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Old Chang Kee: Holey curry puff.

Asked my colleague to help me buy a curry puff from Old Chang Kee earlier as I didn't want to leave the office. Weather is too warm!

No, I didn't take a bite before I took these photos. You can tell that the exposed egg white and potato chunks are rather burnt. This is a holey curry puff...

This is proof that every curry puff is hand made and each one is different. ;-p

Related posts:
1. Old Chang Kee: Filling not enough.
2. Old Chang Kee: Initiated a long position at 26c.

Wilmar: Settling dust?

Bollinger bands are very popular in TA. Upper band acts as resistance and lower band acts as support. Look at Wilmar's daily chart, we see that price has pushed past the lower band. This gives us a very bearish picture. Support is weak. It also tells us that the counter is deeply oversold but remember that in very bearish conditions, oversold can stay oversold. It really doesn't say anything else.

Conventional TA tells us that we should buy when price breaks the lower band. This is to take advantage of oversold conditions. The belief is that, eventually, price would return to the lower band and then the middle band. The operative word here is "eventually". When exactly? Your guess is as good as mine, is it not?

Anyone who bought Wilmar's shares three sessions ago as it closed below the lower band at $4.70 would be licking serious wounds as the counter closed at $4.14 in the last session. Selling pressure has been enormous as share price went much lower.

The Lord Buddha said that nothing is permanent. Similarly, buying or selling pressure would come to an end one day. As our resources are limited, we want to buy when the selling pressure has dissipated.

Volume would be a good indicator if the sellers are done. In the last session, although Wilmar's share price closed lower, volume was less than half of the preceding session's which saw a huge gap down in price. A black spinning top was also formed and spinning tops, whatever the color, are usually signs of indecision on Mr. Market's part. Indecision in a downtrend? Doesn't that sound like good news for long holders? However, we should remember that one stick patterns are not very reliable. So, I would take this with a pinch of salt.

If price continues to decline with smaller magnitudes as volume reduces further, it would be a sign that selling pressure is dissipating and that the counter's share price could be looking for a floor, if not the bottom. This is when I would add to my long position. Bear in mind that it does not mean that price has bottomed as we can only call a bottom once it has been formed. Yes, only hindsight can call a bottom and hindsight, apart from being academically attractive, isn't terribly useful.

Dust is very much still in the air here and although it might not be in the same league as Long Men Ke Zhan's sandstorms, visibility is still not good enough for me. I am staying indoors for now.



Related post:
Wilmar: Mr. Market reacts to weaker earnings.

Saizen REIT: Acquisitions to increase DPU.

To me, there are only a few important points to note in the REIT's latest presentation:

1. Management is on an acquisition path as this is probably the only way to increase DPU as it seems difficult to bump up occupancy of existing portfolio. Occupancy: 91.6%.

2. Potential dilution of DPU to the tune of 12% as warrants are exercised (if funds thus obtained are not put to productive use).

3. NAV per unit (adjusted for warrants): 29c

4. Gearing (adjusted for warrants): 21%

5. Interest cover ratio: 5.2x

Assuming that the management is able to put funds from the exercising of warrants to good use and push gearing to 35%, we could see DPU improve some 30+% from current levels (in JPY terms) based on the management's guidance.

Remember that all the numbers here are based on the current exchange rate between the JPY and S$. As I believe that Singapore would continue to lean towards a gradual appreciation of the S$ while Japan favours a weakening of the JPY, future DPU could be negatively affected in S$ terms. So, unless valuation becomes very compelling, I am unlikely to add to my remaining long position in the REIT.

See Saizen REIT's 3Q presentation: here.

Related post:
Saizen REIT: 1H FY2012 DPU  of 0.61c.

NOL: Bleeding badly.

On 2 February, I cut losses on NOL as its share price rebounded believing that "shipping industry will face a chronic situation of oversupply and weakening demand this year and possibly the next."

Blow-out 1Q12 Net loss. Neptune Orient Lines (NOL) reported a 1Q2012 Net Loss of USD 253.6 mil, blowing away our already pessimistic FY2012 (read: full year) net loss estimates of USD 160 mil, not to mention consensus estimates of a FY2012 USD 31 mil loss. We maintain our SELL call on NOL and reduce our Target Price further to SGD 0.85 based on 0.8x forward P/B. The bleak outlook in the shipping industry, coupled with global economic uncertainties will likely push a firm recovery for NOL to 2014. (Source: Kim Eng Research)

Neptune Orient Lines (NOL) reported a net loss of US$254m in 1Q12. Logistic revenue grew 7% YoY to US$394m but was unable to offset the 4% fall in Liner revenue to US$2.0b. Group revenue slipped 3% YoY to US$2.4b. Liner revenue shrank despite a volume gain of 4% YoY because average revenue per 40-foot unit (FEU) came in at 7% lower. Management said NOL’s Efficiency Leadership Programme is on track to achieve US$500m of cost savings in 2012. Freight rates have so far in 2Q12 averaged 33% higher QoQ and current rates should see NOL return to profitability in 2Q12. And with NOL expected to turn profitable, we maintain our fair value estimate of S$1.38/share and BUY rating on NOL. (OCBC Research)

Who do you believe?

Related post:
NOL: Cutting losses on a strong rebound.

Wilmar: Mr. Market reacts to weaker earnings.

Wilmar's net profit for 1Q 2012 tumbled 34%, year on year. Mr. Market is showing his displeasure in the usual way.

Let us draw some Fibo lines. I am using the high of 15 February at $6.05 and the low of 9 April at $4.76. I am doing this in my office and cannot post the chart here. So, you would have to do it yourself if you want to see the chart.

It is interesting how price gapped down massively at the start of the trading session just now and hit the 138.2% Fibo line and bounced up. At this moment, we have a black hammer that fills the area between the 123.6% Fibo line ($4.46) and the 138.2% Fibo line ($4.26). Could we see price going to $4.11 which is where the 150% Fibo line approximates?

The very high volume up till now is ominous and if this continues throughout the day without price breaking resistance provided by the 123.6% Fibo line, it could herald further weakness to come. Momentum remains negative and the bearish crossover of the MACD with the signal line suggests that things could get worse. The OBV is in decline and it looks like distribution is ongoing.

Fundamentally, Wilmar's management has suggested that 1H 2012 is likely to be challenging. However, the longer term prospects for the company should remain positive as a growing middle class in emerging economies demand better nutrition. In fact, revenue improved 10% year on year which suggests that demand is robust. So, I will want to add to my long position when the dust settles.

Why not buy now? With price action wedged between 123.6% and 138.2% Fibo lines, anyone buying now would want to buy closer to the 138.2% line which is currently acting as support. Would it hold up or would we see the next golden ratio at 150% tested for support?

In any technical analysis book, we would find that a hammer either black or white is considered a bullish reversal signal. However, one stick patterns are not terribly reliable. Also, the trading session has only begun. How would things look at the end of the day?

I still like Wilmar's businesses and its large regional footprint. Its weakening share price presents a chance to accumulate which would allow me to benefit from the company's possibly stronger performance in future. I will keep an eye on things in the meantime.

See: 1Q 2012 Results Briefing.

Should have sold in May and gone away?

In The Straits Times and The Business Times today, there are at least three articles which mentioned "sell in May and go away" and whether it holds any water. Has anyone sold a large part or all of their investments in the last few trading sessions?

Well, today, global stock markets retreated as the Greeks and the French elected new leaders into government. They are sick of austerity measures and they spoke with their votes! European debt story is still very much the key sentiment driver for global stock markets, it would seem.

Asian markets and the euro slumped on Monday after voters in France and Greece voted out their ruling parties in a backlash against austerity measures aimed at battling the eurozone crisis. Read article here: CNA.

I am not an economist. I am not a political scientist. Some issues are definitely beyond me. So, what do I do?

Someone just told me that timing is everything and that now seems like the right time. Right time? For what? I replied that things are increasingly more volatile and I find it harder to time anything.

I am chanting the same mantra to myself and that is to stay invested for income while keeping a war chest ready. This is the only strategy I know which would work either way.

I know that the majority of my portfolio which is in S-REITs is actually doing better now than a few months ago. My more recent investments are not doing as well, notably China Minzhong, SoundGlobal and Wilmar. These investments were made as the counters' share prices retreated from recent highs. Do I press the panic button? I like their businesses and I believe they would probably be around for a long time to come. I like the investment themes of agriculture and water. So, I am staying vested. I would probably add to my long positions too if TA shows me clearer signals to do so.

Don't panic. Stay clear headed. Revisit reasons for being invested in the first place. Are the reasons still valid? Are the investments still fundamentally good? If you want to buy more, what does TA tell you? Think with our heads and not our hearts. Good luck.

Related posts:
1. Sleep well at night with a plan.
2. Why do I not panic?

STI declines 2.2% to 2,924.95 at closing
Monday, 07 May 2012

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