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.
i got kep corp cfds during x'mas week after it bounced off support at 810. entry at 822. and u're right. the price hasn't been moving much.
ReplyDeletean ascending triangle seems to be in formation in the wkly chart. may it break out soon so i can save on interest cost..
cheers
koori
Hi Koori,
ReplyDeleteThe current uptrend for Kep Corp is still intact. For the ascending triangle pattern to be validated, price will have to move higher over the next two weeks and retest resistance provided by the 200wMA. Reason why I'm not so bullish is that 5 weeks ago, a white spinning top was formed and this was followed by a big black candle. Since then, the 20wMA has flattened. The 20wMA is at $8.10 or so. If we see a close below this over the next two weeks, more weakness is likely. Of course, there is that glaring negative divergence. Good luck, mon ami! :)
Hi AK, Keppel drops a lot due to margin squeezed by competition and property market not bright, time to re-visit? At what price you may like to go in?
ReplyDeleteCrude oil inventory is high:
ReplyDeletehttp://www.bespokeinvest.com/thinkbig/2012/11/15/crude-oil-inventories-rise-less-than-expected.html
Hi Ah John,
ReplyDeleteKeppel Corp is a huge conglomerate and I don't pretend to know its businesses well. I can't. ;p
Price wise, the weakness is obvious. Technically, there is a possibility and somewhat high probability that share price could hit $9.60 and in very bearish circumstances, even $8.40.
I will wait. If I miss it, no matter. :)
Hi AK, thanks. Yes, patience is important.
ReplyDeleteHi Ah John,
ReplyDeleteIt also depends on how badly we want something. If it is a few bids away from your target price, you could take a nibble anyway. After all, TA shows us the supports and resistance but it does not mean that they would be tested. :)
Hi AK,
ReplyDeleteGiven current pessimistic oil price, will you be relooking on Keppel Corp? May I ask will you prefer to nibble semb marine ovet keppel corp? I believe that keppel's property segment and its higher gearing level will take more toll on its balance sheet after interest rate hike in the near future, albeit at current price keppel has better yield than Semb marine. Could you enlighten me please? (Read talk to yourself). Thank you very much.
Hi WS,
ReplyDeleteI believe that gearing levels for KepCorp, SembCorp Industries and SembCorp Marine are all elevated this year compared to last year. Of course, higher interest rates might impact them to different degrees.
Their debt in the form of bonds will not see any increase in finance cost. So, that is good news in an environment of rising interest rates as it means that although their balance sheets are weaker, their earnings might not be too badly affected by higher interest rates.
I feel that the biggest gains in the real estate markets are probably behind us. The overall picture is surely weakening. I know that Keppel Land, prior to being taken private, were trying to increase their recurring income base. They know the problem that they must face in the many years ahead is one of oversupply and weaker demand. If they can do this well, they would become more resilient. KepCorp probably is confident that they can do it well. They must do it well because they need Keppel Land's recurring earnings to be higher to bolster the flagging earnings from their own shipyards.
As for SembCorp, the Singapore utilities picture is one of intense competition but their growing international footprint is what I am looking at. Utilities projects (energy and water, for examples) are high CAPEX in nature but once they come on stream, the cash flow is predictable and assured. SembCorp's utilities business will grow stronger, barring unforeseen circumstances, in the next couple of years as more projects are completed. They should be able to pick up some of the slack from SembCorp Marine's less impressive results.
Which one to get into? That is your call, of course. :)
This was something I blogged about in January:
ReplyDeleteA tale of two Keppels: Win, lose or draw?
Hi AK,
ReplyDeleteThank you very much for your wisdom. Appreciate it :) hope you can organize more "evening with friends soon"! See ya again!