Gaining Steam - Biosensors

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Biosensors Gaining Steam

1. Biosensors (Medical equipment)

Biosensors has been posting very steady results for the past 3 years but had fallen out of favour with the investment community in 2012 when its share prices took a tumble to a 2011 low at $1.08. Sell-side research houses still kept their strong rating calls on the stock despite the broader market failing to heed them. Nonetheless, in the start of 2013, Biosensors seem to have gained steam again and could possibly spark the revival of its fortunes to finally match its historical performance and a barometer of the future to come.

• Large white candlestick this week with almost twice the moving average's volume. Prices almost rallied $0.10, representing a 7% gain. The white candlestick has also overcome key moving averages.
• MACD - is trending into the positive region with increased positive divergence.
• RSI (25w) - heading towards 70% levels while just crossing 50%.
• Long with TP - $1.56 (19% from current levels) expected in 6-7 weeks. If buying pressure still persists in the coming week, expect the stock to breakout to the next level above $1.36. With current bullish indications with room for the stock price to come, it will not come as a surprise if stock price ignores $1.36 and heads for $1.55 region. However, do be warned that the coming week is critical for confidence in the stock breaking through a key resistance level at $1.36.

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.

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.