2 interesting charts to take note: Comfort Delgro & Q&M Dental (22 Sep 2021)

Dear all

With reference to my market outlook published on National Day (see HERE), markets have broadly declined, in line with my expectations, with STI and Hang Seng touching their highs on 10 Aug and 11 Aug respectively before dipping.

Amid the recent weakness, two stock charts, namely Comfort Delgro and Q&M Dental catch my attention. Let’s take a look.

 

Comfort Delgro

Based on Chart 1 below, Comfort Delgro has retreated to the low last seen in Nov 2020. It is currently at $1.51 and is testing an important support around $1.50-1.51 for the past three days (inclusive today). Although the exponential moving averages are trending lower with a rising ADX (i.e., bearish signs), its RSI (currently at 32.9) is also approaching near oversold levels. Based on my personal chart observation, it is rather unlikely for Comfort Delgro to stage a sustained break below $1.50, barring negative news flow from covid situation or / and company specific negative factors.

Near term supports: $1.50 – 1.51 / 1.48 / 1.45 – 1.46

Near term resistances: $1.54 – 1.56 / 1.60 / 1.66

Chart 1: Comfort Delgro is testing an important support $1.50-1.51

Comfort Delgro 1 year chart 22 Sep 21

Source: InvestingNote 22 Sep 21

 

Some other noteworthy points on Comfort Delgro

Potential investment merits

a) One of the clearest beneficiaries of economy reopening plays in both Singapore and UK;

b) Based on Bloomberg dated 1 Sep, Comfort’s average analyst target price is around $1.91. Estimated div yield is around 3.2%. i.e., total potential return is around 29%;

c) Net cash company with net cash position S$417m as at 2QFY21. This places it in good stead for M&A, if any;

d) Potential value unlocking: Pursuing an IPO for its Australia subsidiary on the ASX;

e) Regulatory financing framework changes for Downtown Line;

f) Winning of more bus routes.

 

Potential investment risks – Note that this list of risks is not an extensive list

a) Surge in Covid 19 cases accompanied with lockdowns;

b) Expansion by Gojek or Grab resulting in an erosion of market share, or margins for Comfort Delgro;

c) Losing bus contracts without any corresponding wins for other bus routes

Readers can refer to HERE for the analyst reports for more information

 

Q&M Dental

Based on Chart 2 below, Q&M has slid approximately 23% from its intraday high $0.733 (adjusted for bonus shares) on 2 Aug to trade $0.565 today. At $0.565, it seems to be hovering around its strong support region of around $0.550 – 0.560 for the past three days (inclusive today). Unlike Comfort Delgro, notwithstanding Q&M’s declining short-term moving averages, its long-term moving averages (200D SMA, 200D EMA) are still rising. RSI is at 32.4 which is also trading near to oversold levels.

Based on my personal chart observation, it is likely that Q&M should be able to hold above its strong support region of around $0.550 – 0.560, barring negative newsflow from covid situation resulting in lockdowns, or / and company specific negative factors.

Near term supports: $0.560 / 0.550 / 0.525 – 0.530

Near term resistances: $0.580 / 0.600 – 0.610 / 0.625

Chart 2: Q&M seems to be testing its strong support region $0.550 – 0.560

Q&M YTD chart 22 Sep 21

Source: InvestingNote 22 Sep 21

 

Some other noteworthy points on Q&M

Potential investment merits

a) Upcoming 2HFY21F results are likely to be strong amid a ramp up in its testing revenue due to the increase in covid cases + testing;

b) Analysts point to continued strength in dental operations given the tight border controls and seasonal strength;

c) Amid the recent share price weakness, both CGS-CIMB Securities and Maybank have issued updated reports on Q&M last week with target prices ranging from $0.850 – 0.890. This represents a potential capital upside of around 50% – 58%.

Potential investment risks – Note that this list of risks is not an extensive list

a) Dental operations may be affected should there be any lockdowns due to Covid;

b) Usual business risks such as competition should also be considered;

c) Q&M is rather volatile at times especially if it breaks important support. Average daily range in a normal day is around $0.019, i.e., around 3.4% of its share price.

Readers can refer to HERE for the analyst reports for more information

 

Conclusion

In conclusion, it is noteworthy that Comfort Delgro and Q&M are highlighted in this writeup, not because they have staged bullish chart breakouts. Both companies catch my attention because

a) They have spent three trading days hovering around their important supports. Based on my personal observation, it is good for the stocks to hover for a few days around important supports to exhaust the selling;

b) Both companies seem to have good analyst coverage and almost all the analysts who cover them are positive on them;

c) Operating results seem likely to improve in the next few quarters based on the overall business landscape, analyst reports and companies’ announcements.

P.S: I am vested in both companies. I have also highlighted both companies to my clients with more info.

 

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