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Top pick for the day - CAC 40

Shared By Stock Fanatic on Friday, March 27, 2015 | 27.3.15

Key reversal taking place now?

A sharp reversal on France’s CAC 40 Index (CAC) could potentially signal a major top could be in place. 

Looking at the bigger picture, we believe that the CAC is on the verge of completing its wave-C if it has not already done so at the recent high of 5,106. 

First REIT - Visit to Makassar and Manado

• Beneficiary of national health insurance scheme

• Robust growth from operator

• Raise FV and maintain BUY

China Everbright Water - A Changed Animal Post RTO Of Hankore

Upgrade to HOLD, with a target price of S$0.95. We raise our target price to factor in the potential M&A activities as China’s water treatment industry consolidates. Our target price has assumed that the company will double its treatment capacity with the placement fund raised and increased borrowings. Currently the company is trading at a 2015F PE of 26.6x, 20.8% premium to the industry average of 22.1x. Entry price: S$0.83.

Petra Foods Ltd - Company visit note: Solid chocolate franchise in Indonesia

Well positioned to tap on strong growth opportunity in Indonesia and Philippines chocolate market, as per mgmnt: 
Petra Foods is the market leader (c47% market share) in its core markets of Indonesia (c70% of FY14 revenues) and the #4 player (c9% share) in Philippines. Management attributes the company’s strong position to its strategy of offering wide range of brands and variants (catering from mass to premium customer segments), and strong routeto-market capabilities. Based on Euromonitor forecasts, Indonesia is expected to be the fastest growing chocolate market in Asia at c11% CAGR over 2014-2019E.

Super Group - Recovery In 2015 Priced In; Downgrade To HOLD

Super Group is executing its long-term initiatives well and we foresee a better 2015 ahead as conditions normalise. However, we downgrade the stock to HOLD after its recent 28% price appreciation since our last target price upgrade in Mar 15. 

Target price: S$1.43. Entry price: S$1.30.

Swiber Holdings - Contracts galore but margin risks

■ USD406m contracts propel net orderbook to record USD1.8b.

■ Appears to be low-balling prices, though management guides for 10-15% GPM. Adjust EPS by -1%/3%.

Maintain HOLD pending margin delivery. Cut TP to SGD0.17 from SGD0.25, now on 0.2x trough P/BV vs 0.3x.

Oil & Gas - Expect $45 WTI prices in the next 1 month

We have a price target of $45 WTI prices in the next one month

■ Storage capacity at Cushing might be breached by early May if current runrate continues

Market is currently ignoring the negative 25th March EIA data which points to continuous crude stock pileup

■ Seasonal refining activity pickup in summer and inevitable slowdown in upstream production should push prices above our target $45 beyond May

■ Wildcards: easing of sanctions on Iran, expansion of Sunni/Shia conflict

Phillip Futures Energy Daily Outlook - Geopolitical tensions rise! Knee jerk reaction from the market causes prices to spike upwards.

Fundamental and Technical Analysis
Saudi Arabia starts bombing Yemen rebels; Geopolitical tensions increase: Although Yemen is not one of the big producers of crude oil, they do have trading activities in the region and is a key chokepoint in international shipping. The conflict may affect these trade disruptions and thus, lead to supply shortages. This caused prices to spike up as the market prices in these possible disruptions. From now on, it heavily depends on how rebels react to Saudi Arabia's bombings.

If oil pipelines and trade ports in Yemen get out of this unscathed, this trend would most likely be temporary. However, if this moves to infrastructural damages, we may see prolonged price hikes which could last months. Ultimately, we believe that that it should not be in Saudi Arabia's interest to damage the infrastructure in Yemen, however, this may not hold true for the rebels. It is possible for rebels to attack trade ports and pipelines in retaliation. Although it is going to be very unpredictable, I do not expect any long term disruptions.

US natural gas increased by 12B ft3 , marking the end of this “warm” winter: We knew that winter consumption was weak and natural gas production was strong, but to make inventories increase was indeed surprising. If this continues, we will no doubt be seeing prices move to much lower levels. The real change we expect to see is when inventories hit to 2013 and 2012 levels which would increasingly mean more robust inventories.

OCBC Oil Outlook - Remember the unquantifiable

Photo Credit :
Crude oil prices rallied substantially on the relatively weaker dollar, but more importantly, the renewed geopolitical issues on Saudi Arabia and its allies’ move in bombing Yemen. With the oil giant participating in the conflict, oil supply risk are likely magnified as a result.

Indeed, the risk of supply disruption is small. Yemen is a fairly insignificant oil supplier (about 100k bpd according to US EIA, or merely 0.1% of global oil supply). However, Yemen is located strategically along the Gulf of Aden, which Arab oil shippers use to export crude oil to Europe. The choke-point are less than 40km wide, but account for a significant 3.8 mbpd of oil transported through this narrow stream.

Geopolitical tensions, still an important but unquantifiable factor, are a primary reason for huge swings in oil prices. As we stand, the recent bombing have superseded abundant supply views, especially as US oil inventories continue to climb to record high of 467 million barrels. However, apart from geopolitical risk, our outlook for crude oil supply is for it to decline gradually as we approach 2H15, while oil demand is expected to stay healthy according to OPEC.

Top pick for the day - Soybeans

Shared By Stock Fanatic on Thursday, March 26, 2015 | 26.3.15

Relief rally could be taking place

Soybeans’ long term trend remains down but a relief rally could be on the cards now.

Our short term chart (right) suggests that a rebound to above 1092.75 may be taking place right now as wave (c) of b takes place.

The bullish divergence on its indicators supports the view that a short term low may be in place at 953.50.

Singapore REITs - An unfavourable mix

■ SREITs are expensive, trading close to -1SD below 12-year average yields.

■ Above-normal supply, below-trend demand. Borrowing costs rising.

■ Resuming coverage. UNDERWEIGHT sector. Advocate stockpicking. Top SELLs A-reit & CapitaMall Trust. Top BUYs Cache Logistics & Mapletree Industrial Trust.
**** Recommendation ****
Modified by : Stockfanatic
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