Friday, July 27, 2012

Stable Growth Intact - Biosensors

I quite enjoyed reading the BUY rating on Biosensors by the OCBC research team and concur with the author on the following key points
  • Strong revenue growth
  • Maintained operating income
  • Operating cashflow has improved (US$36.3m inflow)
  • Attractive valuations given the recent fall in stock price
Here are also some additional points to add to the investment thesis,
  • Been meeting analyst expectations as a very solid company.
  • Operating cashflow has been on a steady rise over the last 4 quarters.
  • Cash pile has increased steadily over the last 4 quarters.
  • Medical sector will continue to improve in SEA/Asia region given the improving incomes especially form neighbouring countries that are fast developing and attracting investments.

Outlook However, on a pure technical front, I have some reservations. As such, I believe Biosensors deserves a Watch outlook with a possible break in downtrend possible. Lately, its stock prices have suffered with the broader market movements since the year-start rally. Perhaps overdone compared to its counterpart (but not quite similar) Raffles Medical Group, the downtrend has yet to be conquered completely. Will be more tempted to buy when prices can sufficiently cross $1.265 resistance and the 20w MA.
  • MACD (daily) - MACD crossed under its signal line yesterday only to be rescued by a post-close earnings report that allowed the stock to regain some ground in positive momentum.
  • MACD (weekly) - Has shown a strong divergence improvement with the MACD turning up and crossing its signal line in the next week. 
  • RSI (25d/w) - Both daily and weekly RSI are challenging the 50% level soon.
  • Bollinger Bands - Bollinger bands are widen and can accommodate for big price movements in the time periods to come.
  • 20d MA - Prices have crossed the 20d MA with a gap up today (26 June).
  • 20w MA - Prices are steadily headed towards the 20w and 50w MA for the last 5 weeks.
  • Volume - High volume today (26 June) with a gap up in light of earnings report.

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