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CapitaMalls Asia: A late reversal?

Friday, April 2, 2010

I spent a few hours in Ion Orchard today shopping with a friend who just moved into his new home.  Always nice to shop for things for a new home and watching someone else spend money.  It's a very therapeutic experience without any real damage to my own wallet.  What was an eye opener was the crowd at Ion Orchard.  The place was CROWDED!

I have a knack for catching bits of conversations of passers by and I must say I was amazed by how many foreigners there were.  There were Koreans, Chinese, Indonesians and Japanese.  Of course, there were Caucasians too.  These foreigners are now an important part of our domestic economy.  Their consumption contributes to a healthier GDP for Singapore, I have no doubt.  More importantly for me, CapitaMalls Asia owns 50% of Ion Orchard.  That makes me happy.

Fundamentally, CapitaMalls Asia is a company with solid numbers and technically, it seems as if it has started a reversal process having hit $2.26 two sessions ago.  The OBV shows that no distribution is taking place.  The Stochastics is now in oversold region.  The MFI still shows a slowing buying momentum.  The MACD has flattened while the signal line continues to fall, suggesting a possible bullish crossover in the making.

Price action formed a white candle in the previous session and actually broke resistance provided by the 20dMA at $2.31 at one stage, hitting a high of $2.33 before closing the session at $2.30.  All these after I suggested that the inverted black hammer in the preceding session was a possible reversal signal.  A reversal is confirmed... again.  Why again?  Well, you would remember an earlier reversal signal was confirmed but there was no follow through.  The problem? Anaemic volume.

It is quite obvious when we look at the Bollinger bands that CapitaMalls Asia has entered a consolidation phase.  There really isn't any trend per se.  So, I would like to draw your attention to the Stochastics.  In the reversal signal which did not follow through successfully, the Stochastics was not oversold but now, it is.  The chances of a successful reversal is now higher.

It is quite obvious to me that the top of this basing process is at $2.41.  However, getting there is going to take some time given the falling buying momentum as suggested by the declining MFI.  However, the lack of distribution as suggested by the OBV precludes any drastic downward movement in price.  Thus, the low of $2.19 is likely to be a strong support if any further downside presents itself.

My reading: Limited downside at $2.19.  Immediate resistance at $2.31 provided by the 20dMA and this is followed by $2.41, the top of the base formation.  Eventual target is at $2.55, a many times tested candlestick resistance.  If price continues basing with an upward bias as per my expectations, what we might see forming would be a double bottom formation.  Important: Volume has to expand with any move to the upside and this would see the MFI reversing its decline.  Vested.

Related posts:
Replies from AK71: CapitaMalls Asia.
CapitaMalls Asia: Reversal confirmed.


Anonymous said...

Capitaland owns 50% of Ion NOT CMA.

Being a shopping mall in Singapore, it is more likely to be injected into CapitaMall Trust ("CMT") than CMA just like Clark Quay which is now being bought over by CMT.

AK71 said...

Hi Anonymous,

You might want to update yourself on these:

"CapitaMalls Asia is the leading shopping mall owner, developer and manager in Asia.....

"......Our landmark properties include ION Orchard which is strategically located at the gateway to Singapore's premier shopping street, Orchard Road, and Raffles City Singapore."

As for Clarke Quay, CMT is buying it from CapitaMalls Asia.

"CapitaMall Trust to acquire Clarke Quay from
CapitaMalls Asia for S$268 million"

Marcus said... stop posting about Healthway Medical.. anymore updates on it?

Anonymous said...

something that disturb me is how the the 3 companies are linked up. namely, cma, capitamall and capitaretailchina. will there be a conflict of interest?

another thing to note since 3 companies are linked up, for cma to move doesn't it have to wait for all 3 to move at the same time?

AK71 said...

Hi Marcus,

I still have a smallish position in Healthway and still look at the charts daily. However, there isn't much to say since my last post on it on 25 March when it touched 16c which the charts suggested it would. Healthway looks like it is now consolidating.

Healthway was a compelling buy for me from a FA point of view last year as it was very much undervalued. FA now suggests that it is fully valued and to buy into Healthway now is to buy into future earnings. From a TA perspective, Healthway has support at 16c and the downside should be limited but if 16c breaks for any reason, we could see 13.5c again.

AK71 said...

Hi Technician,

Actually, you missed out Capitaland, the parent of CapitaMalls Asia. ;)

No reason to be disturbed really. CapitaMalls Asia, CapitaMalls Trust and CapitaRetail China are separate entities but have cross holdings. Each entity has its own team of managers.

CapitaMalls Asia is a mall owner, developer and manager. The other two are REITs, not companies. They are just there to manage their real estate portfolio and to distribute income to unitholders.

CapitaMalls Asia would, in time, inject more of its malls into the two REITs which would give it more funds to develop new malls. The two REITs would gain access to malls which should be yield accretive.

Investing in CapitaMalls Asia is for growth. Investing in the two REITs is more for the income distribution.

As for their prices in the stock market, certainly, what one does could affect the others but that is not a necessary condition as there could be external stimuli and other considerations as well.

For example, if some pension fund decides that CapitaRetail China provides exposure to the rise of the Chinese consumers with an attractive yield and buys enough units from the open market to make it a substantial shareholder, that would push up the market price of the REIT but it would probably have no effect on CapitaMalls Trust or CapitaMalls Asia.

My major considerations in FA would always be what I see in the numbers and macroeconomics. I also do peer comparison if such a comparison is feasible. However, you have raised a pertinent point and I hope I have answered your question. :)

Investment of the Decade is coming soon... said...

I always feel uncomfortable when I see people trading stocks as if they are trading forex. Warren Buffett is a successful stock investor and he does not use technical, so why should we? But thanks for the article. AK71 raises an important point, I prefer Capitaland.

AK71 said...

Hi IOTDICS (your name is very long to type, hope you don't mind),

Warren Buffet doesn't use TA, why should we? The answer is in your comment, actually. He is an investor, not a trader. Traders have developed their own methods which work for them. Then, there are hybrids like myself. ;)

Thanks for visiting. Come by again soon. :)

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