Wilmar: Not a time to sell.

On 5 June 12, I did a blog post on whether it was time to go long on Wilmar. Yesterday, someone asked me as well if it is now a good time to go long on Wilmar.

To any seasoned market watcher, Wilmar's share price must look quite tantalising as it hit a low of $3.41 on 14 June 12. That was a good 43% lower than its one year high of $5.99 a share.

Now, if we should think of a reason for the decline in price, it is clearly because of the company's disappointing earnings. The company's crushing business is likely to remain very difficult for some time to come. In fact, the CEO said it could take a few years for excess capacity in China to be absorbed. As this business is about 25% of the company's revenue, a decline in its share price is to be expected but the decline has been disproportional. I have no doubt that short sellers made quite a bit of money here as well.

Wilmar's share price has seemingly found a floor and has rebounded somewhat. I see immediate resistance at $3.70 or so. If it should break resistance, we would probably see short sellers covering their positions which would send share price higher to test the next resistance.

If the company's share price should test a new low, everything remaining constant, we should see stronger buying interest returning. Technically, the momentum oscillators are rising and, so, support this thesis. Look out for a higher low in the momentum oscillators then. That would be a clear signal to go long as the share price is set up for a reversal.

Is it time to buy Wilmar's shares? I feel, at least, it is not a time to sell.

Related post:
Wilmar and China Minzhong: Time to go long?

SPH: Better investment than retail S-REITs?

SPH is still my largest investment in a Singapore blue chip and it is an important part of my high yield portfolio. CIMB now suggests that investing in SPH is better than investing in retail S-REITs. It would be a happy coincidence for me if CIMB should be right as my only exposure to retail S-REITs is a small long position in Suntec REIT, much smaller than my investment in SPH.

Singapore Press Holdings is becoming increasingly like a retail real estate investment trust (REIT), CIMB Research said, noting its growing retail property arm and stable media business, as well as typical payouts of more than 90%...


The broker also said SPH is a cheaper alternative for investors seeking exposure to retail Singapore REITS after the stock’s underperformance, offering yields of 6.4% versus an average of 6.1% for retail Singapore REITs...


CIMB said revenue compound annual growth rate for SPH’s “gem asset”, Paragon shopping mall in Singapore, stood at 8.3% over 2006-2011, outstripping growth for comparable assets under retail Singapore REITs.


Related post:
SPH: Interim dividend of 7c per share.

CIMB says SPH a “pseudo retail REIT”. It upgraded its rating on SPH to outperform from neutral and raised its price target to $4.19 from $4.13.
Tuesday, 19 June 2012

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