SEC accuses Goldman Sachs of civil fraud

The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.

The Securities and Exchange Commission announced Friday civil fraud charges against the Wall Street powerhouse and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create -- and then bet against -- subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities are alleged to have lost more than $1 billion, the SEC noted.

The Goldman client implicated in the fraud is one of the world's largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.

Goldman Sachs shares fell more than 10 percent after the SEC announcement.

The civil lawsuit filed by the SEC in federal court in Manhattan was the government's most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession.

A Goldman Sachs spokesman didn't immediately return a call seeking comment.

The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities.

The SEC is seeking unspecified fines and restitution from Goldman Sachs and Tourre.

"The product was new and complex, but the deception and conflicts are old and simple," SEC Enforcement Director Robert Khuzami said in a statement.

"Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

In my humble opinion, I think the current rally has lasted too longer even though it is supported well by its fundamental. With Goldman Saches being charged with fraud over its handling of subprime mortgages, it would serve well as a reason to take some profit out of the stock market. It could be a long winding road for Goldman Saches and traders would be following closely this Goldman Saches case.

On Friday, General Electric (GE), Bank of America (BAC), Google, Advanced Micro Devices, Mattel and Gannett release better-than-expected quarterly financial reports but yet the market can't manage to keep its rally. Traders are profit-taking and running away.

Ok, good luck.

GOon

GE earned 21 cents a share, compared to analysts' estimates of earnings of 17 cents a share

For the recent period, the conglomerate /quotes/comstock/13*!ge/quotes/nls/ge (GE 19.89, +0.39, +2.00%) said earnings fell 32% to $1.87 billion, or 17 cents a share, as revenue fell 5% to $36.61 billion.

From continuing operations, the industrial bellwether said it earned 21 cents a share, compared to FactSet-compiled estimates of earnings of 17 cents a share on revenue of $37.3 billion.

GE, a component of the Dow Jones Industrial Average, said it may evaluate additional restructuring that will improve earnings power going forward.

"We saw encouraging economic signs, including increases in airline passenger miles and freight loadings, declines in receivables delinquencies, and growth in local advertising markets," said Chairman and CEO Jeff Immelt in a statement. He expects earnings and dividends to grow in 2011 and beyond.

GE's stock has climbed more than 66% in the last year after reaching a near 20-year low last March following the credit crisis.

In the first quarter, GE said its financial arm, GE Capital, saw its profit drop 41% to $607 million as revenue fell 10%. Immelt said he was "very encouraged" by the performance as losses and delinquencies declined.

PUBLIC BANK achieves 24% GROWTH IN PRE-TAX PROFIT

PUBLIC BANK ACHIEVES 24% GROWTH IN PRE-TAX PROFIT AND 4.4% DOMESTIC LOAN GROWTH IN FIRST QUARTER OF 2010.

Public Bank Group achieved a commendable start to 2010 with a pre-tax profit of RM923 million for the first quarter of 2010, representing a 24% growth from the corresponding period in 2009. Over the same period, the Group recorded a net profit of RM685 million, 16% higher as compared to RM589 million for the corresponding period in 2009. The Group’s domestic loan base grew strongly by 4.4% in the first quarter of 2010. With the continued pursuit of prudent credit policies and effective credit monitoring, the Group continues to sustain its strong asset quality with its gross impaired loans ratio maintained at below 1%.

The Public Bank Group's results translate into an earnings per share of 19.7 sen for the first quarter of 2010 and an annualised net return on equity of 25.3%.

Highlights of the Public Bank Group's Performance:

• Pre-tax profit of the Group grew by 24% to RM923 million in the first quarter of 2010 as compared to RM745 million in the previous corresponding quarter.

• Net profit attributable to shareholders grew by 16% to RM685 million in the current quarter as compared to RM589 million in the previous corresponding quarter.

• Annualised net return on equity for the first quarter of 2010 stood at 25.3%.

• Earnings per share for the first quarter of 2010 of 19.7 sen was 13% higher as compared to 17.4 sen in the first quarter of 2009.

• Cost-to-income ratio remains efficient at 35.7%.

• Total assets increased to RM219 billion as at the end of March 2010.

• Total loans and advances of the Group grew by RM4.8 billion or 3.5% in thefirst quarter of 2010 to reach RM142.4 billion as at the end of March 2010, driven by the strong domestic loan growth of 4.4% for the first quarter.

• The Group’s total customer deposits increased by 2.8% in the first quarter of 2010 to reach RM175.6 billion as at the end of March 2010. The Group's domestic customer deposits grew at a stronger 3.8%, against the backdrop of a contraction of the domestic industry’s customers deposit of 1.3% for the first two
months of 2010.

• The gross impaired loans ratio of the Group remained below 1% as at the end of March 2010, as compared to the banking industry's gross impaired loans ratio of 3.4% as at the end of February 2010.

• The Group's loan loss coverage of 172.3% continues to be the highest and most prudent in the Malaysian banking industry.

• The core capital ratio and risk-weighted capital ratio of the Group remain healthy at 9.6% and 13.7% respectively as at the end of March 2010.

"Barring unforeseen circumstances, the Group is expected to continue to recordsatisfactory performance for the rest of 2010", Tan Sri Dato’ Sri Dr. Teh Hong Piow (Chairman Of Public Bank)said.

There are a few public bank call warrants listed on KLSE, namely Pbbank-cj, Pbbank-cl and Pbbank-cm. Out of these 3 call warrants, Pbbank-cl is my favourite and closely followed by Pbbank-cj. Both Pbbank-cj and Pbbank-cl are in discount territory. I prefer Pbbank-cl more because of its higher gearing of 5.6. 

I did share my views on Public Bank and Pbbank-cl on my 1st April 2010 post. Since then, Pbbank-cl has jumped 26% and I expect this trade to continue provide me with more handsome profit.

 
Previous post regarding Public Bank:
http://cathoon.blogspot.com/2010/04/public-bank-on-track-to-meet-strong.html
http://cathoon.blogspot.com/2010/04/public-bank-set-to-jump.html
http://cathoon.blogspot.com/2010/04/cimb-research-reaffirms-overweight-on.html 

Public Bank on track to meet strong profit targets

OSK Research says Public Bank is on track to meet its strong profit targets and upgraded it from Neutral to Buy as the bank is set to announce its first quarter earnings on Thursday, April 15.

It said on Thursday that after an upward earnings revision, it is raising its target price for Public Bank from RM11.80 to RM13.00.

“Our new TP assumes a ROE of 26.0%, a long-term growth of 4.0% and 9.3% cost of equity. The current share price implies a relatively conservative 22% ROE vs management’s 3-year target of 30%,” it said.

OSK Research sees its performance remaining firmly on the uptrend, and largely on course to deliver 2%-3% quarter-on-quarter earnings growth, although the 1Q period is typically a weaker quarter.

The relatively strong results are likely to be underpinned by: 1) an uptrend in net interest margins from repricing of mortgages and higher HP rates, 2) quarter-on-quarter growth in wealth management fee income on the back of higher management fees from its unit trust business, 3) a 2%-3% quarter-on-quarter expansion in gross loan base, and 4) continued downtrend in loan loss provisions.

Previous post regarding Public Bank:
http://cathoon.blogspot.com/2010/04/public-bank-set-to-jump.html
http://cathoon.blogspot.com/2010/04/cimb-research-reaffirms-overweight-on.html

IJM secures Rm246.7m contracts in Sarawak

IJM Corp Bhd has secured two contracts in Sarawak valued at RM246.7 million.

It said on Wednesday, April 14 its unit IJM Construction Sdn Bhd had received two letters of acceptance of tender for the Sarawak Public Works Department.

The contracts were for two access roads to be build in Kapit, Sarawak. The first package involved earthwork, construction of three minor bridges, culverts, drains and pavement works for 20km of road for RM125.2 million.

The second package involved earthworks, rock excavation, construction of two minor bridges, culverts, drains and pavement works for 10.5km of road for RM121.5 million. Construction period for both packages is 24 months.

I still prefer IJM-WB. It is still come with a discount of around 2-3%, and gearing around 3.6. In fact, IJM-WB is one of the most discount warrant listed on KLSE. With more good news pouring in, IJM-WB should be able to maintain its upward momentum.

GOon

Good luck.

I WILL ALWAYS LOVE YOU

IJM: Buy, target price RM5.50

MAYBANK Investment Bank upgraded builder and property firm IJM Corp Bhd (3336) to a "buy" with a target price of RM5.50, saying near-term newsflow on potential awards could intensify in the months leading to the announcement of the 10th Malaysia Plan.

"Positive order flow momentum could trigger a further re-rating of the stock in our view," it said in a report yesterday.

It noted that IJM has also been aggressively bidding for contracts in India. The firm's recent lacklustre order flow in India was due to a deliberate decision by its management to cut back on tenders amid an environment of high operating costs, it said.

"(But) with the recent normalisation of building material prices and borrowing costs, we believe management will resume normal bidding for Indian jobs," it said in a report yesterday.
It noted that the outlook for the non-construction divisions remained positive also.

It forecast the construction division to only account for 12 per cent of IJM's 2011 earnings. It believes the property and building materials divisions would remain as the firm's main earnings contributors, accounting for 31 per cent and 30 per cent earnings respectively.

In Peninsular Malaysia, IJM is looking to tender for packages in major infrastructure projects such as the Pahang Selangor Water Transfer Project, the Low Cost Carrier Terminal project and the Klang Valley Light Rail extension, it said.


Previous posts regarding IJM:
http://cathoon.blogspot.com/2010/03/ijm-wb-up-14.html
http://cathoon.blogspot.com/2010/03/ijm-unit-wins-rm600mil-job.html
http://cathoon.blogspot.com/2009/01/ijm.html 

Outperform Rating On General Electric Company (GE)

Bernstein Research Maintains Outperform Rating On General Electric Company (GE)

Analysts Steven E. Winoker and David Abrameto at Bernstein Research have released an update on General Electric Company (NYSE: GE).

GE will report its first-quarter earnings on April 16. Analysts expect the company to report EPS of $0.17 in its first-quarter. Industrial gross margin is expected to be at 25%-26%, while operating margin is expected to be at 10%-11%. Analysts expect GE to report consolidated revenue of $36.7 billion in the quarter.

Analysts at Bernstein Research have maintained their Outperform rating and $20 price target for General Electric Company.

The GE call warrant listed on KLSE, GE-C1, has jumped around 50% since February 2010. With GE-C1's discount status (discount around 3%) and positive rating of GE, GE-C1 would be considered as a good yet safe trading bet. Even if GE were to move side way, GE-C1 should provide us with a profit of 10% (3% discount x 3.3 gearing). Currently, GE-C1 is priced at RM0.145. The fair value would be RM0.16 if GE is to move side way.


Ok, good luck.

GOon

IJM Corp price estimate lifted to RM5.50

IJM Corp, a Malaysian builder and property group, was raised to “buy” from “hold” at Maybank Investment Bank Bhd to reflect the prospects of building contracts in the country and India in the coming months.

The share price estimate was increased to RM5.50 from RM4.50 in Kuala Lumpur trading, Maybank said in a report today.


Previous posts regarding IJM:
http://cathoon.blogspot.com/2010/03/ijm-wb-up-14.html
http://cathoon.blogspot.com/2010/03/ijm-unit-wins-rm600mil-job.html
http://cathoon.blogspot.com/2009/01/ijm.html

Kevin Skinner, from nobody to somebody.

If Tomorrow Never Comes

April. Bull or Bear?

It had been a good March for stock market. Personally, i think that April is going to be even better. There reasons are as below:

• April is traditionally the most bullish month of any year
• First day of April was up 12 out of the last 15
• April has one of the best opening weeks of any month
• The last Monday of April tends to be the most bearish of the month
• Expiration Friday in April has been up 11 out of the last 13
• April of 1999 was the first and only month that DOW gained 1,000 points in a month
• April has one trading holiday on Good Friday, 2 April.
• April ends the “Best six months” on the DOW and S&P500.

But there is still a thing that really concerns me which is the thin volume during the last few trading days of March. The trading volume was thinning since the last 5 days even though the market was advancing. In fact,  KLCI, on 2 April 2010, reached a new high since the financial crisis.  Mostly when the market advances, the volume would, at the same, increases too. But this was not the case. If the trading volume keep on declining, i think i would prefer to keep more cash and prepare for the market to consolidate.

Good luck.

GOon

CIMB Research reaffirms Overweight on banking sector

CIMB Equities Research remains positive on the banking sector given the projected healthy loan growth of 8-9% and stable gross NPL ratio of 3.7%-3.8% for 2010.

“We continue to OVERWEIGHT the sector, predicated on the potential re-rating catalysts of (1) strong earnings growth, (2) increase in investment banking income, (3) strong growth potential for the overseas operations of the larger banks, and (4) potential GP write-backs,” it said on Friday, April 2

CIMB Research said AMMB Holdings still tops its league table for the Malaysian banks as we believe that its transformation programme should help it raise its ROE from 11.5% in FY3/10 to 14% in FY12. For the longer term, management is gunning for even higher targets of 17-20%, which will be one of the best among the local banks.

The potential share price triggers include (1) value-add from ANZ, (2) benefits from the group revamp, (3) better-than-expected pipeline for investment banking deals to increase fee income from this area, and (4) new growth avenue from the derivative and foreign exchange businesses.

CIMB Research’s other picks for the sector is Public Bank and Affin Holdings.

It said Public Bank has the best fundamentals among the Malaysian banks, as reflected by its superior ROE in the mid-20s, lowest net NPL ratio of below 1% and swift loan growth in the teens. Potential re-rating catalysts include (1) even stronger Roes of 28-29% for FY10-11, (2) increased contributions from Greater China, and (3) stronger-than-expected non-interest income growth, primarily from wealth management businesses.

Affin Holdings’ financial performance will be driven by the robust loan growth and margin expansion. It is trading at an undemanding single-digit CY10 P/E of 8.6 times.

Public Bank set to jump!

Public Bank is going to release its quarterly financial report very soon. I think it would release the report on 14/4/2010.

I note that for the last 4 quarter of Public Bank, Public Bank share would jump higher prior to its financial reports release. Days before 14 April 2009, 20 July 2009, 15 October 2009 and 20 January 2010 share a same pattern which is they were all moving up. That is why i suspect this time history again will repeat itself.

Fundamentally, Public Bank is one of the strongest bank in Malaysia.

There are a few Public Bank call warrants listed on KLSE, namely Pbbank-cj, Pbbank-ck and Pbbank-cl. Pbbank-ck is going to expire in another 6 days, so I am not considering this call warrant. I like Pbbank-cl most because of its higher gearing compared to Pbbank-cj. The premium for Pbbank-cl is 0.60%, gearing is 6.22 and expiry date is 2/9/2010. Pbbank-cl jumps 9.3% today.

Ok, good luck.

GOon.