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Friday, April 30, 2010

Greece will be saved in a couple of days!

If Greece is allowed to collapse, it will drag down portugal and spain too and the contagion will spread across europe as many banks and funds that bought into the government bonds of these 3 countries will suffer a painful and acrimonious death and EU will have to bail out many financial institutions.  The cost of saving Greece certainly outweighs the cost of not saving Greece. If EU collapses, nobody will be around to buy US treasury bills and US will never be able to stand on its own feet anymore.

Synopsis of Abterra's AGM

Abterra bought 49% of Jiaozhong coal mine (Shanxi) at $188m rmb with a coal reserve of 10m metric tonnes but was later revised up to 64m metric tonnes. However, it was found later that the true minable coal reserve was 50m metric tonnes. During that time, foreigners were not allowed to own more than 50% shares in chinese coal mines and Abterra made a smart move by buying 49%(24.5m metric tonnes) of Jiaozhong coal mine at a super cheap price with a minable coal reserve of 50m metric tonnes. Please note that Abterra did not account for Jiaozhong's earning contribution in its financial statement and therefore, the temporary production shutdown in Shanxi had no effect on Abterra. Abterra's revenue and earning drops were mainly due to its core trading business which suffered from the worldwide financial crisis and the olympic event whereby coal shipments to china came to a virtual stop.

Thereafter, the chinese government started to restructure the mining industry in 2009. No foreigner is allowed to own any chinese mine now and the chairman of Abterra used his guanxi(close relationship) with Shanxi government to retain part of the shareholding by diluting from 49% to 24.01% as the chairman had been investing in Shanxi province for the past 20 years. Although the purchase price of 188m rmb remained the same, the total coal reserve increased to 117m metric tonnes due to Shanxi government injection of its own coals and the production capacity had been increased to 900,000 metric tonnes instead of 150,000 metric tonnes. Therefore, Abterra can be considered to be in ownership of 28m metric tonnes which is slightly more than its previous holding of 24.5m metric tonnes. Jiaozhong coal mine is said to be restarting production this month and Abterra is awaiting formal confirmation in writing from Jiaozhong and abterra will be accounting for jiaozhong earnings on its financial statement this year.

Abterra also announced during the AGM that it had just clinched a S$20m deal from Glencore with a profit margin of 7-12% and all the cylinders will be firing at full speed this year with the expectation of about 300% improvement in its businesses for 2010. GNR also would like to increase its shareholdings in abterra but is only permitted to purchase only 1% every 6-month according to SGX ruling. This move can be seen by the recent purchases by GNR in the SGX announcement.

Abterra sought a credit line of $20m with YA Global because it had to put up money for bank LC for its trading business. In a nutshell, Abterra has to put up about $30k for every $1m of trade. The shareholders passed all the resolutions including issuance of additional shares for future expansion of credit lines and acquisitions. Abterra also has the intention to increase its shareholdings in yongxin from 15% to 20% so that it can equity account for yongxing's earnings under Abterra.

In conclusion, anyone or company that would like to have a hand in the coal mines in China has to acquire companies like Abterra. Furthermore, China does not export any coal and is a net importer of coals which only goes to show that any coal mine under Abterra in China will be selling all the coals to China users easily. In short, there is no demand problem but supply problem in China and the coal price is definitely increasing over time.

Thursday, April 29, 2010

Is Genting turning around now or the surge today is just an abberation?

Let's take a look at various research report calls below.

Date/Research House/Last Done/Target Price/Call/Valuation Method

14/01,CIMB,$1.24,$1.50,Outperform,Ebitda 20x
27/01,CIMB,$1.10,$1.50,Trading Buy,SOTP
09/02,CIMB,$1.09,$1.50,Trading Buy,SOTP
18/03,CIMB,$0.97,$1.23,Trading Buy,Not Disclosed

22/01,Citigroup,$1.23,$0.80,Sell,Not Disclosed
22/02,Citigroup,$0.97,$0.76,Sell,SOTP & DCF

29/01,DMG,$1.08,$1.22,Trading Buy,Not Disclosed

08/02,DBS Vickers,$1.09,$1.20,Hold,SOTP
22/02,DBS Vickers,$1.04,$1.07,Hold,SOTP
08/03,DBS Vickers,$0.90,$1.07,Hold,PER26x,Ev/Ebitda 14x
19/03,DBS Vickers,$0.97,$1.07,Hold,SOTP

08/02,OCBC,$1.09,$1.39,Buy,Not Disclosed
08/03,OCBC,$0.905,$1.04,Buy,Not Disclosed
18/03,OCBC,$0.97,$1.04,Buy,Not Disclosed

We can see that CIMB has been pushing for a BUY on Genting every month from January to April when Genting has been falling for the past 4 months. The surge in Genting today maybe due to CIMB as it issues a BUY call again on Genting.

Wednesday, April 28, 2010

Is Yangzijiang worth buying after purchasing PPLH from Baker Tech?

Yangzijiang has just announced its revenue and profit increased by more than 20% respectively.

Please take a look at the various research report calls for this April:

Date/Research House/Last Done/Target Price/Call/Valuation Method
19/4,DBS Vickers,$1.43,$1.75,Buy,Not Disclosed
28/4,OCBC,$1.40,$1.60,Hold,Not Disclosed

Is Golden Agri still worth buying after clashes with greenpeace?

The incident with greenpeace is just a blip and will not tarnish the reputation of Golden Agri as Golden Agri has taken action to prevent escalation of the problem.

Please look below for the various research report calls for this year,:
Date/Reseach House/Last Done/Target Price/Call/Valuation Method

02/02,CIMB,$0.52,$0.69,Trading Buy,PER18x
26/02,DMG,$0.54,$0.68,Trading Buy,PER15x

Tuesday, April 27, 2010

US should not persist in making China revalues its yuan upward.

US is having a myopic view by making China revalues its yuan so that it can rebalance its deficit.  First and foremost, US can't rebalance its deficit and bump up its employment. If China revalues its yuan, China will export inflation to the world in this crisis-hit era.  Exports will slow down in China causing retrenchments and closures of factories and prices will shoot up worldwide especially in US as there is no cheap production anymore.

There was a consumer research done a few years ago on price influences in US without using China made products and the ensuing outcome was HIGH PRICES.  I think US is trying to shift focus away from its own problems and conveniently use China as a scapegoat for all the problems.

Nonetheless, this is NOT the time to allow inflation to creep in or we'll be having another BIGGER problem pretty soon in the unforeseenable future.

NOL share price has run ahead of fundamentals!

NOL is getting overpriced as it has sped ahead of fundamentals which is driven by market sentiment.

Looking back at the 12th Global Liner Shipping Conference in London in April 2010, Maersk, the world's largest container shipping company, predicted that 2010 freight rates would only reach break-even level at best on the back of a slow recovery in demand and it would only be making a modest profit for the year of 2010.

Therefore, how would the world economy recover so much in a span of just 2 weeks and propel NOL's shares to surge higher?

Where is the cash in China Hongxing?

China Hongxing had been reassuring investors that it had the cash to redeem the bonds but it could not repatriate the money to Singapore due to administrative issues in China.  It has been months since China Hongxing reported the problem but there is still no new outcome on this problem.

Therefore, I'm very doubtful about this counter and will not touch it at all.  Better to invest in another company and sleep well at night.

Monday, April 26, 2010

Is Rickmers worth buying? What about other shipping trusts?

Rickmers has just reported its profit plunges by 51% even though revenue improves by 14%. This shows that its expenses are growing faster than earnings and that it also has to pay compensations for the huge order cancellations (US$918.7m) by cash & interest-bearing convertible loan (US$64m in total).

This, in fact, is a good thing as Rickmers is biting the bullet and it no longer has to find ways to fund the humongous purchase. Lesson learnt here is never bite more than you can chew.  If Rickmers were to persist in the purchase, its loan-to-value (LTV) clause would be invoked and the loan interest would be revised upward and put Rickmers in dire straits.

However, the bad side to this is whether Rickmers will be able to deliver better revenue with its 16 container ships.  Shipping trusts like Rickmers have to constantly acquire more ships to increase its yield as most of the ships have already locked in chartering rates for the long terms (usually 7-10 years).

I, personally, would advise investors to jump ship and invest in Pacific Shipping as it has no LTV compared to Rickmers & First Ship.

Baker Tech has sold PPLH to Yangzijiang.

Baker Tech has sold off the golden goose to Yangzijiang and this company has nothing much to offer in the future.  This company also reported its profit plunged 60% recently. No doubt the next earnings report will look good due to this one-time off sale but the future prospect is dimmer than before.  If not, why would Sembcorp Marine object to the sale? Time to sell out and reinvest in another stock.

Saturday, April 24, 2010

Death knell bellowing for Genting (RWS)?

There is a high probability that Genting share price is on a downfall trajectory when MBS's casino is opened at the end of April 2010. In fact, Genting share prices has been falling when the MBS's casino official inauguration date gets nearer and nearer.

As customers are always fond of novelties, majority of them would visit and play at MBS's casino instead to experience which of the two would be the preferred joint for themselves.  Therefore, it is not a surprise for RWS to report a drastic drop in customers of at least 50% after the opening of MBS.

Singapore, afterall, is a small isle and I do not think that it can accomodate 2 casino resorts.  Having 2 casino resorts will not widen the pie but cannibalize each other.

Friday, April 23, 2010

Prudential is seeking secondary listing on SGX

It is good to subscribe for prudential shares on SGX as the primary listing on HKE is expected to perform well.  Generally speaking, AIA life was a golden goose under AIG and if not for the crisis, AIG would not sell AIA life.  Prudential had the foresight and took the opportunity to subsume AIA life under its wings at the right time.

Thursday, April 22, 2010

Abterra - Buyers buying!

The chart above dated 22/04/2010 shows that buyers had been buying up Abterra 1 and a half month ago.

Singapore Stock Market - Straits Times Index (STI)

The above chart date 22/04/10 shows that the recent rises in STI is well supported as buyers have been coming into the market.

Wednesday, April 21, 2010

The real situation in US stock market.

The above chart dated 20/04/2010 shows that the rise in Dow Jones Index was not accompanied by rising trading volumes which can only mean that Dow Jones Index can fall easily as it is not well supported.  If the Dow Jones Index is well supported, buyers will be buying up the index as they feel that the index level is cheap but this is not so.  As the index goes higher and higher, there are lesser buyers buying up. Why?

This could only mean that the buyers felt that the index had moved up ahead of  its fundamental and was no longer cheap to buy.

Tuesday, April 20, 2010

Will Greece get IMF's help?

Yes, I believe the probability is very high that Greece will get funds from IMF and as usual, IMF will impose strict economic policies for Greece in exchange for its funds.  The air travel impasse caused by the volcanic clouds looks set to exacerbate the exigency.

Monday, April 19, 2010

Is Goldman Sach saga the trigger for market correction?

Well, it depends on how far the US government will want to pursue the path of justice.  If Goldman Sach just gets away with just a multi-million fine, the world market will not spin into a free fall but if this incident leads to a breakup of Goldman Sach which in my view is very remote, then it will be a trigger for a major correction for the world market.

Sunday, April 18, 2010

Abterra has the potential to be a multi-bagger.

Abterra is in the business of commodity trading (iron ore, coal & coke) but has also started to expand its business downstream and upstream by acquiring coal mines, logistics company & processing factories. Abterra has businesses in india, australia, indonesia & china presently and will make a foray into thailand in the future.

Judging from the M&A activities around the world, commodity business seems to be a piping hot plate now. Recently, india has also started to jump on the bandwagon to acquire coal mines for its own needs while Noble (another Singapore listed company) is trying to take full control of gloucester coal mine in australia.

Abterra is currently a mid-cap stock and if it executes its strategy right, it will likely catch the eyes of fund managers and/or be acquired by the bigger player. The coke prices have been going up by leaps & bounds after the financial crisis in 2007 and this will benefit abterra tremendously and increase its profit exponentially in 2010.

With china & india relentless economic expansions, there is no turning back for abterra. The last closing price is $0.06 and the 100-day simple moving average on the trading volume shows that investors have started to accumulate this stock. Don't miss the boat now!

The stock market is in a conundrum!

The stock market trading volume, from the 100-day simple moving average, is still at a low level compared to its peak when the sti was around 3500. This shows that the rise in the stock market is not sustainable as the market is propped up by institutional funds only. The market has run ahead of its fundamental as not many companies reported more than 50% increase in their financial statements.

Retail investors won't be able to support the market like this as they have very short time horizon and also lack the money resources. Only institutional funds can support the market under low liquidity. The time will come for the institutions to cash out and hand over the baton to the next buyer. When that time comes, the market will correct.