破屋更遭连夜雨，漏船又遇打头风

"Broken house meets torrential rain, broken boat meets strong wind"

Covid19 spread, supply chain worries and politics drama are not enough, here comes the sensational crude oil price collapse in a day.

Brent oil price plunged 30% from $45 to $31 in a single day today, thanks to the price war between Saudi & Russia. 

This is the worst intraday drop since Gulf War in 1991, and it might drop further according to some "experts".

So, are we witnessing the once-every-10-years major financial recession now, despite a slight delay?

Almost all stocks traded in Malaysia fell sharply. Without a doubt oil & gas related stocks suffered the most with a drop of 20-40% in a day.

Hibiscus which is directly affected by the oil price fell 42% to 41sen. This looks like an attractive price but I think I better wait for the dust to settle first before deciding to average down.

Oil price might continue to drop but should not be depressed for too long.

My portfolio has shrunk in value significantly. Even though I sensed that market will not be good in near term, I still decided to keep those stocks and only have myself to blame.

If not because of those stocks sold last month, my loss will be much more year-to-date.

Investors with lots of cash must be very happy as this is a golden opportunity to buy shares at great discount.

Currently my cash:stock ratio is about equal, but I need to be more cautious before buying any shares.

Anyway, if you're suffering temporary loss, it's quite "normal" and don't be too depressed. History has repeatedly shown that after a bear market, bull market will follow.

My Portfolio Feb20

Summary for February 2020

Feb-20
Numbers of stocks	12
Share Sold	Frontken @ 2.35 (all)
	PPHB @ 0.88 (all)
	Latitude @ 2.73 (all)
	Inari @ 1.56 (all)
Share Bought	Geshen @ 0.43
Overall 2020
Portfolio Return Feb20	-10.40%
KLCI Return Feb20	-3.16%
Portfolio Return YTD20	-1.26%
KLCI Return YTD20	-6.68%

Stock Portfolio @ End of Feb20

Stocks	Avg	Jan20	Feb20	Div20	Feb20%	Overall%
ADVENTA	0.58	0.745	0.590	7.0	-20.8	1.7
BJAUTO	1.92	1.85	1.78	2.75	-3.8	-7.3
DAYA	0.035	0.005	0.005		0.0	-85.7
DKSH	2.500	2.550	2.750		7.8	10.0
GESHEN	0.430		0.400			-7.0
HIBISCUS	1.050	0.850	0.750		-11.8	-28.6
KRONO	0.76	0.785	0.635		-19.1	-16.4
LEONFB	0.505	0.430	0.390		-9.3	-22.8
MATRIX	1.42	1.91	1.94		1.6	36.6
NOTION	0.40	1.210	0.990		-18.2	147.5
PRLEXUS	1.15	0.715	0.710		-0.7	-38.3
SCIENTEX	2.735	9.05	9.00		-0.6	229.1

I have a list of stocks to kick out from my portfolio in Feb20. I decided to know their latest quarterly financial results first.

For some stocks, I hope to see better results so that I'll be able to dispose at higher price.

For some stocks, if the financial result does not "perform" up to expectation then I will sell.

In the end, only DKSH & Matrix posted good results. While Hibiscus & Notion didn't look too bad, the others were not quite up to expectation.

Amid the height of political turmoil & Covid19 fear, almost all stocks in my portfolio dropped as a result just like the companies are going bankrupt soon.

So I finally cleared a few stocks, but not in the way that I wanted to.

Those 4 stocks I cut in February (Frontken, PPHB, Latitude & Inari) were actually winning stocks, just that I earn less after the price dropped.

Frontken is one of the stock I wish to sell. The reason is I feel it is fully valued and has limited room to grow especially during this hard time. I was hoping for good FY19Q4 result so that I can sell at higher price. However, market didn't like the result although it's not too bad.

For PPHB, I was thinking to keep for few more days or weeks if the FY19Q4 results beat the previous quarter, and sell if it's not that good. So, it's obviously a sell for me but I didn't expect the share price to fall that much.

Inari & Latitude are a must sell to me, after holding them for so many years. Finally I manage to sell all, albeit at lower share price than initially hoped for.

For loss-making stocks such as Prolexus, LeonFB, Hibiscus & Krono, may be I should sell early but at current level, I feel that it's just too low for me to sell as I still have some faith in them.

Matrix, BAuto & DKSH have rather good dividend yield and the latter might still have room to grow. So I think they might be good to hold at this moment.

Adventa's latest result was not bad if there was no one-off items. Its hospital supply business is picking up though home dialysis business does not seem to make good progress.

Notion's operating PAT of RM5.2mil was not bad as well and I think I better hold until the bonus issue expected in April.

Scientex is the stock that I initially think I might hold for life, but now I guess no stocks are immune to be sold. 

I bought Geshen in anticipation of a turnaround in its business and earning, but it might need more time if it's affected by the virus.

Now we're going into the second week of March. Stock market fell further and the virus fear grows globally. I foresee tough months ahead and bad Q1 & Q2 financial results for most companies.

Am I pessimistic about the stock market now? Yes.

However, I'll still sell stocks even if there is no virus or political issue, as I already have a plan in place to trim my portfolio to less than 10 stocks first, with a target of maximum 5 stocks.

I still need to sell but looks like I'm a bit "stuck" now. 

Anyway, even with more cash on hands, I'll not simply buy as I feel that current issues might last longer than expected.

Notion: On Hyper Growth Phase

"Hyper Growth Phase" is according to its chairman, not me.

For its latest FY20Q1 (Oct19-Dec19), Notion achieved its highest quarterly revenue since 2012 at RM70.3mil with a net profit of RM14.2mil. 

In the next 2 trading days after the release of this financial result, its share price fell 20% from RM1.24 to RM0.99.

Those who follow Notion for a while and study its financial report carefully should be aware that for the last 2 quarters & FY2018, its financial results have been "beautified" by insurance claims and one-off item.

So it's not surprise for the share price to fall especially when it coincided with extremely bad market sentiment that day.

Without those special gains, Notion's bottom line should hover around slight profit and loss in the last few quarters.

Nevertheless, investors buy Notion's shares because of its bright-looking future, as explained by its chairman.

888next Q1 results PAT RM14.2 mil can be broken down into:

1) Insurance BIL claim RM9 mil after tax

2) Operations RM5.2 mil after tax

We still picked up relocation costs in Oct and Nov. The EMS could be better.

Project Nixon (EMS codename) we need 600k pieces of aluminium tubing for vacuum cleaners worth RM4.5 mil sales per month from June 2020 onwards. We need RM6 mil capex to build anodising line and extrusion lines.

Many other projects coming onstreamline in H2.

Project Stingray (Extrusion solutions codename) is a major expansion of the extrusion business from 200 tons per month capacity to 1000 tons capacity and billet furnace for upstream recovery of aluminium leftovers. Mainly for external customers.

We expect RM10 to 12 mil per month sales contribution from Stingray in FY2021.

We are transforming the group into an aluminium total solutions company more than precision machining or fabrication but complete integration in 3 years time.

If you are a short term term investor then you may be missing out on the longer longer term prospects.

But always caveat emptor ie do your own analysis and risk assessment.

Notion is on a hyper growth phase. But the global markets look unsteady so be careful.

From its FY20Q1 report, it shows that current quarter's BIL insurance claim is RM12.2mil before tax. So it looks like actually the claim only contributes RM9mil from RM14.2mil of after tax profit.

I think the RM5.2mil operating net profit is not bad at all at this stage. If it can perform similarly for the whole year, then it can achieve RM20mil PAT for FY2020, or EPS of 6sen.

This is supposedly still without all those "new projects" kicking in.

Another encouraging part is the 56% growth in revenue of its EMS segment which is expected to grow much further in the second half (H2) 

"As the demand of metal parts for the EMS appliances sector continue to grow rapidly over the next year, it will be the mainstay growth driver for FY2020 and even FY2021. As the group delivers in volume and quality, our EMS customer is supportive of localisation of parts and conversion of plastics to metal parts and new models development augurs well for this space."  - FY20Q1 quarterly report

Conversion of plastic to metal parts sounds interesting.

Anyway, since Notion management mentioned that H2 will be strong, I'll assume that its FY20Q2 result and even FY20Q3 will not be that spectacular. Of course Q2 will be much lower compared to Q1 without the insurance claim, but I don't expect loss unless it is significantly affected by Covid19.

At RM1, Notion's share price is not considered very low at the moment. So readers must study the risk and reward properly before investing in it.

Year 2020: Cautiously Optimistic?

February 2020 should be a forgettable month for most stock market investors.

If you're making loss so far in year 2020, you're definitely not alone. The loss might just be temporary and you might still register positive return at the end of the year. 

For me, surely I'm heavily affected. Even without calculation of the return I already knew that year to date I'm making loss.

I have a plan in place since Jan20 to trim my portfolio which has too many stocks. I already have a list of stocks in mind to clear.

However, I decided to wait until the latest quarterly report announcement in Feb20. This has proven to be a bad decision in hindsight.

Escalating concern over Covid19 worldwide, sudden political crisis and last but not least, out of expectation's CY19Q4 financial results all sent the stock price tumbling.

Is it a temporary setback with quick rebound, or will it be the beginning of a prolonged bear market?

Of course no one knows but if you ask me, I think generally year 2020 might not be a good year for stock market.

KLCI has dropped more than 20% from peak of 1,900 in mid 2018. Currently it stands at 1,482.

I'm still not sure to what extent Covid19 will affect the economy in Malaysia & worldwide. Some companies may benefit from it and vice versa. We can only get a glimpse of it in CY20Q1 financial results to be announced in May.

A lot of experts expect the Covid19 fear to subside comes May, as the weather gradually turns hot, just like SARS in 2003.

However, Covid19 seems to be highly contagious and definitely affected more people and countries. Up to today, more than 86,000 Covid19 cases have been reported in 64 countries, and we have countries like South Korea, Iran & Italy which reported exponential rise in cases recently.

In contrast SARS has affected only 29 countries with only 8096 cases reported. Fortunately, the mortality rate of Covid19 is not as high as SARS.

Anyway, we can be 100% sure that Covid19 impact will be over one day, just the matter of when. Two months later, six months later or even one year?

Airlines and tourism industries will no doubt be negatively affected. Those companies who depend a lot on China as customers or suppliers or producers might also feel the heat.

Regarding the political turmoil in Malaysia, it seems to be settled but it might not be in reality. I'm really sick of politics and won't make any comment here.

So far I have trimmed my portfolio a bit last week but not in the way I wanted to. I keep more cash now as planned. I don't know whether I'll regret that later.

I'll remind myself, fear in stock market gives opportunity.