply to all company shares.

Strange but could be true: I don't think it is a coincidence that most of the true blue chips throughout the world are trading at high prices. Most of these blue chips have been there for ages. It had to start off somewhere as a smaller company and it takes time to reach where it is today. If the company was trading at $1 ten years ago, it will probably trade at $10 today to be considered a top performer. Otherwise, it would not be considered a blue chip.

Fundamental based investors always look at companies that have excellent track records and therefore, end up investing in highly priced shares. That is because it is very rare that we can get such companies at low prices as share prices should have risen as companies perform well over the years. I doubt fundamental based investors would be interested in companies that trade at low prices over the last few years because that means that they probably do not have a good track record. Of course, this does not apply to all shares but I believe that it is true to a certain extent.

Conclusion: Do not look at how high the share price is. It is the valuation that counts.

Malaysians must be critical and analytical in their Political thinking. Which Party is more Progressive?

Guan Eng to Gerakan : Don't assume Penangites are stupid

Thursday, 24 February 2011

Choppy waters still for Maybulk

Choppy waters still for Maybulk

Written by Joy Lee
Thursday, 24 February 2011 12:20

KUALA LUMPUR: Grey clouds continue to loom over the prospects of the Baltic Dry Index and companies related to the carriage of dry bulk goods such as Malaysian Bulk Carriers Bhd (Maybulk).

“To be very frank, I think it [the BDI] is going to remain weak going forward. Over the last few months, due to the flooding problems, the market has picked up. But for how long or if it is going to pick up further, we are not sure,” Maybulk’s executive chairman Teo Joo Kim said at a media briefing yesterday.

The BDI, which tracks various drybulk rates over routes on a time charter and voyage basis, peaked at 11,793 points in May 2008 but collapsed shortly after to as low as 663 points in December due to the global financial crisis. The index averaged at 2,758 points in 2010, a 5% improvement from the average of 2,617 points in 2009.

The index has been on a downtrend but picked up slightly at the start of February this year. Nonetheless, industry observers have not been optimistic of its prospects.

Chief executive officer Kuok Khoon Kuan said the BDI has been largely dragged down by the Capesize segment, referring to vessels which are too big to ply the Panama and Suez Canals and have to circle the Cape of Good Hope in Africa and Cape Horn in Chile, South America.

Kuok added that the tankers market is expected to remain weak, which has already affected Maybulk’s earnings.

For the fourth quarter ended Dec 31, Maybulk posted net profit of RM67.7 million, a 23% decrease year-on-year from RM88.45 million in the previous corresponding quarter. Revenue, however, rose 2.6% to RM84.73 million from RM82.61 million.

For the full year, net profit slipped 2% to RM238.37 million from RM243.8 million in FY09 due to weak tanker earnings and lower contribution from associate, PACC Offshore Services Holdings Pte Ltd (POSH) which declined by 72% to RM18.2 million from RM63.9 million in the previous year due to reduced activities in the oil and gas sector and oversupply of vessels in the service sector.

Overcapacity remains a concern for the industry, Kuok said. Additionally, Kuok said the hike in oil prices could derail economic recovery which spells a bleak outlook for the industry.

“In the past two years, the industry has been very concerned about oversupply. But the Lehman Brothers incident brought about a fair bit of cancellation and slippage. Therefore the huge worry of overcapacity did not happen,” Kuok said.

However, the group noted that there were a lot of new ship yards in China and South Korea which were desperate for orders and this may lead to competitive pricing and more new orders.

Maybulk is expecting two new handysize vessels and four long-term charter vessels to join its fleet from now till 2013. Currently, the group has 14 vessels comprising 11 bulk carriers and three tankers.

Teo noted that quite a number of its medium- and long-term charter contracts, which were carried forward at good rates, were coming to an end and these contracts could be renewed at lower rates.

“If the market doesn’t improve, then [Maybulk may see lower contribution from its bulk revenue this year compared to last year],” he said.

But he expects the O&G sector to pick up after a very weak showing in 2010.

Other than its shipping arm, Maybulk has 21.23% equity interest in Singapore based PACC Offshore Services Holding Group.

Maybulk has proposed a dividend of 10 sen for FY10 which is lower than the 15 sen paid for FY09. The company’s stock closed at RM2.76, slipping two sen.

This article appeared in The Edge Financial Daily, February 24, 2011.

Coastal Contracts 4Q net profit marginally stronger

Coastal Contracts 4Q net profit marginally stronger

Written by Financial Daily
Thursday, 24 February 2011 11:57

KUALA LUMPUR: Coastal Contracts Bhd’s net profit for 4QFY10 ended Dec 31 rose 3% to RM55.66 million from RM54.03 million a year ago, underpinned mainly by the delivery of higher end vessels.

In a filing with Bursa Malaysia yesterday, the group said revenue climbed 35% to RM203.4 million from RM150.9 million previously, while posting basic earnings per share of 15.36 sen versus 14.97 sen for the previous corresponding period. No interim dividend was declared for 4Q. Costal’s net assets per share stood at RM1.66.

For FY10 ended Dec 31, the group’s net profit surged 24% to RM200.87 million from RM162.44 million in FY09 on the back of improved revenue of RM675.25 million versus RM466.05 million in FY09.

On its prospects, Coastal expects a “reasonably satisfactory” financial performance for 2011 backed by the strong revenue visibility of the shipbuilding division’s vessel sales order book.

Shares in Coastal yesterday added 11 sen to close at RM2.71 with turnover of 706,100 units.

This article appeared in The Edge Financial Daily, February 24, 2011.

PetGas 3Q net profit up 50.4% to RM400m on higher gas processing revenue

PetGas 3Q net profit up 50.4% to RM400m on higher gas processing revenue
Written by Surin Murugiah of
Tuesday, 22 February 2011 19:30

KUALA LUMPUR: PETRONAS GAS BHD [] (PetGas) net profit increased 50.4% to RM400.74 million for the third quarter ended Dec 31, 2010 from RM266.47 million a year ago driven by higher gas processing and gas transportation revenue.

It said on Tuesday, Feb 22 that revenue rose 10% to RM892.69 million from RM810.89 million. Earnings per share were 20.25 sen while net assets per share was RM4.14.

For the nine months ended Dec 31, PetGas’s net profit rose 58.2% to RM1.17 billion from RM739.5 million a year ago while its revenue increased by 8.67% to RM2.63 billion from RM2.42 billion.

Commenting on its prospects, PetGas said revenue from the new fee structure under the gas processing and transmission agreement (GPTA) hinged on the volume of the gas processed at the gas processing plants as well as volume of gas delivered directly into the pipeline network.

“The performance based structure will continue to provide PetGas with additional earnings potential which is dependent on the level of production of by-products and their prices,” it said.

As internal gas consumption is provided by Petronas, PetGas’s exposure to fuel gas price fluctuation is eliminated, it said.

“The revised terms under the GPTA do not introduce new operating risks to PGB; it better defines the obligations of the parties to the GPTA.

“Prospects for the utilities business will depend on the pace of economic recovery. Any variation in gas price will be reflected in the pricing to customers,” it said.

Parkson 2Q net profit up 16.8% to RM93.8m, to speed up expansion

Parkson 2Q net profit up 16.8% to RM93.8m, to speed up expansion
Written by Surin Murugiah of
Tuesday, 22 February 2011 20:47

KUALA LUMPUR: PARKSON HOLDINGS BHD [], which reported RM93.8 million in earnings in the second quarter, plans to accelerate its expansion plan in the countries which operates and targets to add on average 20% new operating area to its portfolio.

It said on Tuesday, Feb 22 the 2Q earnings in the quarter ended Dec 31, 2010 was a 16.8% increase from RM80.31 million a year ago, driven by year end festivities and the holiday season.

Parkson, which operates in Malaysia, China and Vietnam, said revenue rose 6.7% to RM756.38 million from RM709.32 million a year ago. Earnings per share were 8.67 sen while net assets per share was RM1.89.

Commenting on its prospects, Parkson said its retail operations were expected to continue to record satisfactory results in the next quarter in view of the expected higher spending during the Chinese New Year festivities.

For the six months ended Dec 31, Parkson said gross sales proceeds rose 7.9% to RM4.554 billion from a year ago backed by improved same store sales growth in all three countries (Malaysia 10%, China 11% & Vietnam 23%).

Operating profit increased by 9.0% to RM410.8 million and net profit attributable to the Group improved by 17.2% to RM170.0 million. Basic earnings per share were RM0.16, which grew by 11.9% over the same period of last year.

“As a result of the appreciation of ringgit against Chinese renminbi and Vietnamese dong, lower operating results were consolidated into the group,” it said.

Parkson said excluding the impact of the currency translation, on a comparable basis, the group's gross sales proceeds increased by 15.7% to RM4.884 billion as compared to the preceding year’s corresponding period.

Accordingly, on comparable basis, operating profit increased by 17.4% to RM442.6 million and net profit attributable to the group increased by 25.4% to RM181.8 million.

“In line with the improving macro economic outlook, the group believes domestic consumption will underpin the economic growth in all the countries it operates in.

“On the back of such expectations, the group is accelerating its expansion plan and is targeting to add on average 20% new operating area to its portfolio,” it added.

Parkson said it would focus on improving its market share in existing markets or entering into nearby markets by leveraging on the strength of its flagship store in cities or markets in which the group has established a strong presence with strong brand equity.

It added that attention would also be given to relatively affluent cities or new markets in order to further expand the group’s network and brand image.

Kossan 4Q net profit up 21.4pct to RM29.45m on better product mix, margin

Kossan 4Q net profit up 21.4pct to RM29.45m on better product mix, margin
Written by Surin Murugiah of
Wednesday, 23 February 2011 20:51

KUALA LUMPUR: KOSSAN RUBBER INDUSTRIES BHD [] net profit for the fourth quarter ended Dec 31, 2010 rose 21.4% to RM29.45 million from RM24.25 million a year ago, driven by the expansion in the company’s gloves division with better product mix and margin.

It said on Wednesday, Feb 23 revenue rose 11% to RM252.97 million from RM227.75 million. Earnings per share were 9.18 sen while net assets per share was RM1.40.

For the financial year ended Dec 31, 2010, Kossan’s net profit recorded an increase of 76.1% to RM118.59 million from RM67.33 million a year ago. Revenue rose 24.6% to RM1.05 billion from RM842.14 million.

Kossan said the results for 2010 were within expectations. “For the year, demand for gloves remains good and management is cautiously optimistic of consistent performance in the financial year of 2011,” it said.

HLFG 4Q earnings surge 437pct to RM787m, also aided by one-off gains

HLFG 4Q earnings surge 437pct to RM787m, also aided by one-off gains
Written by Joseph Chin of
Wednesday, 23 February 2011 21:38

KUALA LUMPUR: The HONG LEONG FINANCIAL GROUP BHD [] (HLFG) posted net profit of RM787 million in the fourth quarter ended Dec 31, 2010, which was a 437% increase from the RM146.38 million a year ago.

The financial services group said on Wednesday, Feb 23 the higher profit was mainly due to a one-off gain on the transfer of HLA general business to MSIG Insurance (Malaysia) Bhd (MSIM) of RM619 million.

“Backing off this one-off gain, HLFG would still record an increase of profit by RM90.1 million (up 29.9%) mainly from better performances by all divisions,” it said.

HLFG said revenue rose 134% to RM1.3 billion from RM554.25 million while earnings per share were 76 sen compared with 14.10 sen.

It said the commercial banking division recorded pre-tax profit of RM359.7 million versus RM291.3 million a year ago, mainly due to higher net interest income and higher share of results from its equity stake in Bank of Chengdu.

As for the investment banking, the division recorded pre-tax profit of RM19.4 million compared to RM4.3 million a year ago.

Its insurance division recorded pre-tax profit of RM650.7 million compared to RM16.3 million a year ago.

HLFG said excluding the one-off gain on transfer of HLA General business to MSIM, the insurance division would still record an increase in profit of RM15.4 million, mainly due to the share of profit for the 30% associate stake in MSIM.

For FY10, net profit surged past the RM1 billion mark to RM1.112 billion, up 266% from RM303.97 million in FY09. Its revenue was RM2.073 billion compared to the RM1.116 billion in FY09.

“The higher profit was mainly due to a one-off gain on the transfer of HLA General business to MSIM of RM619 million. Backing off this one-off gain, HLFG would still record an increase of profit by RM90.1 million (up 29.9%) mainly from better performances by all divisions.

For the financial year, the pre-tax profit increased by RM913.6 million to RM1.517 billion from RM604.1 million, up RM913.6 million. The factors were due to a surplus transfer of RM175 million from HLA Life division and a RM619 million one-time gain on transfer of HLA General’s business to MSIM.

Backing off the one-time gain and one-time surplus transfer from Life, the group pre-tax profit was 19.8% higher at RM723.7 million.

The commercial banking division recorded pretax profit of RM677.1 million compared to RM580.1 million in FY09 due to higher net interest income and higher share of results from its stake in the Bank of Chengdu.

Genting Bhd 4Q earnings up 89.6pct to RM465.43m, for FY10 RM2.2b

Genting Bhd 4Q earnings up 89.6pct to RM465.43m, for FY10 RM2.2b
Written by Joseph Chin of
Wednesday, 23 February 2011 19:17

KUALA LUMPUR: GENTING BHD []’s net profit surged 89.6% to RM465.43 million in the fourth quarter ended Dec 31, 2010 from RM245.4 million a year ago.

It said on Feb 23 revenue rose 76% to RM4.086 billion from RM2.320 billion. Earnings per share were 12.57 sen compared with 6.64 sen while it proposed a final dividend of 4.5 sen compared with 4.20 sen a year ago.

It said the higher revenue was mainly from the leisure and hospitality division with the commencement of operations of Resorts World Sentosa in Singapore, during the first quarter of 2010.

“Revenue from Resorts World Genting in Malaysia increased mainly due to better luck factor in the premium players business. The revenue from the UK casino operations decreased mainly due to poor luck factor and the weaker sterling pound. However, the UK business volume has shown improvement over the previous year’s corresponding quarter,” it said.

Genting said the PLANTATION [] division benefited from higher palm products prices. However, its power division recorded lower revenue due to lower generation of electricity by the Kuala Langat and the Meizhou Wan power plants.

“The higher adjusted EBITDA from the Leisure & Hospitality Division in 4Q2010 was mainly attributable to RWS. RWG’s adjusted EBITDA increased due to higher revenue, whilst the UK casinos’ adjusted EBITDA was affected by lower revenue,” it said.

As for FY10, its earnings rose 110.9% to RM2.202 billion from RM1.044 billion while revenue surged 71% to RM15.194 billion from RM8.893 billion.

Group revenue rose by 71% to record a new high of RM15.19 billion in FY2010 (FY2009: RM8.89 billion), while group profit before tax rose by 74% to post a new high of RM4.39 billion in FY2010 (FY2009: RM2.53 billion).

Group adjusted EBITDA rose by 89% to post a new high of RM7.11 billion in FY2010 (FY2009: RM3.77 billion).

Genting M'sia raised to ‘buy’ at Maybank

Genting Malaysia Bhd, a casino and hotel operator, was raised to “buy” from “sell” at Maybank Investment Bank Bhd to reflect its resilient operations and growth prospects.

The share price estimate was increased to RM3.67 from RM2.90 , Wong Chew Hann, an analyst at Maybank, wrote in a report today. - Bloomberg

Read more: Genting M'sia raised to ‘buy’ at Maybank

DiGi hits record high

DiGi.Com Bhd, a Malaysian mobile- phone operator, rose to a record after UOB-Kay Hian Holdings Ltd recommended buying the stock because of its “high” dividends and “defensive” qualities amid the Middle East turmoil.

The stock climbed 2.6 per cent to RM26.64 at 12:06 pm local time, set to close at an all-time high, compared with the benchmark FTSE Bursa Malaysia KLCI Index’s 0.1 per cent decline. DiGi.Com is the biggest gainer on the gauge today.

“Telecommunications stocks stand out for their high dividend yields backed by stable cashflows, and our top telco pick is DiGi,” Vincent Khoo, an analyst at UOB-Kay Hian, wrote in a report today. “Stay relatively defensive until the Middle East issue boils over.”

Digi.Com, which has gained 8.5 per cent this year, has a dividend yield of 6.14 per cent, compared with the average of 3.4 per cent for the 30 companies in the benchmark index, according to data compiled by Bloomberg. DiGi.Com and PLUS Expressways Bhd. are among stocks investors should buy as Middle East violence boosts global equity risk premiums and oil prices, Khoo said.

Oil advanced for a sixth day in New York after reaching US$100 a barrel as Libya’s violent uprising cut shipments from Africa’s third-biggest producer.

The fighting in Libya, which holds Africa’s largest oil reserves, is the most violent yet seen in six weeks of popular uprisings across the Middle East and North Africa, which have already unseated longtime rulers in Tunisia and Egypt.

Commodity and energy-linked sectors such as palm oil and oil and gas companies are also “obvious beneficiaries” of higher oil prices while potential losers are AirAsia Bhd and Tenaga Nasional Bhd, Khoo said. - Bloomberg

Read more: DiGi hits record high

Hong Leong Bank Q2 net climbs 30pc

HONG Leong Bank Bhd (5819)said its second quarter net profit jump 30 per cent as it made more money in all key businesses.

Net profit for the quarter to December 31 2010 was RM291.4 million compared with RM224.7 million in the same quarter a year ago.

In a statement yesterday, the lender said revenue also rose to RM603.9 million from RM519.4 million before.

This was aided by lending out of its Singapore branch, profit contributions from global markets, the treasury division and Islamic banking arm and loan growth in the auto, property and small and medium sized enterprises.

Group managing director and chief executive Yvonne Chia said on a pre-tax profit basis the quarter's RM360 million profit marks the strongest quarter in the past five financial years.

"We are satisfied that the underlying operations are sound to strongly support the growth opportunities and the bank's track record of sustainably creating shareholder value remains firm, with return on average shareholder funds at 16.4 per cent and annualised earnings per share at 75.5 sen".

The bank has a loan to deposit ratio of 68 per cent, which means it has room to continue growing its loans.

Chia remains optimistic of prospects due to the rebound in economic activities.

For the first six months to December 2010, the lending portfolio for the purchase of residential properties grew 16 per cent while for the purchase of non-residential properties saw an expansion of 15 per cent.

Hong Leong Islamic Bank Bhd, the group's wholly-owned subsidiary, contributed 7 per cent of the Group's pre-tax profits in the first half of the financial year.

Profits from the group's 20 per cent shareholding in Bank of Chengdu Co Ltd. grew 41 per cent year-on-year to RM81 million for the six-month period.

Read more: Hong Leong Bank Q2 net climbs 30pc

Wilmar results miss forecasts

SINGAPORE: Wilmar International, the world's largest palm oil plantation firm by market value, reported a 28 per cent decline in quarterly earnings on losses from it oilseeds and grains units, missing forecasts and knocking its shares down 5 per cent.

Wilmar, which earns more than half of its revenue from China, said it is optimistic about the outlook for 2011, with commodity prices expected to remain firm. Still, analysts say the company faces huge pressure on its margins from rising food prices that have pushed up its feed stock costs, while price caps in China are preventing it from passing on increases to customers.

Wilmar shares fell as much as 5 percent to S$5.14 (S$1 = RM2.39), its lowest since mid-2009. Shares of Wilmar were 4.4 per cent lower at S$5.17 at 0730 GMT. They have lost about 8 per cent since the start of the year.

"The numbers are significantly below consensus and our forecasts. The sole factor to that is two consecutive quarterly losses in their oilseeds and grains division," said a Singapore-based analyst, who declined to be identified because he is not authorised to speak to the media.

"The way the company blamed this on weak margins and inopportune buying is kind of a euphemism for 'we got it wrong'."

Wilmar's palm oil plantations in Indonesia and Malaysia supply less than 10 per cent of the demand of its refineries, while logistical and regulatory challenges prevent the company from expanding plantation area.

Wilmar, which has a market value of US$27 billion (US$1 = RM3.05), booked an October-December net profit of US$318.6 million, down from US$442 million a year ago, missing analysts' forecasts of US$378 million.

The company's oilseeds and grains business reported a pre-tax loss of US$173.2 million in the fourth quarter, despite a 15.9 per cent increase in revenue to US$3 billion, and 4.2 per cent increase in volume.

Wilmar said in the statement that the performance of the oilseeds and grains business reflected "very poor crush margins from excessive imports of beans by the industry and the group's less timely purchases of raw materials."

Its consumer products division registered a 33.4 per cent decline in the fourth quarter to US$37.5 million, also on weaker margins due to rising prices of edible oils feedstock, despite a 29.3 per cent rise in revenue.

"The key disappointment came from the larger losses in soyabean crushing despite earlier management guidance that the third quarter would be the worst quarter for this division," brokerage house UOB Kay Hian said in a note to clients.

Wilmar's chairman and chief executive Kuok Khoon Hong said in a statement that the group was optimistic about 2011 despite the weaker performance. - Reuters

Read more: Wilmar results miss forecasts

Buy ‘defensive’ Bursa stocks: UOB Kay Hian

Investors should buy “defensive” stocks with high dividend yields such as Malaysia’s DiGi.Com Bhd and PLUS Expressways Bhd to ride out the Middle East turmoil, according to UOB Kay Hian Holdings Ltd.

Commodity and energy-linked sectors such as palm oil and oil and gas companies are also “obvious beneficiaries” of higher crude oil prices while potential losers are AirAsia Bhd and Tenaga Nasional Bhd, Vincent Khoo, an analyst at UOB Kay Hian, wrote in a report today. - Bloomberg

Read more: Buy ‘defensive’ Bursa stocks: UOB Kay Hian

LPI Capital targets 15pct growth in gross premiums in FY11

LPI Capital targets 15pct growth in gross premiums in FY11
Written by Chong Jin Hun at
Thursday, 24 February 2011 14:03

KUALA LUMPUR: Insurer LPI CAPITAL BHD [] is targeting a 15% growth in gross premiums in the financial year ending Dec 31, 2011.

Its chief executive officer Tee Choon Yeow said on Thursday, Feb 24, the growth would be boosted by new businesses from strategic partners which are also global insurers.

He said LPI was also expanding its agency force with three planned branch offices in Peninsular Malaysia. It has 16 branches now.

“Net profit growth for FY11 should be more than 15%, he told reporters after its AGM here. In FY10, LPI raked in RM755.93 million in gross premiums.

Philip Fisher: Quality first, Price second

Fisher formulated a clear and sensible investing strategy (which I'll get to in a second), wrote one of the best investment books of all time, Common Stocks and Uncommon Profits, and made a good deal of money for himself and his clients.

His son wrote that Phil's best advice was 
  • to "always think long term," 
  • to "buy what you understand," and 
  • to own "not too many stocks." 

Charles Munger, who is Buffett's partner, praised Fisher at the 1993 annual meeting of their company, Berkshire Hathaway Inc. (BRK/A): "Phil Fisher believed in concentrating in about 10 good investments and was happy with a limited number.  That is very much in our playbook. And he believed in knowing a lot about the things he did invest in. And that's in our playbook, too. And the reason why it's in our playbook is that to some extent, we learned it from him."

In addition to the warning against over-diversification — or what Peter Lynch, the great Fidelity Magellan fund manager, calls "de-worse-ification" — the book makes three important points:

(1)  First, don't worry too much about price.  (Quality first, Price second)
  • "Even in these earlier times [he's talking here about 1913], finding the really outstanding companies and staying with them through all the fluctuations of a gyrating market proved far more profitable to far more people than did the more colorful practice of trying to buy them cheap and sell them dear."
  • In fretting about whether a stock is cheap or expensive, many investors miss out on owning great companies. My own rule is: quality first, price second.

(2)  Second, Fisher says that investors must ask, "Does the company have a management of unquestionable integrity?" 

(3)  Finally, Fisher offered the best advice ever on selling stocks. "It is only occasionally," he wrote, "that there is any reason for selling at all."

Yes, but what are those occasions? They come down to this: Sell if a company has deteriorated in some important way. And I don't mean price! 

Fisher's view, instead, is to look to the business — the company itself, not the stock. 

"When companies deteriorate, they usually do so for one of two reasons
  • Either there has been a deterioration of management, or 
  • the company no longer has the prospect of increasing the markets for its product in the way it formerly did."
A stock-price decline can be a key signal: "Pay attention! Something may be wrong!" But the decline alone would not prompt me to sell. Nor would a rise in price. 

Time to sell? If you did, you missed another doubling.

"How long should you hold a stock? As long as the good things that attracted you to the company are still there."

Tuesday, 22 February 2011

Technical Analysis: Five Chart Patterns You Need to Know

A guide for the practical investor

So you’re a believer.
You believe there are profits to be made in stocks. You believe you don’t have to pay a high-profile Wall Street banker to make money. You believe the average Joe can earn a healthy fortune using the right system. And you are dead-set on figuring that system out.We agree with you. We believe that with the right tools, anyone can make consistent money in stocks. 

And we are going to give you those tools.

A Simple Toolkit for Reliable Returns
In this simple-to-follow, eight-page guide, ChartAdvisor introduces you to five of the most powerful, profitable patterns in stocks.
These stock patterns pave the way 10%, 15%, even 20% gains for each winning trade. True, not the 2000% some people are touting. But it’s darn good money, made using an established strategy, and attainable at relatively low risk. It’s realistic money. And you don’t have to trust your hard-earned cash to some broker’s favorite fad.
In the next few pages, you’ll learn all the skills you need to recognize proven money-making stock patterns, and you’ll get to see these patterns in action.
"I've used a variety of ... systems, and lost 25% of my portfolio over a 2-3 year period crazily trading hundreds of stocks. When I began using ChartAdvisor and sticking to the rules it made all the difference. The stress of watching stocks is gone, I can do my job without constantly worrying, and I've made a 26% return on my portfolio just in the last three months on just a few trades!"

~ B. Hiebert, Canada
We’ll also introduce you to our ChartAdvisor system – Three Simple Steps to Stock Profits. Whether you decide to continue with ChartAdvisor or not, after reading this guide, you’ll …
Discover How To:
1. Identify profitable stock patterns
2. Minimize your risk
3. Maximize your return in up and down markets
Make money on the stock market
You’ll learn how to make big money on stocks using a technical analysis toolkit that has been wielded successfully for hundreds of years. That’s no exaggeration.
That makes these patterns some of the most time-tested strategies in finance. You can feel secure that you are trusting your investments to a highly refined system – not a new craze or an analyst’s hunch.
There are hundreds of patterns in stock charts that traders can look for, but atChartAdvisor, we focus only on the most trusted.


Profitable Pattern Number One
The Symmetrical Triangle: A Reliable Workhorse
You’ll recognize the symmetrical triangle pattern when you see a stock’s price vacillating up and down and converging towards a single point. Its back and forth oscillations will become smaller and smaller until the stock reaches a critical price, breaks out of the pattern, and moves drastically up or down.
The symmetrical triangle pattern is formed when investors are unsure of a stock’s value. Once the pattern is broken, investors jump on the bandwagon, shooting the stock price north or south.
Symmetrical Triangle Pattern
To form your symmetrical triangle pattern, draw two converging trendlines that bound the high and low prices. Your trendlines should form (you guessed it) a symmetrical triangle, lying on its side.

How to Profit from Symmetrical Triangles
Symmetrical triangles are very reliable. You can profit from upwards or downwards breakouts. You’ll learn more about how to earn from downtrends when we talk aboutmaximizing profits.
If you see a symmetrical triangle forming, watch it closely. The sooner you catch the breakout, the more money you stand to make.

Watch For:
• Sideways movement, a period of rest, before the breakout.
• Price of the asset traveling between two converging trendlines.
• Breakout ¾ of the way to the apex.
Set Your Target Price:
As with all patterns, knowing when to get out is as important as knowing when to get in. Your target price is the safest time to sell, even if it looks like the trend may be continuing.

For symmetrical triangles, sell your stock at a target price of:
• Entry price plus the pattern’s height for an upward breakout.
• Entry price minus the pattern’s height for a downward breakout.
ChartAdvisor Symmetrical Triangles in Action
ChartAdvisor has a long history of identifying symmetrical triangle patterns. Over the last two and one-half years, ChartAdvisor has brought to its readers over 20 symmetrical triangle patterns. That’s an average of one every month and a half.
Our readers earned an amazing 40% profit on our Nortel Networks Inc (NT) pick. Those who followed our call on Rochester Medical Corp (ROCM) in September of 2004 earned 15% in 33 days. And in October of 2004, our members earn 11% in 19 days when ChartAdvisor noticed Pan American Silver Corp (PAAS).
Our members earned 11% in 19 days on the PAAS symmetrical triangle pattern.
If you’re not sure you can recognize a symmetrical triangle on your own, be sure to daily for out Charts of the Day. 


Profitable Pattern Number Two
Ascending and Descending Triangles: The Traditional Bull and Bear
When you notice a stock has a series of increasing troughs and the price is unable to break through a price barrier, chances are you are witnessing the birth of an ascending triangle pattern.
Ascending Triangle Pattern
Confirm your ascending triangle pattern by drawing a horizontal line tracing the upper price barrier and a diagonal line tracing the series of ascending troughs.
The descending triangle is the bearish counterpart to the ascending triangle.
Descending Triangle Pattern
Confirm your descending triangle by drawing a horizontal line tracing the lower price barrier and a diagonal line tracing the series of descending troughs.
The ascending and descending patterns indicate a stock is increasing or decreasing in demand. The stock meets a level of support or resistance (the horizontal trendline) several times before breaking out and continuing in the direction of the developing up or down pattern.
How to Profit from Ascending and Descending Triangles
Ascending and descending triangles are short-term investor favorites, because the trends allow short-term traders to earn from the same sharp price increase that long-term investors have been waiting for. Rather than holding on to a stock for months or years before you finally see a big payday, you can buy and hold for only a period of days and reap in the same monster returns as the long-time stock owners.
As with many of our favorite patterns, when you learn to identify ascending and descending triangles, you can profit from upwards or downwards breakouts. That way, you’ll earn a healthy profit regardless of where the market is going.
Watch For:
• An ascending or descending pattern forming over three to four weeks.
Set Your Target Price:
For ascending and descending triangles, sell your stock at a target price of:
• Entry price plus the pattern’s height for an upward breakout.
• Entry price minus the pattern’s height for a downward breakout.
ChartAdvisor Ascending and Descending Triangles in Action
Ascending and descending triangles are some of our most popular patterns, because their features are so clear and the breakouts are almost always fast and furious.
Flanders Corp (FLDR) earned our readers 28% in 18 days. Dominos Pizza (DPZ) jumped 12% in 20 days after we pinpointed the breakout point on June 13, 2005.
Another of our winning picks in 2005, Dril-Quip Inc (DRQ) jumped 12% in just 6 days. On Boyd Gaming (BYD), investors following our pick earned a whopping 29% in 35 days.

Our readers earned 29% in 35 days on the BYD ascending triangle pattern.
As a ChartAdvisor regular you would have reaped incredible profits on the 60 ascending and descending triangle picks we’ve made since our program’s beginning.
We features an average of two of these cash cows per month, making them one of the most prevalent and predictable patterns in your toolbox.


Profitable Pattern Number Three
Head and Shoulders: A ChartAdvisor Staple
The head and shoulders pattern is a prevailing pattern among short sellers, investors who profit from downtrends. After three peaks, the stock plummets, offering a textbook, high-return opportunity to traders who catch the trend early.
Head and Shoulders Pattern
Head and shoulder patterns are characterized by a large peak bordered on either side by two smaller peaks. Draw one trendline, called the neckline, connecting the bottom of the two troughs.

The first trough is a signal that buying demand is starting to weaken. Investors who believe the stock is undervalued respond with a buying frenzy, followed by a flood of selling when traders fear the stock has run too high. This decline is followed by another buying streak which fizzles out early. Finally, the stock declines to its true worth below the original price.
How to Profit from the Head and Shoulders Pattern
• Short sell as soon as the price moves below the neckline after the descent from the right shoulder.
Set Your Target Price:
For the head and shoulders pattern, buy shares at a target price of:
• Entry price minus the pattern’s height (distance from the top of the head to the neckline).
ChartAdvisor Head and Shoulders Pattern in Action
Profiting from a downtrend can seem counterintuitive at first, but ChartAdvisor.comreaders soon learn the benefits of being able to profit in up OR down markets.

This head and shoulders pattern on PAWC shot up an astonishing 27% in just 33 days.


Profitable Patterns Number Four and Five
Triple and Double Bottoms and Tops: Reversals upon reversals
When you see a W or M pattern forming, you may have just discovered a money-makingdouble bottom or double top pattern. These patterns are common reversal patterns used to suggest the current stock trend may be likely to shift.
But don’t panic if your double bottom or double top patterns do not develop as you had originally thought. You haven’t lost your chance for cash. If your W or M pattern reverses for a fourth time, you could now be working with the profitable triple bottom or triple top.
Double Bottom Pattern
Double Bottom Pattern
A small peak is surrounded by two equal troughs.

Purchase When:

• The price exceeds the middle-peak price.
Watch For:
• A price increase of 10% to 20% from the first trough to the middle peak.
• Two equal lows, not to differ by more than 3% or 4%.
Set Your Target Price:
For the double bottom pattern, sell your stock at a target price of:
• Entry price plus the pattern’s height (distance from the peak to the bottom of the lowest trough).
Double Top Pattern
Double Top Pattern
A small trough is surrounded by two equal peaks.

Short Sell When:

• The price drops below the middle-trough price.
Watch For:
• A price decrease of 10% to 20% from the first peak to the middle trough.
• Two equal highs, not to differ by more than 3% or 4%.
Set Your Target Price:
For the double top pattern, buy shares at a target price of:
• Entry price minus the pattern’s height (distance from the trough to the top of the highest peak).
Triple Bottom Pattern
Triple Bottom Pattern
Three equal troughs amid a series of peaks.

Purchase When:
• The price exceeds the resistance established by the prior peaks.
Watch For:
• A series of three identical troughs at the end of a prolonged downtrend.
Set Your Target Price:
For triple bottom patterns, sell your stock at a target price of:
• Entry price plus the pattern’s height (distance from the resistance to the bottom of the lowest trough).
Triple Top Pattern
Triple Top Pattern
Three equal peaks amid a series of troughs.
Purchase When:
• The price falls below the support that formed from the prior troughs.
Watch For:
• A series of three peaks at relatively the same level.
Set Your Target Price:
For triple top patterns, buy shares at a target price of:
• Entry price minus the pattern’s height (distance from the support to the top of the highest peak).

Now You Know…
The five most profitable stock patterns:
• symmetrical triangle
• ascending and descending triangles
• head and shoulders
• double top and double bottom
• triple top and triple bottom
You’re halfway through your ChartAdvisor toolbox. But you still need a couple more nuts and bolts to ensure high-dollar profits in the market. Before you’re ready to invest, you’ll want to learn how best to cut your losses and maximize your returns.


How to Minimize Your Risk

No investment advisor likes to admit it, but no stock picking system is perfect. Sometimes, the stocks we think will explode, don’t. Sometimes, the stocks we feature lose money.
There may not be a foolproof system to predicting the stock market, but we do have afoolproof system for managing risk. ChartAdvisor follows one of the safest risk reduction systems available.
Using these three simple steps, you can reduce the risk in your stock picking plan:
Three Ways to Take Risk Out of the Stock Market
1. Screen Your Picks. This might seem obvious, but patterns that look like they are developing into predictable trends do not always follow through. After combing over thousands of stock charts a day, ChartAdvisorwill often not fetures a single stock.
2. Get In. Get Out. ChartAdvisor preaches setting realistic target exit prices for all stocks. We lock in high returns while the stock is high, and we get out before the market has a chance to change its mind.
3. Set Tight Stop Losses. This step is absolutely critical to minimizing your risk in the stock market. If a sure-fire winner turns out to be a fizzled-out dud, your system needs to have a built-in, abandon-ship trigger. That is, you need to know when to cut your losses and move on to brighter prospects.
ChartAdvisor sets its stop-loss trigger around 3%. So if a trade starts to go sour, you will almost never lose more than 3% of your investment.
“I am glad I took a second look at ChartAdvisor. I keyed in your data from the 2nd of Feb 04 into a spread sheet with 20% of capital allocated to each symbol and came up with the 38% annualized return which is better than a poke-in-the-eye-with-a-sharp-stick, considering "the market" has been a sideways affair since the starting date.
What I must mention is how inspired and relaxed I am after an in-depth study of your real trading account making that amount of return... I can more fully appreciate the much-lectured "cut your losses short now", seeing just how early it pays to get out when the trade goes against you, rather than the "give-it-room" systems I have tried."
-P. Cameron, New Zealand


How to Maximize Your Return
In Up or Down Markets
Remember at the beginning of this report when we said we’d show you the Three Simple Steps to Stock Profits?
We already learned about step one: picking profitable stock patterns. We’ve also covered step two: minimizing your risk. Now we’ve come to the final step that makes theChartAdvior system so unique: how to profit from stocks, even when the stock goes down.
It’s a common misconception that traders can only make money when the price of a stock rises.
Investors can make money anytime they can predict a stock’s future movement – up or down.
It’s time to learn about short selling.
Short selling is the secret to making cash in a down market. Here’s how it works:
1. Identify a stock pattern that suggests a stock is headed down.
Example: The Cleveland Cliffs descending triangle pattern in April of 2005 was perfect for short selling.
2. Borrow shares of the soon-to-decline stock from your brokerage.
Example: Let’s say, right before the Cleveland Cliffs pattern (above) breaks out and moves downwards, you borrow 100 shares of the stock.
3. Immediately sell these borrowed shares.
Example: You immediately sell these borrowed shares of Cleveland Cliffs at the price just below the support line: $70 per share, 100 shares = $7,000. You are now sitting on $7,000. But, of course, you still owe the brokerage 100 shares, which you don’t currently have anymore.
4. Wait for the stock to drop to your target price.
Example: You wait for the stock to reach the target price, which in this example, is $63 per share.
5. Buy the shares at the target price.
Example: You use the $7,000 you made earlier to purchase 100 shares at $63 per share. That costs you $6,300 dollars and leaves you with an extra $700 in your account.
6. You return the shares to your brokerage.
Example: Return the 100 shares of Cleveland Cliffs to your brokerage.
7. Enjoy your profits.
Example: You earned $700, a 10% profit on $7,000. And even better, you made $700 when the price of CLF declined and all other investors were losing money!


Time to Get Started!
You’re ready. You know everything you need to make big money on stocks, and you can put all of these tools to work now. Start flipping through stock charts, and see if you can identify the right patterns. Then use our easy-to-follow principles of risk management and short selling to ensure you are squeezing the most out of every one of your investment dollars.