Poised for New Year Rally?

With only 4 days to go (and 1.5 trading days left), the year 2009 is coming to an end. 2009 has been an eventful year indeed as we swing from near hopelessness from the near collapse of the world financial market to a  stock market euphoria, that took most stock indices back to pre-crisis level between April to December.

While the stock market has been largely in a sideway trading phase over the last few months, the fact is that the market has remained in an upward trendline, The key indices has in fact been holding surprisingly well over the past weeks despite the lower trading volume as a result of the holiday season. Technically, there is a chance that the market may be poising for a new year rally after recent months of consolidating move. I have attached the chart of Dow, STI and HS here for your reference.

Personally, I am bullish on the commodities and O&G related play. In fact, looking at some of the charts today, it seems that quite a few counters have either already started moving up or poise for a up move.

Some on my watchlist include:
ASL Marine - which show a breakout today on volume
Ezion - been on a slow uptrend from recent consolidation. Good fundamental on Gorgon.
Ezra - 2nd time testing the resistance of $2.28
Straits Asia - which has been trending upward confidently
Also Noble, Olam, Ausgroup

Perhaps I am overly bullish, but I am putting my bet on a new year rally! Have a Prosperous 2010!

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework as usual.

Chasing the abalone

OCEANUS: TDRs likely to surge post-listing, says issue manager

Written by Sim Kih   source: Nextinsight

Thursday, 24 December 2009

Huang Chiyuan, who heads Polaris' Greater China investment banking, is bullish on new listings of TDRs. OCEANUS TDR’S valuation is unlikely to be dampened as a result of the Singapore market’s conservative valuation compared to Taiwan, according to Polaris Securities’ Huang Chi-Yuan. Mr Huang heads Greater China investment banking at Polaris Financial Group, and spoke from Taiwan to NextInsight this week in an exclusive interview via long distance call when he aired his views about the outlook of TDR prices. TAIEX, which is Taiwan’s capitalization-weighted index of all listed common stocks trading on the Taiwan Stock Exchange has a price earnings of about 200, compared to about 30 for the FT ST All-shares index. The reason for its richer valuations is that retail investors in Taiwan are very sophisticated, very open-minded and highly attuned to international developments, resulting in strong liquidity in the stock market there, according to Mr Huang. Polaris is Oceanus’ appointed issue advisor and lead underwriter for its TDRs that are expected to commence trades on 31 Dec. The book builders decided yesterday that the 200 million Oceanus TDRs will be issued at NT$9.50 (41.5 cts) each, amounting to a float of S$83 million. Polaris typically manages TDR deal sizes valued between US$20 million to US$40 million (S$28 million to S$56 million). The non fungible nature of TDRs mean that Oceanus will be traded like a small cap stock in Taiwan, said Mr Huang, even though the integrated abalone player has in reality a market cap of over S$700 million on the Singapore bourse. As the Taiwanese stock market is dominated by small to medium-sized companies, its investors are more receptive to TDR listings, said Mr Huang. Richer valuations by Taiwan investors mean that investors can expect TDRs to stay above their issue prices, as brokers often refer to prices transacted on the primary exchange when book building. A random sampling of 6 TDRs issued this year show TDRs have stayed above water so far (see table below).   TDRs in 2009 Started trading Issue price NT$ Close price NT$ Price gain WANT WANT 28-Apr-09 15.50 22.80 47% JU TENG INTL 25-May-09 17.30 36.90 113% NEW FOCUS 12-Oct-09 7.00 8.81 26% VIETNAM MAN 3-Dec-09 13.50 13.85 3% SOLARGIGA 11-Dec-09 10.10 13.30 32% TINGYI CAYMAN 16-Dec-09 45.00 45.90 2% Compiled by NextInsight, Dec 23 Mr Huang expects Oceanus TDRs to perform well, as Taiwanese investors like China-concept plays, especially those that benefit from China’s consumption growth. Investors were very excited by Oceanus’ integrated business model encompassing agriculture, food processing to retail (restaurant chain), after the phenomenal showing by Want Want, which was the first TDR listing this year. Small floats tend to show more upside due to the relative scarcity of TDRs available, said Mr Huang. Like Want Want's crackers, Tingyi's Master Kong instant noodles also dominate China's convenience food scene, but the later's TDRs are trading at close to issue price. The difference is Want Want raised S$140 million, while Tingyi raised 5 times the amount. Taiwan investors were also won over by the abalone farmer’s eloquent and charismatic chairman, Dr Ng Cher Yew, said Mr Huang. To them, 10 times PE for a profitable stock like Oceanus with high growth potential is very cheap, compared to Tingyi which trades at 37 times. Why do Taiwan investors to prefer TDRs over the cheaper underlying shares on a foreign exchange? First, opportunities arise when there is high demand for a company's TDRs versus its small float. Second, it is more convenient to trade on one’s local exchange. Third, research is availabe in a local language, and Finally, there is no exchange rate risk. Difference between depositary receipt and primary listing Top volume stocks, led by Oceanus, on Wed 23 Dec 2009 Prices of Singapore stocks with overseas listing plans took a beating on Wed on top volume after all approvals of dual listing on the Hong Kong Stock Exchange were suspended due to concerns by regulators over recent price hikes of the shares listed by introduction. Z-Obee, which had recently received approval for its dual listing on HKSE, was sold down 19%. In contrast, the chairman of Taiwan’s top financial regulator, Financial Supervisory Commission (FSC), Sean Chen, had earlier this month shrugged off press speculation that TDR prices had been artificially jacked up. The difference between a depositary receipt and a dual primary listing is that the later comes with more stringent listing and disclosure requirements, as the exchange takes upon itself the fiduciary role of the primary regulator. A second difference is only a small portion of a company’s issued capital are maintained with a custodian institution for depositary receipts. For dual listing however, a shareholder who holds part of the float on the primary exchange may trade on the second exchange by transferring his share membership from the Bermuda register (for Singapore shares) to the branch register of members in Hong Kong.  Share transfer between the registers takes about 2 weeks. Singapore Listco with second listing intentions Overseas listing announcement Platform Stock price at announcement Last close stock price Price change CHANGTIAN 16-Oct-09 TDR in Taiwan 0.210 0.190 -10% CHINA TAISAN 13-Oct-09 ADR 0.225 0.175 -22% CHINA XLX FERTILIZER* 28-Jul-09 Dual listing in HK 0.54 0.585 8% MAP TECH 7-Dec-09 TDR on GreTai 0.06 0.065 8% MIDAS 22-Sep-09 Secondary listing in HK 0.895 0.875 -2% OCEANUS 27-Oct-09 TDR in Taiwan 0.365 0.385 5% Z-OBEE 28-Sep-09 Dual listing in HK 0.145 0.190 31% Compiled by NextInsight on 23 Dec 2009 * China XLX has already achieved a dual listing recently The good news is: Investors can look forward to a spate of TDRs from Singapore next year. Mr Huang reveals that he has received a fair number of enquiries from Singapore as the relative ease of raising money via TDRs has generated much interest from companies looking for cash. As long as a company has been profitable in the year prior to its proposed TDR listing, has a pretax margin of at least 6%, funds can be raised within 3 months of appointing an issue manager. My take: I have attached my chart for Oceanus here. Personally am hesitant to chase this stock, although there are talks that it may go to 47-48 region. However....talks after all are just talk. Also note the early euphoria usually related to dual listing (just like IPO), although I would not deny that some of these stocks do deserve a better valuation...especially china-related play. Taking a leaf out from Oceanus experience, dual listing should give the counter some head up in term of valuation, however, it is important that such valuation be pegged back to fundamental. Chart wise, I see resistance at 43, then 47 level. For trading play, as usual, place your stop.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework as usual.

Noble Rise on Gloucesther bid - deal a sign of Noble Pedigree status

Gloucester Takeover - Good Deal for Noble? 23 Dec 09 Yesterday, Noble Group announced that Macarthur Coal proposal to buy Noble's 87.7% owned Gloucester Coal. If the deal which includes Noble’s stake in Gloucester (88%), Middlemount (24%) and Donaldson (80%) is sealed, Noble will get approximately 24% stake in Macarthur and A$175m in cash. In a note published this morning, Macquarie Research Equities (MRE) analyses the proposed deal and makes the following observations… Yesterday, Noble Group announced that Macarthur Coal proposal to buy Noble's 87.7% owned Gloucester Coal. Macarthur will offer Gloucester's shareholders 0.84 of Macarthur shares for every 1 Gloucester share, implying an offer price of A$8.16 per Gloucester share. Macarthur has also made an all cash alternative to Gloucester’s shareholders at A$8.00 per share. If the deal, which includes Noble’s stake in Gloucester (88%), Middlemount (24%) and Donaldson (80%) is sealed, Noble will get approximately 24% stake in Macarthur and A$175m in cash. MRE sees this positively as it consolidates Noble's varied coal assets in Australia in one stroke, leaving it with a large stake in a visible listed entity. Proposed price for Gloucester is 14% higher. Macarthur will acquire Noble's stake in Gloucester (88%), Middlemount (24%) & Donaldson (80%, raised from 68% prior) with Noble ending up with 24% of Macarthur. Citic Group is currently the single largest shareholder of Macarthur with a 22% stake. Macarthur's bid values Gloucester at A$8.16 a share (or cash of A$8.00 a share for minorities who elect cash). The proposed price for Gloucester is A$1 (or 14% higher) than Noble's own takeover offer for Gloucester concluded about 6 months ago (which took its stake from 20% prior to 88%). Consolidation, not a sell-down. Noble is not selling down its effective stake in these assets though future marketing fees for Middlemount and Donaldson's output has been reduced (accounts for part of the A$175m in cash and 22.5m Macarthur shares as compensation). Rather, MRE sees this as a consolidative move with a strategic twist as Noble ends up as the single-largest shareholder (though not controlling) at Macarthur. From material posted by Macarthur, the enlarged Macarthur group will be diversified over six mines over three coal basins, with about 7.5mt of coal output for 2009(pro forma), with about 50% as thermal output. Marketing rights remain. Noble will retain marketing rights for Donaldson & Middlemount (albeit with lower fees) which will help it drive volume at its core energy segment. Energy segment volumes accounted for 38% of total volumes for 3Q09. Stronger balance sheet. Noble's balance sheet will be enhanced by the AS$175m in cash compensation. As of 3Q09, Noble was ungeared (adjusted for working capital) post the injection of US$646m in fresh capital from CIC (~11% of its enlarged share base) or ~50% based on nominal gearing. Action and recommendation Assuming this proposal succeeds, Noble will be on its way to extracting greater value from its portfolio of assets. MRE has an Outperform rating on Noble Group and a 12-month target price of $3.30.

Mike's Take: Noble has once again demonstrate its strong deal making and execution capability. Having to just acquire Gloucester at A$7.00 just about 6 months ago, the company is now sitting on a nice A$1 profit for the sales to Macarthur. What is more impressive is the structure of the deal as in that noble opt for a part cash part share structure, which 1) will give it a share in Macarthur hence consolidating all its coal asset into 1 single listed vehicle, and 2) A$175m of war chest for it to play the game going forward. Price wise the share was pushed to a high of S$3.17 versus its last closing of S$3.01. It reach its peak of $3.26 on 9th Dec, which should pose some resistance as it approach this region. However, the chances of it testing this peak and establish new peak is very high. There will be some pullback after the euphoria, but these should be good time for some accumulation. If you believe that the commodity cycle will remain bullish in 2010, Noble is definitely a good counter to consider.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework as usual.

Noble Halted. Bid for Gloucester. News expect to be positive.

0136 GMT [Dow Jones] Noble Group (N21.SG) halted pending announcement; media report says that Macarthur Coal (MCC.AU) set to make bid for Noble's 87.7%-owned Gloucester Coal (GCL.AU). Sydney Morning Herald reports on website Macarthur offering cash and share option or all cash alternative,
cites sources close to transaction, newspaper says Noble is supporting Macarthur bid. Both miners requested trading halts today and people familiar with situation tell Dow Jones Newswires trading halts are related.
Noble only took control of Gloucester in June this year, scuppering Gloucester's merger plan with miner Whitehaven Coal (WHC.AU). Noble's A$7/share offer valued Gloucester at A$572 million, Gloucester currently has market cap of about A$537 million. "It's a little bit surprising as Gloucester was a nice fit and a good asset, but on the other hand there is a price for everything," says analyst. Noble shares closed flat at S$3.01 yesterday. How stock reacts to news depends on price fetched for Gloucester; if high premium is paid, shares may react positively but if premium disappoints, move may be seen as strategic u-turn, raise questions over company's execution.

My take:

No reason for Noble to sell Gloucester at a low premium. Expect news to be largely positive.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework as usual.

Chinese Banks stock under pressure...for a while

CNBC 21 Dec 2010

"Chinese banks will need to raise 500 billion yuan ($73 billion) in capital next year, the country's bank regulator said. According to Li Fuan, a director at the China Banking Regulatory Commission, capital adequacy ratios have been stretched by expanded lending.
Agricultural Bank of China, which is expected to launch an initial public offering, needs to raise 100-200 billion yuan, he said at a forum.
China's banks are under pressure to bolster their capital after new loans surged to record levels in the first half of this year, and while the pace of
lending has since subsided, it is expected to remain relatively high next year."
My take:
Chinese banking stocks fell today across the board. Beside Agricultural Bank fo China, I understand that there are several other chinese banks that are looking to tap the market next year. This could pose some liquidity issue for the chinese and HK market, since such listings are expected to be quite huge in size. At the same time, banking stocks will continue to be susceptible to news of capital adequacy requirement, hence putting pressure on their price.
I personally believe the capital adequacy requirements will remain as the Chinese regulator key instrument to blunt any potential asset inflation, as the chinese central bank has limited room to raise their interest rate next year with the US and other developing countries maintaining a loose monetary policies, without having added pressure on the RMB and export.

Attached are the chart for ICBC, China bank of construction and bank of China (H-Shares). Seems like all is showing a breakdown from trendline.
Avoid short term buy on chinese banking stocks for now. Can look to short on rebound.

Nonetheless, chinese bank long term prospects remain robust.

This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework as usual.

Citigroup

Send out Dec 17

Attached is Citibank Daily chart for those vested in this counter.

Seems to be touching the base trend line (Assuming this is the right trendline). Sitting on support at $3.44. If support broken, may have overshoot effect, taking the stock further downward.

Near term trend is definitely downward. New share offering at 3.10. I am not clear on the dilution effect on the share price. Will let you know once I get more information.

Please do your own charting and research before taking any position. Always have a stop. Play safe.

Singapore Property

Send out Dec 16

CIMB Daily Note:
URA released the new private home sales data for Nov 2009 yesterday. 600 new private homes were sold or a 26% MoM fall in transaction volume, bringing total sales YTD to 14,370 units. This is the second month that the sector saw new private home sales below 1,000 units post cooling measures announced in Sep. We are not concerned by this though, as we believe the seasonally weak year-end and lack of meaningful new launches played a part in the property breather. The positives from this set of data came from improving sentiments for the mid to high-end segment, evidenced by relatively good demand for larger units. In our coverage universe, we see Hobee (Outperform, TP: S$1.95) and Allgreen (OUTPERFORM, TP: S$1.50) as main beneficiaries to the mid to high-end recovery theme going into 2010. We maintain our Overweight call on the sector on strong financial positions both at the developer and buyer level, and improvements in the real economy going into the new year.

Meanwhile pls see attached DBS daily note giving the same call on property counter.

General take is that the start of the IR early next year should create some hype in the property market especially in the mid to high end segment. While the mass market segment has cooled down, ground talk continue to see transaction in the mid to high end segment in line with the recovery of the global economy.

The high end segment is also less affected by the Singapore government recent measure to cool down the property market.

Attached is the daily price chart of SC Global, which show a recent short-term breakout on the 11 of Dec with good volume. Expect any pullback to be supported by the lowest trendline. On the whole, it has been trading at the lowest band lately, which will give it room for more upside ahead when property counter runs again.

As usual, my mantra...invest in what you understand only!
God bless!