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I bought shares of Wilmar's towards the end of the day at $3.28 a share as I observed what I thought to be weaker selling pressure on the part of Mr. Market. There seems to be a reluctance to sell at lower prices and we see hints of this in the chart.
We see the MACD higher as share price made a lower low.
This suggests that negative momentum has weakened. The CMF, a momentum oscillator that measures money flow, is also encouraging as it has moved into positive territory.
The candlestick formed today resembles a hammer and this is a bullish reversal signal. Of course, it needs confirmation in the next session.
In case of a continuing decline in share price, I see the next support level at $3.23.
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31 comments:
hi ak
could you share your reasons for getting into this counter ?
The like of Olam, Noble and Golden have been badly battered and analysts are asking investors to go neutral on put on hold.
is this a take profit on counters and rebalancing to potential counters move ?
I mean, why not increase to your existing portfolio like saizen, marco ,etc ?
thanks
mr chua
hi ak
what is your reasons for buying into this counter ? analysts asked to stay neutral ?
is it a move of taking profit and staying vested in a counter you see upside when market turns later ?
thanks
wilmar is an integrated palm oil producer. the lowering of palm oil crude will boost its bottom line and the bird flu is providing a window for buying in at such low price.
good timing AK!
Hi Mr. Chua,
As your comments are not identical, I didn't know which one to publish. So, I published both. :)
I will add to long positions as long as I think it is favourable to do so. The key is not "favourable" but "I think". ;p
I might base my decisions on either FA or TA or both. I don't really have a preference.
At $3.28, fundamentally, I don't think Wilmar is expensive but neither is it cheap, However, technically, it looks like it could be rewarding trading the stock.
Hi seefei,
I don't really know how the bird flu in China is going to develop and how it would affect Wilmar's business. The move to buy is based on TA. ;p
If I should be wrong, at $3.28, the stock is not expensive and the next support is at $3.23. So, it seems pretty safe from both FA and TA perspectives. :)
Hi AK,
Would it be possible to ask what will be an exit price from a TA perspective? Is that possible? I am still learning so please pardon me if the question doesn't make sense.
Hi matt,
TA shows us where the resistance and supports are, amongst other things. We want to buy at supports in an uptrend and sell at resistance in a downtrend. That is the general idea, anyway.
In this instance, I am looking at a likely positive divergence and also a potential double bottom formation. If valid, the immediate target is $3.55 with an eventual target of $3.75.
We should remember that these are targets and there is no guarantee that they will be hit.
Hi AK,
Thank you very much. Yes I understand that those are targets that may not hit. Cos my targets are almost always misses... haha.
Thank you very much (again)!
Hi matt,
Almost always misses? That makes the two of us. ;p
You are welcome. :)
CIMB is positive on Wilmar’s Moroccan sugar acquisition.
“Wilmar’s acquisition of a strategic 27.5% stake in Cosumar gives the group exposure to the regulated Moroccan sugar industry and access to Africa’s structurally sugar-deficient market.
It can add value by introducing better techniques for farming and procuring raw sugar.” It views the asset valuations are fair, estimating the deal values Cosumar at US$956 million ($1.05 billion), representing a historical P/E of 11X, below the 14X-17X historical P/E for leading Malaysian sugar refiner MSM Malaysia.
It expects the deal to enhance Wilmar’s future earnings base by around 1% in FY14.
It keeps the stock at Outperform with $3.74 target. The stock is up 0.6% at $3.29.
Dow Jones & Co, Inc
Wednesday, 17 April 2013 17:07
Hi Ak,
I realised that you are able pick bottoms and supports with confidence. However, I'm curious.
1) Do you short on Resistance during bear markets...?
2) Do you hedge your portfolios using CFDS or any other financial instruments?
I haven try these methods yet.. Though I have the intentions to in the future.. but I think these are the ways to reduce volatility of ur portfolio?
Hope to hear from you... :)
Thanks..
Best Regards,
Dave
Hi Dave,
I am a long only investor. I don't short and I have no idea what is a CFDS. I am rather unsophisticated when it comes to investing.
I have been primarily invested for income for a while now and I believe the constant passive income stream from my portfolio helps to lessen concerns regarding volatility. Well, I know I am less bothered by price movements these days at least. :)
Hi Ak,
Cfds is a short form for contract for differences. This is a OTC product that can allow u to leverage up to 10x of ur capital outlay . U can go short without borrowing shares or long up to 10x of ur cash . However, u need to pay a little of financing fee.. It includes indexes, currency, shares etc..Some brokerage like Phillips kimeng offers. For your info...
I see. I thought shorting can reduce our risk exposure (beta) because a market crash can actually be quite scary? Yup regular income is essential I believe..
Thanks for sharing :)
Hi Dave,
Oh, ok, I know CFD. I went for a talk many years ago at Phillip Securities at the invitation of a friend. I didn't like the idea of leverage back then and I still don't like the idea now. Of course, this is not a statement on the tool's usefulness. It works for some, I am sure.
As for shorting, I am sure people who are savvy with shorting will make money. Again, it is just something that I don't do.
Of course, if you would like to share your findings, please do. I will be quite happy to put up a guest blog post from you on the subject. :)
Wilmar International Ltd - Bird flu concerns likely less than initially feared
Recommendation: Accumulate
Previous close: S$3.34
Fair value: S$3.70
• Impact from China’s bird flu likely limited
• Vertically integrated model resilient to low CPO prices
• Upgrade to Accumulate with new TP of S$3.70
- Phillip Securities Research Pte Ltd, 22 April 2013.
Hi AK,
I will of course would like to share with you too! :) However, I think I'm not ready yet at the moment... Anyway, I heard your Audio interview ! well done!
Hi Dave,
Thank you for the compliment and I look forward to your sharing on the topics of CFD and short selling in future. :)
Wilmar International Limited (WIL) has acquired a strategic 27.5% stake in Cosumar SA, a Morocco-based sugar producer.
While we see the latest acquisition dovetailing nicely with WIL’s strategy of becoming a global sugar player, the near-term impact is likely going to be muted by still-weak sugar prices.
Weaker sugar prices notwithstanding, we believe that WIL’s large distribution network in China puts the group in a good position to capitalize on the expected increase in sugar consumption there.
Maintain BUY with an unchanged S$3.90 fair value (based on 15x FY13F EPS).
OCBC Research
Wilmar International has posted a 23 per cent rise in first-quarter net profit to US$315.4 million.
It was largely due to a recovery in its oilseeds and grains segment.
The company also said that the bird flu outbreak in China will affect meal consumption in the short-term.
It remains optimistic though about the long-term prospects of the country.
08 May 2013 8:56AM, CNA.
Wilmar International posted better-than-expected 1Q‘13 net income of US$314 million which was up 53% y-o-y.
The Group’s debt to equity ratio dropped to 0.8 X, from 0.85X in 4Q ‘12, with interest coverage standing at 23.6X.
Overall, the firm posted a decent set of quarterly earnings results, driven by the encouraging turnaround of its Oilseeds & Grains division.
Lim & Tan, 8 May 2013.
Nevertheless, reported net profit rose 23.3% YoY (but fell 33.9% QoQ) to US$315.4m; excluding non-operating items, core net profit jumped 52.6% to US$313.7m, although down 21.8% QoQ, it still met 23.6% of our full-year forecast.
OCBC Research, 8 May 2013.
3.28 looks like a good price now... I was hoping for some lower level and didn't manage to get in... Just another missed chance...
Hi Jay,
Well, I did get some at $3.00 too and it now looks like I should have bought a lot more back then. ;p
Simply put, we could be looking back a few months later and think that $3.41 was cheap. :)
Wilmar International, the world’s largest palm oil trader, plans to cut ties with Indonesian suppliers that clear land with illegal fires after blazes engulfed Singapore in a record haze.
Wilmar, which bans burning on its own plantations, relies on third parties for more than 90% of the crude palm oil for its refineries.
- Bloomberg
Net income was $218.5 million ($277.2 million) in the three months ended June 30, compared with US$117.1 million a year earlier, the Singapore-based company said today in a statement.
Wilmar’s palm processing and trading unit, its biggest, posted a 40% gain in pretax profit and a 10% increase in sales volume as it added refining capacity in Indonesia. The company buys more than 90% of the palm oil for its refineries from third parties.
Its oilseeds unit, which processes soybeans in meal and oil, posted a US$15.3 million profit before tax in the quarter compared with a $40 million loss a year earlier as margins remained positive.
Volumes rose 22% at its consumer products unit and 64% at its sugar unit, Wilmar said.
Source: Bloomberg
Nevertheless, the Group also declared an interim dividend of S$0.025 per ordinary share, up from S$0.02 per ordinary share in the same period last year.
Looking ahead, downward pressure on CPO prices for the remaining of 2013 and declining refining margins
could add pressure to earnings in Indonesia.
But we could see greater contributions coming from its recent investments in the sugar business and expansion into
oleochemicals and specialty fats.
Lim & Tan
“Obviously sugar’s made quite a lot of money, and the reason is we bought existing companies. Don’t forget we spent almost US$2 billion-plus on sugar, that’s why it’s showing profits now,” Kuok explains. “[For] rice and flour we started greenfield. It was a lot cheaper but then it takes a much longer time to become profitable. But I think if you really look at the cost and benefit, if you have the patience, doing greenfield [projects] will probably still give you higher returns over time. But analysts don’t like it so much. Every quarter I’m asked when the rice and flour [division] is going to make money. I always give the same answer, ‘akan datang’ (coming soon).”
The EDGE, 8 Nov 13.
hey AK,
long time no comment :p hope everything has been good for you. I was doing a search and read up on Wilmar when i chance upon your old post. I like wilmar but i kinda have to kick myself for the lack of funds when Wilmar hit a low low earlier this year. Since then, commodities has picked up quite abit. How will you value wilmar at its current range? Have you considered Golden Agri? I did love to heard your views.
JQ
Hi JQ,
It is not expensive but it is not super cheap either. I would like to buy more closer to and preferably below $3.00 a share.
This is a cyclical industry and I got in too early. Bad timing. However, it is a well run company with a very competent leader who eats his own pudding.
It is an investment that pays me while I wait for the cycle to turn up again. :)
Dear Ak,
Thanks for the insight and shariing. Yes i like how wilmar is runs back end to front end in the production chain and yes its well run. i was also considering golden agri but it does not have that sort of exposure that wilmar has. perhaps one day golden agri can be like wilmar :D
JQ
Hi JQ,
I can say for sure that when the price of CPO recovers, Golden Agriculture will outperform. Compared to Wilmar, Golden Agriculture's performance is more dependent on the price of CPO.
We cannot even compare the two these days. Wilmar has evolved into quite a different animal over the years.
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