Yangzijiang 180209

Have not been charting Yangzijiang for quite some time now. After forming a double-top on 11 dec and 7 jan, Yangzijiang broke the 0.475 neckline (blue --) and tumbled to a low of 0.415 on 3 feb.

Afterwhich, Yangzijiang failed to break the 0.475 neckline before dipping again, almost testing the 0.420 support (green --) today, before closing right on the 0.440 neckline (red ...).

You can see from the chart that the uptrend support (low blue) meets the 1st downtrend support (mid red) at around the 0.425 level. Therefore, the 0.425 level would be a crucial support.

If this support breaks, we could see Yangzijiang heading for the 0.405 support (green ...). Any upside would be limited to the 0.455 resistance (pink ...).


For tomorrow :

Support @ 0.430 (red --), 0.427 (mid red, low blue), 0.420 (green --), 0.413 (low red), 0.405 (green ...)
Resistance @ 0.440 (red ...), 0.455 (mid blue, pink ...), 0.460, 0.465 (upp blue), 0.475 (blue --)

A bipolar, volatile trading week

by R SIVANITHY (15 Nov)

Despite the volatility and notwithstanding Wall Street's generous Thursday bounce, the general trend appears to be down

THERE was no let-up in volatility this week, particularly for the major indices. Benchmarks in the US, Japan and Hong Kong rose and fell as much as 5 per cent per day, confounding anyone who thought markets would have settled down by now to the business of earnings and the economy.

Then again, maybe the volatility is conveying a message - to the effect that things are shockingly bad, and that the extraordinary bailout efforts by governments won't fix them overnight.

Adding to an already-confused state of affairs, the US Treasury said this week that it was abandoning the US$700 billion Toxic Assets Rescue Plan (TARP) or Bank Assets Rescue Fund (BARF) announced last month to help clean up banks' balance sheets and return them to solvency. Instead, it is looking at direct capital injections.

You don't need to be a genius to realise how negative a signal this is.

In effect, the US government has admitted that its best plan to save the financial system - one that was conceived after months of study - is flawed and has to be scrapped.

Predictably, this sort of signal sent the US stock market - and others with it - into a tailspin on Wednesday, although for some inexplicable reason, Thursday brought an equally large rebound.

As for local trading, a familiar bipolar pattern emerged during the week, with attention focused on a handful of big-caps on the one hand, penny stocks on the other - and little else in between.

This split - into the very big and very small - is a common occurrence in the local market and regular traders would easily recognise it. Hedge funds and institutions desperate to shore up flagging performance concentrate on blue chips, while syndicates and house traders gravitate to the pennies whenever there is any sign of strength.

Small-caps in focus this week included battered China plays China Hongxing Sports, Cosco Corp and Yangzijiang - apparently because they have been sold down hugely. Indonesian commodity plays Indofood Agri and Golden Agri also saw action after they released results.

Having just reported their Q3 earnings, the three local banks were in focus throughout the week, though the resulting downward revisions meant they all traded to the downside. DBS started the week at $11.40 but ended it at $10.34 yesterday, for a loss of $1.06 or 9.3 per cent. UOB's fall was $1.02 or 7.8 per cent, while OCBC's was 34 cents or 6.5 per cent.

SingTel was another big-cap to release its results - a 12 per cent drop in Q2 profit to $868 million. The stock fell 12 cents or 4.8 per cent over the week to $2.40.

Despite the volatility and notwithstanding Wall Street's generous Thursday bounce, the general trend appears to be down. The Straits Times Index yesterday ran up to an intraday high of 1,817 but ended at 1,759.14 for a net gain of a paltry 3.67 points.

Over the week, the index narrowly avoided a triple-digit loss, falling 98 points or 5.3 per cent. Every day, it tailed Hong Kong's Hang Seng Index closely, providing investors with a first-rate advance indicator of how Wall Street might perform later each day

-Editorial Report by R SIVANITHY (15 Nov)

Marine Sector Research Report

by DBS Group Research (20 Aug)

EARNINGS season in H1 2008 has reinforced positive outlook for rig builders, as well as oil and gas service and equipment suppliers. The rig builders, as well as oil and gas service and equipment players, have to-date delivered collectively stronger than expected H1 2008 report cards, underscoring their ability to ride on the positive sector outlook and protect profit margins despite raw material price concerns and weak US dollar.

Indeed, SGX-listed Singapore yards, and oil and gas service and equipment players' earnings have escaped the concerns earlier in the year unscathed; with new orders holding up, and ironically, US dollar rebounding and raw material price concerns easing recently. The exceptions were SGX-listed Chinese yards' earlier-than-expected dip in profit margins, which we had warned since mid-Q1 2008.

Undiscerning selldown in share prices in line with general market weakness has created buying opportunities. In our opinion, the earnings for most SGX-listed Singapore yards and oil and gas service and equipment suppliers have caught up with their share price valuations since early 2008, and the scenario has now reversed for the current depressed share prices to rebound, underpinned by the firm industry fundamentals and successful business execution.

Easing oil prices are positive for the durability of oil and gas industry up-cycle. We have repeatedly mentioned since last August that too high an oil price may result in demand destruction and harm the orderbook replenishment opportunities of stocks exposed to the booming offshore segment.

While the equity market sees the recent cooling off in crude oil price negatively, we are taking the view that the recent retracement in oil prices is reducing the risk of demand destruction and inflationary pressures. This is positive for more new order wins ahead.

This is also in line with rig builders' and oil and gas service and equipment suppliers' feedback that oil price at US$70 per barrel is a good level for their business outlook.

Sembcorp Marine is our top pick among the yards; with price catalyst coming from a possible record level of order wins this year and improving margins from successful execution of its record order book.

Swiber Holdings and Ezra Holding remain our top picks among the oil and gas service and equipment suppliers, as both companies have strong market positioning to ride on the increasing shift to production phases for offshore oil fields.

-Research Report by DBS Group Research (20 Aug)

Yangzijiang Research Report

by DBS GROUP (13 Aug)

MARGIN pressure more apparent: Yangzijiang's Q2 2008 net profit surged 132 per cent y-o-y to 338.2 million yuan (S$69.3 million) on 249 per cent higher sales, as margins disappointed. Gross margin fell 13.5 percentage points (ppt) y-o-y and 3.8 ppt q-o-q to 17.2 per cent, compared with our expectation of 20 per cent.

The negative impact of rising steel prices and the rising yuan against the US dollar has apparently hit Yangzijiang's gross margin earlier than expected, as it executed on projects that were secured in 2006 at much lower contract prices.

As a recap, while we have argued in earlier reports that margins for individual projects commencing April will be hit, the negative impact on the group's margins may only be more apparent in H2 2008.

Yangzijiang's gross margins should remain under pressure in H2 2008, as both steel prices and the currency continue to be significantly higher versus late Q4 2007. Indeed, we expect the prices for new steel plates supply for projects commencing in July 2008 to be about 10 per cent higher than those in Q2 2008.

But this could be mitigated by: contribution from two high-margin vessels with improved efficiency; the deployment of larger and higher-margin vessels, eg 92.5k bulkers; and the execution of better-priced contracts signed in 2007.

Still, we cut our gross margin assumptions for FY2008 and FY2009, and earnings estimates by 6 per cent and 10 per cent to 1.409 billion yuan and 1.701 billion yuan respectively.

While we believe Yangzijiang is pro-active in currency hedging and adopting margin enhancement measures, the execution of its record high order backlog remains a concern. Reduced TP based on a lower PE multiple of eight times (versus 14 times previously) on revised FY2009 forecast earnings.

This is in line with the de-rating of China-listed shipyards, where prices fell recently due to concerns of rising steel prices and currency, as well as order cancellations.

-Research Report by DBS GROUP (13 Aug)

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)

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)

Yangzijiang 300508

After breaking the 0.985 support (blue ...) on 28 may, the next support for Yangzijiang, based on volume distribution, would be around the 0.965 level (pink --).

The 1.15 neckline (pink ...) now seems far away. If Yangzijiang breaks the 0.965 support (pink --), we might even see it testing the 0.935 support (blue --).

We would probably see Yangzijiang trading sideways for the time being, between the 0.965 support (pink --), and 0.985 resistance (blue ...).



For monday :

Support @ 0.968 (low green), 0.965 (pink --), 0.935 (blue --), 0.932 (low red)
Resistance @ 0.980 (mid red), 0.985 (blue ...), 1.00 (upp green), 1.01 (red --), 1.02 (upp red)

Good Luck !!

Yangzijiang 230508

After testing the 1.15 resistance level on 5 may, Yangzijiang didn't last long and came back down to earth on 9 may. Thereafter, it has been downhill for Yangzijiang ever since.



After trading sideways for about a week, Yangzijiang finally broke the 1.08 support (green --) on 21 may.

Today, further selling pressure pushed Yangzijiang down and it broke the uptrend support (low green), downtrend support (mid red) and also the 1.08 support (red --).

The next support based on volume distribution for Yangzijiang would be around the 0.985 level (blue ...).

For monday :

Support @ 0.985 (blue ...), 0.940 (low red, blue --)
Resistance @ 1.01 (mid red, red --), 1.02 (low green), 1.07 (upp red), 1.08 (green --)

Good Luck !!

Yangzijiang 050508

Yangzijiang broke out of the long term downtrend resistance (upp red) and 1.08 resistance (green --) last friday 02 may.



Today, Yangzijiang opened right on the uptrend resistance (upp green) and almost tested the short term uptrend resistance (upp light blue) before closing on the 1.15 resistance (pink --).

Looking at the volume distribution bars on the left, you can see that the next significance resistance starts from 1.20 till about 1.50 before the volume gets lesser. The next neckline also looks to be around the 1.20 level.

For tomorrow :

Support @ 1.12 (upp green), 1.10 (low light blue), 1.08 (green --), 1.06 (mid green), 1.03 (upp red)

Resistance @ 1.15 (pink --), 1.17 (blue), 1.18 (upp light blue)

Good Luck !!

Yangzijiang Research Report

by DBS GROUP (29 April)

YANGZIJIANG'S Q1 2008 results were within our expectation. Q1 2008 net profit doubled to 371.3 million yuan, with revenue surging 86 per cent y-o-y to 1,694.1 million yuan.

Gross margin held up at 21.0 per cent (up 0.7 percentage point y-o-y and 1.1 percentage points higher q-o-q) as the bulk of its steel cost was locked in last year. The 72 million yuan unrealised fair value gains on forward currency contracts also boosted earnings.

Operationally, the firm managed to squeeze in four additional vessel deliveries in 2009 on the back of improved efficiency and resultant higher productivity at its new yard.In addition, these vessels were priced at over 30 per cent premium because of the shorter lead-time.

Hence, we have raised FY2008 and FY2009 revenue estimates by 10.6 per cent and 8.7 per cent, respectively. In anticipation of fatter margins for these vessels, net profit estimates were raised by 13.9 per cent and 13.0 per cent, respectively.

We remain concerned over Yangzijiang's execution of its US$6.8 billion record-high order backlog, which stretches over four years. With 30 per cent of its order book exposed to forex fluctuations and the risk of high steel prices affecting its earnings from H2 2009 onwards, the risk to forecasts is high beyond 2009.

The increase in our earnings estimates are offset by a lower target PE multiple of 14x estimated FY2009 PE (instead of 16x), in line with the industry de-rating to account for higher risk premium.

-Research Report by DBS GROUP (29 April)

Yangzijiang 250408

Although Yangzijiang tested several supports today, it still managed to close above all of them. However, Yangzijiang has also create a Doji today.



Would the pattern be similar to the one create on 2 apr?

If Yangzijiang opens below the 2 uptrend supports (mid light blue, upp green) on monday, and breaks the 1.08 support (green --), we might see Yangzijiang reversing and testing the 1.01 support (red --).

If Yangzijiang opens above the long term downtrend resistance (upp red) on monday, there's a high chance we might see it testing the 1.15 resistance (pink --), or maybe even break it !

For monday :

Support @ 1.10 (upp green), 1.08 (green --), 1.036 (mid green), 1.023 (low light blue), 1.01 (red --)

Resistance @ 1.107 (upp red, mid light blue), 1.15 (blue, pink --), 1.17 (upp light blue)

Good Luck !!

Yangzijiang 240408

Yangzijiang broke the 1.05 resistance level (pink --) with volume today. It also broke 2 uptrend resistance (mid light blue, upp green) but only managed to close above one of them (mid light blue).



Immediate resistance can be seen at 1.14, which is the high on 29 feb, where Yangzijiang tumbled down from.

If Yangzijiang can open above the uptrend resistance (upp green), there's a high chance we might see it testing the 1.14 resistance.

Or we might see Yangzijiang retreating to the 1.05 level if the support (mid light blue) doesn't hold.

For tomorrow :

Support @ 1.078 (mid light blue), 1.05 (pink --), 1.03 (mid green), 1.01 (red --), 1.00 (low light blue),
Resistance @ 1.094 (upp green), 1.14 (blue), 1.15 (upp light blue)

Good Luck !!

Yangzijiang 230408

Although Yangzijiang did not open at or above 0.950 on 22 apr, it still managed to recover and break the uptrend resistance (upp blue).



Yangzijiang broke the 1.01 resistance level (red --) with volume today. It also tested the uptrend resistance (upp light blue) and closed right on another uptrend resistance (low green).

Next immediate resistance can be seen at the 1.05 level (pink --). If Yangzijiang can open tomorrow at 1.01 or higher, and break the uptrend resistance (low green), there's a high chance we might see Yangzijiang testing the 1.05 resistance level soon.

For tomorrow :

Support @ 1.01 (red --), 0.989 (upp blue), 0.978 (low light blue)
Resistance @ 1.025 (low green), 1.05 (pink --), 1.06 (upp light blue), 1.07 (mid green), 1.14 (29 feb high)

Good Luck !!

Yangzijiang 210408

Yangzijiang broke out of the long term downtrend resistance (upp red) with volume today. It also managed to close above the uptrend resistance (mid blue).



If Yangzijiang can open at or above the uptrend resistance (mid blue) at 0.950 or above, there's a high chance we might see it testing the 1.01 resistance level this week.

For tomorrow :

Support @ 0.948 (mid blue), 0.9012 (low blue), 0.8913 (upp red)
Resistance @ 0.975 (upp blue), 1.01 (green, red --)

Good Luck !!

Yangzijiang 180408

Yangzijiang has been on the downtrend ever since it broke the 1.01 support on 9 apr. Looking at the chart, Yangzijiang could be forming a double-bottom.



We will have to see if Yangzijiang reverses it downtrend next week to confirm the formation of the double-bottom.

If Yangzijiang breaks the support (low blue), we might see it testing the 0.850 level.

For monday :

Support @ 0.895 (low blue), 0.852 (mid red), 0.803 (low red)
Resistance @ 0.910 (upp red), 0.925 (mid blue), 0.965 (upp blue)

Good Luck !!

Yangzijiang 090408

Yangzijiang broke the 1.01 support (red --) today. It is also trading below the uptrend support (blue). Furthermore, Yangzijiang just about closed on the downtrend support (low pink).



If Yangzijiang fails to hold on to this support (low pink), we might see it testing the 0.900 level.

For tomorrow :

Support @ 0.9688 (low pink), 0.887 (upp pink --), 0.819 (low pink --)
Resistance @ 1.01 (red --), 1.058 (upp pink), 1.09 (blue)

Good Luck !!

Yangzijiang 020408

Yangzijiang broke the 1.01 psychological resistance (red --) today. It also broke the long term downtrend resistance (upp red). Yangzijiang just about managed to stay above the downtrend resistance (mid pink).



It remains to be seen if there is any follow through for Yangzijiang tomorrow. If Yangzijiang continues to trade within the uptrend channel (blue), we might see it testing the next resistance level which could be around the 1.20 level.

For tomorrow :

Support @ 1.01 (mid pink, red --), 0.9755 (low blue), 0.952 (upp red)
Resistance @ 1.09 (mid blue), 1.18 (upp blue)

Yangzijiang 280308

Yangzijiang broke the downtrend resistance (upp pink) today with volume. From the chart, you can also see Yangzijian also tested the 3 resistances today.



If Yangzijiang continues to trade within the uptrend channel (blue), there is a chance Yangzijiang might break the 1.01 psychological resistance (red --) sometime next week.

For monday :

Support @ 0.9805 (upp red), 0.908 (upp pink, low blue), 0.795 (low pink)
Resistance @ 1.01 (red --), 1.025 (mid blue), 1.123 (upp blue)

Good Luck !!

Yangzijiang 250308

Although Yangzijiang recovered today, it is still trading within the downtrend channel (pink). It will have to break out this channel to have any chance of a reversal.



For tomorrow :

Support @ 0.8178 (low pink), 0.7867 (mid red), 0.705 (upp red --)
Resistance @ 0.928 (upp pink), 1.033 (upp red)

Good Luck !!

Yangzijiang 170308

Yangzijiang first broke the downtrend support (low pink) on 13 mar. Today it opened below the support (low pink) and only managed to touch it, before closing below it.

(Please note that the volume is wrongly indicated)

Yangzijiang is now trading within the downtrend channel (red --). If it breaks the channel's support (low red --), we might see it testing the 0.700 level.

As it is now, there is a higher chance now that Yangzijiang will test the 0.800 level very soon.

For tomorrow :

Support @ 0.800, 0.760 (low red --), 0.702 (low red)
Resistance @ 0.850 (upp red --), 0.857 (low pink), 0.870 (upp red), 0.970 (upp pink)

Good Luck !!