Wilmar: Is the tide turning as buying pressure returns?

I bought more shares of Wilmar as its price went to a new low yesterday. Some might question why I did this. Was I not afraid of losing even more money? Well, it was a calculated risk based on certain technical signs.

As Wilmar's share price went lower, I noticed that the CMF was forming higher lows. So, share price was forming a positive divergence with the CMF. What is CMF?

CMF stands for Chaikin Money Flow. This is a money flow oscillator that measures buying and selling pressure. When the CMF is in positive territory, the bulls have the upper hand. When it is in negative territory, the bears are stronger.

So, if we look at Wilmar's chart, selling pressure was reducing even as its share price drifted lower.  We can see the selling pressure letting up with the CMF forming higher lows. It is a process.

When the CMF forms a bullish divergence while still in negative territory, it is saying that selling pressure is reducing. When the CMF crosses over to positive territory, it is saying that smart money has moved back in and selling pressure has given in to buying pressure. So, the smart money are buying as weaker long holders or late short sellers continue to sell at lower prices. Yes, price could continue to move lower even as buying pressure returned and it did.

Those who short sold as share price retested and broke the low of $3.04 just a few sessions ago probably contributed to the heavy buying today as they scurried to close their short positions.

If we double check with the MACD which is a pure price oscillator, we notice that it did not form new lows even as share price moved lower. If we check the MFI, a favourite of mine as it takes in price and volume and more effectively measures demand, we see it forming a higher low as price formed a lower low. Another positive divergence.

With central banks around the world easing monetary supply, expectations are for commodities and other cyclicals to do much better in future. Wilmar seems like a logical beneficiary.

I would pay attention to the declining 50dMA. At $3.32, it is just 8c away from today's closing price of $3.24. If it should be overcome on high volume, it would attract more buyers and force more shortists to close their positions. Then, we could see price going higher to test the support turned resistance at $3.52.

--------------------------

Wilmar said on Thursday it had repurchased 7.4 million shares from the open market, representing 0.115% of outstanding shares, at $3.00 each.

“The buyback is because Wilmar is good value at these prices. It also reflects the confidence that the Wilmar board has in the long term fundamentals and growth prospects of the group,” Wilmar’s spokeswoman said in an email.

REUTERS

Religare Health Trust: 8.5 to 9% yield.

A new business trust to be listed soon in Singapore, it seems.

Religare Health Trust, which will own assets managed by Indian hospital group Fortis, is offering an indicative yield of 8.5% to 9% for its initial public offering that could raise as much as $500 million. The units offered will comprise about 70% of the total, the source added.

The listing is planned in the third week of October, sources said.

Religare Health Trust has a mandate to invest in medical and healthcare assets and services in Asia, Australasia and emerging markets, Fortis Healthcare has said previously.

Source: REUTERS

Fortis Healthcare is controlled by billionaire brothers
Malvinder and Shivinder Mohan Singh.

The distribution yield is tempting, for sure. However, I wonder what is the debt level going to be like. After all, it was reported in August that Fortis Healthcare, the sponsor of the trust, has a very heavy debt burden.

Religare Health Trust is set to launch an up to US$400 million ($498 million) initial public offering in Singapore, a source said, in a move that will allow the backer of the trust, Indian hospitals group Fortis Healthcare, to cut its substantial debt level.

Fortis is India’s No. 2 hospitals operator after Apollo Hospitals Enterprise. It had consolidated net debt of 62.37 billion Indian rupees ($1.39 billion) as of end-June.

Source: REUTERS

Details are lacking at the moment. What is the gearing level going to be like, pro forma? What is the NAV/unit? Apart from hospitals in India, where and what are the other assets to be held by the trust? Are the assets of good quality?

Apart from watching some documentaries and news coverage on the country, India is a country I barely know. This is also only the second listing in Singapore by an Indian company. Some of us might remember that in 2009, there was Indiabulls Properties Investment Trust.

To trust or not to trust? I will need more information.