Rethinking SPH

This is one of my favourite blue chips. Strong balance sheets, generous dividends and it will be a major beneficiary of the improving economy as well as the opening of the two integrated resorts (IRs) this year. However, I'm in no hurry to load up at the current price.

Its price is being supported by the 20wMA at $3.60 and the declining 200wMA provides resistance at $3.80. I would divest partially if its price moves to touch the 200wMA. I would do this as a hedge as I'm not so sure that its price would not revisit $3.40, the 61.8% fibo retracement which coincides with the declining 100wMA. $3.40 also looks like an important candlestick resistance/support level.

Revisiting Keppel Corporation

Keppel Corp is one counter which I bought at under $4 in early 2009 but offloaded too early. I like this counter. The world cannot do without crude oil. Other counters in the same theme which I offloaded too early as well were Ezra and Swiber. With crude oil strengthening in price, it might be time for me to revisit Keppel Corp.

In terms of fundamentals, if one were to seek exposure to offshore counters, Keppel Corp is a better choice as it has a stronger balance sheet. The economy might be recovering but I'm not sure that taking on too much debt is a good idea as is the case with Ezra and Swiber. Keppel Corp also pays out generous dividends which is very attractive to me.

Looking at its weekly charts, the negative divergence between price and volume from May 09 to Dec 09 is quite clear. Buying momentum has been weak as MFI continues its decline, forming lower highs. However, OBV has a gradual slope upwards which indicates longer term accumulation. Price has been hugging support provided by the 20wMA so far. Without any buying momentum, this counter is doing a rather precarious correction using time. Resistance is being provided by the very gradually rising 200wMA at $8.85. The falling 100wMA is unlikely to provide much support in the event the 20wMA breaks. A stronger support would be one provided by the rising 50wMA.

I would wait for a correction before accumulating. I would buy some at the 50% fibo retracement(S$7.55) as a hedge and would buy more if it goes to the 38.2% fibo retracement (S$7.28). If one is already vested, selling some if the price hits the 200wMA would be a nice hedge. Having said this, I am sure that the longer term trend of Keppel Corp is up as the rising 50wMA is on course to form a golden cross with the declining 100wMA in the coming months.

Crude Palm Oil: Update

On New Year's Eve, crude palm oil (CPO) closed up RM68 or 2.62% at RM2,663, a 7 month high. A retest of the high achieved this year at RM2,790 in May is on the cards.

CPO price is more likely to rise than fall in 2010 because of:

1. Demand from the world's top two consumers of vegetable oils: China and India. This demand is expected to increase as economies improve.

2. Bad weather in the Americas leading to lower soybean yields. This leads to lower soyoil production and higher prices. CPO is a substitute which is also less expensive.

3. Crude oil's price movement which is expected to continue rising as a cold winter increases demand for heating fuel in the short term and economies improve through 2010. CPO is an important source of biofuel and would most likely ride the wave up.
Why Golden Agriculture?

A new year and a new decade. Strategy for 2010.

Firstly, Happy New Year! It's the beginning of a new year and a new decade. Many countries in the world still have huge debts to deal with but let's hope things will be better the next 10 years.

This is extracted from the latest issue of NEWSWEEK magazine:

The American goverment may owe China US$799 billion but when it comes to foreign debt per capita, the US is relatively prudent. Which nationality has the highest foreign debt per capita?

Greeks US$ 27,746
Belgians US$ 27,023
Austrians US$ 26,502
Irish US$ 24,247
Norwegians US$ 21,402
Italians US$ 21,089
Dutch US$ 20,412
French US$ 18,946
Germans US$ 15,574
Finns US$ 13,617
Americans US$ 11,094
Danes US$ 9,410
Spaniards US$ 8,715
Swedes US$ 7,058
Brits US$ 6,526

Now, this puts things in perspective. Many countries are still not out of the woods. This gives the idea that we will see the global economy going into a tailspin again in the next 2 or 3 years greater credence. We are experiencing a cyclical bull in a secular bear market and not the beginnings of a secular bull market.

My strategy for 2010?

1. Gold
I am keeping an eye on the price of gold. If it goes closer to the psychologically important support level of US$1,000 an ounce, I will buy more physical gold as a long term hedge against inflation. Gold also acts as an insurance for my other investments. I buy physical gold from UOB.

2. Crude oil
I believe that demand for crude oil will continue to strengthen through 2010. However, it will not go up in a straight line. It will climb a wall of worries and we will have plenty of worries in 2010, no doubt. I would trade counters which are leveraged to the price of crude palm oil (CPO) as a proxy to the price movement of crude oil. I like Golden Agriculture.

3. Japan
As a contrarian play, Japan might outperform after almost two decades being in the doldrums. I like the Japanese Yen. I like Japanese real estate. I like Saizen REIT.

4. Indonesia
A strong emerging market, Indonesia did not suffer negative growth in 2009. I like LMIR and First REIT for the low gearings and the high yields.

5. Healthcare
There is greater demand for quality healthcare with increasing affluence and an ageing population in Singapore. I choose Healthway Medical.

6. Tourism
2010 will be a year where tourist arrivals balloon in Singapore with the completion of the two integrated resorts (IRs). Looking for value and high yield, I like Suntec REIT and SPH.

There are many other counters which will do well in 2010 but I will concentrate on these I've highlighted. The choices here are based on FA. Remember to use TA to identify entry and exit prices. Good luck in 2010.

31 Dec 09: Healthway Medical

At half day, Healthway Medical's trade volume exceeded yesterday's full day volume! We have a breakout on high volume! The resistance level at 13c has been taken out with a vengeance. Price touched a high of 14c before closing at 13.5c. If we have confirmation in the next session, a retest of 14.5c, the top of the earlier cup pattern is at hand.

MACD has risen strongly above zero. MFI did a sharp about-turn, forming a higher low in the process. OBV continues to rise, indicating continuing accumulation. A retest of 14.5c seems very likely. If 14.5c is taken out, I see an intermediate target of 17c, followed by an eventual price target of 19.5c!
30 Dec 09: Healthway Medical and Golden Agriculture

AIMS-AMP Capital Industrial Reit (MI-REIT)

As expected, a re-rating upwards:

From Business Times, 30 Dec:
Moody's upgrades AIMS-AMP Capital Industrial Reit
Re-rating follows recapitalisation exercise

MOODY'S Investors Service has upgraded AIMS-AMP Capital Industrial Reit's corporate family rating to Ba2 from Caa1 following its recent recapitalisation exercise.

The industrial trust - which was formerly known as MacarthurCook Industrial Reit - underwent a change of name after a recent debt-and-equity-raising plan. The Reit placed out shares to new investor AMP Capital Holdings and existing sponsor AIMS Financial Group as well as other cornerstone investors. This was then followed by a rights issue and a new term loan.

Concluding a rating review that was started on Nov 9, Moody's said that the rating outlook for the Reit is stable.

In addition, its liquidity profile has improved substantially, without material refinancing needs in the near term, Moody's noted. The Reit's debt/capi-talisation leverage has fallen to 30 per cent, from 47 per cent as of Sept 2009. The Reit's major borrowing, a new $175 million term loan, is only due in December 2012.

Strategy: I bought a large chunk of MI-REIT at 20.5c after the recap exercise. At that price, it gives a yield of about 10%. It's trading at about 30% below NAV. It has the lowest gearing amongst Singapore industrial REITs. For anyone looking for high yield at a bargain, this is a BUY even at 21.5c. Once again, look to TA for guidance on entry and exit prices.
High yield portfolio

Crude oil: Update

On Christmas Day, I said, "Technically, crude oil has been in a correction since peaking on 21 Oct. The short term trendline from 21 Oct has been tested 3 times on 4 Nov, 18 Nov and 1 Dec. Price took a plunge from there and only bottomed on 14 Dec. Closing at US$78.05 means that oil is still in a correction stage. We want to see crude oil closing at US$79.00 or higher in the next few sessions to see this broken. We want to see confirmation in time with price action forming higher lows and higher highs."
Crude oil at US$78.05

Taken from: Oil hovers near $79 ahead of U.S. stock data
On Wednesday December 30, 2009, 7:29 am EST
By Emma Farge, REUTERS

Oil held near $79 on Wednesday as cold weather in the United States and an expected fall in both U.S. crude and distillate stocks including heating oil countered a firmer dollar, shoring up prices after a five-day rally.

U.S. crude for February delivery fell 13 cents to $78.74 a barrel by 1124 GMT (6:24 a.m. EST) in thin pre-holiday trade after touching a five-week high the previous day.

Taken from:
Oil-thirsty China to raise Kuwaiti imports by 50 pct
On Wednesday, December 30, 2009
By Chen Aizhu, REUTERS

BEIJING, Dec 30 - China has agreed to raise 2010 crude imports from Kuwait by 50 percent to about 240,000 barrels per day, trade sources told Reuters, with Chinese refiners set to to process at record rates as demand rebounds strongly.

The jump, which follows a one-third increase this year, comes after Iraq said it would more than double exports to the world's second-largest oil consumer and Saudi Arabia agreed to a 12 percent increase for 2010.

China's fuel demand is poised for an 8 percent expansion in 2010, more than double this year's 3 percent, Sinopec's president, Wang Tianpu, told Reuters last month, amid increasing signs of a strong economic recovery spurred by aggressive government spending.

I believe that the demand for crude oil will continue rising through 2010. Crude palm oil will most likely ride the wave up. Golden Agriculture is testing resistance. It's a matter of time before resistance is broken and a new high is made.
Crude oil to hit US$100

30 Dec 09: Healthway Medical and Golden Agriculture

Healthway Medical has a white candle day on increased volume. Closing at 13c, it is still resisted by the flat 100dMA. We have a buy signal on the MACD today as it seems set to cross above zero. OBV has turned up sharply, indicating accumulation. MFI is still declining which indicates a lack of short term buying momentum. Still rising 200dMA at 11c limits any short term downside.

On the weekly chart, the increased trading volume is plainly obvious as price action formed a white hammer. OBV has formed a new high. A buy signal on the MACD was first seen last week. MFI has turned up sharply indicating that buying momentum on a weekly basis has strengthened. A retest of 14.5c will probably take place if the resistance at 13c is taken out.


Golden Agriculture closed at 50.5c, forming a doji in the process. Momentum oscillators are still rising although OBV has gone flat. The dwindling volume since mid August is quite obvious on the weekly chart. Without a surge in volume and a sustained one at that, it would be difficult for price to close above the descending 100wMA.
29 Dec 09: Golden Agriculture

Real estate as a hedge against inflation

For the last year or more, I kept hearing and reading the word "deleveraging". Companies and individuals are all busy deleveraging. So, basically, people are saving more money, paying off their debts and spending less. Overall, it gives an impression that leveraging is undesirable and should be done away with.

Marc Faber famously said that, in Asia, the family run businesses in Hong Kong and Singapore have very little debt. Many rich families in Singapore don't have any mortgages. He thinks that Asian real estate will continue to do well. This gels with what Jim Rogers thinks about how we should own some real estate and he, in a recent interview in New York, actually said that he would buy some US real estate now if he were staying there.

In my posts on the subject of gold, I mentioned that I buy gold as a hedge against inflation and that I do not trade gold. We could also buy other tangible assets which would keep pace with or grow faster than inflation and protect or grow our wealth in the process. However, most of us are not in the same league as Marc Faber or the rich families he mentioned.

So, what are we to do if we want a piece of the action and own some Asian real estate? Do we work very hard to save money before we buy that piece of real estate? 100% cash upfront and without a housing loan? Or do we put down 20% and borrow 80%?

Quite simply, like any other investment, the answer lies in timing. Buy when the market is depressed or just turning up and hold for the long term. If you believe that the world is going to see extraordinary inflation in future, this is one thing we should do if we have the means. If we have the money, pay 100% cash upfront. If we only have 20% to <100% of the value, take a housing loan for the balance. As an example, I bought private real estate 6 years ago and took a loan for 80% of the price. The valuation is now 80% higher. If I were to rent it out, I would realise a yield of 7% p.a. This is much higher than the interest rate on the bank loan I'm servicing. Capital appreciation plus steady passive income. Sounds like a high yield stock? Sure does. Having said this, we have to keep an eye on the interest rates. If that goes up significantly and we do not have the means to pare down the outstanding loan amount drastically, it might be time to let go. If I had told myself 6 years ago that I should work harder and save more money before taking the plunge, I would have worked harder, saved more money but ended up poorer. The next time the property market has a correction in price, bear this in mind and take the plunge, if you have not done so already. Inflation is a powerful force. If we have the means, we must do all we can to protect ourselves against it. Buy Japanese real estate

Q&M Dental Group

Q&M Dental Group's share price has more than doubled since its IPO a month ago. Yes, more than doubled! IPO price was 27c on 26 Nov 09. Price closed at 56c today. >100% gain in slightly more than a month. Phenomenal!

I just looked on in disbelieve as the price kept forming new highs. Based on FA, the valuation is simply too rich compared to peers in the medical services sector in Singapore.

With an estimated diluted EPS of 1.6c per annum, the PE for Q&M Dental Group at 56c is about 35x! This is much higher than Parkway's 25x at $2.92 and Raffles Medical Group's 20x at $1.44 and these are large medical services providers! Compared to a peer closer to its size, Healthway Medical's PE at a price of 12.5c is only 10.4x!

Let's compare Q&M Dental Group with Healthway Medical, an undervalued counter in Singapore's medical services sector, in my opinion. Q&M Dental Group has more than 30 clinics islandwide but this is dwarfed by Healthway Medical's more than 80 clinics islandwide. In 3Q09, Q&M Dental Group's profit after tax went up 8.7% to $1.9m while revenue went up by 1% to $14m. Healthway's profit after tax went up 44.7% to $3.98m while revenue went up by 6.2% to $25.32m!

On 12 Dec 2009, shares of Q&M Dental Group were included for trade on the Freiverkehr in Germany. Perhaps, this has a large part to play in its current rich valuation. Fundamentally, that the share price is trading at a PE so much higher than Parkway and Raffles Medical Groups' is mind boggling. Will we see a correction or will Q&M Dental Group's share price continue to astound on the upside? Your guess is as good as mine but I'm not buying.
Healthway Medical: Growing a defensive business

29 Dec 09: Golden Agriculture

My overnight sell queue for Golden Agriculture at 51c resistance, provided by the descending 100wMA, was done today. Another 20% of my position sold. Credit Suisse bought from me.
















It was nice how the 50c resistance was punched through but a white spinning top ended the day. If 51c is taken out convincingly tomorrow, I see a target of 62c in time. If 51c resistance holds out, price is likely to weaken to support and I would like to buy again at 47c or so in the near future.
More charts for Golden Agriculture

Buy Japanese real estate

Marc Faber has been bullish on Japan for some time and recently in an interview with The Economic Times, he said, "I think as a contrarian, you really want the contrarian play. You should buy Japanese stocks and Japanese banks. This is the absolute contrarian play. Nobody is interested in Japan, all the funds have withdrawn money from Japan, they have given up on Japan."

Japanese real estate peaked in early 1991 and has been on a decline since. Believe it or not, the price of real estate in the 6 biggest cities in Japan have fallen by 50% or more while the decline in other parts of Japan is around 30%. Imagine buying a piece of real estate and almost 20 years later, you find that it's worth 50% less in NOMINAL terms. Imagine what's the REAL value lost. No wonder many Japanese do not want to buy real estate. However, it's precisely when everyone is so bearish that we should be interested.

Japanese land price fell from 1991 to 2005 unabated and rose in 2006 and 2007 before falling again. The Japanese real estate market is oversold and unloved. However, with Japan coming out of a recession and optimism returning, things are set to improve. If you could visualise this graphically, we might be getting a classic double bottom pattern!

From an article in Property Wire on 30 May 09:
There is growing speculation the Japanese property market has bottomed out with analysts forecasting an improvement in the economy. Credit Suisse Group AG said that property manager Nomura Real Estate Holdings operations are improving. Analysts said that the company's condominium, investment and brokerage operations are outperforming expectations.

From another article on 19 Jun 09:
The property market in Tokyo is set to rebound as easier credit and low prices entice overseas investors back to the Japanese capital, according to a leading banker. Kazuo Tanabe, president of Chuo Mitsui Trust Holdings, Japan's sixth largest bank, said that foreign buyers are showing a lot of interest in acquiring Japanese property. 'We are seeing more deals as prices bottom out and investors think that it's time to buy,' he said. Property transactions being negotiated now are up as much as 30% from last year, added Tanabe, as Japanese firms and individuals also seek to buy.

From an article on 18 Jul 09:
Giant investment funds are poised to start buying Japanese property in the first half of next year when prices are expected to be at rock bottom, it is claimed. Global investors including Carlyle Group, Blackstone Group and Lone Star Funds are still waiting for prices to drop a bit further, according to Ben Duncan, managing director of CB Richard Ellis Japan. 'The market is steering toward big, opportunistic funds. They're waiting for prices to fall further. At the moment they are not seeing as much distress as they hope for. But as the market starts to bottom out they'll probably start to buy,' he explained.

We have a chance to own Japanese real estate in Singapore at a bargain too. Yes, you guessed it, buy units in Saizen REIT! Buying Japanese real estate at this time is attractive because we are buying real estate with more than decent rental income on the cheap. Well, it's not as cheap as it was earlier this year but things are a lot clearer and there is much less risk now.

Although rents have declined since 1995, property prices dropped at a faster pace in the same period. From 1995 to 2008, rents fell by 11.2% while property prices slid 35%, according to JREI. With property prices falling, young people tend to prefer renting, while individuals migrating to urban areas from rural areas create another source of rental demand. (Source: Global Property Guide, 22 Oct 09)
Passive income with high yields: Saizen REIT

28 Dec 09: Saizen REIT, Golden Agriculture, Healthway Medical

Got more Saizen REIT today at 14.5c. >800 lots sell down today. Happened in the last few minutes of the trading day. Easily absorbed by the long buy queue. Counterparty: Kim Eng. I checked the last annual report. Kim Eng had 6.9m shares. Kim Eng could easily push the price down to 14c which would gel with the support seen in the daily chart. 14c? I'm buying more. Charts for Saizen REIT

Crude palm oil at RM 2,591, up RM 37 or 1.45%. I took some profit selling 20% of my current position in Golden Agriculture at 49.5c today. Not enough buyers to punch through 50c today. I will buy again if the price sinks to support and if the volume remains lacklustre, this might very well happen. Charts for Golden Agriculture

Healthway Medical makes me happy today. Yesterday, when I met up with friends for lunch, I repeated my believe that this is an investment that will do very well in time. So, I would continue to hold on to what I have and would buy more if the price weakens. Today, there were strong buy ups and its price closed at 13c, resisted by the rising 100dMA. Volume was a respectable 11.3m. OBV shows strong accumulation. All the momentum oscillators have turned up strongly. If the buying momentum continues in the next few sessions, a re-test of 14.5c, the brim of the previous cup formation, is on hand. Charts for Healthway Medical

Gold as an insurance against inflation

Why buy gold? For me, gold is just another form of insurance against inflation. Real assets such as crude oil, Asian real estate and commodities are also used to hedge against inflation.

Gold will hit US$2.5k eventually and, probably, go higher in the years to come. The current inflation adjusted value of gold compared to the high achieved in 1980 should be about US$2.4k now. We are about halfway there. If we believe that inflation is going to be a big issue in the coming years, it's a no brainer that gold is on a long term uptrend. Real value of gold

However, I'm not overzealous about gold because I am not living in the USA or HK, making US$ or HK$. I am living in Singapore and making S$ which will appreciate against US$ and HK$ in time. This makes gold investment less compelling for me.

Frankly, I still prefer trading in the stockmarket and buying undervalued and/or strong dividend paying stocks for now. My gains in the stockmarket so far this year have outperformed gold or silver. Cashflow is also something I get from my stockmarket investments that I do not get from gold. However, all parties will come to an end. Will have to know when to exit the stockmarket.

Crude oil to hit US$100

I've mentioned before that Darryl Guppy predicted that crude oil will hit US$100 after Christmas based on TA. Now, from a FA perspective, John Kilduff, co-chief investment officer of Round Earth Capital said on 24 Dec 09 that:

"I'm worried about several geopolitical fronts out there that are going to stoke crude oil prices. I think first above $85 real quickly [in 2010], and then I see oil possibly at $100 by the first half of the year."

A strong outlook for crude oil would limit any downside in the price of crude palm oil. I continue to believe that there is limited downside (support is at 46c) for Golden Agriculture as it tries to break resistance at 50c.

Separately, this is taken from an article in Business Times (Malaysia), 25 Dec 09,
Palm oil prices up after 3 straight days of losses

Malaysian crude palm oil futures jumped 2.2 percent on Thursday, after three consecutive days of declines, as higher crude oil prices and a weaker U.S. dollar lifted the market.

The benchmark March contract on the Bursa Malaysia Derivatives Exchange settled up RM54 to RM2,554 per tonne after going as high as RM2,573.

“Crude oil is bound to touch 80, sooner or later, and the palm oil traders left in the market are speculating on this,” said a dealer with a foreign commodities brokerage. “We are still quite strong on the demand-supply scenario.”

Expectations of a stock drawdown due to the end of the high production season supported the market. Traders expect stocks to fall about 13 percent to 1.68 million tonnes in December compared with the previous month.

I would accumulate Golden Agriculture on weakness, if any.

To queue for a $1 parking fee redemption

I was out the whole afternoon for lunch and tea with a couple of good friends. They are people who have developed naturally into good friends in recent years as we share similar interests in investing for a better future etc. However, even twin brothers have differences. It's normal.

One friend mentioned how he's impressed that I would queue to make a parking fee redemption of $1 at Vivo City. You know how Vivo City has this ingenious system where they store credits in an account which is linked to your car's IU? After he made the remark, it kind of stayed at the back of my mind. I started thinking.

Apart from the fact that I like to squirrel away reward points of any kind, I do enjoy bargains. I actually do not spend much money on myself and enjoy spending on people I love more. I am quite happy cooking for myself instant noodles or boiling a pot of barley or porridge for a meal. This is usually when I'm home alone. Yet, I enjoy little luxuries like chocolates and preserved mangoes, which are quite expensive. I refuse to employ domestic help and do my own laundry and cleaning. I wash my car myself instead of going to a car wash. Yes, I have a car which is a luxury but it's a practical Japanese brand car, nothing too luxurious. One tenet runs through all my monetary decisions in life: look for value for money as it's not really about affordability. When did I become like this? I can't say exactly but it probably happened in the last ten years. I can't remember being financially prudent in my younger days.

So, when I spend money on loved ones and see them happy, I think it's value for money. Going for a nice meal with my mom at a nice restaurant is money and time well spent, for example. When I buy chocolates and preserved mangoes, I buy them when there is a sale. I can afford sending my car for a car wash but I prefer to do it myself. I can afford a car with the four rings insignia but I rather not do it. I can probably afford to pay for parking but I choose to park for free. Hahaha... I think I'm getting predictable.

I think in all these observations, what another friend said to me is true, that I must learn how to enjoy the finer things in life and learn to spend more on myself. I still remember an outing with another friend when we walked past a Swatch outlet and I saw a nice Irony watch which I liked. Price: S$189. Not too pricey but I walked away. My friend told me I should buy it if I liked it. When I said I already have a few watches and I should not buy it, I got a scolding. Hahaha... I bought the watch in the end and I do like it but my favourite two watches are still the ones my parents gave me very early on in my working life.

I guess everything boils down to being happy. Happiness is never a science though.

Stock market analysts

I used to read recommendations by stock market analysts and thought of them as really clever people who seem to know everything. I thought to myself that these people must get very rich since they know what to buy and sell all the time. Alas, I learned the hard way that nothing beats doing our own research.
I have discovered that the best investments are still those which I have thoroughly researched using primary data provided by the companies, coupled with my understanding of the trends in business, government policies and economics. These are investments which I have the conviction to hold through rough patches as they progress in time. Of course, the buy price is important as well since we do not want to overpay. This can be determined with the help of charts. Ultimately, if we do not feel comfortable with the price for whatever reason (no matter what FA or TA says), don't go in as we would lack the fortitude to soldier on. Being comfortable with our investment decisions is very important as it lets us sleep better at night.

Reports by analysts could be catalysts for us as they bring our attention to certain counters and we should follow up with our own research if we are interested enough. These reports are also useful as they give us information which we might otherwise find hard to obtain such as up to date data provided by interviews with key company executives. Just don't take what analysts say as the gospel truth.

There are many books on FA and TA in the bookshops and I've found the DUMMIES series very easy to read and digest. If we want to be an investor, we have to know fundamental and technical analyses. Of course, as we grow older, we accumulate priceless experience. There is simply no substitute. I am still working towards the goal of having enough passive income to free myself from a life of work because I have to. Equiping myself with FA and TA skills is the way to go. Identifying trends and value: FA and TA