Weekly Update - NOL, Yangzijiang, Swiber

Current Market Theme:
Favour oil & gas counters with solid order books for the current market recovery. Expect more new deals in the pipeline given the lifting outlook with emerging economies such as Latin America where oil exploration has always been key.

Also favour shipping companies given recent China's recovery and improved export data. Reports suggest that China may overtake US in economic leadership by 2014 so good news in China is good news for world trade. Europe and US are in a period of trade stagnation but no major shocks to be expected.

[Previous post: Olam Bonds plus Warrants Offer - To take or not to take for Retail Investors?]

1. Neptune Orient Lines (Shipping)

• Breakout in this week with high volume sending stock to a price of $1.31.
• MACD - positive divergence and trending into the positive
• RSI (25w) - crossed 50% and headed for 70%
• Price Target - $1.44 (~11% from current levels) over the next 3-4 weeks.

-->

2. Yangzijiang (Shipping and Oil & Gas)
The market has been viewing company's decision to enter into the Oil & Gas competition favourably. Bagging its first deal at a much lower revenue (and possibly profit margin) than a similar rig done by Keppel Corp, this is a significant milestone for the company and yet it speaks volumes about the intense competition and journey ahead. Kudos nonetheless to the management for diverting underutilised resources away from ship building to rig building.

• Breakout in this week with high volume sending stock to a price of $1.115.
• MACD - positive divergence and trending into the positive
• RSI (25w) - crossed 50% and headed for 70%
• Price Target - $1.32 (~19% from current levels) over the next 4 weeks.

-->

3. Swiber (Oil & Gas)

• Continuation of upward trend with increased trading volume this week.
• MACD - positive divergence and trending in the positive
• RSI (25w) - crossed 50% and headed for 70%
• Price Target - $0.71 (~8% from current levels) over the next 2 weeks.

Jump on the Oil & Gas Bandwagon? Part 1 - Ezion, Swiber, Swissco

A favorable news article on the Straits Times on Saturday offered some insights into trading this period of quantitative easing from major economies by targeting the (usual) Oil & Gas sector. However, it was highlighted that the favourite pick was not big cap stocks such as Semb Corp, Keppel Corp or Semb Marine. Instead, the article focused on mid cap stocks with good order books and growth potential such as Ezion, Ezra and Swiber. 

Ezion has definitely caught the attention of many traders over the last 1 plus year owing to a managerial and strategy turnaround that has been yielding very decent cash flows, increasing stockpile of cash as well as orders. It was also mentioned in the article that its strategy to have one of the most innovative fleet of jack-up liftboats that provides for offshore industries was a real gem in its managerial direction. Other players such as Swiber and Ezra are companies that been there and done that, very solidly and stably run over the years with a very localised culture but yet international presence. Swiber has an order book of $1.5billion in the pipeline, definitely more than sufficient revenue to last the next 3-5 years.

Of course, there are many other hidden gems that are Oil & Gas players that were not mentioned in the article such as Kreuz, Swissco and, the almost forgotten, Rotary.

Let's take a look at how you can participate in the Oil & Gas rally that has really mimicked the STI's performance over the last year (as seen from the ST news article on Saturday). Listed are technical charts of Ezion, Swissco and Swiber. For charts on Ezra, Rotary and Kreuz, refer to part 2 of this article here.

--> -->

--> -->

Weekly Update - Golden Agri, Swiber

Golden Agri is the world's second-largest palm oil company by plantation area. It recently announced its 2Q earnings on Friday where profit fell 39.9% y-o-y. The operating environment has clearly seen continued effect from the European demise as well as slowing growth in US and China, impacting revenues and palm oil prices. Nonetheless with recent droughts also causing crop shortages such as soybean, sunflower, it seems like there may be a bottoming out of palm oil prices. There has been a recent run in stock prices of many commodity counters such as Olam and Noble Group and there was a blog post on them on Friday. Check out the post here.

Outlook - Watch then Buy. Golden Agri share prices have already taken a beating on 8th Aug before National Day seemingly in preparation for its slightly dismal earnings report released on Friday. Prices have touched the lower bollinger even before the earnings report. Expect some more selling pressure to around $0.675 levels before expected support. Would be buyers at that level or if it breaks down into the 0.60-0.67 region as palm oil prices are still expected to show some support into the 2nd half of the year. 

• MACD - MACD trending downwards with negative divergence increasing.
• RSI (25d) - RSI just crossed below 50%.
• Bollinger Bands - Bollinger bands are widening and prices are riding the lower bollinger band already.
• 200d MA - Prices have just crossed below the 200d MA.
• Volume - High volume on 8 Aug in anticipation of earnings report. Clear winner for the selling side given a large black candlestick with unusually high volume traded.

Swiber is a Singapore-based Offshore Oil & Gas player providing construction, marine and subsea services.  With an order book of more than $1.8 billion in waiting, it is definitely a company with secure earnings up to 2013 at least. Most recently in June, it clinched contracts worth US$830 million for work in Asia Pacific region with work that has already began. Nonetheless, it faces strong headwinds from the economic downturn as well as strong competition from local and global oil & gas players in this very competitive landscape.

Outlook - Buy. Its stock prices have stabilised around the $0.5-0.7 region that represents an attractive valuation of the company at 6x PE (taking 1Q 2012 earnings of US$12million and projecting it for the year as US$48million) current price of S$0.59. Note that its historical PE stands at around 8.5x (as obtained from its website/share investor).

• MACD - is trending upwards slightly over the last week and has crossed over its signal line for positive divergence.
• RSI (25d) - RSI just crossed below 50%.
• Bollinger Bands - Bollinger bands are constricted very narrowly at the moment. Prices are on the upper bollinger region with a possible break coming up.
• 200d MA - Prices are still slightly below the 200d MA and resisted by it.
• Volume - is increasing slightly over the last 3 days.

The Stock Market Rally As Predicted - Midas, Mewah, Swiber

If you had been following my blog for the last 4 weeks, it is of no coincidence that the current market rally was about to unfold. 

On a technical analysis basis, weekly MACD of most stocks was slowing down in the negative direction, started to turn upwards and cross its signal line. The first positive call on the most iconic Capitaland came on 28 May that netted a return of 8.8% (check out that blog article here). That marked the start of the property bull when most of the property counters caught up with the Juggernaut's (Capland) rally in the next 2-3 weeks (check out blog article on the property bull run here). Finally, when big cap stocks like Kep Corp, F&N, Semb Corp, Semb Marine start to move, as they have done in the last 3-5 trading days, it is perhaps time to really declare this a bull run. 

However euphoric you may be reading this now, let's keep our excitement in bay because of the lessons learnt in the start of the year - when things become too overly optimistic. Is that the case now though? I do not think so as it is really quite a start of the rally. Yet, it is worth to pay attention to the divergence in prices of the large cap stocks as they are usually the ones that begin to signal the end of the run. Since Capitaland started this rally early, it is also probably the best indicator that we can use to gauge on the end of this run. For now, remember that entering now is probably 2-3 weeks late (from the really good traders) but do still enjoy the run. Reach your targets and enjoy for the year - healthy trading. 

Mewah is probably the only palm oil counter that has yet to go on an immense bull run that we have been engulfing the prices of Bumitama Agri, Golden Agri and Indo Agri. At the end of 2011, it had a price of ~$1, falling immensely to $0.37. Will it be able to see the 20-30% recovery in its prices as we have seen in that of its fellow palm oil counters (Indo Agri has risen a whopping 30% from its local low in May)? Right now prices of Mewah has already risen 15% from its local low in June.

Outlook - Buy; laggard play. Technical indicators are aligning to put this stock on a upward trajectory. Volumes are recovering, most notably today where a spike in buying pressure clearly appearing. Having performed less admirably compared to its fellow palm oil counters such as Bumitama Agri, Golden Agri  and Indo Agri, there is no reason not to expect this once-hot-counter to embark on a similar trajectory when traders start to feel the others have long overran their fundamentals.

• MACD - Is trending upwards for last 4 weeks for daily chart. Daily MACD just crossed 0 and headed strongly higher. Weekly MACD just crossed its signal line.
• RSI (25d) - Just crossed the 50% level.
• Bollinger Bands - Prices are riding along the upper bollinger band now with the bands clearly widening to accomodate for even more price volatility and possible uptrend.
• 20d MA - the 20d MA has just started to turn up, another positive sign that the average momentum has indeed left pessimism trailing. 
• 200d MA - Prices are still a good 8% away from the 200d MA as compared to most palm oil stocks that have prices already crossed the 200d MA. Undervalued much.
• Major white candlestick - and 2 smaller white ones for the last 3 trading days signify a much stronger rebound.
• Volume - A surge in volume occured today (3 July) accompanying the major white candlestick.

Midas announced a RM860 million metro contract today (3 July) that was very well received by the market together with market optimism that pushed its shares a whopping 5% higher. There has been increased optimism too that it will be able to secure more rail contracts closer to 2013 onwards given the recovering China rail industry after the recent rail incident.

Outlook - Buy; cheap play. Stocks dealing with basic materials have been a good recovery in the last 2 weeks with Sakari Resources already increasing a whopping 25%. In the US, aluminium and metal counters have similarly enjoyed a good run. 

• MACD - Is trending upwards for last 4 weeks for daily chart. Mild increase until today when MACD seems to be increasing more firmly and urgently.
• RSI (25d) - Just reached the 50% level.
• Bollinger Bands - Prices have burst the upper bollinger band now with the bands soon-to widen to accomodate for even more price volatility and possible uptrend. Nonetheless do note that there could be an anticipated take profit on 4 June (tomorrow) given the huge break from the upper bollinger line. 
• 20d MA - the 20d MA has just started to turn up, another positive sign that the average momentum has indeed left pessimism trailing. 
• 200d MA - Prices are still a good 12.9% away from the 200d MA. Potential for upside is high.
• Major white candlestick - accompanied another yesterday (2 June).
• Volume - A huge surge in volume occured today (3 July) accompanying the major white candlestick. Investor appetite for this stock is clearly increasing and has increased much over the last 1-2 weeks steadily.

Swiber was arguably the most battered down stock after the first-half-of-the-year rally. It recovered mildly after securing a host of contracts that extended its order book towards $1.5billion over the next 5 years. An impressive record for this company but the market has yet to firmly price its potential and brand in the oil & gas sector. Today its price finally broke $0.60 which was a local high in end June after euphoria on its slew of contracts. With more investor buying pressure, it seems that its fundamentals will soon be correctly validated.

Outlook - Buy. Still a 17% away from its year-start rally high (Ezion holdings is almost at its year-start rally price high for comparison) presents a good upside potential for this stock. In this sustained bull run, it is always a great idea to be vested in oil & gas counters. This is cheap, in a great sector, has strong fundamentals. All in for a good buy.

• MACD - had a blip over the last 2 weeks but is well supported on the 0 in the positive territory and is trended upwards. Weekly MACD has just crossed its signal line for more bullish break.
• RSI (25d) - Just reached cleared the 50% level.
• Bollinger Bands - Prices are touching the upper bollinger band now with the bands seemingly narrowing due to lagging calculations where the volatility of the last 14 days was pretty low. Not a great buy sign but given today's break in prices above $0.60 (around 5% increase from the 14d average), there is no reason not to believe additional volatility is back. 
• 20d MA - the 20d MA has been trended upwards with no signs of decrease. Strong upside.
• 200d MA - Prices have just crossed the 200d MA putting it in the likes of similar oil & gas counters of a bull rally time. Let's not forget that the other counters have prices already much above the 200d MA. 
• Diagonal major support - Prices are well supported on the diagonal as show in the chart. Risk reward is very healthy at current prices.
• Major white candlestick - accompanied 2 other in the last 3 trading days. Very positive uptrend.
• Volume - Steadily increasing volume has accompanied the last 3 trading days signifying much renewed buying pressure for this counter.

Swiber Breakout

Market has been pretty erratic since morning today but there has been one counter that caught my sight with a strong buy call based on technical analysis.

Based on the W figure formed since Aug to start Feb, Swiber has broken out of its downtrend at around $0.65 and has been trending quickly towards $0.75. Lately, it took a correction and has tested $0.71 support firmly since Friday and today (intraday low is at 0.71). Now the stock is at $0.75, breaking through the highest close 3 trading days earlier.

Volume is at 6million currently, probably not that ideal but also since market has been inactive the whole of today, it should be relatively unaffecting the above analysis of a strong breakout by Swiber.

Blue arrow is the expected take-profits area by measuring the height of the W and projecting it above the support/resistance line at $0.65. Top right corner is a fibonacci projection, confirming the blue arrow's height/take-profit area of 61.8% fib. Red arrow is today's breakout.

Swiber is also not overbought on the weekly and since a correction has already taken place, chances are momentum is still intact.

Very strong call by the bulls this time.