Before I start, I will like to state that this short write up, similar to the opportunistic play on Capitaland on 30 Nov and Wilmar on 5 Oct, is to highlight an opportunistic play on Capitamalls Asia (“CMA”). This is based on technicals, and not an in depth analysis on CMA’s fundamentals.
Worse STI component stock performance on a year to date (“YTD”) basis
With reference to Table 1 below, it is apparent that CMA is the worst performer among the STI component stocks. However, this underperformance has also allowed it to have the highest potential capital gain (due to the sharp drop in share price). Taking into account the potential dividend yield, analysts are projecting a total potential return of around 25.5% (with a horizon of one year) for CMA, second only to SIA.
Table 1: CMA – worst performer among STI component stocks on a YTD basis
|
Short Name
|
Last Price
|
Analyst Consensus Px
|
Chg from consensus TP
|
Forward Div Yield
|
Year to Date Returns
|
Potential (cap gain + div yield)
|
|
Capitamalls Asia
|
1.86
|
2.32
|
24.9%
|
0.6%
|
-26.5%
|
25.5%
|
|
Singapore Airlin
|
15.04
|
18.65
|
24.0%
|
4.0%
|
2.7%
|
28.0%
|
|
Noble Group Ltd
|
2.04
|
2.52
|
23.7%
|
1.4%
|
-1.3%
|
25.1%
|
|
Capitaland Ltd
|
3.65
|
4.38
|
19.9%
|
1.7%
|
-10.7%
|
21.5%
|
|
Wilmar Internati
|
5.89
|
7.06
|
19.8%
|
1.2%
|
-7.2%
|
21.1%
|
|
Jardine Strat
|
26.2
|
31.33
|
19.6%
|
0.9%
|
50.3%
|
20.5%
|
|
United Overseas
|
17.9
|
21.04
|
17.5%
|
3.9%
|
-6.2%
|
21.5%
|
|
Comfortdelgro Co
|
1.54
|
1.81
|
17.5%
|
3.0%
|
-2.8%
|
20.5%
|
|
Singapore Exch
|
8.37
|
9.76
|
16.6%
|
3.8%
|
3.6%
|
20.4%
|
|
Jardine Matheson
|
43.48
|
50.16
|
15.4%
|
2.5%
|
48.0%
|
17.8%
|
|
Fraser And Neave
|
6.12
|
6.93
|
13.2%
|
2.9%
|
51.0%
|
16.2%
|
|
Singap Tech Eng
|
3.25
|
3.66
|
12.6%
|
4.1%
|
4.2%
|
16.7%
|
|
Sembcorp Indus
|
5.02
|
5.64
|
12.3%
|
3.0%
|
40.3%
|
15.3%
|
|
Capitamall Trust
|
1.88
|
2.10
|
11.5%
|
4.4%
|
9.7%
|
15.9%
|
|
Genting Singapor
|
2.11
|
2.340
|
10.9%
|
0.0%
|
62.3%
|
10.9%
|
|
Keppel Corp Ltd
|
10.8
|
11.93
|
10.5%
|
3.3%
|
40.3%
|
13.8%
|
|
Singap Press Hgs
|
3.95
|
4.35
|
10.2%
|
5.7%
|
15.0%
|
15.9%
|
|
Olam Internation
|
3.07
|
3.38
|
10.0%
|
1.3%
|
17.3%
|
11.3%
|
|
Singap Telecomm
|
3.08
|
3.36
|
9.2%
|
4.6%
|
1.6%
|
13.8%
|
|
Ocbc Bank
|
9.8
|
10.68
|
9.0%
|
3.2%
|
11.3%
|
12.2%
|
|
Jardine Cycle &
|
36.84
|
40.00
|
8.6%
|
3.2%
|
40.3%
|
11.8%
|
|
Hongkong Land
|
7.03
|
7.61
|
8.2%
|
2.2%
|
46.5%
|
10.4%
|
|
Sia Engineering
|
4.37
|
4.72
|
8.0%
|
4.5%
|
36.8%
|
12.5%
|
|
Dbs Group Hldgs
|
14.4
|
15.49
|
7.6%
|
3.8%
|
-3.7%
|
11.4%
|
|
Sembcorp Marine
|
5.01
|
5.35
|
6.7%
|
3.0%
|
40.4%
|
9.7%
|
|
Golden Agri-Reso
|
0.76
|
0.80
|
5.9%
|
1.5%
|
50.3%
|
7.4%
|
|
Starhub Ltd
|
2.57
|
2.71
|
5.3%
|
7.1%
|
30.0%
|
12.3%
|
|
Neptune Orient
|
2.15
|
2.26
|
4.9%
|
1.7%
|
30.3%
|
6.6%
|
|
Smrt Corp Ltd
|
2.01
|
1.97
|
-2.0%
|
4.1%
|
9.4%
|
2.1%
|
|
City Develops
|
12.96
|
12.59
|
-2.9%
|
0.7%
|
13.0%
|
-2.2%
|
Source: Bloomberg (17 Dec 10). Note the above price refers to intraday price and not closing price.
What contributed to the sharp selloff?
CMA’s 14% drop since its results release on 28 Oct could have been partially attributed to fears of monetary tightening and property measures in China due to CMA’s property exposure in China. (Capitaland’s share price has also been pressured since mid October.)
Nevertheless, based on Figure 1 below, analysts are still positive on CMA and average consensus one year target price is around $2.32, representing an approximate 25% potential upside.
Figure 1: Analysts’ target prices for CMA
Source: Bloomberg (17 Dec 10).
Oversold to a huge extent
With reference to Chart 2, it is apparent that CMA’s RSI has dropped to almost an all time low since its listing on 25 Nov 2009. According to Bloomberg 14D RSI daily records dating back to 25 Nov 2009, out of the 238 trading sessions, only two sessions have RSI which are lower than the 17 Dec level of 24.99. Both sessions occurred during the slump in May where markets are worried about the debt crisis in Greece (5, 6 May 10). (Recap: Dow dropped close to a thousand points during intraday trading on 6 May 10).
In addition, it is noteworthy that the lowest RSI level for CMA was 20.90. Thus, at this level, aggressive traders can consider initiating long trades starting at current levels via tranches on CMA.
Chart 2: CMA’s share price since 2009
Source: Shareinvestor (17 Dec 10)
Noteworthy risks
RSI – can remain depressed for some time
As per my previous opportunistic write-up on Capitaland, it is rightfully that RSI should not the sole indicator to indicate that a company is ripe for rebound. In addition, RSI can remain depressed for some time, thus clients should not do contra but to consider buying at least a tranche with a horizon of 1-3 months.
Notwithstanding the above, it is a good indicator (and sensitive but not too sensitive) to highlight companies which are oversold. Furthermore, I have used an exhaustive list of its trading record (238 trading sessions) to increase the probability of the veracity of this signal. In addition, other indicators such as MACD or MFI also corroborated to the oversold condition.
Opportunistic trade – involves risks
Clients should evaluate and understand their personal risk profile before initiating trades as opportunistic trades involve risk which may be more than that of long term trades.
Return expectations should be realistic
As this is a technical play to play on a retracement in the sharp decline of CMA (and not a reversal), traders should be aware that upside is likely not much.
Conclusion – odds are pointing favourably to long trades via tranches
Although it may be true that CMA has not hit the bottom yet, the risk to reward ratio is favourable to initiate long trades starting at current levels via tranches on CMA with a horizon of 1-3 months (as we would never know where is the bottom but we can be fairly sure that the bottom is rather near). Nevertheless, traders who do so should be cognizant of the risks inherent in this opportunistic play and do appropriate risk management.
CMA’s supports and resistances which are subject to change, are provided for reference only.
Price on 17 Dec 10: $1.84
Supports: $1.83 / $1.80
Resistances: $1.92 / $1.97
Disclaimer
The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.