STI at 2,425 points?

What we have is a sea of red.  Sentiments have not been so bearish in a long time as the HSI sank below 20,000 points.  I continue to believe that any rebound that comes along in the near future should be an opportunity to reduce exposure in the stock market. This is more so for stocks which are clearly in a downtrend. Having said that, the STI is holding up rather well under all the selling pressure.

As the index retreats, the OBV declines. This is an obvious sign of distribution. The MFI has been forming lower highs and lower lows.  Positive buying momentum is lacking.  In the near term, the 2,780 level or so should be an important support.  This is confirmed by Fibo lines, the rising 200dMA as well as candlesticks.

Looking at weekly charts is sometimes very revealing. If we look at STI's weekly chart, we understand why it is more resilient than some other indices. We understand why the 2,780 level is an important support. 2,780 is also where we find the uptrend line and the flat 200wMA. If the longer term uptrend is to stay intact, 2,780 must not break. Will it break?  I cannot say for sure, of course, but the technicals are rather weak.

1. Volume has been rising as the index retreated in the past few weeks.

2. The high achieved in the week of 12 April was accompanied by a lower high on the OBV compared to the high achieved in the week of 4 January, telling us that there was less accumulation taking place in April. Similarly, the MFI was lacklustre on 12 April compared to where it was on 4 January.

Not all weekly MAs are uptrending.  The 100wMA is still declining and is currently at 2,425. The chances of the STI retreating further exist.  Much depends on whether 2,780 holds up. Could we see the STI at 2,425 in the coming weeks? Perhaps.

Healthway Medical: A weak first quarter.

Earlier this year on 24 Feb, I said that Healthway Medical's share price did not provide value for money anymore. By then, I was 80% divested. Primarily, I was concerned about the heavy dilution which took place due to the rights issue and a following share placement which increased the number of shares from 1.384b shares to 1.841b shares.  I explained that I would not buy more Healthway Medical's shares unless I feel it provides value for money once more.

Even earlier on 16 Jan, I explained the rationale for partial divestment based purely on technical analysis. Healthway Medical's share price gained almost 40% in a matter of days.  "The fundamentals and prospects are still good over the longer term. I just feel that the market became a little too enthusiastic and sent prices up too high and too quickly. I liken it to a sprinter who is able to run very quickly over short distances but the speed is unsustainable over longer distances."

Thus, in the recent months, informed by a combination of TA and FA, I sold down my stake in Healthway Medical and at the moment, I am almost 100% divested, retaining only the rights shares and shares from the scrip dividend exercises.

Technically, now, Healthway Medical is testing resistance at 15.5c after it went CD. Fundamentally, I am still waiting to see if Healthway Medical could utilise the funds raised from its rights issue and share placements well enough to increase earnings at least proportionally to restore EPS to pre-dilution levels. With this in mind, I looked at the 1Q 2010 report released on 14 May.

Compared to the same period last year:
1. Revenue reduced 6.3%.
2. Staff cost increased 20.1%.
3. Profit before income tax reduced 68.5% to S$1.409m.
4. Total liabilities remain more or less the same.
5. Cash and cash equivalents increased from $28.4m to $39.4m.
6. Cash flow from operations became a negative $4.946m compared to a positive $3.974m.
7. Due to its rights issue, cash flow from financing activities is a positive $19.2m.
8. EPS is 0.09c, down from 0.28c.

I would draw attention to points 3, 6 and 8 in bold. The results are disappointing. Given the increase in the number of shares by 33% or so, in the short term, I was expecting the EPS to reduce proportionally by 25% or so.  EPS has instead reduced by 70%!

To be fair, Healthway Medical is going through an expansionary phase and would have more costs and greater expenses. As an investor, to be prudent, I would continue to wait for greater clarity on whether higher earnings would follow, maintaining that the share price at current level does not offer good value.

The technicals suggest that the longer term uptrend is still intact and the rising 200dMA should provide initial support at 14c. The declining 20dMA has formed a dead cross with the rising 100dMA.  Two gravestone dojis were formed in succession in the last two trading days. MFI is flat and OBV has been declining. Ominous signs.  The only consolation I see is the reducing volume as price declined.

There is also a possibility that a double top was formed by the highs in January and March respectively. If the pattern is valid, there is a long way to fall.

Related posts:
Healthway Medical: An updated valuation.
Rationale for partial divestment.

Golden Agriculture: An inverted cross.

A doji that looks like an inverted cross. Not good.  Well, it's not because it invites the devil in but it suggests that price tried to push higher but ended up in failure at the end of the day.

Fundamentally, CPO price declined again today and, thus, continues the downtrend. This is probably one reason why Golden Agriculture's share price is lacklustre.

MFI has formed a slightly higher high. It remains to be seen if it would form a higher low. MACD and OBV are both flat. Volume is much lower.  All these suggest a lack of interest from market participants.  If this continues, chances are greater that the price would drift slowly lower.

55.5c remains the resistance level to watch for now. This was the price at which I divested some of my remaining investment in the company recently on 10 May, observing that the uptrend has been compromised.

SPH: Another black candle day.

After doing a partial divestment of my investment in this company at $3.95 on 10 May, the price has been closing lower. This is the 4th black candle day in a row. I was hoping that price would move higher to test the next higher resistance so that I could divest more of my investment. No such luck.

MACD is moving deeper into negative territory. MFI formed a lower high on 10 May and has continued declining since, suggesting declining positive buying momentum. OBV is more or less flat.

On a positive note, the volume has been rather low in the last four sessions which means an absence of heavy selling.  If price does move higher towards the declining 20dMA at $4.00, I would very likely sell more.  If it moves to retest the recent low, I would wait to see if a higher or lower low is formed before deciding on a course of action.

CapitaMalls Asia: Another up day.

CapitaMalls Asia staged another up day on similar volume as the prior session.  I queued overnight to reduce exposure further at $2.12, not confident that this level would be taken out.  I also queued to sell at $2.17, two bids below the next resistance which was identified at $2.19, if $2.12 should be taken out.  Of course, both sell orders were done. I have a small position left. 

What will I do next? If the price moves higher to test the higher resistance level at $2.23, I would exit totally. If it does not and shows signs of a slide back downwards, I would also exit totally as it might go on to retest the recent low. The recent increase in price on rather low volumes lacks conviction and does not bode well for long only investors. I would watch out for the counter to form a base, lacking which, it should form a higher low, before I consider going long again.

This is the second counter I have cut loss on this year after China Hongxing.  In a way, it is good to lose some money after a long winning streak as it reminds me that I am human and that I make mistakes too.  Must not become overly confident which might really sink me one day.

I read somewhere that it is normal to give back some of our gains to the market when the trend turns.  The person being interviewed said to give back 25% of our gains is acceptable. Personally, I think that is too much. ;-p

Courage Marine: 1Q 2010 results.

Courage Marine presented its 1Q 2010 results today with the BDI at an auspicious number, 3,888! A happy coincidence! 

Quarter on quarter, operationally, its revenue improved 12.9% and gross profit margin improved from 19.1% to 27.8%.  Its balance sheet remains very strong as it retains a nett cash position.  Cash flow from operations in 1Q 2010 was US$5.3m.

Technically, Courage Marine's chart looks weak.  However, there is no obvious selling down of the stock.  This is confirmed by the OBV which is flat. MFI is in the oversold region and price is currently below all the daily MAs.  If the price action does not recapture supports, the malaise could continue and price could drift lower.

I have a list of companies and REITs which I would like to buy on any near term weakness in the next few months. Courage Marine is one of them.

Read press release here.

Related post:
Courage Marine: Riding the waves of recovery.

Charts in brief: 13 May 10.

CapitaMalls Asia:  MFI continues to rise from the oversold region.  MACD turned up towards the signal line. OBV has turned up. Things are looking up, it seems.  Then, we see the white candle with a long wick on top.  This is a weak white candle. Volume has expanded but not significantly so on an up day.

$2.12 remains a strong resistance as market participants remember this as the support that failed not so long ago on 4 May.  The descending 20dMA is, coincidentally, at $2.12 as well which adds to the downward pressure. 

I queued overnight to reduce exposure at 2 bids below resistance at $2.10, cutting losses in the process.  I am not confident that $2.12 could be taken out but if it does get taken out, the next resistance is at $2.19, the bottom of the base formation earlier in February.

Golden Agriculture: CPO's price declined again today, continuing its downtrend. For Golden Agriculture, it is quite obvious that 55.5c continues to be a formidable resistance. That the decline has halted is evident as the MACD has flattened. The OBV has flattened too.  Price seems to be moving sideways within a range for now. 53c to 55.5c is my observation.  The near term downtrend is still intact.

Hyflux Water Trust achieves DPU of 1.16 cents for 1Q
Thursday, 13 May 2010

© 2010 - The Edge Singapore

Related post:
Charts in brief: 12 May 10.

LMIR: 1Q 2010 results.

For me, the important numbers are the following:

1. LMIR is trading at a huge 43% discount to NAV 84c.
2. Gearing is very low at 10%.
3. Annualised yield is 10% at the unit price of 48c.

Despite the very strong fundamentals, LMIR's unit price has been languishing.

Technically weak, it has closed below the 200dMA support today after forming lower highs since the start of the year. The next support is at 47c. If this breaks, price could fall to as low as 44c, I reckon.

MFI has been forming lower highs, suggesting a lack of positive buying momentum, making a further weakening in price for this REIT probable. So? I would definitely accumulate on weakness if it does come to that. 44c would be a bargain!

See presentation slides here.

Related post:
LMIR: More units at 10% yield.

AIMS AMP Capital Industrial REIT: Results.

A nice set of numbers and within expectations.  A dpu of 0.5376c will be paid out on 28 June. Annualised dpu of 2.1504c or an annualised yield of 10% based on a unit price of 21.5c.  Low gearing of 28.9% and a NAV of 31c make this REIT a very attractive proposition for anyone seeking reliable high yields as a source of passive income.

Technically, there seems to be some underlying support for this REIT.  MFI and OBV are both uptrending, although choppy. The MAs are uptrending too. 23c remains the resistance to watch and support has been established at 20.5c.  I would very much like to accumulate more units of this REIT.

See presentation slides here.

Related post:
High Yield Portfolio.

Charts in brief: 12 May 10.

Courage Marine: BDI is up 3.1% at 3,822 today. Looking good for dry bulk shipping. Very low volume today with price at 19.5c. MFI remains in the oversold region. OBV is flat. Investors are not taking up big positions either way. Waiting for the quarterly results? Maybe.

CapitaMalls Asia: Price is detaching from the lower limits of the Bollinger bands. Although momentum has turned up, the volume is low. Let us see if immediate resistance could be taken out and if $2.12 would be tested. I would definitely reduce exposure then.

SPH: The technical weakness is obvious. Volume has been declining as price rebounded from a low of $3.76 four sessions ago. MFI has been forming lower highs. I would wait to accumulate on further weakness.  If price falls closer to $3.70, I would be tempted.

Related post:
Charts in brief: 11 May 10.

Golden Agriculture: Net profit rose 932%.

Chu Yeow commented during lunchtime that Golden Agriculture "turned in quite a good quarter". It was an understatement, I found out. The impressive set of numbers resulted in a white candle day for the counter. What we have looks like a bullish harami and, if valid, will see 55.5c resistance taken out.  The technicals do suggest that the rate of descent has slowed. If 55.5c is taken out, the next resistance level would be 58c.

"Golden Agri-Resources says net profit attributable to shareholders rose 932% to US$89 million ($122.9 million) in the first quarter 2010 (1Q 2010) from US$9 million in (1Q 2009) despite low seasonal production....

".........The planter’s financial position as at end of March 2010 remained at a healthy level with conservative gearing and sufficient cash balance. Total assets maintained at US$7.83 billion while total liabilities were recorded at US$2.21 billion."


Read full article:

Golden Agri-Resources’ 1Q net profit surges 932% to $123m
Wednesday, 12 May 2010

© 2010 - The Edge Singapore

 
Related post:
Three portfolios and three counters: Future gains and passive income.

Gold is higher once more.

Gold hits record high in Asian trade
Posted: 12 May 2010 1113 hrs

HONG KONG : Gold opened at a record high of 1,228.00-1,229.00 US dollars an ounce in Hong Kong on Wednesday, as investors sought a safe-haven over deepening concerns about the eurozone debt crisis.

The precious metal closed in Asia on Tuesday at 1,208.00-1,209.00 dollars but later climbed as high as 1,224.82 dollars an ounce in European trade.

Analysts said the commodity was likely to maintain its safe haven role while other markets remained vulnerable.

The previous record for the metal was set on December 3 last year when it reached 1,226.56 dollars.

"The response of the central banks and the IMF to the southern European mess is almost guaranteed to ensure continued volatility in world markets," said Capital Spreads analyst Simon Denham.

Investors had on Monday welcomed the European Union and International Monetary Fund aid package worth 750 billion euros (one trillion dollars) to resolve the debt and budget deficit crisis in Europe.

However, the euphoria faded on Tuesday amid resurgent doubts over countries' ability to reduce their deficits.

Read complete article here.

Gold Surges: Time to Climb on Board or Is the Party Just About Over?
Posted May 12, 2010 03:06pm EDT by Heesun Wee



Related post:
Gold at US$1,210 an ounce.

Saizen REIT: 3Q FY2010 Results.

A good set of numbers overall for Saizen REIT.  The only thorn in its side remains the CMBS for YK Shintoku which it defaulted on late last year.

Key points for me:

1. Saizen REIT's properties are all Freehold and not Leasehold.  So, there is no "depreciation" which some investors might be concerned about.

2. Occupancy rates have been consistently above 90% even through the financial crisis which reinforces the idea that demand is relatively inelastic for Saizen REIT's properties.

3. Average rental rates have stayed consistently above JPY1,500 psm.

4. If YK Shintoku were to suffer foreclosure, the nett effects would be a 22% decrease in nett property income, a 10% reduction in NAV and its gearing level would decline from the current 36.9% to 27.4%. 

A 22% decrease in nett property income would probably mean a similar reduction in dpu from my projection here. Based on the current number of units in issue, the dpu would reduce from 2c to 1.56c giving us a yield of 9.45%.  The NAV would reduce from 39c to 35c approximately.  With the proforma foreclosure gearing at 27.4%, Saizen REIT would emerge unscathed and, in my opinion, stronger in its balance sheets. So, if YK Shintoku goes through a foreclosure, Saizen REIT remains a great investment as it has high yield, a big discount to NAV and low gearing.

The CMBS lenders for YK Shintoku, as expected, are dragging their feet and still "formulating course of action".  Why would they want to go ahead with foreclosure when they are receiving 7.07% interest payment now? They are lenders, not property managers or investors, after all.

YK Shintoku's property income is more than sufficient to cover the punitive interest payment due to the default.  So, it is still more positive than negative to keep the status quo.

Presentation slides here.

Saizen REIT to resume FY10 distribution to unitholders in Sept
Wednesday, 12 May 2010

© 2010 - The Edge Singapore

SAIZEN REIT:
Out of woods and resuming cash distribution
Written by Sim Kih, Thursday, 13 May 2010.
Read the article in NEXT INSIGHT here.

Related post:
Saizen REIT: March 2010 presentation.

Charts in brief: 11 May 10.

STI opened higher but declined to close lower at the end of the day. The huge rallies in Europe and the US did not manage to lift Asian markets today, painting a picture of uncertainty with a bearish bias.

STI drops 0.8% to 2,857.67 at closing
Tuesday, 11 May 2010

© 2010 - The Edge Singapore

Courage Marine: BDI higher at 3,707 today. MFI has just dipped into oversold region. OBV is flat.  Immediate resistance remains at 20c. Picture of low volume pullback continues. As the fundamentals are good, I would accumulate when the technicals give me the signal.

Golden Agriculture: CPO declined to close at RM2,505. This continues the downtrend. Things look pretty weak, technically. We have an engulfing black candle today which negated the morning star setup. Buy signal on the MACD has been negated as well. The rising 200dMA might be tested as a support soon if the weakness continues.

SPH: Opening at $3.95 only to move and close lower at $3.88 is bearish. What has been formed is a bearish piercing line pattern as the black candle declined to cover more than half of the previous day white candle. $3.95 is now burnt into the psyche of traders as an important resistance level due to the failure to move higher today.

In summary, for most counters, prices did not move higher and, so, I did not get to sell more at higher resistance levels with the exception of Healthway Medical which I managed to sell off most of my remaining shares at resistance.

I will continue to use any rebound to sell into strength, for stocks with weakening technicals.  I will accumulate when the technicals show signs of bottoming, especially for stocks of companies with sound fundamentals. The market is now a riskier place for long only investors like myself.

Dow 8500 Before 11,500:
Sell the Surge, Suttmeier Says
Posted May 10, 2010 09:47am EDT by Aaron Task
 


Related post:
Charts in brief: 10 May 10.