CapmallsAsia, SGX

CapitaMalls Asia recently announced 3Q net profit at $68m (+14.0% yoy but -39.8% qoq) on 22% drop in revenue to $42.5m (-41.8% qoq). OCBC Sec notes weaker results due to divestment of Clarke Quay & 3 M’sian malls to its Reits. Highlights joint bid for Bedok site with parent CapitaLand marks CMA's 1st investment in Spore post-IPO. Some houses like CMA's retail expertise, large cash balance of $1.4b & significant debt headroom (no net gearing), which will fit its plans to invest $800m-1b in new projects in Spore, China, M’sia.
Management expects to complete 3 more malls in China in 4Q10. Stock is trading at close to support at $2.13.

Houses Target Price
OCBC 2.40 (under review)
Daiwa 2.65 (under review)
JPM 2.60
Deutsche 2.53
Normura 2.20


Different houses have very different views on SGX.
At the moment, It is still uncertain if the deal would go through. If the deal is off, the current price of SGX now would be very attractive to the fund managers and investors. If the deal is through, we may see more selling pressure as the price to pay for ASX is very high.
Technical indicators suggests the selling pressure is still on. Support for SGX would be it's resistance at $8.45.

Short Term
SGX is facing selling pressure due to the high investment cost of ASX. ASX receive A$22 in cash per share and 3.473 SGX shares for each ASX share. This is a 37% premium to the traded price before the announcement. SGX will shift from net cash position to a net *gearing(see below for definition) of 45%. This may even result in equity raising exercises which may deter investors from being vested.

Long Term
Since stock exchanges relies greatly on the volume and liquidity, the merger would have a positive effect in the long run. The merger will result in an additional 2000 over listed companies and more financial products.
These few days, we see a lot of reports from various houses on their views on SGX. To summarize, these are the target prices of the various banks and research houses.

Kim Eng TP of 8.33
DBS TP$11.40
Credit Suisse: $7.50
CIMB $8.21
DMG $8.33
OCBC $8.97
CLSA: $9.00
J.P. Morgan $7.40
Citibank $10.50
Deutsche Bank $8.55

Value investing.....

Watched the movie, Wall Street last week but didn't really think it was up to my expectation. Maybe I was expecting more secrets revealed about the dark side of the market rather than understanding the emotions of family disputes and disagreements.

In the show.... there was one part which intrigues me... and hence, i googled.. Tulipmania...
Tulip mania or tulipomania (Dutch names include: tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.[ -wikipedia- I think it's a very interesting story and it teaches about greed and speculation, which is the cause to every economy crisis. We argued that if the sale price is far more than the intrinsic value, then the item is overpriced... using credit limit to buy over priced item is speculation but in a bull market, what is expensive to the traders who can sell off their shares for higher value??

I apologise for the less frequent blogging now.. send reports to clients on a daily basis so needed more time to compile their reports. Here, I will not give any corporate infomation because most of it are easily obtained from the internet. However, I would still like to share my opinions.

Read a lot of investment books recently, only interested to know how investors can be successful... if only 5 out of 100 people make money from the stock market, I am of course interested to learn and guide my supportive clients in their directions.

Warrren Buffett, Benjamin Graham... They have few traits in similar.. they are frugal and save for rainy days. They are value investors which means they only use $0.60 to buy a share that is worth $1.00.. they learn to read the fundamentals of a company and understand before they purchase the stock...

This is important as with the case of XXX company...
There is a reason why we should never touch penny counters if we are merely a retail investor. It is very easy to manipulate a counter if the market capitalization is small. If the below counter selldown, to just 8 cents, 100 lots can cause a contra loss of $7000.00. The fundamentals of this company is ambigous...
XXX S$0.14-XXX.SI
􀁺 It is trading activity in stocks like XXX that causes us concern.
􀁺 A placement of 42 mln new shares at 4 cents a share were placed out to 2 individuals, and the stock surged.
􀁺 On Monday Sept 20th (day before the placement news), the stock was trading at 15.5 cents

Market is dominated by big players... As retail investors, we must learn to trade with care and practise value investing...