Golden Agriculture: slow and steady?

Golden agriculture closed above the declining 100wMA today on low volume. This being the weekly chart, we have to see if it stays above the 100wMA at the end of the week.

Even though there is a negative divergence between price and volume, I see limited downside with all the MAs rising and within close proximity of each other on the daily chart. However, without a surge in buying momentum or some positive catalyst, this counter might end up moving sideways for a while.

The FA for crude palm oil (CPO) and for Golden Agriculture remains positive. Patience will be rewarded.

Healthway Medical - A spectacular breakout

Healthway Medical had a spectacular breakout today on very high volume. Closing firmly at 16c, this is beyond the top of the previous cup formation at 14.5c. The relentless buying momentum towards end of the day looks set to continue in the next trading session. The intermediate target of 17c looks attainable. Eventual target remains at 19.5c. This is derived from measuring the trough to the top of the cup formation and projected forward. This is further confirmed by the Fibo lines.

From a FA perspective, a price of 19.5c would mean a PE of about 17x which I believe is more than fair compared to Q&M Dental Group's PE of 37x at 60c!
Q&M Dental Group

I have divested 20% of my position at 14.5c and 15c as a hedge. The rest, I am leaving to ride the wave up. To all fellow shareholders, congratulations!



Here, I would like to share my recent response (with some editing) to a fellow shareholder's question on what might be Healthway Medical's future price movement:

From a FA point of view, Healthway Medical is cheap relative to its peers in Singapore. Compared to Q&M Dental Group, it's very cheap.

However, I also do a bit of TA which says that price action is all about sentiments. So, charts are supposed to be windows to the mass psychology of investors.

People keep saying that Healthway Medical will move to the mainboard one day and, guess what, I agree. However, that is over the longer term. Believing in that longer term prospect of the company will not stop me from taking some profit today based on TA.

Using TA, I hedge by selling some of my position at each resistance level. Usually, it's 10% or 20% of my position per level. It depends on how big a position I have. So, 14.5c is the top of the previous cup formation while 15c was the last high. I sold 10% at each of these two prices. The next resistance is 17c based on Fibo lines and candlesticks. I might sell 10% again. 19.5c, sell again.

As for what is the price going to be after the rights issue. Your guess is as good as mine. I will cross that bridge when I come to it.

Wilmar International

A friend mentioned that he would want to buy some shares of Wilmar International because he is confident that a listing of its China-related operations in Hong Kong will take place and it is just a matter of time.

Wilmar's valuation looks rich to me compared to other palm oil companies like Golden Agriculture. Of course, Wilmar is not a pure palm oil play but most people associate it with crude palm oil. The stock market is not the best place to find rational behaviour, we know.

Let's do a TA. Similar to Noble's chart, the 20wMA pulled away rapidly from the 100wMA. The 20wMA flattened two weeks ago. Compared to Golden Agriculture, which is testing resistance, Wilmar is hugging the flattening 20wMA for dear life as volumes dwindled. If I were to do some crystal ball gazing, this chart shows what Noble's chart might look like in future. For anyone who is thinking of entering, I see $5.54 or so as a fair entry point. It is about a 15% correction from the closing price of $6.43 and it is also a natural candlestick resistance and support level. This is another counter not for the faint hearted.

Noble Group

A friend told me recently that Noble Group was 9c a share in 1999. It closed the 2009 at $3.25. That's a 36x returns over 10 years!!! I've not done any research on any financial engineering the company might have done in the last 10 years. So, this observation might be too simplistic.

Looking at the numbers, I find valuation for Noble rather mind boggling. To buy at the current valuation, one must be extremely optimistic about the future earnings of the company. Well, Jim Rogers thinks that prices of commodities will continue to rise in the years ahead. If we believe him, then, it might be better to buy directly into commodities or companies producing these commodities rather than commodities trading companies. I remember Musicwhiz did some FA on Noble and Olam. So, I shan't go into details here. The link to his blog is in my blogroll. As is my style, if the FA fails, I do not bother to go on to the next step which is to do a TA.

However, what worries me is that even some usually very cautious investors I know are euphoric about Noble. From a TA standpoint, if the trend is not broken, continue riding it. Having said this, Noble's rapid climb in price does not look sustainable. So, I'm doing a TA out of curiosity. The negative divergence between price and volume on the weekly chart is quite plain to see. After breaking multiple wMAs in May, it tested the 100wMA support in July and off it went hugging the upper limits of the Bollinger bands since. The shorter term 20wMA has pulled away from the longer term 100wMA and 200wMA. The spread is now quite susbtantial. Using two sets of Fibo lines, it looks as if the current price of $3.25 is at resistane. A pullback is on the cards but with such positive sentiments bouying the counter, the 20wMA, at $2.70 this week, might just be able to support the price. That would be a 15% pullback. To my friends who are vested, stay vigilant. If the 20wMA breaks, there is quite a fair bit to fall.

Bungee jumping, anyone?

Under normal circumstances, if we were given a choice to stay safely on land or to jump off a bridge, I think we would choose to stay on land. If we were guaranteed safety if we were to jump off a bridge and collect an experience of a lifetime, would we do it? Many still wouldn't or else bungee jumping would become a very common pastime.

Last night, I had dinner with a few friends and as usual, we talked about investments as well. We all have friends who are very risk averse and would rather leave their money in the banks and collect 0.125% interest p.a. Some are "smarter" and leave their money in one year fixed deposits and collect 0.7% interest p.a. Now, we are talking about people with excess cash, beyond what they need in the event of unemployment over a period of 6 months. They are safely on land or so they think.

The threat of wealth erosion by inflation is very real and leaving our hard earned money in bank accounts to collect <1% p.a. isn't the wisest thing to do. The Monetary Authority of Singapore lifted its 2010 inflation forecast to between 2.5 and 3.5% on 19 Nov 2009. Land we were standing on which seemed firm just now might quickly become quicksand. Jim Rogers says that the worst thing to be in now is cash. It's perhaps an exaggeration but I think we get the idea.

There are many financial instruments which would "guarantee" higher returns but few would provide the liquidity which the stock market has. All financial instruments carry an element of risk to varying degrees. Make no mistake, the stock market has plenty of risks but it also has ample rewards for those who are equipped properly to traverse the difficult terrain. Having the right skills and, dare I say, right companions would make the journey a smoother one. Ultimately, do our due diligence and make our own decisions. We have no one to blame for our failures but ourselves.

There are many reasons why people would not venture into the stock market. Fear of losing money is probably the main reason. Not everyone has the mental strength to overcome this fear to move their money out of their "risk free" savings accounts into the stock market. We have friends who say they "cannot lose a single cent" and that they "would lose sleep at night if they have money in the stock market". It would be better to leave them be. Till this day, I have not had the good fortune of knowing anyone who had only made money in the stock market and did not lose a single cent. People who ask for 100% safety for their money (in nominal value) would have to settle for <1% annual yield.
Things Singaporean: SRS, CPF-OA and CPF-SA.

Rethinking SPH

This is one of my favourite blue chips. Strong balance sheets, generous dividends and it will be a major beneficiary of the improving economy as well as the opening of the two integrated resorts (IRs) this year. However, I'm in no hurry to load up at the current price.

Its price is being supported by the 20wMA at $3.60 and the declining 200wMA provides resistance at $3.80. I would divest partially if its price moves to touch the 200wMA. I would do this as a hedge as I'm not so sure that its price would not revisit $3.40, the 61.8% fibo retracement which coincides with the declining 100wMA. $3.40 also looks like an important candlestick resistance/support level.

Revisiting Keppel Corporation

Keppel Corp is one counter which I bought at under $4 in early 2009 but offloaded too early. I like this counter. The world cannot do without crude oil. Other counters in the same theme which I offloaded too early as well were Ezra and Swiber. With crude oil strengthening in price, it might be time for me to revisit Keppel Corp.

In terms of fundamentals, if one were to seek exposure to offshore counters, Keppel Corp is a better choice as it has a stronger balance sheet. The economy might be recovering but I'm not sure that taking on too much debt is a good idea as is the case with Ezra and Swiber. Keppel Corp also pays out generous dividends which is very attractive to me.

Looking at its weekly charts, the negative divergence between price and volume from May 09 to Dec 09 is quite clear. Buying momentum has been weak as MFI continues its decline, forming lower highs. However, OBV has a gradual slope upwards which indicates longer term accumulation. Price has been hugging support provided by the 20wMA so far. Without any buying momentum, this counter is doing a rather precarious correction using time. Resistance is being provided by the very gradually rising 200wMA at $8.85. The falling 100wMA is unlikely to provide much support in the event the 20wMA breaks. A stronger support would be one provided by the rising 50wMA.

I would wait for a correction before accumulating. I would buy some at the 50% fibo retracement(S$7.55) as a hedge and would buy more if it goes to the 38.2% fibo retracement (S$7.28). If one is already vested, selling some if the price hits the 200wMA would be a nice hedge. Having said this, I am sure that the longer term trend of Keppel Corp is up as the rising 50wMA is on course to form a golden cross with the declining 100wMA in the coming months.

Crude Palm Oil: Update

On New Year's Eve, crude palm oil (CPO) closed up RM68 or 2.62% at RM2,663, a 7 month high. A retest of the high achieved this year at RM2,790 in May is on the cards.

CPO price is more likely to rise than fall in 2010 because of:

1. Demand from the world's top two consumers of vegetable oils: China and India. This demand is expected to increase as economies improve.

2. Bad weather in the Americas leading to lower soybean yields. This leads to lower soyoil production and higher prices. CPO is a substitute which is also less expensive.

3. Crude oil's price movement which is expected to continue rising as a cold winter increases demand for heating fuel in the short term and economies improve through 2010. CPO is an important source of biofuel and would most likely ride the wave up.
Why Golden Agriculture?

A new year and a new decade. Strategy for 2010.

Firstly, Happy New Year! It's the beginning of a new year and a new decade. Many countries in the world still have huge debts to deal with but let's hope things will be better the next 10 years.

This is extracted from the latest issue of NEWSWEEK magazine:

The American goverment may owe China US$799 billion but when it comes to foreign debt per capita, the US is relatively prudent. Which nationality has the highest foreign debt per capita?

Greeks US$ 27,746
Belgians US$ 27,023
Austrians US$ 26,502
Irish US$ 24,247
Norwegians US$ 21,402
Italians US$ 21,089
Dutch US$ 20,412
French US$ 18,946
Germans US$ 15,574
Finns US$ 13,617
Americans US$ 11,094
Danes US$ 9,410
Spaniards US$ 8,715
Swedes US$ 7,058
Brits US$ 6,526

Now, this puts things in perspective. Many countries are still not out of the woods. This gives the idea that we will see the global economy going into a tailspin again in the next 2 or 3 years greater credence. We are experiencing a cyclical bull in a secular bear market and not the beginnings of a secular bull market.

My strategy for 2010?

1. Gold
I am keeping an eye on the price of gold. If it goes closer to the psychologically important support level of US$1,000 an ounce, I will buy more physical gold as a long term hedge against inflation. Gold also acts as an insurance for my other investments. I buy physical gold from UOB.

2. Crude oil
I believe that demand for crude oil will continue to strengthen through 2010. However, it will not go up in a straight line. It will climb a wall of worries and we will have plenty of worries in 2010, no doubt. I would trade counters which are leveraged to the price of crude palm oil (CPO) as a proxy to the price movement of crude oil. I like Golden Agriculture.

3. Japan
As a contrarian play, Japan might outperform after almost two decades being in the doldrums. I like the Japanese Yen. I like Japanese real estate. I like Saizen REIT.

4. Indonesia
A strong emerging market, Indonesia did not suffer negative growth in 2009. I like LMIR and First REIT for the low gearings and the high yields.

5. Healthcare
There is greater demand for quality healthcare with increasing affluence and an ageing population in Singapore. I choose Healthway Medical.

6. Tourism
2010 will be a year where tourist arrivals balloon in Singapore with the completion of the two integrated resorts (IRs). Looking for value and high yield, I like Suntec REIT and SPH.

There are many other counters which will do well in 2010 but I will concentrate on these I've highlighted. The choices here are based on FA. Remember to use TA to identify entry and exit prices. Good luck in 2010.

31 Dec 09: Healthway Medical

At half day, Healthway Medical's trade volume exceeded yesterday's full day volume! We have a breakout on high volume! The resistance level at 13c has been taken out with a vengeance. Price touched a high of 14c before closing at 13.5c. If we have confirmation in the next session, a retest of 14.5c, the top of the earlier cup pattern is at hand.

MACD has risen strongly above zero. MFI did a sharp about-turn, forming a higher low in the process. OBV continues to rise, indicating continuing accumulation. A retest of 14.5c seems very likely. If 14.5c is taken out, I see an intermediate target of 17c, followed by an eventual price target of 19.5c!
30 Dec 09: Healthway Medical and Golden Agriculture

AIMS-AMP Capital Industrial Reit (MI-REIT)

As expected, a re-rating upwards:

From Business Times, 30 Dec:
Moody's upgrades AIMS-AMP Capital Industrial Reit
Re-rating follows recapitalisation exercise

MOODY'S Investors Service has upgraded AIMS-AMP Capital Industrial Reit's corporate family rating to Ba2 from Caa1 following its recent recapitalisation exercise.

The industrial trust - which was formerly known as MacarthurCook Industrial Reit - underwent a change of name after a recent debt-and-equity-raising plan. The Reit placed out shares to new investor AMP Capital Holdings and existing sponsor AIMS Financial Group as well as other cornerstone investors. This was then followed by a rights issue and a new term loan.

Concluding a rating review that was started on Nov 9, Moody's said that the rating outlook for the Reit is stable.

In addition, its liquidity profile has improved substantially, without material refinancing needs in the near term, Moody's noted. The Reit's debt/capi-talisation leverage has fallen to 30 per cent, from 47 per cent as of Sept 2009. The Reit's major borrowing, a new $175 million term loan, is only due in December 2012.

Strategy: I bought a large chunk of MI-REIT at 20.5c after the recap exercise. At that price, it gives a yield of about 10%. It's trading at about 30% below NAV. It has the lowest gearing amongst Singapore industrial REITs. For anyone looking for high yield at a bargain, this is a BUY even at 21.5c. Once again, look to TA for guidance on entry and exit prices.
High yield portfolio

Crude oil: Update

On Christmas Day, I said, "Technically, crude oil has been in a correction since peaking on 21 Oct. The short term trendline from 21 Oct has been tested 3 times on 4 Nov, 18 Nov and 1 Dec. Price took a plunge from there and only bottomed on 14 Dec. Closing at US$78.05 means that oil is still in a correction stage. We want to see crude oil closing at US$79.00 or higher in the next few sessions to see this broken. We want to see confirmation in time with price action forming higher lows and higher highs."
Crude oil at US$78.05

Taken from: Oil hovers near $79 ahead of U.S. stock data
On Wednesday December 30, 2009, 7:29 am EST
By Emma Farge, REUTERS

Oil held near $79 on Wednesday as cold weather in the United States and an expected fall in both U.S. crude and distillate stocks including heating oil countered a firmer dollar, shoring up prices after a five-day rally.

U.S. crude for February delivery fell 13 cents to $78.74 a barrel by 1124 GMT (6:24 a.m. EST) in thin pre-holiday trade after touching a five-week high the previous day.

Taken from:
Oil-thirsty China to raise Kuwaiti imports by 50 pct
On Wednesday, December 30, 2009
By Chen Aizhu, REUTERS

BEIJING, Dec 30 - China has agreed to raise 2010 crude imports from Kuwait by 50 percent to about 240,000 barrels per day, trade sources told Reuters, with Chinese refiners set to to process at record rates as demand rebounds strongly.

The jump, which follows a one-third increase this year, comes after Iraq said it would more than double exports to the world's second-largest oil consumer and Saudi Arabia agreed to a 12 percent increase for 2010.

China's fuel demand is poised for an 8 percent expansion in 2010, more than double this year's 3 percent, Sinopec's president, Wang Tianpu, told Reuters last month, amid increasing signs of a strong economic recovery spurred by aggressive government spending.

I believe that the demand for crude oil will continue rising through 2010. Crude palm oil will most likely ride the wave up. Golden Agriculture is testing resistance. It's a matter of time before resistance is broken and a new high is made.
Crude oil to hit US$100

30 Dec 09: Healthway Medical and Golden Agriculture

Healthway Medical has a white candle day on increased volume. Closing at 13c, it is still resisted by the flat 100dMA. We have a buy signal on the MACD today as it seems set to cross above zero. OBV has turned up sharply, indicating accumulation. MFI is still declining which indicates a lack of short term buying momentum. Still rising 200dMA at 11c limits any short term downside.

On the weekly chart, the increased trading volume is plainly obvious as price action formed a white hammer. OBV has formed a new high. A buy signal on the MACD was first seen last week. MFI has turned up sharply indicating that buying momentum on a weekly basis has strengthened. A retest of 14.5c will probably take place if the resistance at 13c is taken out.


Golden Agriculture closed at 50.5c, forming a doji in the process. Momentum oscillators are still rising although OBV has gone flat. The dwindling volume since mid August is quite obvious on the weekly chart. Without a surge in volume and a sustained one at that, it would be difficult for price to close above the descending 100wMA.
29 Dec 09: Golden Agriculture

Real estate as a hedge against inflation

For the last year or more, I kept hearing and reading the word "deleveraging". Companies and individuals are all busy deleveraging. So, basically, people are saving more money, paying off their debts and spending less. Overall, it gives an impression that leveraging is undesirable and should be done away with.

Marc Faber famously said that, in Asia, the family run businesses in Hong Kong and Singapore have very little debt. Many rich families in Singapore don't have any mortgages. He thinks that Asian real estate will continue to do well. This gels with what Jim Rogers thinks about how we should own some real estate and he, in a recent interview in New York, actually said that he would buy some US real estate now if he were staying there.

In my posts on the subject of gold, I mentioned that I buy gold as a hedge against inflation and that I do not trade gold. We could also buy other tangible assets which would keep pace with or grow faster than inflation and protect or grow our wealth in the process. However, most of us are not in the same league as Marc Faber or the rich families he mentioned.

So, what are we to do if we want a piece of the action and own some Asian real estate? Do we work very hard to save money before we buy that piece of real estate? 100% cash upfront and without a housing loan? Or do we put down 20% and borrow 80%?

Quite simply, like any other investment, the answer lies in timing. Buy when the market is depressed or just turning up and hold for the long term. If you believe that the world is going to see extraordinary inflation in future, this is one thing we should do if we have the means. If we have the money, pay 100% cash upfront. If we only have 20% to <100% of the value, take a housing loan for the balance. As an example, I bought private real estate 6 years ago and took a loan for 80% of the price. The valuation is now 80% higher. If I were to rent it out, I would realise a yield of 7% p.a. This is much higher than the interest rate on the bank loan I'm servicing. Capital appreciation plus steady passive income. Sounds like a high yield stock? Sure does. Having said this, we have to keep an eye on the interest rates. If that goes up significantly and we do not have the means to pare down the outstanding loan amount drastically, it might be time to let go. If I had told myself 6 years ago that I should work harder and save more money before taking the plunge, I would have worked harder, saved more money but ended up poorer. The next time the property market has a correction in price, bear this in mind and take the plunge, if you have not done so already. Inflation is a powerful force. If we have the means, we must do all we can to protect ourselves against it. Buy Japanese real estate

Q&M Dental Group

Q&M Dental Group's share price has more than doubled since its IPO a month ago. Yes, more than doubled! IPO price was 27c on 26 Nov 09. Price closed at 56c today. >100% gain in slightly more than a month. Phenomenal!

I just looked on in disbelieve as the price kept forming new highs. Based on FA, the valuation is simply too rich compared to peers in the medical services sector in Singapore.

With an estimated diluted EPS of 1.6c per annum, the PE for Q&M Dental Group at 56c is about 35x! This is much higher than Parkway's 25x at $2.92 and Raffles Medical Group's 20x at $1.44 and these are large medical services providers! Compared to a peer closer to its size, Healthway Medical's PE at a price of 12.5c is only 10.4x!

Let's compare Q&M Dental Group with Healthway Medical, an undervalued counter in Singapore's medical services sector, in my opinion. Q&M Dental Group has more than 30 clinics islandwide but this is dwarfed by Healthway Medical's more than 80 clinics islandwide. In 3Q09, Q&M Dental Group's profit after tax went up 8.7% to $1.9m while revenue went up by 1% to $14m. Healthway's profit after tax went up 44.7% to $3.98m while revenue went up by 6.2% to $25.32m!

On 12 Dec 2009, shares of Q&M Dental Group were included for trade on the Freiverkehr in Germany. Perhaps, this has a large part to play in its current rich valuation. Fundamentally, that the share price is trading at a PE so much higher than Parkway and Raffles Medical Groups' is mind boggling. Will we see a correction or will Q&M Dental Group's share price continue to astound on the upside? Your guess is as good as mine but I'm not buying.
Healthway Medical: Growing a defensive business

29 Dec 09: Golden Agriculture

My overnight sell queue for Golden Agriculture at 51c resistance, provided by the descending 100wMA, was done today. Another 20% of my position sold. Credit Suisse bought from me.
















It was nice how the 50c resistance was punched through but a white spinning top ended the day. If 51c is taken out convincingly tomorrow, I see a target of 62c in time. If 51c resistance holds out, price is likely to weaken to support and I would like to buy again at 47c or so in the near future.
More charts for Golden Agriculture