Yongnam: Partial divestment at 31c.

Last month, I commented that I was almost sure that Yongnam's stock would hit 31c per share and this has happened sooner than expected. Today, the stock hit an intra day high of 31.5c.

Technically, I have observed that the share price seems to move in bands of 1.5c. So, overcoming resistance at 31c, we could see share price rising to 32.5c and 34c over time.

Fundamentally, it is not so easy to forecast Yongnam's earnings as it depends on the number and value of projects they might capture in future. There really is no consistent recurring income base which can be used.

However, if we were to accept last year's performance as the worst case scenario and be more conservative, at 31c per share, Yongnam is trading at a PE of almost 9x. It is hardly expensive.

If we accept CIMB's forecast of 5.2c EPS in 2013, then, PE is much lower at almost 6x. Definitely inexpensive.

CIMB thinks 5.2c EPS is attainable because previously delayed projects would be ramped up in 1Q 2013. Various landmark projects are also expected to boost earnings in 2013. (See CIMB's report: here.)

Is share price going higher in the next few sessions? The formation of a long white candle on the back of extremely high volume is very bullish. Share price could indeed move higher but because my initial target price of 31c has been hit, I decided to do another partial divestment today.

After all, to sustain the upward movement in price from here, much higher volume is probably required. Is this likely? I don't know but locking in some gains as price action went parabolic seems like a good idea.

Keep an eye on the momentum oscillators. If lower highs form although share price has moved higher, we would see the formation of negative divergences. This would sound a warning bell although it does not mean that share price would decline right away.

Related post:
Yongnam: Investing in infrastructural developments.

Yongnam: Investing in infrastructural developments.

I like what I read in The Business Times today on how Yongnam is leveraging on its core competencies to diversify into investing in infrastructural developments which would generate recurring earnings in future.

This is an astute step in the right direction since Yongnam is already a leader in the provision of structural steelworks, specialist civil engineering and mechanical engineering services. So, they have an upperhand in undertaking infrastructural developments.

Yongnam has, together with JGC Corporation and Changi Airport Planner and Engineers Pte Ltd, looked into possibly submitting a tender for the construction and management of an international airport in Myanmar.

This new business direction and the burgeoning pipeline of infrastructure projects in Singapore to 2030 hint of more vibrant times ahead. Yongnam is, more likely than not, going to be a steady performer and could surprise with better results in time to come.

Dividend payout remained the same at 1c per share despite a decline in EPS. This suggests to me that Yongnam is commited to paying at least 1c per share in annual dividend in future.

I am rather contented to be paid to wait for Yongnam's results to improve meaningfully over time.

Related post:
Yongnam: Declared 1.0c dividend per share.