Monday, June 2, 2008

Corporate: New targets/support for selected STI stocks


Infomation for traders only

Unlike the time when the STI first crossed the 3200 level on April 23, with financials, properties and SingTel behind the move, this time oil and commodity plays have been leading the pack as the index knocks the door of 3200 again.

But many of these stocks led by Wilmar, Olam, SCI and SembMarine, have exceeded our target prices while SingTel is trying to resume its lead which hopefully will pave the way for the banks, SGX and properties to recover to their highs in late April.

There maybe a stronger case to buy DBS, UOB, OCBC, SGX, CityDev and Capitaland besides SingTel which are still significantly below their April 23 levels.

DBS ($19.58) stood at $19.52-$20 on April 23 and slightly exceeded our TP of $20.60-70, reaching $20.80 on May 7, falling to as low as $19.08 last week. It should recover back to $20.

UOB ($20.20) was at $20.70-$21.04 on April 23, meeting our $21.50-22 TP when it climbed to $21.70 on May 7. It dropped to $19.26 last week (ignoring the $18.94 closing low the previous Friday which could be a trading error). It should recover to $20.50-70.

OCBC ($8.67) was $8.59-$8.70 then, exceeding our $9 TP to $9.09 on May 6. Its fall has been muted, touching a low of only $8.53 which suggests its innate strength to test $9 again.

SGX ($8.09) is the worst performer this round, not recovering much from its low of $7.92 last week. It had moved between $8.30-60 on April 23 and exceeded our $9 in a matter of a few days, climbing as high as $9.62 on May 7. The rally was too sharp, causing it to slump back to below $8 and could only rise to $8.20 last Friday.

Traders should seize any weakness back to $7.90-$8 during this current consolidation as SGX should recover to $8.50-70.

Property heavyweights Capland and CityDev should also recover at least near its April 23 levels when the oil and commodity plays take a break. City ($11.54) stood at $12.24-$12.52 then, but fell sort of our $13 TP, touching $12.80 the next day onwards.

After a few rally attempts failed, it fell to a slow as $10.92 last week before recovering to $11.60 last Friday and this morning. City should recover again to $11.80-$12.

Capland ($6.50) has lost a bit from its Apr 23 level of $6.88-95 when we placed a TP of $7 and $7.40. It rallied to $7.18 on Apr 28, and after a subsequent rebound to a lower high of $7.15, it began its fall to as low as $6.20 last week, recovering to $6.57 this morning. It should be able to recover to $6.70-90.

Among offshore/conglo plays, previous laggard SCI ($4.95) stands out, rallying from Apr 23 level of $4.48-63 to as high as $4.93 a month later, above our $4.70-80 TP, climbing further to $5.01 this morning. Resistance should set in at $5.10 and then $5.35. Taking profits should be considered.

Sembmarine ($4.70) was trading at only $4.04-18 on Apr 23, breaking our $4.30 TP only after about a month later but has been shooting up in the last fortnight, reaching a high of $4.72 this morning.

Having reached its highest level since last November when it moved widely between $4.40 and record $5.70 high, it is interesting to see whether it can test the peak soon. The next resistance after overcoming $4.70 is $5.10-25.

KepCorp ($12.24) was at its highs of $11.82-$12.12 on Apr 23 but has yet to test our $13 TP, reaching a high of $12.34 last Friday. It appears to have a bit more steam to go to $12.50-70 with support at $12.10.

SingTel ($3.73) was $3.83-87 on April 23 and failed to rally to our $4 TP, reaching a high of only $3.94 on May 2 before falling to as low as $3.58 last Monday.

However we put out a trading idea on May 23 at $3.61 touting support at $3.56-62 and TP of $3.76-86. It touched $3.81 last Friday and should rally again back to $3.80-90 after some consolidation around $3.65-70.

Sgbluechip says: I will not chase the market after rig builders as they have risen to 85% peak levels when STI was 3800. They just need one piece of negative news before carnage and bloodbath sets in. Analysts have been upgrading rig builders to BUY when they were just recently downgraded. It seems that BUY calls are often made when a particular sector starts picking up (again). Fundamentals do not change overnight. Hence, do not trust analysts reports blindly.

I believe banks still offer positive trading opportunities.

I will stay away from property counters until Capitaland (SEA market leader) reaches $5. I will also be happy to buy City Dev at $8. Property firms pay very little dividends, hence I need to set aside a larger margin of safety when investing in such businesses.

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