Earnings Report Trade - Kreuz

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Earnings Report Trade - Kreuz

1. Kreuz (Offshore services)

Kreuz had recently announced contract wins totally US$15.5 million in January resulting in a considerable surge in its share prices. Prices have already risen a whopping 100% since its 2 year low in May 2012. Traders have turned considerably bullish lately again on the nearing of its earnings report tomorrow 21 Feb 2013.

• Large white candlestick last week that has broken a 2 year major resistance line on some trading volume.
• MACD - is high in the positive with some wavering though.
• RSI (25w) - is recapturing 70% high since Oct 2012.
• Short term trade TP - $0.54 (11% from current levels) expected in 1-2 weeks. On the back of anticipated strong earnings, if reported tomorrow, will give the bulls more reason for higher prices. Of course, the risk here is that the company reports lower than expected earnings and prices fall through the support. If nothing drastic, prices could still be supported by $0.47 support levels and it does seem like a decent risk-reward trade.

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Back in Focus - STXOSV

[Previous post: Largest IPO in 2 Years - Mapletree Greater China Commercial Trust]

Back in Focus - STXOSV

1. STX OSV (Offshore support vehicles)

STXOSV shares slid in Nov after reporting dismal quarterly results. Share prices were then hit again by news of a buyout by Fincantieri mopping up their shares at $1.22/pc and will be making a cash offer for the rest of the shares. However, last week STXOSV reported securing 3 new contracts for OSCVs illustrating a  positive outlook for the OSV market in Europe.

• Large white candlestick last week that erased a 2 week-loss. Trade volumes was almost twice higher than the average for the last 3 weeks of trading.
• MACD - is recovering with decreasing negative divergence.
• RSI (25w) - is rebounding off ~45% and heading towards 50%. Note that the RSI is at a 1 year low.
• Long with TP - $1.50 (16% from current levels) expected in 4-5 weeks. Buying pressure seems to be coming back with the stock scheduled to also report their quarterly results on the 26 Feb. Seems like traders have been repositioning and accumulating for the last 2-3 weeks, stemming the stock price decline. On the back of good contract win news, this buying momentum should be good for this coming week and possibly after the next on good earnings.

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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.

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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.

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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.

Initial Pop or Long Term View? - Gaylin IPO

Gaylin Holdings is the 4th IPO to list on the SGX in a space of 2 weeks following Courts, Geo Energy, and Religare. Not a bad week for cash-rich investors seeking the extra investment opportunities in a saturated property market, overpriced REITs soon-to-form-bubble and lack of global growth leading to stagnation in stock prices. Underwriters and company managements seem to be expecting the market to pick up in the final quarter of the year to spur up some more stock demand. The flood of liquidity from US and Europe (all the bond buying activities) and in anticipation of that from China has finally caught up with companies seeking that extra equity to drive growth in this intrepid environment.

Here's a quick summary of the offering. For more information, please refer to the prospectus lodged with SGX here.

• Established since 1974
• Expanded to Vietnam in 2001
• One of the largest Singapore-based multi-disciplinary specialist providers of rigging and lifting solutions to the global offshore Oil & Gas industry
• Manufacture lifting equipment
• Ancilliary related services
• Provision of ship supplies
• 3 warehouses - 2 in Singapore, 1 in Vietnam
• 1 fabrication facility in Singapore
• Sales and distribution network spanning Asia, Oceania, Europe, the Middle East and Africa.
• Business plans
• Further expand into Asia
• Expand Malaysian operations
• Will be commencing construction on new facilities in Tanjung Langsat in Dec 2012
• Setting up representative office in KL, Malaysia
• Figures and numerics
• $0.35 per share
• 5,000,000 offer shares for public subscription
• 110,000,000 new shares
• S$38.5 million in gross proceeds to be raised
• S$35.4 million after deducting listing expenses
• 51.9% expansion of operations in Asia (ie. possible future acquisitions)
• 5.2% expansion into Malaysia
• 34.7% working capital
• 'No formal' dividend policy
• Intention is to distribute dividends of not less than 30% of net profits for FY2013 and FY2014
• Net profit after tax is ~$12-13 million (for the last 2 FYs)
• ~1c/share (based on 410 million shares after offering)
• ~2.7% dividend yield over offer price of $0.35/share
• Major shareholders
• All shareholders stated below have pledged not to attempt to sell any of the post-offering share capital for up to 6 months from listing. This represents 73.1% of the company paid-up share capital.
• Comfort shipping - 8.4 million shares (paid average 29.8c/share)
• Amhoist - 8.4 million shares (paid average 29.8c/share)
• Wee Seng - 6.49 million shares (paid average 30.8c/share)
• Rhodus - 12.3 million shares (paid average 22.4c/share)
• Keh Swee - 264.41 million shares 
• Timeline for offering

Definitely considering this IPO as a hit-and-run IPO for the moment and not as a long term value investor. Reasons are as follows below

• > 30 years of industry experience with Singapore-based operations represents some form of stability and continuity that the company can bring.
• However, a quick check with Spring Singapore shows that the company faces strong competition to rise up as a global brand representing the Oil & Gas support services sector in Singapore. [Spring Singapore 2009 report]
• The article also speaks volume of the intense competition in this saturated business environment although the Singapore brand name helps with overseas collaboration.
• No 'formal' dividend policy gives me the vibe that the management may be uncertain of the future performance of the company and are unwilling to make any commitment.
• Low liquidity stock except for the listing time fireworks. Only 26.9% of the shares are tradable in the next 6 months, representing 110 million shares or $38.5 million in value.

On the bright side,

• I like the company's geographical and business focus. The management probably sees huge energy growth emanating from Asia and is keen to explore the developing demand.
• LNG was sort of mentioned as a passing remark in the IPO prospectus but I suspect there would be more interest going forward to harness that demand that is developing sure fast in Asia and especially so, Singapore.
• Coincidentally, Malaysia is a net exporter of LNG
• Oil & Gas sector is ever-expanding together with energy demands. Let's remind ourselves that Japan is totally eliminating nuclear power and requires yet more oil & gas to sustain its energy needs. China is growing, albeit more slowly this time but Indonesia, Myanmar are up and coming.
• PE ratio of 8.5x seems reasonable for a growing company
• Singapore's stock market trades at a ~9x PE (Source: Mystockinvesting.com)

With Dynasty REIT also in the focus this week, I would still be tempted to put my money with Gaylin Holdings for the initial pop at the start of the listing. It is not an easy IPO to get too, given just 5 million shares on offer for a very active IPO market this period.

PS. for a statistical breakdown of all SG-listed IPOs in 2012, do visit "SG IPO Statistics" on this Healthytrading blog. It presents an easy snapshot of all the IPOs at a glance for your analysis and comparisons.

For those of you gunning for the Gaylin Holdings or Dynasty REIT IPOs, check out my blog page on "Guide to IPO Investing" to help you navigate around especially if you are a new investor or new to the IPO bidding system of SGX. Do not waste time; time is ticking away to those offer deadlines!

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Jump on the Oil & Gas Bandwagon? Part 2 - Ezra, Kreuz, Rotary

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 Ezra, Kreuz and Rotary. For charts on Ezion, Swissco and Swiber, refer to part 1 of this article here.

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.

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A Good Stock Remains A Good Buy - Ezion Holdings, Semb Corp

A good stock always remains a good buy. 

The fast growing phase of the business Ezion has been operating is indeed a very compelling investment story. Since last year, its management has shown good urgency and quality in making decisions to steer the company forward after a sharp decline in its stock prices between Aug - Oct. And it seems that this has been well executed over into the new year.

Outlook - Buy. OCBC research too has a good coverage report on Ezion following its 2Q earnings report. Fair value estimate is $1.20 which represents some further 16% upside from current prices. Technically, Ezion holdings has broken the $1.025 resistance with high volumes traded on Friday following OCBC research maintaining a Buy call and its favourable earnings report.

• MACD (weekly) - MACD trending upwards with increasing positive divergence.
• RSI (25w) - RSI trending towards 70% but not at extremely overbought regions yet.
• Bollinger Bands - Bollinger bands are widening and prices are headed towards the upper bollinger band with room to maneuver. 
• Volume - High volume on 10 Aug with a large white candlestick bodes well technically for further demand increase.

SembCorp is a government-linked company with strong utilities and marine expertise. It recently announced a good performance in its 2Q earnings report with an increase net profit of S$190million compared to 175 a year ago. Order book stands at $6.6billion where half of which has been procured in this year. Its share prices were given a further adrenaline boost, crossing a critical resistance level, after its Marine subsidiary Sembcorp Marine announced that it secured contracts worth US$4billion from Brazil.

Outlook - Buy. Knocking on the door of $5.40 and overcoming it presents a great psychological triumph for the demand and supply forces in the stock market. Technically, this break gives good upside to Sembcorp stock prices and further good news coming out of the Oil & Gas sector lately just bodes well for this GLC to reach new heights.

• MACD - MACD trending upwards with positive divergence.
• RSI (25d) - RSI trending towards 70% with room to go.
• Bollinger Bands - Bollinger bands are widening and prices are riding the upper bollinger band already. Possible further volatility to ensue.
• Volume - No presence of any spectacular change in volumes traded but some slight increase in average volumes traded over the last 14 days. 

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.

Midweek Stocks in Focus - NOL, Cosco, Rotary

It's been a really volatile week with the US, HK and UK markets surging to local highs while the STI maintained steady at 3020. Alas, it broke 3020 today with good strength exhibited throughout the day to close at 3051. This is the highest level since 1 year back and it seems like the 3020 psychological barrier is finally broken. Expect more upside to come (and also some retest of the 3020 resistance-turned support).

In the meantime, the usual market rally components are my favourite picks - Oil & Gas, Commodities and Shipping. In this first part of the article, I will focus on NOL, Cosco and Rotary while the 2nd part of my article will focus on Wilmar, Noble Group and Sakari.

NOL is a Government-linked-Company (GLC) with a strong presence in the shipping industry through its APL shipping and logistics networks. It has been in malaise for the last year with its stock price firmly in the ~$1 region. 

Outlook - Watch for break above $1.17 then buy for high stock beta in preparation for more market upside. Stock has seen 3 consecutive days of white candlesticks with accompanying good volume. Over the last 2-3 months stock prices have stabilised at a possible low suggesting that the worst is over and this is really the bottom of its malaise. Perhaps time for better fortune with easing European outlook and that prices are overdone on the downside.

• MACD - MACD crossed over signal line today and in the positive momentum region. First good sign.
• RSI (25d) - Crossed 50% and heading up.
• Bollinger Bands - Price is surging towards the upper bollinger band with some uncertainty to increased volatility/upwards price movement surge beyond $1.17.
• 20d MA - Prices have crossed the 20d MA yesterday
• 200d MA - Prices are still below the 200d MA with some more room to conquer.
• $1.17 resistance - An important note is the $1.17 resistance line that acted as a strong resistance in the short rally NOL experienced between May and June. Prices are now close to it and challenging it in the next few days. 
• Volume - Steady volume.

Cosco is one of the biggest companies in the world dealing with the shipping industry. It operates liner services, ship repair, building and offshore marine engineering. 

Outlook - Buy. With recently reported quarter earnings dipping 13.3% largely due to continued capacity surplus and weak demand in the shipping sector but a stabilisation in stock price, there seems to be a consensus in the market this is really the worst shipping can get. 

• MACD - MACD is about to cross over its signal line in the next few days.
• RSI (25d) - Still facing some resistance at 50% and possibly challenging it over the next few days with more upward movement.
• Bollinger Bands - Bands seem to be widening somewhat and prices have just rebounded off the lower bollinger band.
• 20d MA - Prices are still under the 20d MA with some intention of crossing it soon.
• 200d MA - Prices are still below the 200d MA with some room to conquer.
• Support diagonal - Most importantly, the risk-to-reward ratio is fairly tempting for this counter right now. Prices are close to the major support diagonal.
• Volume - Steady volume.

Rotary engineering is an Oil & Gas company involved mainly in Asia and Australia. 

Outlook - Buy. After a huge selldown since its peak in March, its prices have already risen by 5% from June lows. Though less attractive apparently compared to its counterparts in the Oil & Gas business, Rotary has a strong history of good management and that this selldown presents a good valuation to grab this stock on a cheap. Technically, there was a gap up on open today from the previous day in a rare situation. Good buying pressure is coming back together with the STI breaking through 3020. 

• MACD - MACD is about to cross over its signal line in the next few days.
• RSI (25d) - Challenging the 50% level tomorrow and headed upwards.
• Bollinger Bands - Bands are wide and can still accomodate a 5.2% upside on current prices to the upper bollinger band.
• 20d MA - Prices are justl under the 20d MA with intention of crossing it soon.
• 200d MA - Prices are still below the 200d MA with good room to conquer.
• Volume - Small volume today with the gap up.