Tough Business Conditions - NOL, Vard Holdings

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NOL (Shipping & Logistics Chain)
NOL reported a US$76 million profit on the back of the sale of its NOL headquarters building. Without the gains from the sale, it would still be in the red with EBIT at -US$85 million. The company has been having a very tough 2-3 years due to supply glut of liner vessels putting pressure on shipping rates but it seems that with a new CEO and leadership team, the cost cutting measures have become more aligned and aggressive to unlock value for shareholders in these tough times. For both liner and logistics, core EBIT losses have been narrowed and it is now in a stronger cash position after tapping new loans and increasing investment in PPE with cash from its sale of the building. Having said these, its performance is still highly correlated with shipping rates where there still seems no end to the oversupply of vessels. Europe and US are still in the doldrums and economic trade has not improved much compared to 2012.

• Black candlesticks for the last 5 weeks of trading. Share price has been plunging since the start of 2013 until a strong resistance at $1.10.
• MACD - seems to be turning upwards weakly.
• RSI (25w) - still downtrended
• Chance of technical break on narrowing losses - $1.18 (8% from current levels) Chances are traders will take this chance to buy at a low/major resistance and attempt a short term trade on NOL. Given that prices have been sliding since the start of the year, this announcement today may give some relief to the selling pressure. 

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VARD (Shipbuilder,Offshore Services Company)
Previously known as STXOSV, Vard has had its share prices fall since Oct 2012 after poor quarterly results in Nov and a price offer for shares by Fincantieri at $1.22/share. Vard had secured new contracts for 3 OSCVs worth some 3 NOK million in the first quarter, one of the slowest start since 2009. Delivering only 5 out of its 24 vessels scheduled for delivery this year, EBITDA has fallen some 23% in 1Q2013. Cash position has also dipped to 2 NOK billion from 3 NOK billion in March 2012.

• Share price slide since Oct 2012 with little indication that there will be a reversal in trend. 
• MACD - is negative but with some chance of turning upwards.
• RSI (25w) - trending downwards towards 30%. 
• Bad news and bad technical chart - $0.90 (-15% from current levels). It does seem that investor interest in this stock has been waning since 2011 when its prices were on a one way trajectory. Oct 2012 has marked the start of its share decline and so far there is still no good news to send its prices up. Bad news, bad technicals. Go short.

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Back in Focus - STXOSV

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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 Stock Picks - STXOSV, NOL

Hot oil & gas play STXOSV has a $2 fair value suggested by OCBC research. It is currently trading downbeat though at $1.4, possibly presenting a 42% upside. Still fresh from takeover bid news that has been linking them with several key players in the market since end 2011, the stock had seen a doubling of its share price since October low last year to $1.8 in April before falling to $1.4. 

Outlook - Track closely for direction in the first trading day of the week. A cross below the 200d MA will fit in nicely with MACD and RSI suggestions of further downside. A rebound will suggest some strength in the stock reaching a local low. Chances of further downside however is definitely more likely in this supposed bear week to come.

• MACD - Is trending downwards quite heavily.
• RSI (25d) - Is also heading downwards but with some resistance at around 38% level. 
• Bollinger Bands - Prices are now falling along the lower bollinger bands with some suggestion of a rebound. However, it is noted that the prices have been walking along the lower bollinger band for the last 5 days without a rebound in sight.
• 200d MA - Prices are now supported by 200d MA. A further downside cross will spell greater possible selling pressure that will drive prices even lower.

Similar to the Yangzijiang post discussed 1 week earlier on this blog, shipping companies such as NOL, YZJ, Cosco have been in malaise ever since 2008. Baltic dry index has been oscillating around 1000 levels which is a really low level given supply glut and poor demand on economic concerns. The good news here is that shipping companies are trading at very very low prices already factored into account right now. 

Outlook - Buy on the consensus that it is in for a long investment period. Right now there is nothing to suggest that the stock may go any lower than 2011 lows unless incredible mayhem strikes Europe. Very well  defined major resistance floor for NOL prices.

• MACD - Still trending downwards but with some glimpses that there might be an increase in investors sentiments to come.
• RSI (25w) - RSI still at lower half of the territory.
• Bollinger bands - Prices are at the lower bollinger band giving rise to a greater likelihood of a rebound off the $1 resistance floor.
• $1 resistance floor - Very well defined resistance floor observed in NOL prices. 

More Upside to STVOSV?

STXOSV has risen an astonishing 110% since the bottom of the start of October. This is by far one of the best performing stock in the last 6 months. When I meant best, I meant returns with measured risk. 

Let's analyse this stock with the news in December that broke and suggested a willingness of its parent, STX, to offload this arm in order to raise funds for itself. It survived that awful call that began a minor plunge in its stock prices before recovering on some speculations that it could be taken over. 

Along these 6 months, news announcements from the company has been mainly positive, with continual orders coming in and a healthy order book. In fact, its order book has expanded greatly. Lately, its financial announcement showed a doubling in its 4th quarter net profits compared yoy.

Given the improvement in the economic landscape and its strategic position in Norway where the OSV demand has clearly been improving, STXOSV has good and strong fundamentals, tested along the way in these 6 months.

On a technical analysis perspective, its share price has been largely correlated with its news. The share price strength was clearly tested in December on news that STX would be looking to offload this lucrative unit. It has not looked back since. Its price has seen a healthy increase since October and the trendline is very well defined. On Friday, the stock just rebounded off the diagonal trendline support.

MACD is however a bit weak given its crossover with its signal line but if you are looking to trade off the support, it should not be too big a concern given MACD and its signal are still both in the positive territory. Alternatively, it could be interpreted as the stock taking a breather from its rapid rise 1 week back so do track closely and look out for the first and second green MACD bars to initiate a long.

RSI is around 70 confirming the stock's price strength and has bounced off a horizontal support at around 65.

Bullish with mid term outlook.