Courage Marine: Riding the waves of recovery.

Admittedly, I have always thought of the shipping industry as a very difficult one.  Huge capital expenditure is required and the ongoing maintenance expenses are substantial as well.  I also do not like how its huge capital expenditure is on assets which are depreciating in nature.  Furthermore, its fortunes are tied inextricably with those of the global economy.  So, during difficult times like the recent crisis, shipping companies suffered badly.  Anecdotal evidence tells of hundreds of ships anchored off the shores of Singapore, idling away as there is too much spare capacity.

However, I am very much aware of the global economic recovery which is now well underway.  I targetted mainly three stocks in the second half of 2009: Healthway Medical for its defensive growth model, Golden Agriculture for the increasing demand for CPO and Saizen REIT for the compelling valuation and a contrarian play.  This year, I also increased my exposure to LMIR and AIMS AMP Capital Industrial REIT. Lately, I became interested in CapitaMalls Asia as I believe it would benefit from the rise of the Asian consumers.

Recognising that the global economic recovery is going to strengthen in 2010, it would be pure bigotry for me not to consider the shipping industry as a logical beneficiary. Latching once more on the theme that Asia is leading the world in this recovery, I decided to look at shipping companies with more of an Asian exposure.

Having learned some valuable lessons from this past crisis, I decided that the company I invest in should not have high gearing and it should be one that could control its costs well.  These factors are crucial for the survival of a company in hard times.  In this last crisis, many companies issued rights and even NOL went to shareholders with hat in hand despite having a powerhouse shareholder like Temasek Holdings:

"NOL's proactive capital raising will strengthen its balance sheet, enhance its financial flexibility and allow it to seize investment opportunities," Ong Beng Teck, managing director of investments at Temasek said in a statement. June 2, 2009 (REUTERS).

By some stroke of luck, the first shipping company I looked at in detail, Courage Marine, a dry bulk shipping business, has many of the qualities I am looking for. Established in 2001, the company has exposure primarily in Greater China.  This is their niche in the industry and fits well with my aim to look for a company which will benefit from a stronger and recovering Asia.

Being wary of the large capital expenditure that shipping companies have to make, I was very pleased to find that Courage Marine only buys and operates second hand vessels.  This maximises return on investment and minimises depreciation cost. Of course, what I then worried about was the cost of maintenance but they have been able to manage this as well, keeping cost of maintenance low.

I suppose this is the same rationale that buying a second hand car makes more sense than buying a new car for us common folks most of the time.  A new car depreciates rapidly in the first three years of its life.  If the cost of maintaining a second hand car is less than the premium we have to pay in order to buy a new car, it's a no brainer.

Next, I looked at gearing.  Courage Marine has very low gearing.  Gross gearing as of 31 Dec 2009 was at 6.2%, a reduction from 8.5% a year ago.  Taking into consideration that they have cash and cash equivalents of more than US$43m and total debt of only US$6.8m, Courage Marine is in a net cash position!

Courage Marine is not immune to economic slowdowns but through prudent management, it managed to reduce its debts and declare a dividend of US 0.47c per share for the year ended 31 Dec 2009.  Based on the last done price of S 20.5c, that is a yield of 3.1% (based on US$1 = S$1.37).  Not too attractive but try looking at the preceding three years when it declared dividends of US 1.888c, US 3.115c and US 1.41c.  Sounds more interesting?  This is a company that shares its profits with its shareholders.

Courage Marine has a NAV of US 10.41c per share.  At an exchange rate of US$1 = S$1.37, the NAV is S 14.26c per share.  At the last closing price of S 20.5c, it is now trading at a premium of 44% above NAV which I do not think is expensive.

Finally, what really caught my eye is the strong return to profitability in the fourth quarter of 2009.  Compared to a year ago, gross profit in the fourth quarter increased 523% and net profit margin improved to 25.9%!  I fully expect its revenue and profits to continue improving in 2010.  Taking last quarter's EPS as a guide, assuming that things stay stagnant, Courage Marine would have an annual EPS of US1.08c or S1.48c which, based on a share price of 20.5c, gives a PE of 13.85x.  Not expensive.  EPS is more likely than not to improve in 2010.

Courage Marine is a company that has a niche in the shipping industry.  It capitalises on its expertise in that niche and concentrates on what it knows best.  It is excellent in managing costs and it is conservative when it comes to financing new capital expenditure.  All these characteristics, I believe, translate into a strong competitive edge and business resilience.

When I arrived at this conclusion on 26 March, the next step was to look at the charts.  Its price closed at a high of 21.5c that day.  To me, 21.5c looks like the top of a base formation and I decided to wait and see if it would break out or retreat.  The next day, it went on to touch a high of 22.5c.  I thought I had missed the boat (pardon the pun) after all the FA that I did.

Fortunately for me, the price weakened to 20c on 31 Mar and seeing that it's where the flat 200dMA is and seeing how the rising 20dMA might just push up the price, I bought some then.  There is a chance that price might weaken further seeing how the MFI is in the overbought region but as the OBV does not suggest any heavy distribution activity, I believe that downside should be limited, perhaps to 19c, the confluence of the 100dMA and 50dMA.  A retest of the previous low would mean a floor of 17.5c although I do not think this likely.

I believe that Courage Marine is a well run company that is riding the waves of recovery and the market will recognise this in the usual way.  I would accumulate on weakness.

CapitaMalls Asia: A late reversal?

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.

Golden Agriculture: Further divestment at 60c.

I hope Golden Agriculture made many happy today as the reversal signals seen a few days ago followed through nicely.  The price closed at 60c today, the previous high. My overnight sell queue at 60c was done towards the end of the day.

Looking at the chart, it is obvious that Golden Agriculture is firmly back in the uptrend channel.  Price action formed three wickless white candles in a row, reminiscent of a pattern which chart watchers call the Three White Soldiers and this pattern could signal more upside to come.

MFI rose above 50% convincingly, signalling positive buying momentum.  OBV continues to rise, signalling continuing accumulation.  The MACD has crossed the signal line in a bullish crossover.  All the momentum oscillators are bullish and also hint of more upside to come.

I have drawn some Fibo lines to determine the next resistance levels to watch in case of further upside.  I would like to draw your attention to 63.5c and 64.5c as these would be in closer proximity to the uptrend resistance in the course of the new week.  64.5c was also the closing and opening prices of the peak achieved in mid January on the 11th and 12th respectively.  This price would likely be fresh in the memories of market participants and would thus be a strong resistance.  I do not expect it to be taken out for now but I could be wrong.

Bugbear? Volume has not expanded in this latest move up in price and this suggests that we should not be too euphoric. I have put my remaining Golden Agriculture shares in the queue to sell in case its price hits the resistance levels I have identified in the preceding paragraph.

Certainly, from a fundamental perspective, the very strong showing by crude oil which is trading at almost US$85 a barrel as of now might have a spillover effect on crude palm oil and this would surely benefit Golden Agriculture.

Related posts:
Golden Agriculture: Reversal confirmed.
Golden Agriculture: Partial divestment at 57.5c.

Unique visitors: Crossing the 40,000 mark.

It might be a cliche but time really flies.  It has been slightly more than three months since I started this blog last Christmas Eve. Has it been so long? It feels like I just started blogging last week.  I guess we don't feel the passage of time when we are doing something we enjoy.

Blogging has introduced new groups of people in my life.  I used to simply share ideas with friends and family but I am now sharing ideas in cyberspace and reaching out to a wider audience.  I have made contact with fellow bloggers and I have many visitors to my blog, some of whom have left comments and exchanged ideas with me. My social life has become a tad fuller.

Today, the number of unique vistors to my blog crossed the 40,000 mark.  This is overwhelming and I am truly humbled by the support my blog has received so far.  I guess I must be doing something right here.  Although this is really a personal blog, your support and encouragement give me that little push to continue blogging and sharing my ideas.  Thank you very much and have a great long weekend. :)


Thank You Images

AusGroup: Update.

AusGroup seems to have some trouble breaking resistance at 61.5c. If we draw a trendline support from 9 Feb, we see the support at 59.5c today, it is quite clear that the uptrend is broken.

However, I would like to point out that volume was rather low and, in fact, it is true for other down days in the past few weeks. Volume has been generally lower on down days and higher on up days for AusGroup recently. This suggests that a longer term accumulation is underway and this is confirmed by the rising OBV in recent weeks. However, with the MFI turning down, I expect some weakness in the near term but I do not expect a crash in price.

If 58.5c gives way, the next supports are at 57.5c (50% Fibo) and 56.5c (38.2% Fibo).  If the price action moves above the trendline support once more, resistance remains at 61.5c.

CapitaMalls Asia: Inverted black hammer.

CapitaMalls Asia's volume expanded on a down day as the 50dMA was breached.  It closed at $2.26, forming an inverted black hammer in the process, which happens to be another possible reversal signal.

OBV has declined but the overall trend of accumulation is still intact.  MFI shows reduced buying momentum while the MACD has dipped below zero, signalling the end of positive momentum.  Having said this, the picture of a low volume pullback has not changed.

Drawing Fibo lines to determine where the supports are in case the price does continue to decline shows the next support levels at $2.25 and $2.23.  The low in February was established at $2.19 and should be a strong support if tested.  The downside is still pretty limited, therefore.

------------------------------------------------------------

The Chinese people love to shop. Grand Gateway Plaza in Shanghai:

Golden Agriculture: Partial divestment at 57.5c. (Rabobank's John Baker speaks.)

Golden Agriculture breached the resistance at 57.5c and closed at 58c, forming a nice bullish white candle in the process.  In my usual style, I partially divested at resistance on the way up and it's 57.5c in this case.  I have put in a sell queue at the next resistance of 60c, the previous high.

Although price action formed a white candle today, the slight reduction in volume creates a bit of unease, especially when volume expanded on the STI as the index tumbled almost 46 points to close at 2,887.46.

OBV continues to rise and MFI has turned up, indicating continuing accumulation and a return of positive buying momentum.  This is comforting.  MACD has touched the signal line and a bullish crossover seems imminent.

-------------------------------------------------------
Baker Says Palm Oil `Stands Out' Among Soft Commodities.
22 March 2010, Bloomberg.

A tale of two reversals and Saizen REIT.

In the last two sessions, I spoke of reversals for CapitaMalls Asia and Golden Agriculture and how their prices are likely to move higher.

CapitaMalls Asia disappoints today as its price closed at $2.29, supported by the 50dMA, forming a black hammer in the process.  A black hammer is actually another possible reversal signal.  The trading volume continues to decline which re-inforces the picture of a low volume pullback.  The MFI turned down, forming a lower high while the OBV is more or less flat.   All these suggest that the selling is half-hearted at best.

I continue to believe that buying at the current price has limited downside even though the buy signal on the MACD yesterday was negated today.

Golden Agriculture, on the other hand, put on a satisfying show of strength as it gapped up and closed at 57c, forming a bullish white candle in the process today.  Volume has also expanded with the rise in price, suggesting some sustainability.  The MACD's buy signal is confirmed as it moved upwards today, poised to do a bullish crossover with the signal line.  OBV continues to rise, signalling ongoing accumulation.

MFI, however, continues to decline, suggesting weak buying momentum.  We want to see the MFI turn up as that would signal a strengthening buying momentum.  Otherwise, any appreciation in price might turn out to be mediocre.

Saizen REIT has a new substantial shareholder, Credit Suisse Securities (Europe) Limited.  Credit Suisse Securities (Europe) Limited bought 2,149,000 units on 25 March 10, making it a substantial shareholder with 49,659,000 units or 5.2112 % of Saizen REIT.  Percentage of issue share capital computed based on unit capital of 952,927,055 units.  Saizen REIT closed unchanged at 16.5c today.  Longer term MAs are all rising and the longer term uptrend is intact.

CapitaMalls Asia: Reversal confirmed. (With comments on the US economy.)

Last Friday, I suggested that a reversal might be on hand as price action formed a white spinning top, with stalling selling pressure and continuing accumulation.

MFI turned up today and OBV is still rising as price action formed a white hammer.  Suggestion is for the price to continue rising with immediate resistance being provided by the 20dMA at $2.32.  Breaking this will see the recent high of $2.41 tested as resistance and I have an eventual target of $2.55 which should be the top of a longer basing process. The MACD has a buy signal today.

Buying at the current level has limited downside as it would be almost at the support provided by the 50dMA at $2.29.  Vested.

------------------------------------------------
Growth May Slow But "There's No New Recession Anywhere in Sight"

Posted Mar 26, 2010 01:51pm EDT by Peter Gorenstein



My sentiments are similar for 2010.  This guy makes sense.

And, as for a double-dip recession, Achuthan says it isn't in the cards. "There's no new recession anywhere in sight. In 2010, the business cycle remains your friend," he says with confidence.
---------------------------------------------------

IMF foresees rapid US growth
AFP - Tuesday, March 30

WARSAW (AFP) - – The US economy looks set to return to relatively rapid growth soon, International Monetary Fund chief Dominique Strauss-Kahn said here on Monday. "The US economy, whilst it has been hard hit by the crisis, may recover rather rapidly," Strauss-Kahn said in a speech at the Warsaw School of Economics, during a visit to Poland.

"It's a flexible economy," noted Frenchman Strauss-Kahn, who is managing director of the Washington-based global lender.

"We'll see how rapid the recovery in the US economy can be. But I'm rather confident that the US economy will grow rather rapidly again quite soon," he added.

In January, the IMF raised its forecast for US growth this year to 2.7 percent from output in 2009, from its earlier 1.5-percent forecast. Strauss-Kahn did not say whether the IMF was set to revise its forecast upwards again.

Golden Agriculture: Reversal confirmed.

Last Friday, I suggested that Golden Agriculture spotted a Bullish Harami Cross pattern.  OBV showed a cessation of distribution and a reversal to accumulation.

Price action formed an inverted white hammer today with OBV continuing its rise and the MFI upturning, suggesting a return of buying momentum.  The MACD also spots a buy signal today.  The support at 54.5c is confirmed and is underpinned by the 50dMA.  Immediate resistance at 56c.  In the event that this is taken out, next resistance is at 57.5c.  This is followed by 60c, the recent high. 

The rising 100dMA is at 52c and the rising 200dMA is at 47c.  The longer term uptrend is intact.  In the immediate term, we want to see the price closing above 55c to rejoin the uptrending channel to resume the short term uptrend.  A close above 56c would be a firm signal that the short term uptrend is back in play. Vested.

A movie: How to train your dragon.

I know this has nothing to do with the stock market but we need to unwind and not think of the stock market all the time, right?

I am sharing this with all my readers:



Uber cool! I must watch this movie!