Thought of sharing this counter that I invested since last year and hopefully you will be able to enjoy the dividend or capital gains in the long run as well. Disclosure: I am holding BAuto (5248) since last year and looking forward to add positions whenever it reaches my entry target or exit positions when it reaches my target profit level. I have no business relationship with BAuto and the information below is purely my own opinions.
For those of you who are not aware, Bermaz Auto Berhad (BAuto) is involved in the distribution and retailing of Mazda vehicles, including provision of after sales service for Mazda vehicles. What drove me to put my money in this counter is because of its attractive fundamentals, good dividend and "cyclical" technicals.
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| BAuto Financials: Improved Revenue, EPS and Free Cash Flow |
Positive free cash flow, low debt/equity, improving EPS and operating margin are few key factors that I look for (first screening) when I am planning to invest in a company. In this case, BAuto met the criteria and it has also practically zero debt/equity and long term debt (balance sheet) with high free cash flow. What this meant is that BAuto will be able to support its sustainable dividend payout. Quite a few analyst provided similar coverage to BAuto's attractive dividend yield ranging from 6.5% to 9.5%; 15 to 19 cents per share. I have been enjoying the dividend :)
Auto industry is cyclical in nature and sensitive to business cycle whereby revenues generally are higher in periods of economic prosperity with expansion and lower in periods of economic downturn with contraction. If that is the case, we should see similar actions when it comes to its technicals; price actions. Attached below is the price actions which supports the cyclical technicals.
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| Daily Price Actions with Support and Resistance Levels |
As you can see, the strongest resistance is at 2.40 and support at 1.84 to 2.00 levels. My entry or add positions is always at the level between 1.84 and 2.00; provided there is no change to its fundamentals. Often; negative market sentiments will drive the price to the level between 1.84 and 2.00; that is the best time to add positions or entry for long term investment. And my target profit is at 2.40 levels.
As BAuto continues to pay dividend to its shareholders, you may be wondering what is the intrinsic value for BAuto. From a valuations perspective, I am using dividend discount model to determine its intrinsic value.
My required rate of returns for BAuto investment is 15%; assuming BAuto is paying consistent 15 cents per share dividend for year 1 and year 2 and my target profit is 2.40. So, the intrinsic value for BAuto would be 2.06.
What it meant is that whenever BAuto price is at 2.06 and below, it is a Strong Buy for me based on my required rate of returns, target profit and its dividend payout. Coincidentally, this matches with the technicals of the price actions whereby BAuto price at the levels (1.84 to 2.00) is always short lived. It will rebound strongly and serves as an opportunity for me to add positions for my long term investment.
One can use the levels shared in the chart above and risk/reward ratio to determine the entry and exit strategy if you intend to trade it for short term.
Good luck and all the best.
BAuto paid out the second interim dividend today (0.0375 cents per share) bringing it a total of 0.1515 cents per share since ex date of 12 Jan 2018 until cum to date. That's quite a decent dividend payout.
ReplyDeleteBAuto tested 2.25 yesterday. Lets see whether it will be able to break that level and head towards 2.40. Price is still trending as per the arrow in the chart above.
ReplyDeleteAll the best to everyone.
2.25 proved to be a strong resistance for BAuto. Doji star (bearish reversal) formation at 2.25. Support is currently at 2.14 based on MA50 and MA200.
ReplyDeleteAll the best to everyone.
For existing readers trading BAuto:
ReplyDelete2.25 continued to be a strong resistance while there are signs that accumulations is going on. 2.14 is still the support.
For existing readers investing BAuto:
Continue to hold BAuto for its dividend and wait for its upcoming quarter report. As automotive industry is sensitive to economy prospects, I am in the opinion that BAuto uptrend will remain at least for this quarter. I will still exit at 2.40 though lots of analysts anticipated it to go beyond 2.50.
Good luck and all the best!!!
Recent price actions of BAuto indicated that it is testing the resistance of 2.25 again. As this is a year long resistance, an increased number of attempts to break above 2.25 over the last two months is gaining momentum at the same time to overcome it. Watch for breakout above 2.25 and breaking this level will bring it to 2.40.
ReplyDeleteGood luck and all the best!!!
BAuto went up to 2.45 today and settled down at 2.31 at noon. 0.045 cents per share interim dividend announced, driven by record quarter results. Glad that it met the target exit price and congrats to those who bought :)
ReplyDeleteIf it is successful to stay above 2.40, the new support will be at 2.40. Next resistance will be at 2.65. Continue to keep this counter in your watchlist as global market conditions may trigger opportunity to re-initiate position on BAuto due to its attractive dividends.
We will stop updating the comments section on BAuto and you are always welcome to contact us at acc.alphapatterns@gmail.com if you need opinions on BAuto in future.
Good luck and all the best!!!
Thank you for asking the important question when should you reenter. If your objective is dividend, I will use the assumption below to identify the intrinsic value.
ReplyDeleteMinimum dividend per share per year = 0.15
Minimum target price of BAuto = $2.70 (please note that all the analysts upgraded BAuto TP and majority is more than $2.80)
Assuming your target rate of returns = 15%
Based on the information above, the intrinsic value for BAuto is $2.30. What it meant here is that whenever the price is at $2.30 and below, it is strong buy for dividend.
Do take note also that $2.40 is the resistance. With the latest performance and new models, there is a possibility that $2.40 will become support level. Do monitor the price actions accordingly.
Good luck and all the best!!!