Monday, June 11, 2012

Weekly Stock Picks - CapitaMalls Asia and Ezion Holdings

CapitaMalls Asia is a particular counter that caught my attention over the last 2-3 weeks. It is also one of the stronger counters that have outperformed the STI by almost 20 basis points and turned in around a 23% YTD gain. Pretty impressive counter that has a solid balance sheet of increasing assets/long term investments over the last 4 years. High stockpile of cash that was recently (in 2011) used to acquire more investments which is pretty shrewd given the low valuations during that period. Stockpile of cash still remains pretty high at $930m as of 31 Mar 2011. Earnings, though, have been hit recently due to the sluggishly economy that has finally found its way eating a still solid track record of equity investments. Expect more decrease to come in this bulk contributing segment that is also pulled down by lowered operating income (though almost negligble compared to equities investment income).

Outlook Short Term Rebound observed. Stars are aligning to put this stock on a upward trajectory. Nonetheless, pay attention to possible downside risks of price lowering to 1.3-1.35 (lower bollinger bands of both daily and weekly charts as well as major support horizontal at ~$1.35). Risk reward favourable and a good long opportunity is suggested. 
  • MACD - Is trending upwards for last 2 trading weeks with suggestion of clearing the negative levels in the coming week.
  • RSI (25d) - Is also steadily trending upwards to cross the 50% level.
  • Bollinger Bands - Bollinger bands are narrowed with some possible big price movements to come.
  • 20d MA - the 20d MA has clearly stabilised in the downward direction and there is some good suggestion of a local minimum. Another suggestion that upward momentum is building and this is a good opportunity to enter with low risk of selling pressure.
  • 200d MA - Prices are now supported by 200d MA prevailing at support levels of $1.35. Very clear support.
  • Volume - Buyer participation for the last 4 weeks has been dwindling but this has been stemming/flooring the prices at ~$1.35 levels.

Ezion Holdings is a counter that I have been seeking to own but prices have been sky rocketing since end 2011. There has been strong analyst coverage on this company and many are very bullish about its prospects with some brokerages even placing a TP $1.4 on it. Well, it is not too unexpected given that the company has been growing its income steadily since the downturn of post financial crisis in 2010. Cash reserves are being built up with some difficulty in the last year with this economic malaise. Nonetheless, the company has shown good vision in growing its business, securing more deals and income margin quite convincingly over the last 4 years. 

Outlook Track for uptrend. The 20d MA is still showing a downtrend but other leading indicators are turning in favour of a rebound. In this jittery market, it is still better to wait for real confirmation of upward momentum to reflect in the 20d MA before deciding on the long position.
  • MACD - Is trending upwards for last 2 trading weeks. Still far from the 0 level and momentum is still in the negative territory. 
  • RSI (25d) - Is also steadily trending upwards to the 50% level.
  • Bollinger Bands - Bollinger bands are narrowing.
  • 20d MA - 20d MA is still downtrended with some suggestion of a minimum point to come but not totally indicative yet. Prices are suspended above the 20d MA precariously. More strength validation still required.
  • 200d MA - Prices are seen bouncing off the 200d MA on Tuesday last week. Pretty much indicative of a strong stock in this market. 
  • Horizontal Price line (red line in weekly chart) - Price is trading near the red line which is almost an average price of the stock since 2010. An almost well-valued stock right now. Considering also that earnings have been increasing, it is even more sufficient to say that the stock is slightly undervalued now. 

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