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ASTI: Low volume pullback.

Sunday, October 24, 2010

On 19 September, I mentioned that "NRA has a target price of 21c for ASTI.  That is a 100% upside from my entry price of 10.5c.  Nice but I see resistance at 12c which was tested several times in recent months.  It is, however, also interesting to note that we might be seeing the formation of an ascending triangle here with 12c being the top of the formation."

Immediately the next day, "12c resistance was weakened as price briefly touched 12.5c before ending the day at 12c.  This means that 12c is still resistance and we need to see if it could be taken out in the coming sessions." and I asked "should my friend buy some shares of ASTI at 12c? Buying at 12c would be buying at resistance. Not a very good idea."


In the last session, ASTI's share price closed at 10.5c on very low volume. To me, it seems as if the counter is doing a classic low volume pullback. If we draw trendlines connecting the highs of 11 May and 20 Sep as well as the lows of 25 May and 2 Sep, ASTI's share price is clearly in an up channel.  In the last session, the closing price of 10.5c was right smack on the channel support.

We have a sell signal on the MACD histogram and the MACD has been forming lower highs, calling for caution. The OBV is, however, showing no signs of active distribution and, in fact, the picture of continual accumulation is very much intact.

ASTI would be announcing 3Q results soon in the first two weeks of November, next month.  With improving fundamentals, 3Q should turn out to be quite satisfactory. To recapt, EPS for the half year ended 30 June 2010 was at 1.31c and NAV/share was at 17.75c. I like how ASTI has been repaying bank loans which resulted in the lowering of financing costs year on year by 81.8% from $1.2 million (2Q2009) to $0.2 million (2Q2010). Its gearing now stands at only 8%.

ASTI paid out a dividend per share of 0.5c to 1.1c between 2005 to 2007. This translates to a yield of 4.76% to 10.48% based on the last done price of 10.5c per share.

Buying more at 10.5c seems like a good idea, given the improving fundamentals and the benign technicals.

See 2Q10 results here.

Related post:
ASTI: A doubling of share price in time?

14 comments:

Drizzt said...

the balance sheet does not look strong. a look at 2009 cashflow statements shows that cash is dwindling and that a good operating cashflow is only because of an increase in accounts payables.

for 4 years its not been earning good cashflow from its business.

Drizzt
Investment Moats.com

AK71 said...

Hi Drizzt,

ASTI paid down $6.2m in loans and paid $1.6m in interest and taxes.

If we look at operating cashflows before reinvestment in working capital, ASTI improved year on year from S$1.5m to S$14.55m.

It is reasonable to say that, having paid down substantial portion of its loans, it would incur much lower interest payments. It follows that net cash used in financing would reduce.

Therefore, with improving cashflow from operating activities, we can expect cash and cash equivalent to increase in time.

ASTI is in the semi-con industry, a cyclical business. Not much of a moat. I won't look for consistency in earnngs for the last 4 years.

What I am more concerned about is its AR which is very high but I understand that it could be the norm in its industry.

Drizzt said...

ok fair enough for me.

regards,

Drizzt

AK71 said...

Hi Drizzt,

I don't have much luck with tech counters. I have a small position in ASTI at 10.5c. Wish me luck. ;)

ortho said...

Hi AK71, what do you tink if we enter at a bid higher? ie at 11c?

AK71 said...

Hi ortho,

If I were not vested at 10.5c, I would buy some at 11c but that's me. You have to decide for yourself. ;)

Ortho said...

Hi AK71,
Will you load more ASTI at the current low of 0.1?

AK71 said...

Hi ortho,

I have a small position in ASTI at 10.5c. 10c is not compelling enough a number for me to buy more. :)

jason said...

Looks like nothing on the TA front for ASTI? I see you havent looked at this penny tech stock for quite a while. Seems analysts are bullish on tech/semicon for 2011.

AK71 said...

Hi Jason,

Fundamentally, ASTI's numbers are looking good. I am not an industry insider but I hope that the demand for tablets and smart phones would keep the semi-con industry humming along.

Technically, ASTI is in a trading range and is currently at the lower end of the range. Immediate support at 10c. The upper end of the range is 12c as this is a many times tested resistance.

The weekly chart suggests that there is support in the longer term. However, the daily chart suggests weakness. This probably needs holding power.

You vested too? ;)

jason said...

Yeah, decided to park some excess CPF in it at 0.11. Sit here and quietly wait for it. hahaha.....

AK71 said...

Hi Jason,

If your aim is to beat returns in CPF-OA, you could divest if ASTI retests 12c resistance. ;)

Of course, if ASTI manages to overcome resistance, its price could move higher. ;p

jason said...

Yes definitely so, at 0.12 its still a good 7-8% gain (after costs) for a few months window. Also keeping my eyes peeled for other opportunities.

AK71 said...

Hi Jason,

Good luck to both of us. :)

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