Dear all

It has been an extremely hectic couple of months. Markets have been extremely buoyant and I have been swarmed with trades, meetings and trips. If only, I have another pair of hands. 🙂

Anyway, just a short technical note on two companies, namely China Aviation Oil (CAO) and Olam which have seen bullish developments in their charts.

 

A) CAO closes $0.01 above its 50D SMA, first since 5 Nov

CAO is interesting as the increase in the share price in the past three days was accompanied with an increase in volume. CAO closed at $0.910, accompanied by a two-week high volume on 3 Dec.

 

In addition, some other noteworthy points are

1) China outbound travel hits 96% of pre-pandemic level in Oct 2024

With reference to this website (click HERE), China outbound travel has hit 96% of pre-pandemic level in Oct 2024. In 1HFY24 results, CAO cited a report published by The Civil Aviation Administration of China, the international air passenger demand in China has exceeded 80% of pre-pandemic levels for 5 consecutive months since February 2024. Thus, it is assuring to see that China outbound travel has hit 96% of pre-pandemic level in Oct 2024 which signifies the unabated resumption in outbound travel.

2) FY24F results likely to exceed consensus numbers

1HFY24 net profit was around US$42M. Consensus estimate FY24F net profit to reach US$77m, which I suspect should be able to exceed given the outbound travel statistics. In addition, 1HFY24 results already comprised of 55% of full year numbers.

3) Travel related HK listed stocks are seeing interest

a) Samsonite (1910.HK) on the verge of a chart breakout. Although it may not happen immediately given that it has rallied 6 out of 7 days, its rather assuring to see.

b) Trip.com (9961.HK) is on a strong uptrend based on chart. In their latest results, they are positive on both domestic and outbound travel in China.

4) CAO trades at attractive valuations 

CAO trades at 0.6x P/BV. Its NAV / share is $1.50. Based on 1HFY24 results, CAO has net cash of US$353m which comprises of 60.4% of its market capitalisation (based on the USDSGD exchange rate: 1.3390).

5) Consensus expects FY24F DPS of SGD0.05, translating to 5.5% dividend yield

Inclusive of special dividends, CAO gave out a dividend per share (DPS) of S$0.0505 in FY23. Based on Bloomberg, consensus expects CAO may give around $0.05 / share (i.e. around the same level as last year) in 4QFY24F. This translates to a dividend yield of around 5.5%. Based on my personal view, this DPS estimate is probably reasonable given that CAO is likely to report a stronger set of financials vs FY23.

6) CAO’s chart seems to be quietly strengthening

Based on Chart 1 below, the increase in the share price in the past three days was accompanied with an increase in volume. A sustained break above $0.900 (50D SMA) is a 1st positive with a clean breach above $0.920 (downtrend line and Fibonacci resistance) as a clear bullish sign.

Chart 1: CAO chart – quietly strengthening

B) Olam breaks out of an eight-month trading range!

There are two noteworthy points on Olam which caught my attention. Olam closed at $1.26 on 3 Dec.

1) Olam gets buy out offer for Agri unit

Based on SGX announcement dated 1 Nov (click HERE), Olam said it has received a non-binding indicative offer (NBIO) from the Saudi Agricultural and Livestock Investment Company (“SALIC”) for its stake in its Olam Agri business and is presently exploring with its appointed advisers the sale of such stake.

While the Company is reviewing this offer and no definitive terms or formal legal documentation have been agreed upon between the parties to date, it is likely that Olam may trade in tandem with news flow on such potential corporate action (similar to how SingPost traded).

2) More importantly, Olam breaks out of an eight-month trading range

Based on Chart 2 below, Olam seems to have staged a bullish break above its eight-month trading range. It has been trading a multi month trading range $1.07 – 1.23 since Mar 2024. Most chartists will likely agree that the longer the consolidation, the more reliable and likely more powerful will be the chart breakout. Eight month trading consolidation range is quite a long consolidation period.

Other indicators such as moving averages; OBV, MFI, RSI are strengthening too. ADX is rising and closes at 39.3 amid positively placed DIs, indicative of a trend.

A sustained breach above $1.23 points to an eventual technical measured target of around $1.39.

Chart 2: Olam breaks out of an eight month trading range $1.07 – 1.23

 

Risks

Due to severe time constraints, suffice to say that there are definitely risks in investing and trading the aforementioned companies. Please refer to the analyst reports for more info and do your own due diligence on their fundamentals, while paying attention on the risks. Click HERE for CAO’s analyst reports and HERE for Olam. Olam does not seem to have any brokerage coverage for the past few years.

 

Conclusion

The above is just my personal technical chart observation. It is by no means complete and readers have to do their own fundamental research.

Furthermore, readers have to assess their own % invested, risk profile, investment horizon and make your own informed decisions. Everybody is different hence you need to understand and assess yourself. The above is for general information only. For specific advice catering to your specific situation, do consult your financial advisor or banker for more information

 

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P.S: I am vested in both companies and have earlier highlighted to my clients

 

Disclaimer

Please refer to the disclaimer HERE