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

Identifying trends and value: FA and TA.

When someone looks at a company's financial statements and says he thinks a company is worth $X, he is arriving at a value that the books tell him. This kind of FA is useful if we are doing comparison within the industry or just looking at how well the company is doing stand alone. It helps to determine if the company is a worthwhile investment in itself and if there are better companies to invest in within the same industry.

Now, if we wanna find the next big thing, FA alone is not enough. We need knowledge which is very insider in nature. Now, this does not mean necessarily being on the inside of a company but we have to be inside an industry or know the industry very well. There are also some very broad trends in the economy which are identifiable if we are in tune with the economic currents. All these are beyond standard FA.

For example, a friend of mine is thinking of selling their family business and they have had a couple of offers so far. Offer number one came from a business professional but the person looked at the books and gave a value which was considered too low. Offer number two came from a person in the same industry and was willing to offer twice the value!!! Offerer number two saw value which could not be seen in the books.

Basic FA can be quite easy once we get the hang of it, just like basic TA. But to go beyond the basics, that is a different ball-game. I would be very contented if FA constantly finds me good value and TA constantly helps me find good entry and exit prices.

A trade or an investment?

If a counter we'd bought into moved up within the first three days, should we do a contra and sell off or should we hold on? The answer would depend on many things. One is whether we'd bought into the counter as a trade or as an investment.

If it was meant to be a trade, we should sell and, actually, what we would receive is free money! We did not pay a single cent and we would just receive an angpao for buying the right stock at the right time.

If it was meant to be an investment, then, it usually means we should be prepared for a longer holding period. It usually means that we saw value in a stock (i.e. it was a bargain). Usually, we would form a fair value for the stock in our minds and would not liquidate (not 100% anyway) unless the fair value was hit.

So, if we sort out our motivations each time we buy into a counter, our strategy would become clearer.

Be a pragmatist and prosper in 2010.

Many people are still waiting on the side, people who do not quite believe in the rally, who might even be getting angry with the optimism, should just make use of this optimism to make some money. I don't believe in being overly bearish or bullish. I believe in being a pragmatist.

If you have missed the earlier river taxis, it's ok. Maybe you don't feel ok about it but it's really ok because there are other river taxis.

Position your money for growth that's going to happen over the next 2 to 3 years. Don't leave it in the bank or in a pillow or in a biscuit tin. I say 2 to 3 years because I believe that we will see another dip in 2012/2013. Until then, I am going to put my money to work.

Given the increased stability and clarity in the global economies, we could benefit a lot more if we adopt a longer time frame in our investments. Don't be too bothered with short term fluctuations in prices as the technical indicators are all pointing up and all the fundamentals have improved significantly.

I have seen so many instances of people who bought a good stock only to grow scared or impatient, letting go of their investments only to see the price forming a new high soon after. I should confess that it has happened to me too. If the trend has not changed, there is no reason to fear. A correction using price or a correction using time shakes out the weaker holders and once all the sellers are out of the way, the price is free to form a new high. In an uptrend, buying during corrections is the way to go. Of course, this is easy to say but might be hard to do. Conquering one's emotions is probably the hardest thing to master as an investor.

The STI moved sideways from August to November before moving higher. This is a correction using time. A sideways movement during an uptrend is more bullish than bearish in nature. We will see the STI moving higher in 2010, I'm sure.
Three portfolios and three counters: future gains and passive income

Lippo-Mapletree Indonesia Retail Trust (LMIR)

I've always been a great believer in the Indonesian economy. I guess I have an advantage since I do plenty of business with Indonesians. My dealers would bring me to the malls for meals and shopping whenever I visit. I like what I saw. From late last year, I kept adding to my position in LMIR .

I traded along the way up from the lows and have reached a point where I have decided I would be keeping my remaining LMIR units till the price next peaks. Even at a higher average price of 39c now, my investment in LMIR will yield 13.3% p.a. (if the dpu remains unchanged). As of now, with very low gearing, there is no need for a cash call from LMIR. This remains one of my best investments in my portfolio currently.

I actually bought some at 18c but didn't dare to buy any at 16.5c. That was a time when we couldn't see the bottom yet. I bought some based on FA. Shortly after, prices turned up.

I was buying shares in LMIR, HWT, Golden Agri, Kep Corp, SPH and a few other counters then. I got SPH at $2.80 too but didn't dare buy more when it went to $2.60+. Everything I bought then, I bought based on FA. TA was just so bearish. I did explain my strategy to a close circle of friends and family. 

They were very kind not to mention it but I'm sure most thought I was crazy. hehehe...

People keep talking about the little tapped domestic market in China. With Indonesia at our doorsteps, I feel it would be a big mistake not to look at Indonesia's domestic market. LMIR is a good place to park your money as the middle class in Indonesia increases in size.

The current price of LMIR is still reasonable. From a FA perspective, the fair value I give to LMIR is about 70c.

Acronym: ASSI

Just for fun, I did a search on what "ASSI" might stand for and I found the following:

ASSI Area of Special Scientific Interest
ASSI Airglow Solar Spectrometer Instrument
ASSI Ab Statens Skogsindustrier
ASSI Additional Special Skill Indicator
ASSI Aerial Scout Sensors Integration
ASSI Arvin Suspension Systems Italy
(from AcronymFinder.com)

Bright World still bright?

BRIGHT WORLD PRECISION MACHINERY LIMITED, incorporated in Singapore in 2004, has seen its fortunes rising and falling over the years. On 11 Nov 09, I posted in a forum about the spectacular results the company reported. Its CEO bought 900 lots in the open market at a price of 16c per share too.

I said: Revenue for 3Q09 improved 73.2% compared to 1Q09 and improved 33.2% compared to 2Q09. Nett profit for 3Q09 improved 282.4% compared to 1Q09 and 235.7% compared to 2Q09. This company is rising once more as its fortunes are closely tied to the recovering manufacturing sector in China.

Unfortunately, it was called up by the CAD and the price crashed a week later on 18 Nov 09: Price touched a low of 13c today. Is currently at 14.5c. Everyone is afraid. What is CAD investigating Bright World for? It is probable that Bright World has been called up regarding an investigation which MAS was conducting over possible breach of disclosure rules. If this is the case, it should not have any material impact on the company's business as a going concern.

On 23 Nov 09, I said: Potential catalyst would come from a benign update from Bright World on details of the call up by CAD. Improving numbers from Bright World's business were reported in the quarterly report prior to the call up. So, the next report, which I expect to be even better, is still a few months away and unable to influence price action in the near term.

I still believe that Bright World's business will continue to improve with the Chinese PMI rising unabated. Its financial numbers are also good. However, transparency is lacking with regards to CAD's investigation. Bright World's weekly chart shows a confluence of 20wMA and 50wMA providing resistance at 17c. On the daily chart, the 50dMA and the 100dMA provide resistance at the same level. The flat 200dMA provides support at 15.5c. So, it doesn't look like Bright World's price will collapse but it's not going to shoot through the roof either.

Strategy: I made a decision to cut my exposure by 65% and move the funds into other more transparent investments. The remaining position in Bright World represents the maximum I am comfortable enough to commit to a clouded waiting game. In the event that the CAD investigation turns out to be a non-issue, coupled with stronger corporate results, overcoming the 17c resistance would see an eventual target price provided by the declining 100wMA, currently at 27.5c.

Charts for Golden Agriculture

In a post on 24 Dec titled "Chart Reading: Golden Agriculture", I said that there is strong support at 46c provided by the rising 50dMA and 100dMA but I would do a partial divestment if price hits 50c in the short term. This is largely because there is a lack of buying momentum in the short term and the price might pull back to support upon hitting 50c. I would buy more at closer to 46c in such an instance. The lack of buying momentum is quite clear on the daily chart with the MFI forming lower highs and the MACD flat.

















Over the longer term, I continue to believe that Golden Agriculture is going up. Looking at the weekly chart, it becomes quite clear why 50c is a major resistance. That resistance is provided by the declining 100wMA, currently at 51c. Rising 20wMA is at 46.5c. Overcoming the 100wMA will take some time but it will happen as the rising 20wMA seems on course to form a golden cross with the 100wMA in the next few weeks. This gels with certain views that demand for crude palm oil will strengthen towards the Chinese New Year celebrations.

Strategy: Take some profit off the table if price hits 50c. This is a hedge in case price weakens to support. Buy again at support or close to it if this happens. Overcoming the 100wMA in time will give a target price of 62c. Why Golden Agriculture?

Crude oil at US$78.05

Crude oil closed at US$78.05 on Christmas Eve. With this being an extremely cold winter in the northern hemisphere, the price of crude oil might go higher. This would make Darryl Guppy's prediction of a post Christmas high of US$100 closer to reality.

If crude oil breaks the recent high of US$83 achieved on 21 Oct this year, we could expect crude palm oil to follow closely and appreciate in price as well. That would be good news for counters like Golden Agriculture.

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.

The candlesticks formed in the last three sessions for crude oil look like a three white soldiers formation. If the formation follows through, oil is set to move higher sooner rather than later. The longer term trend for crude oil is still up.

Charts for Healthway Medical

It is clear to see from the declining MFI that Healthway's price lacks buying momentum. Price is currently at 12c, midpoint of a cup pattern formed from June to August this year. The brim of the cup is at 14.5c and the trough at 9.5c. A cup and handle formation is usually an uptrend continuation pattern but this handle is too long. The 20dMA, 50dMA and 100dMA have all bundled above recent price action and impose resistance at 12.5c. Support is provided by the rising 200dMA, currently at 11c. With the proposed rights issue and a TERP of 11c, the support provided by the 200dMA might be tested in time. However, volume has been diminishing with the declining price. There is no negative divergence and I do not foresee any drastic price decline.


On the weekly chart, we see a buy signal on the MACD, the first in 4 months. However, the lack of buying momentum and volume makes this signal suspect. The rising 50wMA provides support at 10.5c in case of a bigger price decline.

Strategy: Overall, price action looks rather weak. Buying now would be a hedge at best and it would be a long term investment. As I am already vested, I will accumulate if a pullback to 11c happens.

Healthway Medical's growing in China

Singapore's domestic market is tiny. Instead of opening hospitals in Singapore and waiting for patients to visit us in Singapore, go to the patients instead in countries where high quality medical services are lacking! I like the Chinese RMB. Earning Chinese RMB is a great strategy.

Video Clip added on 11 Feb 2010:



Business Times, December 14, 2009 Monday
Healthway plans to invest another $20m in China;
It is targeting a dozen first and second-tier cities there.
Ven Sreenivasan

AFTER expanding rapidly into one of Singapore's largest clinic chains, Catalist-listed Healthway Medical Corporation has set its sights on equally rapid expansion into the huge China market.

Less than a year after investing in its first venture in Shanghai via Crane Medical through a $3.3 million convertible loan, the company is preparing to spend another $20 million to expand its footprint in a dozen first and second-tier cities across the country.

'We will initially set up medical centres in Suzhou, Nantong and Nanjing,' said managing director Wong Weng Hong. The next phase will be expansion to other gateway cities like Beijing, Guangzhou, Chongqing, Chengdu, Tianjin, Dalian, Shenyang and Qingdao by 2015.

In Singapore, the group's business has been growing rapidly. The number of its clinics and doctors will double to 120 and 400, respectively, by by 2013. This includes the establishment of a complex diseases diagnostic centre in the city. Dr Wong, however, is particularly bullish on his company's growth prospects in China.

'This is a huge US $118 billion a year market which continues to grow at almost 20 per cent a year,' he said. 'The country is now undergoing a US $800 billion healthcare reform. It has a population of over 1.3 billion, of whom only 400 million have medical insurance. The numbers speak for themselves.'

The group currently operates on a management contract via Shanghai-based Nobel Hospital, an eye/ENT/dental practice. But going forward, according to Dr Wong, this will be expanded into general medicine, specialist and diagnostic services.

But would the plans pit Healthway against more entrenched players like Singapore's Parkway group and American health services group United Family?

'Right now the foreign players largely target the expatriate population,' Dr Wong said. 'Our aim is to provide accessible and affordable medical services for the local population. There is rapid shift in the demographics of the country, both in terms of geography and financial status.'

Dr Wong envisions a country-wide roll-out of a rapidly scaleable model of diagnostic clinics, specialist clinics and general practices which will have a presence in rural, suburban and urban areas, focusing on the growing demand for better quality and more reliable medical services.

'We will focus on specific specialist and sub-specialist services,' he said. 'This will include multi-specialty medical centres for locals and foreigners, dental clinics, eye and ENT, hospitals and GP clinics.'

The company, which has a gearing of 30 per cent, intends to use internal resources (it has cash of some $28 million) and credit lines to fund the China expansion. It recently announced a 67 per cent rise in profits to $12 million for the nine months to end-September.

Healthway is not planning to grow via acquisitions, at least in the initial phase of its China roll-out.

'At the initial stage, we will go in for management contracts,' Dr Wong said. 'This will enable us to be asset light and not burden our balance sheet.'

This is a model it follows at its Nobel Hospital in Shanghai, run by Crane.

Still, given that the China expansion will also have to dovetail with the planned roll-out of more clinics and a major medical diagnostic centre in Singapore, Dr Wong does not rule out raising funds from the market.

But one thing is certain, China will feature prominently on Healthway's books by 2015.

'If all goes according to plan, China's contribution will dwarf Singapore's, both on the top line and bottom line,' he said. Healthway Medical: Growing a defensive business

Three portfolios and three counters: future gains and passive income

I've been investing in the stockmarket since my university days when I was basically clueless and had some silly notions about investments. Today, I am less clueless and less silly but I'm still human. Emotions, they make us human and, yes, fallible.

To make it easier for me to manage my investment portfolio, I've divided the counters into 3 sub-portfolios:


1. Rubbish - This portfolio is similar to what Citibank did by taking out their toxic and non-performing assets and putting them in a "bad" bank. I've made many mistakes in investments and this portfolio holds my mistakes. Some may ask why I do not just close this portfolio and not look at these counters anymore. Well, human beings are forgetful. I keep this portfolio to remind myself of my follies and, hopefully, will not make the same mistakes. Examples in this portfolio: MPSF and Ferrochina.

2. Alive & Kicking - This portfolio holds shares of companies which were bought before the crash. The businesses are sound and ongoing. They also pay good and consistent dividends. In a bear market, none is spared. Their prices suffered along with the rest when global markets crashed. They have now recovered substantially. Examples in this portfolio: SPH and First REIT.

3. Current - This portfolio holds shares of companies which were bought after October 2008. I selected counters such as Hyflux Water Trust and First REIT based on their defensive business models and high dividend payouts and bought at very depressed prices. Some such as Epure which I've divested totally have been extremely rewarding. I have counters in this portfolio which I will no longer trade but hold for consistent dividend payouts.

Three counters which I will continue to actively monitor are:

a. A growth counter: Healthway Medical - Currently at 12c. In comparison to its peers, it is inexpensive whether you use PE or P/B ratios. If we look at their results in the last quarter, they outperformed Raffles Medical Group in terms of percentage growth. I continue to believe that a price of 17c would be barely fair. Over the next 12 months, I would be surprised if investors in this counter do not make a handsome profit. A strong growth story makes this a buy and hold counter for me. Healthway Medical: Growing a defensive business

b. A cyclical counter: Golden Agriculture - Currently at 49c. This is the second largest crude palm oil (CPO) producer in the region. It is heavily levered to the price of CPO compared to Wilmar which has a greater percentage of income from downstream activities. Whether we look at PE, ROA, ROE or Gross Margin, Golden Agriculture looks better than Wilmar. With the improving global economy, the demand for CPO has increased. With the rising price of crude oil, there will be a further increase in demand for CPO as an important source of biofuel. The journey up will be choppy which makes this a perfect counter for trading. Charts for Golden Agriculture

c. A yield counter: Saizen REIT - Currently at 15c. I thought I would not be able to find another severely undervalued REIT in Singapore after the REIT sector ran up strongly in the last 9 months. I've written quite a bit about this in another entry and so I shall not elaborate here. I am accumulating units in this REIT to form the bulk of my future passive income generation. This is another buy and hold counter for me. Passive income with high yields: Saizen REIT

New global economic leadership

The USA was not always the global economic leader. It took its current place more or less after the world wars. Before the USA, the UK was the leader. The Sterling Pound was worth a lot more than what it's worth today. I remember my parents and my grandparents keeping the Sterling Pound. The exchange rate was S$7 to a Sterling Pound, if I remember their accounts correctly. So, global economic leadership shifted from the UK to the USA.

Now, Jim Rogers has said this many times and I agree with him: economic leadership is shifting once more and the next 100 years will see Asia taking over the reigns of global economic leadership and he expects China to take the lead.

That's why I've also shared my views with friends that my favourite currencies, apart from gold, are the RMB and the Indonesian Rupiah. I've a bit of all three and intend to accumulate more gold. The RMB and the Rupiah are fiat currencies like the US$ but they have not been abused and are not as flawed.

The Chinese economy is large and dynamic. However, it has to undergo a huge behavioral and structural transformation for the Chinese to consume more and to rely less on exports. Why do I say this? Let's look at Indonesia. It has a population of 240 million, a far cry from China's 1.6 billion, and private consumption is 60% of its GDP. In China, private consumption is only 36% of its GDP.

Many might or might not know this but "China's consumption-to-GDP ratio has dropped by nearly 15 percentage points since 1990 and continues to deteriorate in the aftermath of the financial crisis. The sources of China's low consumption rate are both behavioral and structural." This was in a recent report by McKinsey.

Asia might be the future economic powerhouse of the world and China might become the leader but the journey has only begun.

Thoughts on methodology

1. Buying when a stock has broken out of its base formation or long term downtrend in the early stage might be good. This is what pure TA guys would do: wait for confirmation before buying in. I don't do this because I look at FA first and, then, TA. If FA is good, I look for a nice price to enter using TA.

2. Buying a stock when it has broken out of its base formation or long term downtrend and has gone way up is a bad idea as that carries greater risk.

3. Personally, I like to be where the action will be rather than where the action is. I'm not very good with the latter and usually end up losing money. So, looking for early signs of a possible breakout scenario is what I've been doing for months now. I continue to do this and I like stocks of fundamentally good companies which are still in their base formations, either primary or secondary.

4. The stocks which are testing the top of base formations and long term resistance trendlines should ideally have limited downside: TA should show rising MAs closely supporting the prices even as the formation or resistance trendline is being tested. FA should show a robust set of numbers which tells the investor to stay vested with confidence. This is why I'm vested in counters like Saizen REIT, for example. This is why I am not vested in Genting, for example.

Everyone should develop a method that works for him and one that he is comfortable with.

101 investment choices

There are so many things we can invest in these days. Basically, it's a whole gamut of stuff including stuff like wines, art, watches, jewelry and antiques. Heck, I collected comics when I was in school because a friend of mine told me how they could appreciate in value over time! The comics are probably still mouldering away at home.

For the average person, there is no need to be knowledgeable in all or even most forms of investments and there is definitely no need to diversify into 101 areas in investment. I am quite contented to have the following:

1. Bank deposits
2. CPF
3. SRS
4. Foreign currencies (RMB and IDR)
5. Gold buillion coins
6. Single Premium Endowment Policies
7. Regular Premium Endowment Policies
8. Regular Premium Life Policies
9. Unit trusts
10. Equities (High yielding types mostly.)
11. Real Estate

I am able to manage these on my own and, in aggregate, if they outperform the returns from fixed deposits and outpace inflation, I'm happy. To me, investment is not a complicated matter. It's quite simple.

Keep things simple. Don't complicate things for ourselves. Land banking? Wine? I don't need these. There are many money making opportunities with the tools I have now. That's enough for me.

Don't get carried away

I would like to share this little snippet:

Extracted from an article by
by James B. Stewart
Wednesday, September 30, 2009

As I've said before, no rally goes on forever. The tide will turn, and when it does, I suspect the overvalued stocks will be the hardest to fall. That's why I'll continue to prune my exposure to the highest-flying stocks when and if we hit another selling threshold. Cash may seem dull today, but remember what it felt like just a year ago?

I think this makes sense. Don't you think so? The rally in global equities has astounded bulls and floored the bears. However, all things will end. It's a matter of when and not if.

I usually make it a point to buy only undervalued stocks and laggards. Will I be spared the carnage when the tide turns? I doubt it. Will have to stay vigilant.

Things Singaporean: SRS, CPF-OA and CPF-SA.

As long as a person is paying income tax, he should start a SRS account and contribute to it yearly so that he pays less income tax (or none at all). For me, it's that simple.

What is done with the money in the SRS account is another question. For me, I've always put the money in single premium endowment policies, shortest tenure being 8 years and the longest being 20 years. They have guaranteed returns of 3% p.a. to 4% p.a. The returns are not fantastic but I like how everything is stable and guaranteed (with insurance coverage thrown in). Beats FDs anyway.

I didn't start using money in my CPF and SRS accounts for investments until after Oct 08. Over the years, I stuck to my believe that if everything else fails, I would still have my CPF and SRS intact for my retirement.

However, after Oct 08, I changed my mind. Things were just too cheap and tantalising. I used my CPF OA to buy shares in F&N, SPH and Suntec REIT. All liquidated and now I'm purely in SPH.

I even utilised 10% of my CPF SA to buy units in a Singapore equities/bond unit trust in December 08 (since I cannot use SA to buy shares) and that made 9% in just 6 months, 4.5x more than if I were to leave it in the SA. If I did not liquidate the unit trust, I would have made a lot more. Well, it was a new experience and my SA money is sacred to me.

My CPF SA is now my opportunity fund. If the STI sinks to support, I'm pouring my SA into the same unit trust. I fully agree with Buffet, Faber and Rogers that the worst thing to be in now is cash and I fully believe that the recovery is genuine and things will only get better in the next two years. CPF OA, SA and SRS are all cash. Must put them to work.

Real value of gold

To look at gold as a hedge against inflation, we have to look at the real value of gold over time. For example, if someone bought gold at the peak in 1980, he would still have lost money after taking inflation into consideration today.

If someone had bought gold in 1914, he would have gained about 200% in the course of the last century after taking inflation into consideration. It is not an amazing return.

Everything must be put in context. I am a buyer of gold today but I will be a seller of gold one day, I'm quite sure.

With US government printing money and with almost 0% interest rate, inflation is likely to become a serious problem in future. As mentioned by Jim Rogers many times over, gold will probably see US$2,000 an ounce again.

The following chart is taken from an article on inflation adjusted value of gold by Barry Ritholtz - October 7th, 2009, 11:30AM:

High yield portfolio

In case anyone is interested in building up a portfolio of high yielding Singapore counters, here are a few counters worth considering:

Saizen REIT - For a potential yield of 13% from middle of 2010. Lower gearing in time. A strong Yen is a plus as distributable income is converted to S$ for distribution to unitholders. At 15c, it is deeply undervalued. Please refer to the earlier entry on Saizen REIT for a more detailed write-up. Passive income with high yields: Saizen REIT

MI-REIT - Soon to be renamed AIMS AMP Capital Industrial REIT. With its recent recapitalisation exercise, gearing is at 29% and the yield is a respectable 10% with price at 20.5c. NAV is 31c. I like Singapore industrial properties a bit more than office buildings as the demand is more inelastic. AIMS-AMP Capital Industrial Reit (MI-REIT)


LMIR - A joint venture between Indonesian powerhouse, Lippo, and Mapletree (a subsidiary of Singapore's Temasek Holdings). Indonesia never did go into a recession. It kept growing through the financial crisis. This REIT owns shopping malls in the country. With domestic consumption forming 60% of GDP plus a growing middle class, this REIT will do better in time. Indonesia needs more malls. Yield is at 9.5% with price at 51.5c. Gearing is a low 12%. Price has closed above resistance. 50c might just be resistance turned support. LMIR

First REIT - Owned by Lippo, it primarily owns healthcare facilities in Indonesia and Singapore. Yield at 9.5% with price at 80c. Gearing is a low 16%. This counter has been doing a levitation act. Seemingly infallible.

Suntec REIT - A respectable yield of 8.6% with price at $1.35. Gearing is at 34%. However, its price is close to resistance. Might want to wait for a pullback before entering. $1.25 or thereabouts would be a nice entry price.

SPH - My favourite high yield blue chip. At the price of $3.60, I'm estimating a fairly conservative 5.5% yield in 2010. Strong balance sheet. Price seems to be going through a basing process now.

I own units or shares in all the above. These are for long term passive income generation. So, I won't be too bothered by short term price fluctuations. There will come a time when I should liquidate these. This is when there is a change in the longer term trend.
A new year and a new decade. Strategy for 2010. 

Update (added on 13 Oct 2010).

Chart reading: Golden Agriculture

Crude Palm Oil (CPO) has been forming higher lows in the last 12 months. On 16 Dec, it successfully tested the neckline of a double bottom formation. The new support for CPO is established at RM2,480 to RM2,510. A retest of the 12 months high of RM2,790 is likely in the next few months.

Golden Agri's chart has a pattern which looks like a mini ascending triangle (on diminishing volume). 50c remains the resistance to watch. The rising 20dMA has been compromised twice this week. Rising 50dMA and 100dMA are at 46c. These should provide strong support. I am still long this counter but might consider partial divestment if it hits 50c. Charts for Golden Agriculture

Charts for Saizen REIT

Here are the daily and weekly charts for Saizen REIT which help illustrate what I was saying in my previous entry:

Passive income with high yields: Saizen REIT

I've talked about a cyclical stock (Golden Agriculture) and a growth stock (Healthway Medical). Now, it's time to talk about my favourite topic: yield stocks.

I've always liked high yields. Who wouldn't be attracted to a 10% yield which is 100 times more than the interest payment from a good ol POSB bank savings account? 

Of course, it's not that simple.

In this last financial crisis, I learned the hard way that high yields might come with high risk. REITs which had high gearing levels crashed despite their high yields. Some went bankrupt (like a couple in Japan). All suffered lower valuations on their properties and most suffered from lower revenues. These affected the NAV and the distributable income respectively.

In Singapore, all the REITs have survived and many have managed to raise capital either through rights issues or share placements.

I believe that majority of the REITs in Singapore will continue to appreciate in time with stronger balance sheets and a stronger economy.

In fact, many have doubled or tripled in price since the March lows. Some are even trading above their NAVs! It's harder to find value now.

A REIT which I am accumulating is Saizen REIT. It owns residential buildings in Japan. The demand for such properties is relatively inelastic.

 

The occupancy rate has been consistently above 90% even through the crisis. Its financial health has improved with a successful rights issue earlier this year and a suspension of distributions to repay loans.

In one scenario, we could see the gearing level drop to less than 20% and its NAV drop to 29c by 2012. The manager plans on resuming distributions in mid-2010. By my calculations, we could see a dpu of about 2c per annum. The REIT closed at 15c today. This means a potential yield of 13.3%.

Soon, Saizen REIT's gearing will be lower than many S-REITs. Anyone who is concerned about its debts should go take a look.

The question many would ask now is if this is a good time to buy.

Charting shows a symmetrical triangle. It reminds me of the symmetrical triangle I saw in Hyflux Water Trust's chart many months ago. Apex of triangle is in late Feb 2010. Expecting price to breakout on the upside anytime before then. Strong support provided by the rising 200dMA which coincides with the uptrendline of the symmetrical triangle. This is at 14c. Expect strong resistance to be provided by the rapidly descending 100wMA, currently at 22c. Limited downside compared to the potential upside.

Good luck to us all.

Gold: to buy or not to buy?

Technically, gold was overdue for a correction and the charts show it. Technically, the US$ was due for a rebound as it's oversold and short covering must take place at some point. The market just needed an excuse.

Fundamentally, gold is an asset and still a hedge against inflation as the US$ will continue its long term slide due to oversupply, this is after a brief rebound (which could last up to several months).

At this moment, we can only identify price levels which are strong supports and see if they hold or break. Currently, the next band of strong support is US$1,020 to US$1,040. If that breaks, it would be US$990 to US$1,000. We want to see price bouncing of a support and closing convincingly above it. It needs to be confirmed in the following sessions, hopefully forming higher lows and higher highs till the next resistance level is broken.

If gold does go below US$990, it might be a whipsaw as I feel that US$990 is a level that should hold as it is a level that was a many times tested resistance and should be a strong support. If US$990 breaks convincingly, gold would be headed much lower. It would spell the end of the uptrend for gold, for quite a while at least.

However, the longer term trend of gold is up and the longer term trend of the US$ is down. I do not doubt that.

Healthway Medical: Growing a defensive business

Healthway Medical has taken definite steps to expand into China with their platform in Shanghai. It has recently proposed to issue rights for further expansion into other Chinese cities. It will not remain purely a Singapore brand for long.

Healthway has been clever to identify and fill areas in healthcare services which are underserved. Their business model also creates strong cashflow. This gives a solid foundation for growth without being too reliant on financing.

Healthway has a historical PE of 13 (@13c). Parkway has a historical PE of 54.8 (@$2.41). RMG has a historical PE of 21 (@$$1.39). Figures by DBS Vickers. Parkway's 2010 forecast PE is 22. RMG's is 18. There is no forecast for Healthway.

However, if I were to hazard a guess, Healthway's PE would improve at the same pace as RMG's, if not more, looking at both parties' 3rd quarter results.

I know that the management has proven themselves so far to be astute and aggressive. The business is a defensive one with stable and growing demand. The management is not resting on its laurels and have grown the business rapidly. The business model enjoys a strong cashflow. Directors are committed to the business and have opted for scrip dividends instead of cash. This has diluted the NAV per share to <9c though. Healthway is a growth company in a defensive business. This combination, in my experience, if led by a strong, business minded management, is one for success. Healthway Medical's growing in China

Why Golden Agriculture?

On 21 Nov 09, crude palm oil's (CPO's) price closed at RM2,419, up RM48 (2.02%), effectively breaking out of a 2 year down trendline which started after price peaked in early 2008 at RM4,330. This down trendline was tested twice earlier this year but not broken.

We are seeing this breakout translate into some strength in the price of CPO producers like Golden Agriculture. I believe that this is something that will continue into the new year and the Chinese New Year when CPO might retest its 2009 peak of RM2,790.

CPO price has been going up due to increased buying in Europe, India and China. The bad weather has caused production to decline marginally and inventory is being drawn down. Domestic demand in Indonesia remains strong. It is a daily necessity that doubles up as a biofuel.

I continue to believe in the future of Crude Oil and that will have a direct impact on the price of CPO. Darryl Guppy predicts that Crude Oil will hit US$100 after Christmas from a TA perspective. I have read elsewhere predictions of between US$85 to US$90 a barrel.

Golden Agriculture remains the cheapest CPO counter, no matter which parameter you use as a measurement. It is also the most levered to CPO price. I remain confident of its future in the next 12 months. This is one counter that I can foresee myself trading for the next 12 months