February 2, 2016 By Calvin Tan Smart Investment

Since the End of QE3 & The Start of Interest Rate Hike by  the US FED Liquidity has flowed back to the US from Emerging Markets. A Strong US Dollar has helped exporting Companies from Malaysia. So far so good. Most furniture, electronic, rubber gloves, plastic & furniture companies have done very well. In fact, many have already run far ahead of fundamentals. Chasing them now is detrimental to your financial well being as all the future profits have already been priced in. So buying them at such lofty prices will only give you mediocre growth at best and at worst you might even suffer a loss when the tide goes against you.

And in  the Malaysian context  the macro picture is contracting more and more by the day.

GST has sucked Rm51 Billions from the Rakyat to save  the Malaysian Economy as Petronas Oil Revenue has fallen down due to Crude Oil price crashed from US$120 to US$60.

Another Rm9 Billions will be withdrawn from circulation as Govt recalculated budget when Crude Oil crashed further from US$60 to US$30. This round the Rakyat can no longer bear the burden of further increase in GST (Consumption tax)

Petronas itself has shrunk capex by another Rm50 Billions. All Off Shore Oil & Gas Companies will suffer contraction & indirectly leading to stagnant wages or even job loss. This is another drain on the Economy.

And further levy of Rm2.5 Billions on construction and plantation workers will impact all Builders & Planters

And on the heel of Worker’s Levy is the Tax of Telcos – another Rm4.5 Billions be Drained  Off. At the adverse news all Telcos like Maxis, Digi, Celcom & Others Fell in Unison. Over Rm12 Billions Were Wiped off in Bursa in a single day as their prices instantly crashed.

Here you are. These are the figures

Rm51 Billions (GST)

Rm9 Billions (Budget Revision)

Rm50 Billions (Petronas Capex Reduction)

Rm2.5 Billions (Workers Levy)

Rm4.5 Billions (Tax on Telcos.)

Total: A Whopping Rm117 Billions Siphoned off from circulation.

Since the Macro Picture is showing a dwindling pool of liquidity All Companies in Malaysia depending on domestic sales will be impacted one way or another. The months ahead will be stressful for all Companies. The inevitable result will show up in falling prices among  most if not all of KLSE Stocks. The few bright spots are export stocks , tourism, defensive utilities, basic food and construction companies depending on Govt Largesse.

And with weakening ringgit imported goods will eat into purchasing power.

This is a very challenging time indeed. So Calvin caution all to go defensive. Buy only the most defensive laggard stocks which can withstand a financial crisis. If you are not sure. The idea of keeping it safe in Bank FD at 5% interest rate would be a lesser evil than dabbling in stocks which you are unsure of.

In View of the Ongoing Recessionary Wave I have selected TMakmur as a resilient defensive play.

TMakmur is into Cash Crop like Oil Palm  Plantations which should benefit from El Nino. Both in 1997/8 Asian Financial Crisis & again in 2007/8 Lehman Brothers’ Debacle It was Palm Oil that saved the day!

And according to NASA and the US Weather Bureau this Year’s El Nino is forecasted to be one of the worst on record. So TMakmur should make more profit from higher CPO prices. Another good asset is bauxide mining. As Company is highly responsible the mining of bauxide is done in a very proper method. The lands of Kota Sass remain in good condition after bauxide extraction.

All the houses built  from year 2012, 2013, 2014 & most of 2015 have all been “SOLD OUT”. This is a testimony to the quality of Tmakmur’s management and integrity.

Not only that. According to quarterly report Company even rear live stocks on its plantations for sale. This shows that Directors are not neglecting their jobs by playing golf or just wasting precious resources. So we think these little details assure us that our Investments in TMakmur is in good and responsible hands.

Above all we like the twice yearly dividend of 6 cents which equal to 8.5%. This is the 2nd Highest Dividend Paying Stock in all of Bursa after Tasek Cement at 9.6% dividend. TMakmur’s 8.5% dividend beats Star Publication dividend of 8% into 3rd place.

As to director selling we are not too concerned. One Lady Director linked to the palace have been buying and buying TMakmur shares up to Rm1.38 according to Bursa Filing.

After the illegal miners have been put away TMakmur will accelerate exports of even more bauxide through  proper means.

At Rm1.37 TMakmur current closing price we are getting it below insider buying price. Getting a dividend of 8.5% – far better than Bank FD. And With El Nino helping us we expect TMakmur to perform well.


Calvin wishes all our Chinese Investors “KONG XI FATT CHAI”

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