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Last month, I commented that I was almost sure that Yongnam's stock would hit 31c per share and this has happened sooner than expected. Today, the stock hit an intra day high of 31.5c.
Technically, I have observed that the share price seems to move in bands of 1.5c. So, overcoming resistance at 31c, we could see share price rising to 32.5c and 34c over time.
Fundamentally, it is not so easy to forecast Yongnam's earnings as it depends on the number and value of projects they might capture in future. There really is no consistent recurring income base which can be used.
However, if we were to accept last year's performance as the worst case scenario and be more conservative, at 31c per share, Yongnam is trading at a PE of almost 9x. It is hardly expensive.
If we accept CIMB's forecast of 5.2c EPS in 2013, then, PE is much lower at almost 6x. Definitely inexpensive.
CIMB thinks 5.2c EPS is attainable because previously delayed projects would be ramped up in 1Q 2013. Various landmark projects are also expected to boost earnings in 2013. (See CIMB's report: here.)
Is share price going higher in the next few sessions? The formation of a long white candle on the back of extremely high volume is very bullish. Share price could indeed move higher but because my initial target price of 31c has been hit, I decided to do another partial divestment today.
After all, to sustain the upward movement in price from here, much higher volume is probably required. Is this likely? I don't know but locking in some gains as price action went parabolic seems like a good idea.
Keep an eye on the momentum oscillators. If lower highs form although share price has moved higher, we would see the formation of negative divergences. This would sound a warning bell although it does not mean that share price would decline right away.
Related post:
Yongnam: Investing in infrastructural developments.
Bloggy Award
6 comments:
I do some trading on the side beside buy and hold. It is a good bet to short when there is a strong breakout like what I did to cmz when it rallied to 1.23. I also sold off part of my holding at that point.
So taking profit is a good portfolio management at this point.
Hi seefei,
You are a nimble footed trader cum investor, I see. Good on you. :)
My style is probably more ponderous without as much excitement and rewards.
Whatever our style, if we make money, I am happy. :)
Hi AK,
Amazing that you have catch the peak at 31 cents... i sold my remaining holding at 30.5 cents and sitting on the sideline and will pick it up again when it correct.
Although the new development look good but yet to have any result...
The other competitors for the Myanamar airport project seem to pretty strong too and have local partner where as Yongnam are all foreign players.
Well done to all who have profited from this investment and good sharing by AK.
Cheers
Yee
Hi Yee,
I simply added 1.5c to 29.5c to arrive at 31c. This is based on my observation that the share price seems to trade in bands of 1.5c.
I am sure I was lucky as well that its share price overshot my target and touched a high of 31.5c. :)
About 50% divested, I am holding on to my remaining long position as the stock's uptrend is intact and momentum strong.
There is a chance of a pull back to support but, many times, there is no accounting for Mr. Market's actions. Best to hedge. :)
We initiate coverage on Yongnam Holdings with a BUY rating and Street-high TP of SGD0.45, for 53% upside.
With a leading and defensible position in Southeast Asia for structural steel and strutting assets, it is a multi-bagger in the making as it is poised to transform into an infrastructure powerhouse over the next five years, riding on an unprecedented boom in Asia.
Yongnam is perceived as a construction firm, which generally has low pricing power and cyclical earnings. But it has recorded profit growth for six consecutive years prior to FY12 and its margins have consistently outshone its peers.
This suggests that its business enjoys high barriers to entry. Unmatched technical expertise
in its niche coupled with an unparalleled track record of iconic projects makes it the go-to company for most major international contractors.
Maybank Kim Eng, 16 April 2013
Shares of construction firm Yongnam Holdings jumped as much as 6.3% to $0.335, the highest since late 2007. Nearly 46 million shares were traded, 3.9 times the average full-day volume over the past 30 days.
"Management expects the resumption of major contract wins in the second half of this year, which we think will be positive stock catalysts," Maybank Kim Eng said, noting that the company's consortium is among the front-runners for airport projects in Myanmar. The broker has a "buy" rating and a target price of $0.45 on the stock.
Reuters
Tuesday, 07 May 2013
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