This week, Chasen catches my attention as it seems to be forming a bullish double bottom on its chart. I have appended my personal chart analysis, together with some potential positive and negative points on the company. Read on for more below.
Chasen’s chart analysis
Based on my personal interpretation of Chasen’s chart, it seems to have tested its double bottom neckline around $0.070-0.072 for the past few days. For the past two days, it managed to close higher consecutively with above average volume. In fact, Chasen closed today with 7.3m shares changing hands, 3.8x above its average 30-day volume. ADX closed at 22.6, amid positively placed DIs (indicative of a trend). Other indicators such as OBV and MACD are strengthening.
A sustained break above $0.072 with volume expansion points to an eventual technical target of around $0.079. Chasen closed at $0.073 today.
Near term supports: S$0.072 / 0.070 / 0.068 / 0.066
Near term resistances: S$0.075 / 0.077 / 0.079 – 0.080
Chart 1: Chasen – potential bullish double bottom formation
Source: InvestingNote 23 Oct 19
Potential positive points on the company
1) Low valuations: Chasen trades at 0.39x Price to Book with NAV / share at $0.182;
2) Based on The Edge Aug 2018 article, Chasen may unlock shareholder value by spinning off its China subsidiary in Hong Kong. A capital gain may be recognised by the company should the spinoff materialises. My personal guess is that if this IPO materialises, it is likely to be in the next few months.
3) If there is a spinoff, there may be a special dividend to be given to shareholders. Even without a spinoff, company has been giving dividends for the past five years ranging from SGD0.0005 to SGD0.004 / share.
4) This write-up is based more on its technical chart. Hence, I am not very familiar with Chasen’s business fundamentals. Readers should do their own due diligence to understand more about the company’s fundamentals, growth drivers, business risks etc., and exercise your own independent judgement.
Potential negative points on the company
1) FY19 (financial year ends in Mar) revenue and net profit amounted to S$132m and S$5.4m respectively on record revenue and highest ever gross profit. However, I wish to point out that 1QFY20 revenue and net profit dropped 10% and 81% year on year basis to S$28.3m and S$0.3m respectively. Quarterly results may be lumpy due to timing of revenue recognition and the slowdown in global economy (at least in the near term).
2) Being on the Mainboard, this company is on the watchlist as it is below the minimum trading price $0.20. If its share price still does not move above $0.200 in the next few months and assuming SGX does not change its minimum trading price regulations, it may need to either delist, or do share consolidation, or transfer to Catalist.
3) Chart reading on small caps may not be as accurate as blue chips, as the depth and liquidity of small caps pales that of blue chips.
Its chart and the potential to list its China subsidiary on the Hong Kong bourse (news of which should be out in the next few months, if successful) attract me to this company, for a punting play only. I’m vested with a small position and only aim for a couple of bids of profit if any. Its watchlist status and lumpy quarterly results are some potential risks to take note hence do exercise caution as always.
P.S: I have already notified my clients to take note of Chasen’s chart formation last Mon, 21 Oct 2019 when it was trading around $0.070.
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