Charts in brief: 5 Jul 10.

NOL: MFI did not manage to recapture 50% as support and its continuing decline suggests a lack of demand.  RSI similarly did not manage to recapture 50% as support and this suggests the speed of decline in price is relentless. Downtrend in price is intact. Since forming an inverted hammer on 21 Jun, volume has increased as price declined.  In the last two sessions, trading volume has fallen somewhat. This might or might not be a temporary respite.  I see support at the flat 200dMA, $1.83, and resistance at a confluence of MAs, $1.98.

SPH: Price touched a high of $3.88 again. MFI is rising sharply.  Demand is strong.  OBV is rising.  Accumulation is ongoing. Volume is, however, a tad lower today.  Breaking $3.88 could possibly see a target at $4.08 reached. Resistance at $3.95, the lower high formed on 10 May, would have to be taken out first, in such a case.

Metro: This counter has been in a downtrend since it peaked on 7 Jan, touching a high of 90.5c. Since May, indicators are showing some strength returning.  MFI has been climbing since late May.  OBV has been rising since late May.  RSI has been rising since early May.  The peak in distribution happened on 25 May as an ugly black candle was accompanied by a huge spike in trading volume.  A low of 73.5c was touched in two separate sessions on 21 May and 7 Jun.  That likely is the immediate support for now.  With momentum oscillators bouyant, it is unlikely that 73.5c would be taken out anytime soon.  In fact, the 20dMA has been rising gently since middle of June. The trend is still down but the worst might just be over, for now.

Related posts:
NOL: Downtrend.
Charts in brief: 2 Jul 10.

K-Green Trust: A stable source of passive income.

I spent some time recently looking into the latest trust to list in the stock market here: K-Green Trust (KGT). This is an infrastructure business trust listed by Keppel Corporation recently. Initially, it only has three assets:

1. Senoko Waste-to-Energy Plant

(Concession period: 15 years from 1 Sep 09)

2. Keppel Seghers Tuas Waste-to-Energy Plant

(Concession period: 25 years from 30 Oct 09)

3. Keppel Seghers Ulu Pandan NEWater Plant

(Concession period: 20 years from 28 March 07)

The Waste-to-Energy plants treat close to half of Singapore's incinerable waste while the NEWater plant is one of Singapore's largest.

The main attraction of this trust is the stability of its non-cyclical cash flows and a lack of counter-party risks as its customers are NEA and PUB.

Using the usual metrics for analysing trusts, we find that KGT has zero gearing, has an estimated dpu of 7.82c (which translates into a yield of 7.38% based on the last traded price of $1.06) and is currently trading at a 5.5% discount to its NAV of $1.12. Although the small discount to NAV is unattractive, the zero gearing is.  There is room for KGT to gear up to, say, 40% and improve its dpu in time.

Stable cash flow, low risk and room to grow.  This sounds like a good addition to my passive income portfolio. It diversifies my income stream and injects a higher level of stability at the same time. The lower yield is acceptable because of its debt free balance sheet.  When a balance sheet is heavy in debt, the risk is higher and, consequently, I would demand a higher yield.

I would like to buy some units of KGT but how much would I pay? On its first day of trading, KGT started off at $1.17 and hit a high of $1.33 and closed at $1.11. Usually, I would depend on TA here but being so new in its listing, four days old, to be exact, TA is impossible. However, we can see that it reached a low of $1.00 on 1 Jul and formed a white candle with a long upper wick on 2 Jul as it closed at $1.06.  This suggests some selling pressure.

Why the selling pressure? If we remember that KGT units were actually given to existing shareholders of Keppel Corporation as a special dividend, the reason becomes apparent. Some shareholders are monetising their "dividends".  If this continues to play out and if the buying interest does not strengthen to counter balance the selling pressure, KGT unit price could go lower.

I would be quite happy to collect some units at $1.00 which would give a yield of 7.82% to begin with.

K-Green Trust rated hold
Monday, 28 June 2010

© 2010 - The Edge Singapore

China Hongxing: Bottoming?

In an earlier analysis on 14 March, I mentioned that "A broader head and shoulders pattern which stretched over a duration of about nine months is now quite obvious.  This, coupled with the obvious downtrend of all the moving averages suggest that more downside is on the cards.  Accumulating at supports in an uptrend is a good idea.  Accumulating at supports in a downtrend is a different story as supports could quickly become resistance.

"Using Fibo lines, we see that 14.5c is a 123.6% support.  Unless there is an upmove with meaningful volume in the near future, a test of the 138.2% Fibo support is most likely and that is at 13c.  Thereafter, the 150% Fibo support is at 12c. Further downside cannot be discounted as a valid head and shoulders pattern would see the ultimate downside target somewhere at 10c."

Although 11.5c is now a many times tested support since 24 May, is it the bottom or just a floor?  On 15 Jun, volume expanded as the 20dMA resistance at 12c was taken out. The following session saw a follow through that tested the resistance provided by the 50dMA at 13.5c. The euphoria was short lived as the 50dMA proved too strong to be taken out and price has been pushed down since.  The 20dMA is once again resistance at 12c and, in the last session, a gravestone doji was formed as price closed once more at 11.5c.

A very interesting fact is found in the OBV.  Although the price is clearly in a downtrend, OBV is flattish. This suggests a lack of heavy distribution. Also, as price fell, volume has generally declined with the exception of one or two sessions. These observations suggest that most of the sellers are probably done selling by now.

The 20dMA has flattened which suggests that the short term downtrend has halted. However the longer term MAs are still declining. So, the trend is still down. However, if we look at the MACD, it has formed a higher low and has recently flattened.  Despite being in negative territory, this positive divergence between price and MACD is an indicator that the downtrend is losing strength.

Should we jump back in and go long here?  Looking at the momentum oscillators, we see that the MFI is down both over the shorter term as well as the longer term. This suggests a lack of demand.  The RSI shows the same picture which suggests a sustained momentum in the decline in price. These indicators are not spotting any positive divergence with price.

So, the conclusion is that although the speed of decline has slowed and the counter seems to have found a stronger support at 11.5c, the trend is still down and the momentum is negative. The price action of this counter has proven treacherous before and unless there is a clear sign of bottoming, I would avoid going long.  Any long position taken here should be a smallish hedge and nothing more.

Related post:
China Hongxing: Downside target?

Charts in brief: 2 Jul 10.

AIMS AMP Cap Ind REIT: Volume rose today as more shares changed hands at the 21.5c support.  MFI declined sharply as short term demand seems to have disappeared. In spite of this, there is no sharp decline in the OBV.  Instead, it is flattish which suggests a lack of heavy distribution activity. From the high achieved on 3 Jun, price seems to be doing a low volume pullback to support.  If 21.5c support should break, I would be happy to buy more at the long term support of 20.5c.  Based on FA, I think that is a very attractive price. TA is more mutable and needs to be looked at again at that point in time.

According to DTZ Research, the improving Singapore economy has caused industrial rents in Singapore to rise for the first time after quarters of decline since Q3 2008.

DTZ’s latest report on industrial property stated, “Average monthly gross rents of first-storey private industrial space edged up 2.6% quarter-on-quarter (QOQ) to $2.00 per sq ft and 3.2% QOQ to $1.60 per sq ft for upper-storey space per month. Since the height in Q3 2008, average monthly gross rents of first-storey and upper-storey private industrial space have fallen 14.9% and 22.0% respectively.”

However, the research consultancy reported that “rents for hi-tech industrial properties, which include business park and science park space, were unchanged at $3.15 per sq per month in Q2 2010.”Article here.

Healthway Medical: Clinging on to support at 19c while forming a gravestone doji is ominous. The rising 20dMA is exactly at 19c now.  Will it push the price higher in the next session or will it fail as support? The MFI, which accounts for price and volume and is a measure of demand is clearly in decline.  The OBV shows the sharpest drop in three weeks, suggesting that distribution is heightening. MACD continues to decline below the signal line. It is obvious that upward momentum and demand have both weakened. If 19c breaks as support, next support is not far away at 18.5c which was a resistance formed in March as price tried to advance higher then.

SPH: A friend asked me if he should sell his SPH shares today. Let's look at the chart.  With today's expansion in volume on a white candle day as price hit a high of $3.88 before closing at $3.85, SPH looks like it might be able to go higher. MFI has been forming higher lows, suggesting rising demand. RSI has been rising as well.  The MACD is still in positive territory.  In short, SPH is seeing some underlying strength. $3.88 is the resistance to watch.  If it breaks convincingly, I see an eventual target price of $4.08. I would be happy to sell more of my remaining shares in SPH then.

Related post:

SPH: Reading the lines.