Featured Report: OSK On Perwaja II

Posted last night: A Quick Look At Perwaja Holdings Quarterly Earnings

As mentioned in the posting, Perwaja Holdings lost much more earnings.

Year-to-date losses now stands at a whopping 141 million.

Now guess what's OSK recommendation on a company that lost so much money!

It's a buy... and not only it's a buy .... the buy target had been increased!!!!

Shocked?!

Some might argue that perhaps there is some justification in OSK's reasoning because as argued Perwaja should be boosted by increase in selling prices...

• While stunned with Perwaja’s 2Q net loss that was 50.4% deeper q-o-q, we think the counter may stay under the spotlight being the direct beneficially of various stimulus packages. The 48.3% cut in iron ore pellets price in converse to higher scrap prices that benchmark Direct Reduced Iron (DRI) selling prices, as well as an increase of billets prices prompt us to revise up our FY10 earning by 15.7%. Therefore, our 12-month target price is raised to RM2.06 from RM1.78 derived from 8x FY10 EPS. We reiterate our Trading BUY recommendation.

But.... on the other hand.... some would be deeply puzzled and quick to point out that OSK themselves are 'stunned' by the relative poor earnings performance from Perwaja!

Some would also argue that if one judges Perwaja based on earnings performance this company had been doing really poor since listing.

Here's a simple screen shot.

And here is how Perwaja doing since listing.



And if one takes the stock performance of Perwaja into consideration..

One would have clearly realised that the stock plunged to as low as 59 sen in April 2009 and the price now is 1.59!!! Now despite the increase in selling prices, given the relatively poor earnings performance + the fact the stock had already flew to the moon (from 59 sen to 1.59), what is the justification to buy now?

Buy and hope that the stock can fly some more to 2.06?????

I guess some might be thinking that perhaps it is mad money time in Malaysia!!! lol

Strange also.. the head of OSK research says the general market is "Market ripe for retracement" on the Edge Financial Daily, the other day.

• Markets overvalued, ripe for a retracement
  Even as OSK anticipates a better set of results, it maintains the view that the market has run ahead of fundamentals.
  
  In fact, across East Asia, markets had rallied to the levels last seen in late 2006 and early 2007. Given that markets are essentially valuing the economy some 12 months forward, it would appear that investors were expecting 2010 to be equivalent to 2007, which will definitely not be the case.
  
  As such, OSK believed that markets were significantly overvalued and ripe for a retracement.

Rather ironic yes?

The head of the research, who signs all daily reports, said publicly that the market has run ahead of its fundamentals. However, the researchers under him, issues out upgrades and buy calls left, right and center. Feeding the fire eh? Isn't this why the market has run way ahead of its fundamentals?

How?

Last but not least... check this out... this is how OSK increases their Target Prices!

On May 19th 2009, OSK wrote this.. (see screen shot.. Perwaja's TP was a mere 1.11 on that day! No joke! see this screen shot )

On May 27th, despite the relative shocking poor result posted by Perwaja in May 2009, OSK sneak in a buy upgrade in their steel sector report! LOL! No joke man!

• Considering that Perwaja is currently trading above our original target price, we have decided to factor in the potential earnings enhancement to our new fair value of RM1.67 and upgrade our recommendation to TRADING BUY.

( LOL! That was a nice reason to upgrade to rm1.67, eh? )

Now on July 24th, OSK did another Long steel report and they sneak in yet another price increase for Perwaja Holdings to 1.78!

Just like that.. Perwaja Holdings target price went from 1.11 to 1.78 and today OSK gave it another price increase (I wonder perhaps they are scared that 'tak cukup'! lol) to 2.06.

Which means from 19th May 2009 to 20th Aug 2009, Perwaja Holdings target price was increased from 1.11 to 2.06!

LMAO!

Nice target price upgrades or what?!

No wonder OSK is crying in the press that the market is ahead of its fundamentals and that the market is so ripe for a retracement!

So how now my dearest?

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