Technical Outlook of Malaysia’s Consumer Industry

Scan of Malaysia’s Consumer Industry:

Consumer sector is in boom this year due to higher operating costs for consumer companies this year on an account of forthcoming Government policies.

Coming in with 0.93% year-on-year gain for the year ended December 2013, the consumer services industry under the FTSE EMAS Index is one of the handful of industries that ended in the positive territory last year. This covers broad view of businesses which is most affected by the Budget 2014’s policies viz. fiscal debt, shrinking current account surplus and growing debt pile.

With policies such as the implementation of goods and services tax come April 2015 as well as reduced subsidies, the consumer services industry is expected to mellow from the rising cost of living this year. 

Consumer spending is likely to experience slower growth from lower purchasing power and disposable income although selective bright spots exist. Higher tourist flows into the country in conjunction with Visit Malaysia Year 2014 is expected to mitigate the slowdown in domestic consumer spending.

While the outlook for the industry appears to have dimmed, not negative for the consumer industry in Malaysia. Looking into the Visit Malaysia Year 2014 initiative, Malaysia is targeting to attract 28 million in foreign tourist arrivals with up to 13.2 million tourist arrivals from Singapore to the country this year. This is certainly good news for the travel and leisure sector of the consumer industry. Noticing, the gaming sector pops to mind when it comes to tourism in Malaysia.

Current Volume: 659,818

Current Change: 4.650

Current Change %: 0.78

Sector Allocation Chart by Turnover

• Consumer Industry lifted the FBMKLCI Market by 30.81% followed by Trade/Service (24.83%), Finance (11.50%), Properties (10.30%), Technology (9.11%) and Industry-Production (7.83%).

ANALYSIS:

This sector has been “underweight” since long time and it moved within the range of 590.782-582.432, but now it is in good pace to boom the Malaysian Economy maintaining a sharp uptrend. 

Trading Facts for Top Gainers Comprising Consumer Industry:

TOP GAINERS	CHANGE	CHANGE%	LAST RATE	HIGH	LOW	VOLUME
MSPORTS	0.03	16.67	0.21	0.215	0.185	48,81,900
SINOTOP	0.005	9.09	0.06	0.065	0.055	24,51,100
CAB	0.07	7.91	0.955	0.975	0.88	1,11,58,600
TPC	0.03	7.79	0.415	0.43	0.38	11,06,800
MFLOUR	0.11	5.76	2.02	2.03	1.88	31,42,400
HOVID	0.02	4.49	0.465	0.465	0.44	76,01,800
BIOOSMO	0.005	3.33	0.155	0.155	0.15	20,92,100
GPHAROS	0.025	2.69	0.955	0.96	0.92	11,80,500
PELIKAN	0.03	2.52	1.22	1.23	1.17	16,26,600
EURO	0.01	1.57	0.645	0.67	0.64	41,29,900
UMW	0.18	1.54	11.88	11.9	11.7	31,12,800
TEOSENG	0.02	1.42	1.43	1.44	1.35	20,69,500
LIONFIB	0.01	0.86	1.17	1.18	1.14	9,48,000

Highlighting HOVID BHD addressing Consumer Industry

Hovid Berhad is engaged in the manufacture and sell of pharmaceutical and herbal products. The company operates through two segments, Pharmaceutical and Phytonutrient. It is involved in extracting and processing nutrients from palm oil for manufacturing and producing pharmaceutical, phytonutrient, and oleochemicals/biodiesel products. The company offers special drug delivery systems, including modified release formulations and bio-availability enhanced formulations; ethical products, such as anti-biotics, anti-diabetics, anti-hypertensives, and anti-malarial and anti-inflammatory analgesics; dietary supplements; and consumer products, as well as extracts palm tocotrienol complex, mixed carotenoid complex, and phytosterols from palm fruits. It also owns and manages a chain of concept stores selling over-the-counter health food products, consumer products, supplements, and herbal products. In addition, the company is engaged in establishing, maintaining, and operating laboratories and shops for carrying on chemical, physical, and other research and development activities in medicine, chemistry, industry, and other fields. Further, it is involved in trading and marketing pharmaceutical products, medical supplies, and health and wellness products. Hovid Berhad operates in Asia, Africa, North and South America, and the Pacific Island. The company is based in Ipoh, Malaysia.

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FUNDAMENTALS:

Comparison of Income, Balance Sheet and Key ratios on Previous Year over Year basis showing Growth of the Company.

• Company is having strong fundamentals which are constantly increasing on Y-o-Y basis.
• Operating margin increased over three fiscal years 30/06/2011 to 30/06/2013, it evaluate what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. More is the operating margin, more is the dollar per sales.
• Return on Equity Capital is important to equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on shareholder’s investments and higher the ratio better is.
• Current Ratio is ability to pay short-term obligations. The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign.
• The debt-to-capital ratio addresses the company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The lesser the debt-to-capital ratio, the lower debt that company has compared to its equity.

RECENT ANNUONCEMENTS:

As per the recent announcement, Directors of the Company of their intention to deal in the securities of Hovid during the closed period pending the announcement by Hovid of its results for the financial quarter ended 30 June 2014.

• 286,776,400 no. shares are directly held by the Chairman and Managing Director.
• 331,555 no. shares are directly held by the Executive Director.
• 1,765,830 no. shares are directly held by the Executive Director.

Interim Dividend of 0.5 cents per share under the single tier system for the financial year ending 30 June 2014.

OUTLOOK:

Hovid is looking to export to emerging markets and the Middle East, which it has yet to tap. Its export contributions may increase to 56% in the financial year (FY) 2016, should this expansion prove successful. Hovid is set for a good FY2015 ahead, given abundant opportunities in both domestic and global pharmaceutical markets. We anticipate that its net profit may grow at a CAGR of 18.5% in FY2014-2016 or RM20.7 million to RM32.7 million, on the back of growing affluence, health awareness and healthcare expenditure in the markets that it operates in.

Hovid is good for its robust revenue pipeline, strong and wide exposure to the export market, and decent return on equity of 12-13% in FY2014-2015.

OUR VIEW:

As per the Fundamentals, HOVID is good for generating profit. Technical also support the Stock as EMA 20 DAY is above its EMA 50 DAY and share prices lied above the major support 0.415.