Healthway Medical: 20c target.

Standard Chartered has suggested a target price of 20c for Healthway Medical. They arrived at this target price after highlighting a slew of difficulties the company faces:

1. Opening chain of clinics in China and setting up specialist center in Singapore are facing challenges in execution.

2. The group has not delivered good execution in its specialist services in the past and has limited experience of organic expansion.

3. Mass exodus of prominent specialist doctors from Healthway’s employment is also troublesome. 

4. Cost pressure mounting due to aggressive expansion.

I am almost 100% divested and I am still waiting for its share price to fall to a more reasonable level before I load up once more because if the management does deliver on its expansion plans, the company's share price would fly. At the current price, valuation is simply astronomical.

Standard Chartered's target price of 20c implies a PE of 36x!  This is almost as ridiculous as Q&M Dental Group's valuation when they first listed!  Please bear in mind that my considerations here are based on FA.  There is no accounting for sentiments.

Related post:
Healthway Medical: Second quarter results.

SPH: $4.20 is still resistance.

On 9 September, I said "although a correction could be avoided if volume expands in the next few sessions as price pushes upwards, such a move would have a formidable sell queue to clear at $4.20. If ever this resistance was cleared, SPH's share price could fly.  At the moment, chances are slim that this would happen".  Well, $4.20 is still the resistance to watch.

Today, another black candle was formed, the third in a row, as price touched a low of  $4.13 before closing at $4.16.  The MACD seems set to form a bearish crossover with the signal line while the OBV continues to decline. Distribution is underway. The MFI has emerged from the overbought region which suggests that demand is no longer zealous.  The RSI although declining is still in the overbought territory and this suggests that we could see buying momentum slow down further.

The rising 20dMA should provide immediate support at $4.10 and this was also a natural candlestick resistance level. Would $4.10 hold as a support? We would have to wait and see.

Related post:
SPH: Touched $4.20.

AIMS AMP Capital Industrial REIT: XR.

This REIT went XR today. Closing at 22c, it shows a great deal of resilience and is much better than the expected TERP (theoretical ex-rights price) of 21c. If we look at the trade summary, of the total 3,307 lots which changed hands today, most of these, 2,487 lots to be exact, were bought up at 22c.  There is still a great deal of demand for this REIT.  In fact, anyone who went ahead and bought some at 22c or 22.5c when the counter first went CR would be in the money now.

We will get 7 rights for every 20 units which we currently hold. If we had bought these 20 units at 22c, we could sell these 7 rights when the nil-paid rights start trading on 23 Sep.  Since the price to pay to convert these rights is set at 15.5c, theoretically, they are worth 6.5c a piece (22c - 15.5c = 6.5c).  This would bag a gain of 6.5c x 7= 45.5c.  Based on an initial investment of 22c x 20 = 440c, 45.5c represents a gain of  more than 10% if we sell away the nil-paid rights! Detractors' aplenty but I believe the numbers here speak for themselves. Of course, bear in mind that these calculations are done assuming that this is a perfect world (which it is not).  So, it would be realistic to expect some deviation.

The question some might have on their minds is whether this is still a good time to enter?  Well, the estimated DPU, XR, is 2.08c per year.  This gives a yield of 9.45% at the current price of 22c.  If that is good enough for you, why not?

Personally, I would wait to see what the the nil-paid rights might be trading at come 23 Sep. I do not expect the nil-paid rights to trade below 5.5c since 5.5c + 15.5c = 21c which is the expected TERP and would enjoy a yield of almost 10% per annum.  However, if I were proven wrong and the nil-paid rights do trade at 5c or less, I would probably end up buying more. The yield would be simply irresistable at more than 10% per annum.

See slides from EGM here.

Related posts:
REITs: Simply explained?
AMPS AMP Capital Industrial REIT: Sell the rights.

China Hongxing: CD.

China Hongxing went CD today and the market rewarded its share price in a most sporting way as it touched a high of 22.5c before closing at 22c. The 19.5c target identified earlier this month is probably resistance turned support at this point.

Volume expanded significantly as price formed an impressive white candle. The OBV turned sharply upwards suggesting strong accumulation.  With volume so high, there could be a follow through. 22c target was based on the 138.2% Fibo line. We could see the 161.8% Fibo line tested next and this is at 23.5c.

Although the sell signal of the previous session as seen in the MACD histogram was negated today, the MFI and RSI are both in overbought territories. So, although price could push higher, this counter is rather overbought and anyone choosing to go long at the current price would have to be very nimble and might have to settle for smaller gains. The risk premium is definitely higher.

Related post:
China Hongxing: New target.