Yangzijiang Research Report

by HSBC Global Research (27 June)

MODERATING container ship outlook, but secured revenue growth: Global container ship delivery until 2010 should exceed the average 10 per cent y-o-y global container trade growth.

Ship owners could withhold order placement on any softening of time charter and container ship freight rates, unless demand growth accelerates over the next two years. Yangzijiang's full backlog and new capacity should, however, secure impressive revenue growth (70-85 per cent over 2008-09 estimated).

Operating margins under pressure due to limited pricing power: We expect operating margins to flatten or decline in 2008 and 2009. Limited pricing power from ships will be delivered in 2008 and 2009, more bulk carrier deliveries, better operating leverage from increased volumes at the new shipyard, and efficiency gains are unlikely to offset rising steel costs (up 20-25 per cent y-o-y), in our opinion.

Panamax container ship (80 per cent of revenues and 50 per cent of order book) prices increased at a slower pace than bulk carriers (20 per cent of revenue). We expect 2008 operating margin to be essentially flat y-o-y and down 50 basis points in 2009.

Our proprietary market assessed cost of capital (MACC) valuation implies the stock is trading at a discount to sector average. Our TP is based on long-term adjusted cash returns on invested capital of 11.5 per cent, MACC of 16.6 per cent, PE of 7.8 times, and enterprise value/Ebitda of 4.9 times our 2009 EPS forecast.

Given the moderating container ship market, we think Yangzijiang should trade at a discount to its peers.

-Research Report by HSBC Global Research (27 June)

Semb Marine 270608

We did indeed see Sembcorp Marine breaking the 4.12 support (green --) at the beginning of the week. Sembcorp Marine even tested the downtrend support thrice, and the 4.00 support (blue ...) twice.

However, today we saw Sembcorp Marine finally gapping down to open below the 4.00 support. It even tested the long term downtrend support (low pink), and came very close to testing the 3.86 support (green ...) too.

As the day progressed, we saw Sembcorp Marine slowly recovering and continued buying momentum helped pushed the counter back above the 4.00 support (blue ...), briefly testing the long term downtrend resistance (mid pink).

If Sembcorp Marine opens above the 4.00 support (blue ...) on monday, and breaks the long term downtrend resistance (mid pink), we could see it testing the 4.12 resistance (green --) soon.

However, if Sembcorp Marine opens below the 4.00 support, and breaks the 3.86 support (green ...) we could see it continue to trade within the downtrend channel (red). If it holds above the uptrend support (low blue), we would probably see Sembcorp Marine trading sideways, with the upside limited by the 4.00 neckline (blue ...) and supported by the uptrend support (low blue).



For monday :

Support @ 4.00 (blue ...), 3.88 (low blue), 3.868 (low pink), 3.86 (green ...), 3.83 (low red)
Resistance @ 4.05 (upp red), 4.083 (mid pink), 4.12 (green --), 4.15 (mid blue), 4.22 (red --)

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Olam 270608

Olam couldn't hold onto the 2.60 support (pink ...) anymore and finally broke it today when it gapped down on opening.

We also saw Olam testing the downtrend support (mid red) before closing right on the 2.48 support (blue ...).

If Olam opens above the 2.48 support (blue ...) on monday, we could see it trading sideways for the time being.

However, if Olam breaks the long term downtrend support (low pink), we could see it testing the downtrend support (mid red), or even the 2.36 support (green ...).



For monday :

Support @ 2.48 (blue ...), 2.46 (low green), 2.45 (low pink), 2.43 (mid red), 2.36 (green ...)
Resistance @ 2.58 (mid pink), 2.60 (pink ...), 2.61 (mid green), 2.63 (pink --), 2.67 (upp red), 2.715 (upp green)

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Indofood Agri 270608

After plunging dramatically from a high of 2.87 on 24 jun to a low of 2.45 today, Indofood Agri formed a Bullish Piercing Line when it gapped down on opening, before closing below the 2.60 resistance (red --) and right on the uptrend resistance (mid blue).

For confirmation of the trend reversal, we would need Indofood Agri ideally to gap up on opening, or at least stay above the 2.60 resistance (red --).



For monday :

Support @ 2.53 (green --), 2.47 (low red, green ...), 2.45 (low blue), 2.40 (blue --), 2.26 (blue ...)
Resistance @ 2.60 (mid blue, red --, mid red), 2.64 (red ...), 2.77 (upp blue, pink --), 2.85 (upp red)

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Ferro China 270608

Another counter that gapped down today and formed the Long Legged Doji. Ferro China broke the 1.26 support (green ...) by opening right on the 1.22 support (blue --).

Going by recent market sentiments, it is very likely FerroChina will continue to trade within the downtrend channel (red), and could also possibly test the 1.18 (light blue --).



For monday :

Support @ 1.22 (blue --), 1.21 (low blue), 1.19 (low red), 1.18 (low pink, light blue --)
Resistance @ 1.237 (mid red), 1.26 (green ...), 1.30 (upp red, blue ...), 1.325 (upp pink)

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Cosco 270608

Cosco opened below the 3.26 support (blue ...) again today. Cosco also broke the uptrend support (low blue) and tested the downtrend support (mid red).

Unless Cosco breaks the 3.26 resistance (blue ...), we would most likely see Cosco continue trading within the downtrend channel (pink), maybe even towards the 3.08 support (red ...).



For monday :

Support @ 3.18 (mid red), 3.12 (low pink), 3.08 (red ...), 3.05 (low red)
Resistance @ 3.24 (low blue), 3.26 (blue ...), 3.284 (upp pink), 3.346 (upp blue), 3.36 (green ...)

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China HongX 270608

There was a great deal of confusion and indecision in the market recently, as characterised by the Long Legged Doji formed for China Hongxing today. As the trend prior to the Long Legged Doji was a downtrend, this would usually indicate that there could be a trend reversal.

Therefore, to confirm that China Hongxing has indeed reversed its downtrend, we would have see it at least opening above its 0.450 closing price on monday, forming the Abandoned Baby or the Morning Doji Star.

Having said that, we must also not forget that China Hongxing is still trading within the downtrend channel (pink), and is also trading very near to the uptrend support (low blue) and lown term downtrend support (low grey).



For monday :

Support @ 0.434 (low blue), 0.416 (low grey), 0.407 (low pink)
Resistance @ 0.456 (upp pink), 0.485 (red --), 0.513 (upp blue), 0.520 (pink --), 0.535 (light blue --)

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Indofood Agri Research Report

by DMG & Partners (26 June)

KNEE-JERK reaction to higher crude palm oil (CPO) export tax and weaker Malaysian CPO export data: Indofood's share price fell on Wednesday, together with the other Singapore-listed palm oil companies, when news of higher Indonesian CPO export tax levied for July and weaker Malaysia CPO export data broke.

Indonesia's trade ministry raised the base price used to calculate the CPO export tax from US$1,105 per tonne in June to US$1,144 per tonne in July. The tax rate on CPO shipments will be raised from 15 per cent to 20 per cent accordingly.

According to the independent surveyor, Intertek Agri Services, Malaysia's palm oil exports for the period June 1 to 25 declined 9.4 per cent from the prior month to 899,300 tonnes. For the same period in May, Malaysia exported 993,100 tonnes of palm oil.

Selldown overdone, outlook still positive: We are of a view that the sharp selldown is unwarranted as we have already factored in the higher tax rate in our earnings forecasts. In addition, the macro outlook remains positive. According to the United States Department of Agriculture's projections, global palm oil consumption for 2008/2009 will grow 6 per cent, reaching 42.7 million tonnes.

On the back of forecast growing demand of palm oil from India and China and persistently high petroleum prices, CPO prices are likely to remain at favourable levels, currently at around RM3,553 (S$1,491) per tonne.

With the global trend of higher consumption and usage of palm oil and the present high CPO price of about RM3,553 per tonne, we believe that Indofood will continue to enjoy the present conducive environment, especially with its high ratio of mature acreage.

This being so, we are maintaining our PE of 14 times (in line with the Singapore and Malaysian plantation companies). Although Indofood's share price has risen 11.7 per cent since our initiation on the platter as at end-May, our fair potentially translates into an additional upside of 29.5 per cent.

-Research Report by DMG & Partners (26 June)

Ferro China 260608

After barely keeping its head above the 1.30 support (blue ...) Ferro China finally broke the support, tested the 1.26 support (green ...) and closed right on the uptrend support (low blue).

If FerroChina breaks the 1.26 support (green ...) tomorrow, we could see it testing the long term downtrend support (low pink).



For tomorrow :

Support @ 1.26 (green ...), 1.23 (low pink), 1.22 (blue --), 1.18 (light blue --), 1.11 (red --)
Resistance @ 1.30 (blue ...), 1.33 (upp pink), 1.34 (pink ...), 1.346 (mid blue), 1.38 (upp blue)

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Cosco 260608

After closing below the 3.26 support (blue ...) on 24 jun, Cosco managed to recover and managed to trade above the 3.26 support (blue ...) today, although its upside is still capped by the long term downtrend resistance (upp pink) and uptrend resistance (mid blue).

We could continue to see Cosco trading sideways, supported by the 3.26 support (blue ...) and uptrend support (low blue). If the uptrend support breaks, we could see Cosco testing the downtrend support (low red), or even the long term downtrend support (low pink).



For tomorrow :

Support @ 3.26 (blue ...), 3.23 (low blue), 3.19 (low red), 3.15 (low pink)
Resistance @ 3.31 (upp pink), 3.338 (upp red, mid blue), 3.36 (green ...)

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China HongX 260608

Although China Hongxing opened above the downtrend resistance (upp pink) and almost came close to testing the 0.485 resistance, the buying momentum could not be sustained and we saw China Hongxing closing right on the uptrend support (low green).

Tomorrow, we see the downtrend resistance (upp pink) and uptrend support (low green) meeting at the around the 0.468 level. If China Hongxing opens or trades below that level, we could see it testing the lower uptrend support (low blue).

Otherwise, we could see China Hongxing continue to trade sideways around the 0.465 level.



For tomorrow :

Support @ 0.465 (upp pink), 0.433 (low blue), 0.422 (low grey), 0.415 (low pink)
Resistance @ 0.470 (low green), 0.485 (red --), 0.494 (upp green), 0.513 (upp blue)

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Marine Sector Research Report

by DBS Group Research (25 June)

IRON cost pressure: The newswire reported that BHP Bilton and Rio Tinto and the Chinese steelmakers have settled on an annual price increase of 85-96 per cent for iron ores from Australia, confirming earlier rumours on similar magnitude of increase as Australian miners demand for a freight premium over iron ores from Brazil.

This two to three-month delay in settlement of annual price increase for Australian iron ores is significantly higher than the earlier 65-71 per cent price increase for Brazilian iron ores. This will inevitably drive up the cost structure for steel mills, and assert further pressure on newbuild prices for bulkers and containerships, given the higher cost structure.

China's surging appetite for iron-ore price has resulted in an annual price increase since 2004: 18.6 per cent y-o-y in 2004, 71.5 per cent in 2005, 19.0 per cent in 2006, 9.5 per cent in 2007, and 65-96 per cent in 2008, according to data from China Daily and DBS Vickers.

We reiterate our view that the Chinese yards have yet to feel the full impact of annual increase in prices for coking coal and iron ore YTD, as the usual time-lag in cost passed on by steel mills has been lengthened due to the government's clampdown on inflationary pressure in the economy and the expected strong resistance from customers to absorb a single sharp increase in steel prices.

Still, we believe that the Singapore Exchange-listed Chinese shipyards cannot avoid the inevitable but lagged steel price increase, and they will need to grapple with expected margin pressure on their 4-5 year backlog for orders that were secured at lower newbuild prices in 2006-07.

In our opinion, the negative effect of higher steel prices will set in for projects that start work after April 2008, after factoring in the lagged effect in steel price increase to customers, and taking into account the announced steel price increase YTD.

We recommend investors to switch or stay with Singapore-based yards, which are exposed to the still-positive offshore sector and face lesser cost pressure. Our picks include Sembcorp Marine, ASL Marine, and Jaya Holdings.

-Research Report by DBS Group Research (25 June)

Cosco 240608

When Cosco opened above the uptrend resistance (mid blue), there was hope initially that it could test the 3.36 resistance (green ...) and the long term downtrend resistance (upp pink). However, selling pressure prevailed and we saw Cosco doing a U-turn and breaking the 3.26 (blue ...) supports instead.

Cosco closed at 3.20 today, which is right on 3 support trendlines. However, if you had noticed, Cosco is still trading within the downtrend channel (pink). So we could still see Cosco trending lower, unless it can stay above the 3.26 support (blue ...).



For tomorrow :

Support @ 3.20 (mid red), 3.19 (low pink), 3.12 (low red), 3.08 (red ...)
Resistance @ 3.26 (blue ...), 3.32 (mid blue), 3.35 (upp pink), 3.36 (green ...), 3.41 (upp blue)

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BakerTech 240608

BakerTech today broke the 0.290 support (red ...) and downtrend support (mid pink), and also closed at day low at the 0.280 support (green --).

If Baker Tech breaks the 0.280 support (green --), we could see it testing the 0.270 support (blue --).



For tomorrow :

Support @ 0.280 (green --), 0.277 (low pink), 0.275 (pink --), 0.270 (blue --)
Resistance @ 0.286 (mid pink), 0.290 (red ...), 0.297 (upp blue), 0.300 blue ...)

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Semb Marine 200608

Sembcorp Marine's position has become more and more precarious. As you can see from the chart, Sembcorp Marine closed right on many support trendlines. Initially, with the forming of a Doji on 18 jun, coupled with the downtrend prior to the Doji, there was hope of a trend reversal. However, the next day (19 jun) saw Sembcorp Marine breaking the 4.22 support (red --), dashing any hope of a reversal.

Going by recent market sentiments, we could see a high chance Sembcorp Marine breaking the 4.12 support (green --). If that happens, we could see Sembcorp Marine testing the downtrend support (low red, low pink).

Next support based on volume is around the 4.00 level (blue ...).



For monday :

Support @ 4.12 (green --), 4.11 (mid pink), 4.02 (low red, low pink), 4.00 (blue ...)
Resistance @ 4.13 (mid blue, low light blue), 4.18 (upp red), 4.22 (red --), 4.30 (upp blue, blue --)

Hope you find my analysis helpful. Thank you !!

Olam 200608

Olam opened above the 2.60 neckline (pink ...) and long term downtrend resistance (mid pink) and even tested the 2.63 neckline (pink --). However, selling pressure persisted and we saw Olam again closing below the 2.60 neckline (pink ...).

Since Olam did not test the uptrend support (low blue), we could see Olam consolidating around the 2.60 neckline, maybe even trending up slightly within the uptrend channel (green).

If Olam does not break the uptrend support (low blue) next week, we could see it testing the downtrend resistance (upp red) and the 2.63 neckline (pink --). However, if the uptrend support is broken, we could see Olam testing the 2.48 support (blue ...).



For monday :

Support @ 2.56 (low green), 2.52 (low blue), 2.48 (blue ...), 2.47 (low red), 2.41 (low pink)
Resistance @ 2.60 (mid pink, pink ...), 2.63 (pink --) 2.657 (mid green), 2.676 (mid blue), 2.69 (upp green), 2.70 (upp red)

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Ferro China 200608

Action came earlier than expected for Ferro China as we saw it going on a super run on wed 18 jun. FerroChina broke the 1.30 resistance (blue ...) and tested several other resistances before closing below the 1.34 resistance (pink ...).

However, the run was brought abruptly to a slowdown as we saw Ferro China testing the 1.30 support (blue ...) again and closing just above the downtrend support (low red) and uptrend support (mid blue).

If FerroChina wants to maintain its uptrend momentum, it would have to remain at least above the 1.30 support (blue ...).

However if the 1.30 support breaks, we could see Ferro China revisiting the 1.26 support (green ...) again.



For monday :

Support @ 1.31 (mid blue), 1.30 (low red, blue ...), 1.264 (low pink), 1.26 (low blue, green ...)
Resistance @ 1.34 (pink ...), 1.362 (mid pink), 1.37 (upp blue), 1.41 (mid red), 1.44 (red ...)

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Cosco 200608

After breaking the 3.36 resistance (green ...) and uptrend resistance (upp blue) on 17 jun, we saw Cosco hitting the long term downtrend resistance (upp pink). However, the uptrend momentum could not be sustained and we saw Cosco breaking the 3.36 support today.

If we compare this recent uptrend with the one during 26 may to 6 jun, we can find some similarities. Would we see Cosco gapping down next monday like it did on 9 jun? Market sentiments remains cautious as volume remains relatively low.



For monday :

Support @ 3.30 (mid blue), 3.27 (low red), 3.26 (red ...), 3.23 (low pink), 3.19 (low blue)
Resistance @ 3.36 (green ...), 3.40 (upp blue, upp pink), 3.43 (mid red), 3.48 (blue --)

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Olam 190608

After breaking the 2.76 resistance (red --) yesterday, Olam came back down to earth just as quickly today, closing below the 2.60 support (pink ...) as well.

If Olam cannot break the 2.60 neckline (pink ...) tomorrow, we might see it testing the uptrend support (low blue), or even the 2.48 support (blue ...).

Even if Olam breaks the 2.60 neckline, it still has to content with the uptrend resistance (mid blue) and downtrend resistance (upp red).



For tomorrow :

Support @ 2.58, 2.508 (low blue, low red), 2.48 (blue ...)
Resistance @ 2.60 (mid pink, pink ...), 2.63 (pink --), 2.663 (mid blue), 2.73 (upp red), 2.75 (upp blue), 2.76 (red --)

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BakerTech 190608

Today is T + 9 since BakerTech surged and hit the 0.325 resistance (red --) on 6 jun. Moreover, Baker Tech formed a Gravestone Doji today too. Would we see a repeat of the pattern of 6 jun?

If Baker Tech breaks the uptrend support, we could see it testing the 0.290 support (red ...), which it did not touch since 15 may. If Bakertech breaks the long term downtrend resistance (red), we could see it testing at least the 0.315 resistance (pink --).



For tomorrow :

Support @ 0.2957 (low blue), 0.292 (low pink), 0.290 (red ...)
Resistance @ 0.300 (blue ...), 0.305 (pink ...), 0.307 (red), 0.310 (upp blue), 0.312 (mid pink), 0.315 (pink --)

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