Thursday, August 30, 2012

A Selling Market Offers Opportunities - Genting SP, Biosensors

As the old adage goes - "Buy when people are fearful, Sell when people are overly optimistic" - has a certain truth if you really look at it in perspective. What is more salient about this concept is the fact the market may not be totally efficient at any point in time. 
Our job as an acute investor is hence to identify market opportunities and make an intelligent 'bet' with all available information. In more obvious words, we always seek the cheapest buy with the highest potential for returns. That is by definition the meaning of a trader. 

Genting SP had been badly sold down since its early year highs due to its rumored take-over bid for Echo, an Australian casino player. The bidding war against Packer for Echo has not really materialized after much concern about Genting's strategy. Its prices had taken another nose dive on China growth concerns and poor tourism numbers from high-roller countries. However, in the last 2 weeks, its prices have recovered some 10% from Aug lows.

Outlook - Watch and Buy; cyclical accumulation. Tourism traditionally peaks towards the year end given the school holidays in Singapore as well as in neighbouring countries. Festive period in Christmas and New Year will definitely help to pump up some numbers both in tourist receipts around Genting assets as well as its casino. The cyclical nature of Genting's business is notoriously well known and observed in its stock prices over the last 3 years.
Technically, the stock has taken a beating and is recovering. While selling pressure day on day is still present, it is of the opinion that it will wane over the next 1-2 weeks with the broader market performing much more poorly. Weekly charts show good upwards momentum still.
  • MACD(weekly) - About to cross its signal line and headed upwards
  • RSI (25w) - Still below 50%, offering cheap opportunity to accumulate. Off RSI lows in late July.
  • Bollinger Bands - Prices just rebounded off the lower bollinger bands in late Jul when the stock was badly oversold in light of poor China economy figures and slowdown in Asia as well as Singapore tourism.
  • 20w MA - Prices are still headed to 20w MA.
  • 200w MA - Prices are still a good 30% away from 200w MA.
  • Volume - Thin volumes were observed over the last 5 trading days with the stock prices in decline. Fear factor is very high and perhaps it gives a good time to explore a cheap opportunistic bet.

Biosensors is a medical stent research company with global operations. A review of its latest operations has been provided in an earlier blog article - Stable Growth Intact - Biosensors . In summary, 
  • Strong revenue growth
  • Maintained operating income
  • Operating cashflow has improved (US$36.3m inflow)
  • Attractive valuations given the recent fall in stock price.
  • 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. A recent OCBC research report offers more insights.

Outlook Buy. Selling pressure seems finally subsiding given a stabilisation in recent prices. While the broader market had been in decline, its prices have relatively stayed constant together with declining volumes. More importantly, bollinger bands have narrowed significantly that points to a soon sharp move highly possibly in the upwards direction barring any unfortunate news events. Kim Eng recently reiterated a buy call on the stock with TP at $1.42.
  • MACD - Divergence turning up again with MACD line showing some form of a minimum. Still some nominal positive momentum as MACD is above 0.
  • RSI (25d) - Hovering well around 50% for the last 3-4 weeks.
  • Bollinger Bands - have narrowed tremendously. Volatility in prices have reduced with some anticipation for a future big move coming.
  • 20d MA - Prices are moving in tandem with the 20d MA.
  • 200d MA - Prices are a good 11% below the 200d MA line, offering good upside potential.
  • Volume - Thin volumes were observed over the last 5 trading days. Buy when people fear excessively.


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