Sunday, January 27, 2013

Gaining Steam - Biosensors

[Previous post: Large Caps Gain Steam - SGX, Semb Corp]

Biosensors Gaining Steam

1. Biosensors (Medical equipment)
Biosensors has been posting very steady results for the past 3 years but had fallen out of favour with the investment community in 2012 when its share prices took a tumble to a 2011 low at $1.08. Sell-side research houses still kept their strong rating calls on the stock despite the broader market failing to heed them. Nonetheless, in the start of 2013, Biosensors seem to have gained steam again and could possibly spark the revival of its fortunes to finally match its historical performance and a barometer of the future to come.
  • Large white candlestick this week with almost twice the moving average's volume. Prices almost rallied $0.10, representing a 7% gain. The white candlestick has also overcome key moving averages.
  • MACD - is trending into the positive region with increased positive divergence.
  • RSI (25w) - heading towards 70% levels while just crossing 50%.
  • Long with TP - $1.56 (19% from current levels) expected in 6-7 weeks. If buying pressure still persists in the coming week, expect the stock to breakout to the next level above $1.36. With current bullish indications with room for the stock price to come, it will not come as a surprise if stock price ignores $1.36 and heads for $1.55 region. However, do be warned that the coming week is critical for confidence in the stock breaking through a key resistance level at $1.36.




Wednesday, January 23, 2013

Large Caps Gain Steam - SGX, Semb Corp

[Previous post: Mixed Fortunes of Oil & Gas - Ezra, Swissco]

Large Caps Gain Steam

1. SGX (financial services)
SGX 2Q profit grew to $76 million on the back of increased daily average traded volume. This 16.7% increase in quarter profit reflects the resilience and rebound of Singapore's key market place and the work SGX has been putting into attracting more securities and derivatives trades.
  • Price broke out last week above $7.20. Even stronger buying pressure ensued in the first half of this week with yet another big white candlestick with an open at the same levels as last week's close. Very bullish situation.
  • MACD - is trending upwards is increased positive divergence.
  • RSI (25w) - heading towards 70% levels with some leeway to go before overbought status.
  • Long with TP - $$7.80 (-2% from current levels) in the near term (1-2weeks). If buying pressure still persists, expect the stock to breakout to the next support level at $8.60 which translates to almost a 10% gain from Wednesday close price. Prepare to provide 6-8 weeks for $7.80 resistance to be broken as that is roughly the same time period between May to Aug 2011 where the stock tumbled through the price region.




2. SembCorp (Oil & Gas; Utilities; Env Management)
  • Prices appear steadily appreciating towards $5.70. In a stealth rally, Semb Corp has almost risen $0.60 since Nov 2012. Volumes are still thin but that is the surprise of the move since 2 months ago. Large white bullish candlestick currently formed this week.
  • MACD - MACD crossed into the positive territory this week. Positive divergence showing good pace.
  • RSI (25w) -RSI climbing steadily but slowly and managed to ease past 50% already.
  • Long with TP - $$5.70 (~5% from current levels) over 2-3 weeks. No reason for prices to remain resisted at current levels. Expect trend to continue upwards in the absence of company/industry news.

Tuesday, January 22, 2013

Mixed Fortunes of Oil & Gas - Ezra, Swissco

[Previous post: Weekly Update - STI to Charge Further?]

Mixed Fortunes of Oil & Gas

1. Ezra (Oil & Gas)
Ezra's year-start rally had its wings clipped severely after the company reported a 49% drop in 1Q net profit of US$6.8 million on 14 Jan. That resulted in a week tumble and the share price reduction continued this week with strong selling pressure. Despite all the enthusiasm regarding oil & gas counters, it is clear that cherry picking in this time of intense competition will still help the investor weed out stocks that are potential pit-falls. 
  • Selling continued this week seeing the stock tumble a further $0.04 from last week's close. In these 2 weeks, share prices have plummeted almost 14 cents. On the fundamental front, stock prices have been hit by poor profits, in canny resemblance to the situation Rotary engineering was in in 2012. Bad news at a fragile time.
  • MACD - declining positive divergence with MACD failing to challenge the Sept 2012 peak. Possible turnaround/volatility to ensue. 
  • RSI (25w) - perched along the 50% levels
  • Short with TP - $$1.09 (-6.5% from current levels) in the near term. If selling pressure still persists, expect the stock to continue down to the next support level at $0.97 which translates to almost a 2012 low.




2. Swissco (Oil & Gas)
Another of my long-tracked counter that only recently staged a spectacular increase in its share prices. Had all along felt a mismatch in fundamentals of the company with the its stock price (almost constant in 2012 after the year-start rally). Nonetheless, it is always an intriguing question to when such an inefficiency will eventually realised in the market - sometimes perhaps never. So happen, the time for this stock seem to have arrived on the back of very thin news. 
  • Prices challenged the key support levels at $0.27 last week to close above. This week, prices have shot above $0.30 for the first time though late selling today in the SGX caused prices to fall back to $0.295.
  • MACD - MACD has been on the rise for the past 5-6 weeks and does not seem to be waning any time this week.
  • RSI (25w) - RSI, though, has hit 70% on the back of a very strong run.
  • Long with fast TP - $$0.32 (8.5% from current levels) over 2-3 weeks. Prices are straddling between $0.33 and support by $0.27 with little in between. Still some room more for the rally to run unless selling pressure takes over and prices go back to $0.27 support again.



Monday, January 21, 2013

Weekly Update - STI to Charge Further?

Current Weekly Market Theme:
Market euphoria over partial resolution of the fiscal cliff is on the wane and the market has been looking for new catalysts to spur another round of rally. 
The debt ceiling is looming around the corner and due for another round of political 'negotiations' by end Feb - expect more market volatility and jittery. Nonetheless, the debt ceiling has been raised countless times before and going by the remarkable standards US politicians set for themselves (and their political paths), we should see yet another kick-the-can-down-the-road situation unfold. Nothing new.
Anything related to China's growth is still hot and up-and-coming. China's GDP was a tad above analyst estimates with the census department announcing an official 7.8%. While still higher than expectations, the dampener is the reluctant acceptance that China's growth will not be returning to the stunning levels we have seen in the last decade any time soon. 

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STI Index goes from strength to strength; to Charge Further?
The STI has always been a huge beneficiary when China recovers given the large Chinese market links that the 30 component stocks have such as Capitaland, CapitaMalls Asia, Wilmar and Genting. The STI is also Oil & Gas heavy owing to Keppel Corp, Semb Corp, Semb Marine and Noble Group. These two sectors have been winners in the recent rally given a better-than-expected China and emerging markets recovery, bringing the STI to almost a 3 year high.
Taking a break this week, and owing to jittery fears about the looming debt ceiling, the unresolved debt crisis still ongoing in Europe, the STI took a breather with much profit-taking occuring this week. The big question is if the STI will continue to charge up further or see a near-term decline to even lower levels.
  • Challenged 3190 key support levels in this week to close at 3211 on Friday. 
  • MACD - positive divergence albeit declining. MACD still upwards trending but may seem to peak given the current run.
  • RSI (25w) - exhibiting a seeming turning point.
  • Level to watch - 3190 key support line. The STI is well perched on 3190 having tested the support this week by rallying to close on the support line despite dipping to 3160 in mid-week. Continue resting here will provide traders with confidence with the STI's rally strength and future upside may be more likely. If this support level is breached, the STI may seek a tumble down to 3080 levels.


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Saturday, January 19, 2013

Breakout of the Laggards? - Wilmar, Midas, Tiger

Current Weekly Market Theme:
Market euphoria over partial resolution of the fiscal cliff is on the wane, with laggard and penny stocks in focus this week. 
Anything related to China's growth is still hot and up-and-coming. China's GDP was a tad above analyst estimates with the census department announcing an official 7.8%. While still higher than expectations, the dampener is the reluctant acceptance that China's growth will not be returning to the stunning levels we have seen in the last decade any time soon. 


1. Wilmar (China play; Palm Oil)
  • Strong resistance in this week with increasing volume at ~$3.67. 2nd time in 9 months that prices have attempted to cross this level, with the first being unsuccessful in June.
  • MACD - high positive divergence and trending into the positive
  • RSI (25w) - crossing 50% on a steady upward trend
  • Price to watch - $3.67 resistance line. Break out into the huge gap down region in Apr 2012 provides good buying reason that the worst could be finally over for this badly battered palm oil counter. With a successful break, expect TP $4.75 (~28% from breakout level) over the next 3-4 weeks.


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2. Midas (China proxy; rail; aluminium)
  • Strong upward trend from 15 weeks ago that resulted in a breakout 3 weeks back. Straddling between the gap down region in Jul 2011, stock prices seem destined for the upper resistance region.
  • MACD - increasing positive divergence and trending in the positive
  • RSI (25w) - above 50% and seems headed for 70%
  • Price Target - $0.61 (~19% from current levels) over the next 5 weeks. Expect the counter to take a short break next week for more accumulation opportunities given how much the stock price has already risen. On the long term (5-6weeks) outlook, the uptrend looks strong and there's no reason for news to drive the stock down given the resumption of railway investment in China.


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3. Tiger Airways (SEA growth; aviation)
  • Breakout strongly this week with increased volume and trading attention.
  • MACD - small positive divergence and trending into the positive.
  • RSI (25w) - crossed 50%.
  • Price Target - $0.81 (~5% from current levels) over the next 2-3 weeks. 
  • The good thing about Tiger seems to be its slow and steady rise back into prominence after a terrible 2011-12 period that threatened its profits. New CEO with new marketing company does bode well to set the records straight to continue to overhaul the Tiger brand and put it back into the limelight again.


Tuesday, January 15, 2013

Singapore Property Cooling Measures - Buy on Dip?

Current Market Theme:
Mass market residential property to be worst hit given the additional measures aimed to further curb speculation in this category by hot money flowing through the financial system. Measures seem most drastic in the 7th round of property cooling but as with all past measures, it has shown that the government's steps have been well balanced and aimed to prevent a sudden collapse in prices in the near future should monetary easing start to reduce worldwide.
Going by history, as long as hot money is kept circulating in the global financial system (highly likely given the tepid growth experienced in US and Europe), property counters will still enjoy upside albeit less pronounced in the near future. Effects of measures present a buying opportunity to accumulate property counters.


1. Capitaland
  • Gap down on Monday, first day of the week, declining to a day low of  $3.61 before returning to $3.73.
  • MACD - positive divergence declining and MACD turned downwards for the first time in 6 months.
  • RSI (25w) - hit 70% to face resistance.
  • Would be buyers at ~$3.45 after testing $3.42 key support to catch the property momentum.


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2. Keppeland
  • Faced key resistance at $4.38 last week. Gaped down opening today at $3.97 to close at same price.
  • MACD - MACD turning downwards after peaking at highest levels in 2 years.
  • RSI (25w) - hit 70% to face resistance.
  • Prices are currently sandwiched in the middle of nowhere between key support and resistances. Would be buyers at ~$3.6 when prices cool down further as that coincides with the 20w average.



3. Ho Bee
  • Big dip on first day of the week, erasing almost 6.5% off its share prices. Prices seem firmly support at $1.8 levels.
  • MACD - MACD turning downwards with 3 weeks of declining positive divergence.
  • RSI (25w) - Overbought RSI finally heading down for some cooling.
  • Expect to buy at ~$1.8. Possible to wait for $1.8 resistance to be tested before entering. 


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4. Wing Tai
  • Big dip on first day of the week, erasing almost 10% off its share prices.
  • MACD - MACD turning downwards after weeks of low positive divergence.
  • RSI (25w) - Overbought RSI finally heading down for some cooling.
  • Expect to buy at ~$1.7. Possible to wait for $1.7 resistance to be tested before entering. 

Sunday, January 13, 2013

Weekly Update - NOL, Yangzijiang, Swiber

Current Market Theme:
Favour oil & gas counters with solid order books for the current market recovery. Expect more new deals in the pipeline given the lifting outlook with emerging economies such as Latin America where oil exploration has always been key.
Also favour shipping companies given recent China's recovery and improved export data. Reports suggest that China may overtake US in economic leadership by 2014 so good news in China is good news for world trade. Europe and US are in a period of trade stagnation but no major shocks to be expected.

[Previous post: Olam Bonds plus Warrants Offer - To take or not to take for Retail Investors?]


1. Neptune Orient Lines (Shipping)
  • Breakout in this week with high volume sending stock to a price of $1.31.
  • MACD - positive divergence and trending into the positive
  • RSI (25w) - crossed 50% and headed for 70%
  • Price Target - $1.44 (~11% from current levels) over the next 3-4 weeks.

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2. Yangzijiang (Shipping and Oil & Gas)
The market has been viewing company's decision to enter into the Oil & Gas competition favourably. Bagging its first deal at a much lower revenue (and possibly profit margin) than a similar rig done by Keppel Corp, this is a significant milestone for the company and yet it speaks volumes about the intense competition and journey ahead. Kudos nonetheless to the management for diverting underutilised resources away from ship building to rig building.

  • Breakout in this week with high volume sending stock to a price of $1.115.
  • MACD - positive divergence and trending into the positive
  • RSI (25w) - crossed 50% and headed for 70%
  • Price Target - $1.32 (~19% from current levels) over the next 4 weeks.

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3. Swiber (Oil & Gas)

  • Continuation of upward trend with increased trading volume this week.
  • MACD - positive divergence and trending in the positive
  • RSI (25w) - crossed 50% and headed for 70%
  • Price Target - $0.71 (~8% from current levels) over the next 2 weeks.


Saturday, January 12, 2013

Olam Bonds plus Warrants Offer - To take or not to take for Retail Investors?

I was on annual leave travelling Europe for the last couple of weeks and was too busy since being back earlier this week to make any decent postings. Oh my, how much has the stock market rallied in my absence and how Olam made tremendous amount of headlines during the Nov-Dec period.

Being a  retail shareholder of Olam (vested), I received the thick bond and warrant offer booklet outlining all the details of this terribly complicated offering. 

  1. 5 year bonds +
  2. 3 year European warrants and then 2 years of American style warrants +
  3. USD denominated exchange rate risk (USD down, bond coupon and maturity payment when converted to SGD down // USD down, warrants cost down, capital gain increase)
  4. Trade-ability of bonds and warrants only in 1,000 units boardlot on SGX which makes odd lots difficult to dispose of.
  5. (And in addition) Newspaper reports of people suggesting that the offer is really good and hence likelihood that the offer might be fully subscribed leaving little odd lot conversion possible.
Anyway, that's the simple qualitative analysis. 


Below is another simple quantitative analysis that I have came up with to aid my decision making process
Assumptions to calculations are
  1. Based on purchasing 1932 bonds + 1,000 warrants (162:313)
  2. Hold bonds to maturity (5 years lock-up)
  3. Sell warrants immediately after 3 years lock-up
  4. USD/SGD stays at 1.2273 level throughout 5 years
  5. Calculations include ~S$28 brokerage fee to sell exercised warrants
  6. Calculations factor in dilution factor in Olam share prices right after this offering assuming that ALL warrants are exercised and the company adjusts the warrant strike price accordingly in future dilution exercises to maintain the same spread.
  7. Total annualised returns = (1 + Gain from 5 year bond coupons + US$0.05 bond discount after maturity + Gain from Warrants sale)^(1/5years) - 1

I think that to be putting in ~S$2,300 (for 1932 bonds) and taking the risk for 5 years, the minimum annualised returns that I expect from this investment be at least 6%. This is based on my own risk and target investment profile. In order to achieve this, the table simply tells me that I would require Olam stock price to appreciate by at least 30% in 3 years. So now, if you believe such is possible, then this subscription does make some appetizing sense.

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I also repeated the same analysis above to find out the sensitivity of USD/SGD exchange to this investment gain. The additional assumption is fixing analysis based on 
  1. 20% gain in Olam share price (changing to 50% gain on Olam share price does not make the exchange rate sensitivity any greater)


As shown, the obvious fact is that exchange rate does little to impact total annualised returns. For the nitpickers, the weaker the USD, the better the gain becomes. And for analysis sake, the USD has been on a downward slide against SGD in the last 5 years due to weaker economic fundamentals and huge monetary stimulus (devaluation). However, in end 2013 the Fed has suggested an easing of the monetary stimulus with growth recovery in sight so expect some support at near current USD/SGD levels for the next 2-3 years.

In a nutshell, this offering ties Olam to the shareholders of the company for the long-term (at least for retail investors who may find it difficult to unlock value of bonds/warrants in the bond/warrants market). If you believe in the stock fundamentals that there is nothing wrong with being overaggressive in capital investment of late, that the company will return to positive cashflows in 2013-2014 after investments start to realise potential, that Olam has the liquidity in place to ride out any more storms, that the commodities market will make a timely rebound to push its stock prices up, then I would say this investment makes sense.
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