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Commodities Poised to Rebound

Alex — Tue, 02 Dec 2008 03:04:32 +0000

The Reuters/Jefferies CRB Commodity Index, the commodity price benchmark made up of 19 commodities (petroleum products, base metals, agricultural products…) has continued its broad decline started in early July.

In our last update (MM of October 23) we were mentioning that commodity prices had tumbled to a four- year low today, at 266 points (point C on the chart), and that a further move downward was likely as the indicators were clearly bearish.

Click To Enlarge

The price action actually hit the following expected support level at 230 points It means that the CRB has lost more than 50% of its value in 5 months (between points A and B on the weekly chart). This new support level at 230 points is a previous high point posted in October 2000 (point C), then in January 2001and in October 2002 (points D and E). Once this resistance was cleared, it became a new low and the inflection basis point for the bullish trend development that started in March 2003 (point F).

The RSI shows that the CRB is clearly oversold now. Therefore technically, the current support level may be an opportunity for a bounce back. But as long as the RSI does not jump above its signal line and gets out of the oversold area, there is no positive alert triggered. Consequently the price action can potentially decline further with a RSI that remains oversold during several weeks.

A break of the current support would open the door towards the historical low levels posted in February and July 1999 (points G and H) and in October 2001 (point I), when the CRB bottomed at 182 points. Roughly it’s a further 20% fall from the current levels.

Click To Enlarge

On the daily chart, we see that the immediate resistance during the large decline generated last July is the 30-day moving average. If the support at 230 points holds (yesterday the closing price of the US session was 233.35), the Fibonacci retracement ratios are likely to become the price objectives.

Small Caps to Lead the Way in 2009

Alex — Sat, 29 Nov 2008 03:39:46 +0000

of the century. Aside from all the why’s and wherefore’s about what went wrong with the merger, it also elicited the greatest number of marriage/engagement/divorce metaphors in the history of journalism.

That is quite some feat. We write of course, on the subject of the BHP Billiton/Rio Tinto story.

Aside from all the benefits that a takeover would have brought to BHP, the big point to take from it is that even mega companies are reluctant to add debt to their books at the moment. And it also gives an indication that if it is troublesome for the likes of BHP and Rio to raise money in this market, think about the smaller companies and how they must be faring.

An example of this is one of the companies in our Australian Small Cap Investigator (ASI) portfolio. Last week it released details of a new joint venture deal it had entered into. Three days later the window closed for shareholders to pick up more stock in a capital raising.

The result was that the company raised less than 40% of the capital is was hoping for. If it was twelve months ago we are sure they would have raised the full amount. Fortunately, the company in question does have a Plan B. But many small companies out there don’t. If they can’t borrow from banks and can’t raise additional capital from shareholders, it makes it very hard for smaller companies to invest in growing their business.

On the other hand, that is one of the reasons why rather than stepping back from looking at new investments for ASI, we are actually ramping up the coverage in the New Year.

The credit markets will eventually recover, but it may be slow. However, even before this becomes obvious to the market many small cap companies will have already taken advantage and should surge ahead in price.

In our view, we believe the next six months will be the best time in years to pick up undervalued small cap companies.

australia banks

Alex — Fri, 28 Nov 2008 01:56:46 +0000

We have climbed down from our soapbox today, in order to take a look at the banks. Or, more precisely, the dividends on bank shares.

Today’s Age reports that “Australian banks pressured to lower dividends.” It’s a touchy subject for the four major banks. If there are two things Australian income investors like it’s a nice juicy dividend and 100% franking.

With interest rates falling, investors will naturally be looking for other sources of income. And with bank share dividends offering yields of about 9% it is a pretty attractive investment.

For instance, take a look at the four major banks:

ANZ Bank - yields 9.7%
National Australia Bank - yields 10.2%
Commonwealth Bank - 8.1%
Westpac Bank - 8.5%

And Queensland based Suncorp can offer a dividend even better than that. It is yielding 11.7%.

Add in the franking credits and the yield gets another boost.

For those that rely on income streams from their investments, falling interest rates can make a big difference. Supposing an investor has $500k in their account to live on in retirement, a cut in interest rates from 6% to 5% results in an income reduction of $5,000 per year.

For that reason bank shares should look attractive. $500k could potentially provide an income of about $45,000, compared to only $25,000 if held in cash at 5%.

But it is a big, big risk. Especially for those in retirement. Many will have seen a drastic reduction in the value of their share portfolios. They would be the same people who assumed investing in the banks was safe and reliable. They would have convinced themselves that banks shares couldn’t fall - not by 50% anyway.

The big question for them is, has the market discounted the price of bank shares in the belief that dividends will be cut? You would think it has. So far the Australian banks have weathered the global credit problems quite well.

Not that they have got off completely. But unless something really bad comes out of the woodwork it seems likely that all the ‘bad debt’ risk is already built into the share price.

So it can only really mean that expectations are high for a dividend cut. As Bell Potter research director Peter Quinton points out in The Age article, “It’s increasingly untenable to be paying out 90% of profits as dividends when all banks around the world are rebuilding their capital.”

If we assume a reduction in the yield to about 7% then the banks are now trading around that level. That should reduce the chances of them falling much further in the event that dividends are cut.

Considering that if banks do reduce dividends there is little incentive for investors to jump in as they won’t benefit from the current yield anyway. Therefore it would seem probable that despite the appearance of being good value, bank shares will remain low until there is an indication on the next round of dividends.

australia stock market

Alex — Fri, 28 Nov 2008 01:51:02 +0000

Child Care, Autos… What Next?
“Swan: May Have to Invest in Economy to Strengthen Jobs” the Dow Jones Newswire tells us. Oh dear. According to the newswire service, Treasurer Wayne Swan has told ABC Radio “if growth were to slow much further, then we would take additional action, whatever steps are necessary to protect Australian growth and Australian jobs.”

That would be in addition to their “investments” in child care centres and auto manufacturers we assume. Surely by now they must have worked out that government investments of this sort have the opposite effect.

Propping up rubbish companies not only rewards bad management and bad businesses but it punishes good management and good businesses by preventing the investments flows and new customers from reaching them.

The biggest disaster out of the current financial mess is not how many unsustainable businesses go under, but how many good businesses will be prevented from leading the economy back to recovery thanks to government meddling.

I.O.U. $47 Million
We mentioned a week or so ago the debacle that is the BrisConnections share register. Well, it turns out it has a new ‘largest’ shareholder, a Mr. Nicholas Bolton from St Kilda. He owns a whopping 47,643,166 shares which he bought for $47,600.

Of course, that’s not the problem. The problem is that whether he knows it or not, Mr. Bolton has to stump up $47 million by April next year in order to pay for the second installment.

Then if he’s still in the game he’ll need to pay another $47 million the following year for the final installment.

According to the report in The Age newspaper, this whole crazy deal was put together by the pointy heads at Macquarie. Not surprisingly they walked away with a cool $100 million for their efforts.

Imagine what they get paid when they do a good deal!

BHP to RIO

Alex — Wed, 26 Nov 2008 02:10:14 +0000

What is the big news this morning? We’ll need to think about that one for a while.

In the meantime there is the small matter of BHP Billiton [ASX:BHP] pulling out of the takeover of Rio Tinto [ASX:RIO].

Let’s be honest, it isn’t a major surprise. For some time the market has doubted that the deal would go through. Based on yesterday’s BHP share price Rio should have been trading closer to $90 a share rather than the $63.90 that it closed at.

Chairman Don Argus summed up the reasons for the decision:

“We have said that we would only seek to complete the transaction if it was in the best interests of BHP Billiton’s shareholders. While we have not changed our view of the basic industrial logic of the combination, or of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near term global economic conditions, the lack of any certainty as to the time it will take for conditions to improve and the risks that these issues imply for shareholder value.”

After Mr. Argus finishes his stint as BHP chairman he may want to consider giving the circus a try. Because that’s the best example of tightrope walking we’ve seen in a while.

In effect the statement reads, “Not making the acquisition is now good, but we still think the resources sector is going to boom… only not right now, but in the future. Honest.”

Now the story is over and the papers and web pages are stuffed stories about the “Bid Collapse” and “BHP scraps $150bn tilt at Rio Tinto” we think about what the real reason for backing out is.

After all, $450 million is a lot of money to spend on putting the deal together. And it is also a lot of money to just write off by backing out of the deal.

So, three points stand out. First, it is a crappy market for one resources company to be taking over another. Second, Rio Tinto has a big stack of debt - $9 billion due to be refinanced by next October. And third, when you combine the first two it just doesn’t make much sense to proceed… for now.

We’ve got no idea what is going on in the mind of Don Argus and Marius Kloppers, but we would be surprised to see BHP come back with a new deal once the market has steadied and once Rio has tidied its books up.

It may mean paying more. And they could even miss out all together if China Inc decides to have a go. But there is just as much chance of BHP picking up a leaner, meaner and possibly less indebted Rio at a later date even if it does involved paying a premium.

Better that than getting lumped with $70 billion worth of debt in a falling resources market.

Australia’s Apollo 13 ‘Moment’
“Is this a new $800 billion the Fed and Treasury are stumping up?” I asked Daily Reckoning editor Dan Denning this morning.

“Yep” he replied.

This time it is to support the credit card and mortgage debt collateralisation markets. Roll back the clock three months ago when the $700 billion TARP was first proposed and there was almost universal shock and alarm that the government could spend that much on bad debt.

Today $800 billion seems like a drop in the ocean. There’s no vote in Congress, no suspension of Presidential campaigning, no special TV programmes. In fact it doesn’t even make the top story on Yahoo! Finance.

We imagine it to be like the space race in the 1960s and 1970s. Everyone stood up and paid attention the first couple of times, but as more and more missions were scheduled the public took less and less interest. Until Tom Hanks got into trouble on Apollo 13 and the world watched again.

We’re not sure whether the market has had its “Apollo 13″ moment or not yet. With any luck last week was it.

The issue for Australia is not so much whether the US government can repay all its debts (clearly it can’t) but how closely the Australian federal government is watching. Is it picking up ideas, and working out ways to spend and increase government debt?

If it is like most governments it will try to get away with as much as it can, all in the ‘national interest.’

Short Selling

admin — Tue, 25 Nov 2008 08:49:53 +0000

After re-reading the ASX circular on the new covered short selling regime it appears we made an error last week. Our assumption was that the daily report would show all ‘open’ short positions in a stock. This appears to be incorrect. Instead, in their wisdom, the ASX are only publishing the daily volume of short trades.

So, looking at today’s report for instance, a couple of points stand out. First is the daily short selling volumes are greater than we thought they would be if you compare it to the total volume traded in a stock.

BHP Billiton [ASX:BHP] had nearly three million shares traded short yesterday. Compared against the total number of outstanding BHP shares of 3.3 billion that only equates to less than 0.1%. However, when you compare the three million shorts against yesterday’s share turnover of about 18 million shares then this is nearly 17% of the daily turnover that is going short.

A more bizarre one is Fairfax Media [ASX:FXJ]. According to the short report over four million shares in Fairfax were traded short yesterday. Again, as a percentage of its total outstanding shares it is only 0.26%. Yet, as a percentage of yesterday’s traded volume of about 5.5 million shares it equates to 73%.

We just make the point out of a matter of interest. Remember that only ‘covered’ short selling is now allowed on the ASX. This means that the brokerage firm executing the trade must be satisfied that the short seller is able to deliver the stock on T+3. Also, as we understand it, the report only shows the gross amount and does not take into account short positions that may have been closed out intraday.

And we still do not have a problem either with the concept or the practice of short selling. After all, in order for a short sell to go through there must be someone else who is prepared to buy them. Hence the argument that short selling helps to add liquidity to the market.

There are many explanations for the seemingly high day-to-day shorting volumes. One is obviously those terrible hedge funds. Another is the retail investor using Contracts for Difference (CFDs). Another reason could be institutions reweighting portfolios. And another could be companies that are hedging their DRP schemes. In addition there are probably another dozen or more explanations.

The upshot of it is that the ASX will need to provide a more thorough short selling report that displays more meaningful information than what it is supplying at the moment.

singapore stock market news

Alex — Tue, 25 Nov 2008 08:47:58 +0000

singapore stock market news.singapore stock market ,sgx market , singapore stock market blog

CAPITACOMMERCIAL TRUST, gs maintain BUY with target price $1.52

CHINA SPORTS, philip downgrade to HOLD with target price $0.16

CITY DEV, daiwa maintain HOLD with target price $7.24($10.58)

COMFORTDELGRO by gs
COMFORTDELGRO, jpm maintain NEUTRAL with target price $1.65

EPURE, citi maintain BUY with target price $0.24($0.71)

FIRST RESOURCES, dbs maintain FLLY VALUED with target price $0.2($0.3)

GOLDEN AGRI, cimb maintain NEUTRAL with target price $0.21($0.23)

INDOFOOD, cimb maintain TRADING BUY with target price $0.52($0.62)

JASPER, daiwa downgrade to UNDERPERFORM with target price $0.225

KARIN, ocbc maintain BUY with target price $0.18

KENCANA, dbs maintain FULLY VALUED with target price $0.08($0.11)

KEPLAND, uob kay hian remains a BUY with target price $2.90

SGX, cl remains a SELL with target price $4.80

SP AUSNET, cimb maintain OUTPERFORM with target price $1.44($1.71)

VENTURE, bnp initial coverage REDUCE with target price $3.20

WILMAR, cimb maintain OUTPERFORM with target price $3.25($3.30)
WILMAR, dbs maintain HOLD with target price $2.50($2.80)
WILMAR, mac maintain OUTPERFORM with target price $3

nol

Alex — Fri, 21 Nov 2008 10:02:10 +0000

NOL, cimb maintain UNDERPERFORM with target price $1.30
-NOL today announced aggressive cost reduction initiatives as it
wrestles
with the impact of the global economic downturn. This is a positive
surprise. On 21 October, NOL announced that it was reducing Asia-Europe
capacity by 25% and transpacific capacity by 20% from November, which
is
expected to reduce vessel network costs by about US$200m in 2009 (when
including savings on fixed vessel and charter-hire costs). Today¡¯s
announcement is in addition to these capacity cuts, with the highlights
as
follows Retrenchment of the group¡¯s global workforce of about 1,000
positions with the largest impacts being in North America, where the
company’s cost base is highest, including 50 positions in the Singapore
office. The bulk of the staff reductions will be in non-customer facing
roles; Relocation of the Americas¡¯ regional headquarters from Oakland,
California to a more cost effective location elsewhere in the United
States; Changes in the way APL Logistics manages its business to create
efficiencies and clearer line of sight of roles and accountabilities;
Additional business adjustments in Europe and other Asian regions; and
Continuing strong focus on productivity measures to reduce operating
and
overhead costs.
-These measures are likely to result in a US$33m restructuring charge
in
the 4Q08 results, and additional charges in 2009. CEO Ron Widdows
justified
the measures by saying that the current industry downturn was not only
unprecedented, but also beyond a normal cyclical downturn¡± and
expected
challenging conditions to persist for the next few years.
-Maintain UNDERPERFORM and target price of S$1.30 for now; forecasts
and
target under review. Our target price is based on an unchanged trough
valuation of 0.5x P/BV. NOL¡¯s historic P/BV range is between 0.5x to
2.5x.
-While we are positive on the measures announced by NOL, the cost
cutting
initiatives may not be able to offset the severe top-line pressure at
the
Asia-Europe trades, and also the transpacific and intra-Asia trades
moving
into 2009.
-For 2007, staff costs and employee benefits came to US$576m, or just
7% of
group revenue. Hence, the planned 10% cut in the workforce at the
minimum
should help reduce costs by some 0.7% of revenue ¨C which is not a lot
when
Asia-Europe spot rates have collapsed 70-80% yoy. The US$200m savings
from
capacity cuts could be more significant, but with NOL guiding for a
grim
outlook for 2009 profitability, it may still not be enough to keep NOL
in
the black. As a result, we believe that our forecasts need further
downward
revision, likely into losses for the next two years.
-Downside catalysts include falling container rates and declining
container
volumes as the global economies synchronously decelerate into 2009. Our
base case in-house economics view is for a recovery in 2010, but the
probability of our bear case forecasts for continued GDP contraction in
2010 are increasing. Together with record newbuilding deliveries next
year,
the container shipping industry could in turmoil for a while yet.

AMSTRONG

Alex — Fri, 21 Nov 2008 09:59:50 +0000

AMSTRONG, dmg maintain BUY with target price $0.17
-Affected by forex losses. 3Q08 revenue was almost flat at S$48.5m
while
net earnings fell 26.7% to S$2.4m mainly due to a S$2.6m mark-to-market
derivative loss that in turn resulted from unfavourable FX movements.
Additionally, Armstrong¡¯s operating profit was also hit due to the
high raw
materials costs which have not yet abated while increased admin
expenses
attributed to the new factories in Wuhan (China) and Thailand was also
a
factor.
-Dragged down by translation losses. Turnover and net profit would have
stood at S$52.1m and S$3.8m respectively should the S$ stay stable
against
the various Asian currencies and the US$ ¨C this in turn equates to a
6% and
19% gain in top and bottomline in 3Q08. For 9M08, sales and net
earnings
would actually have been higher by 13% and 41% respectively.
-Consumer Electronics, the star performer. Among the company¡¯s various
business segments, sales from Consumer Electronics increased 8% to
S$18m
and accounted for 37.1% of 3Q08 revenue. Growth in Data Storage, which
now
mainly consists of Armstrong¡¯s higher-margined rubber business, inched
up
2% to S$12.4m.
-Due to a drop in automotive demand from the US, however, sales from
Armstrong¡¯s Automotive segment fell 6% to S$11.2m. Additionally, the
company¡¯s Office Automation business also continued to contract as
sales
fell 19% to S$5.9m in 3Q08, inline with Armstrong¡¯s focus on margin
enhancement and resource management strategy.

BEAUTY CHINA, philip downgrade to HOLD with target price $0.42
-Downgrade to HOLD. . In view of the Group¡¯s recent half year
financial
results and the current economic situation, we remain conservative and
have
further revised our fair value estimate to S$0.42. We have changed our
valuation method and pegged 1x to the Group¡¯s FY2008 book value per
share,
translating to 7.69% upside. Despite the Management¡¯s assurance, we
remain
concerned about the Group¡¯s strategy in extending full credit terms to
their distributors, which has in turn increased their exposure to
credit
risk, especially in the current credit climate.
-3QFY2008 and 9MFY2008 financial results. Beauty China Holdings Limited
(¡°Beauty China¡±) reported 31.69% (year-on-year) growth in revenue
from HKD
421.30 million in 9MFY2007 to HKD 554.79 million 9MFY2008. Net profit,
on
the other hand, grew by 15.22% (year-on-year) from HKD 122.26 million
in
9MFY2007 to HKD 140.87 million 9MFY2008. On a quarterly basis, revenue
grew
by 30.66% (yearon- year) from HKD 187.95 million in 3QFY2007 to HKD
245.58
million in 3QFY2008. In addition, net profit grew by 18.56%
(year-on-year)
from HKD 52.23 million in 3QFY2007 to HKD 61.92 million in 3QFY2008.
The
Group attributes the growth to the increase in their point-of-sales in
the
PRC.
-Profit Margins. The Group¡¯s gross profit margin continued to improve,
by
1.28ppts from 62.55% in 9MFY2007 to 63.83% in 9MFY2008; and by 2.31ppts
from 62.28% in 3QFY2007 to 64.59% in 3QFY2008. However, as anticipated,
net
profit margin continued to fall in 9MFY2008 and 3QFY2008, due to the
increase in advertising and promotions. Net profit margin decreased by
3.63ppts from 29.02% in 9MFY2007 to 25.39% in 9MFY2008; and by 2.57ppts
from 27.79% in 3QFY2007 to 25.22% in 3QFY2008.
-Full credit terms extended to distributors. The Group has full credit
terms extended to their distributors, in aid to ensure business
continuity
between both parties and revenue growth. However, in the current global
credit climate and concerns of solvency and liquidity issues, we are
concern about the Group¡¯s strategy which has increased their exposure
to
credit risk. The Management has assured that they have had
long-standing
relationships with their distributors and to date and they have not
experienced any defaults in payment as yet.
-Estimates. Based on the Group¡¯s recent financial results and the
global
economic situation, we have revised our revenue growth forecast to
26.51%
in FY2008, 22.74% in FY2009 and 5.82% in FY2010. These were derived
based
on the Group¡¯s possible production utilization rate over the years. We
also
believe that the Group will still be able to continue managing their
gross
profit margins; hence we have maintained our forecasted gross profit
margins of 63.89% in FY2008, 64.55% in FY2009 and 65.55% in FY2010. In
addition, with the Group¡¯s continuous focus in the advertising and
promotion of their Charming Lady brand, we have maintained our
forecasts
for net profit margins of 24.45% in FY2008, 23.55% in FY2009 and 22.21%
in
FY2010.

ASX Renamed - Now Called the “$2 Shop”

Alex — Thu, 13 Nov 2008 07:16:09 +0000

ASX Renamed - Now Called the “$2 Shop”

This morning we were beaten to it by The Age newspaper. Damn the ruthless efficiency and timeliness of the printed press.

“$2 company has new meaning” reads the front page story. It tells us that 48 of the S&P/ASX200 companies are trading for less than $2. We did a similar check on the S&P/ASX100 index yesterday. Fifty-three of those companies are trading for less than $5.

Of course the actual dollar value of the share price is not always significant. The market capitalisation of the company is more relevant. But it’s certainly a far cry from the euphoria of last year. Remember when pundits were jumping up and down with excitement trying to pick which Australian share would be the first to break through the $100 barrier?

Leading the charge was Macquarie Group, CSL, Rio Tinto and Perpetual. Where are they now?

The chart below tells us the story.

From December 2006 all four of them led a charge towards the $100 level. Then October 2007 came along and spoilt the party. Since then, as you’re no doubt aware, the share prices have plummeted.

As of yesterday Rio Tinto was $75.20, Macquarie was $26.95, CSL was $36.95 and Perpetual was $35.26.

Templeton’s $1 Stocks MkII
But back to our original premise.

Company share prices are getting smaller and smaller by the day. Market caps are falling. In fact, some of the companies that used to be blue chip are now targets for inclusion in our Australian Small Cap Investigator report. More on that later.

You may have heard this story. In 1939 US investor John Templeton bought $100 worth of stock in every New York Stock Exchange listed share that was trading for less than $1. So the story goes, there were 104 companies that he invested in with 37 of them in bankruptcy.

Three years later he was in profit on 100 out of 104.

Unfortunately we don’t have the time or space to do the analysis on every share currently listed on the NYSE. So here’s what we have come up with. After taking into account inflation, 1939’s $1 is now the equivalent of $14.78.

The NYSE now has 3,619 US companies listed, which is double the amount listed on the Australian Stock Exchange (ASX). But it doesn’t include listings of overseas companies - or the thousands more that are traded on the NASDAQ.

So, how many companies are trading on the NYSE for less than USD$14.78? It would be a lot, so we won’t bother counting. But if we look at a narrower range of stocks, say the S&P500 it tells us the following story.

Of the 499 companies in the S&P500, a total of 142 are trading at the inflation adjusted equivalent of less than a Templeton dollar. And they aren’t all Mickey Mouse companies either. There are some big names in the mix: Western Union, Sara Lee, New York Times, Morgan Stanley, Motorola, Mattel and Intel.

To make the equivalent investment to Templeton, an investor today would need to stump up around USD$210,000.

singapore stock market news

Alex — Wed, 12 Nov 2008 09:02:16 +0000

ASL MARINE, dbs maintain BUY with target price $0.84($1)

CAPITALAND, cimb maintain UNDERPERFORM with target price $2.30

CHINA HONGXING, dbs downgrade to HOLD with target price $0.24($0.4)
CHINA HONGXING, nomura maintain BUY with target price $0.47

CHINA ZAINO, cimb maintain OUTPERFORM with target price $0.49($0.95)
CHINA ZAINO, uob maintain BUY with target price $0.53

CSE GLOBAL, dbs maintain BUY with target price $0.85($1.24)

DBS, cimb maintain UNDERPERFORM with target price $11.36
DBS, citi maintain SELL with target price $9.50($12.15)
DBS, cl downgrade to UNDERPERFORM with target price $12($18.90)
DBS, csfb maintain UNDERPERFORM with target price $11.50($11.70)
DBS, db maintain BUY with target price $13.80
DBS, jpm maintain OVERWEIGHT with target price $20
DBS, ms maintain UNDERWEIGHT with target price $10($12.50)
DBS, nom maintain NEUTRAL
DBS, ocbc maintain HOLD with target price $12.70($20.10)
DBS, rbs maintain BUY with target price $14.4($15.30)
DBS, uob maintain BUY with target price $14($13.68)

GALLANT VENTURE, ocbc downgrade to HOLD with target price $0.26

GENTING INT, cimb maintain NEUTRAL with target price $0.45

HONGKONG LAND, cl maintain SELL with target price $1.99
HONGKONG LAND, csfb downgrade to UNDERPERFORM with target price $2.07
($3.38)

JAYA HOLDINGS, cl maintain BUY with target price $1.40
JAYA HOLDINGS, dbs downgrade to HOLD with target price $0.64($2.07)
JAYA HOLDINGS, jpm maintain OVERWEIGHT with target price $1.65

JARDINE C&C, gs maintain NEUTRAL with target price $14(from $16.6)

JIUTIAN, uob upgrade to HOLD with target price $0.05($0.1)

KODA, daiwa maintain SELL with target price $0.165
KODA, ocbc maintain HOLD with target price $0.185

MEIBAN, cimb maintain OUTPERFORM with target price $0.31

MIDAS, csfb maintain OUTPERFORM with target price $0.53($0.55)
MIDAS, dbs maintain BUY with target price $0.6
MIDAS, ocbc maintain BUY with target price $0.65

SEMBCORP INDUSTRIES, cimb maintain OUTPERFORM with target price
$3.31($3.6)
SEMBCORP INDUSTRIES, cl maintain OUTPERFORM with target price $3.60
SEMBCORP INDUSTRIES, csfb maintain OUTPERFORM with target price
$3.85($4)
SEMBCORP INDUSTRIES, daiwa maintain UNDERPERFORM with target price
$2.57
SEMBCORP INDUSTRIES, db maintain BUY with target price $3.55($3.45)
SEMBCORP INDUSTRIES, dbs maintain HOLD with target price $2.74($3.88)
SEMBCORP INDUSTRIES, gs maintain NEUTRAL with target price $3.20
SEMBCORP INDUSTRIES, jpm maintain OVERWEIGHT with target price
$3.50($3.40)
SEMBCORP INDUSTRIES, nom maintain NEUTRAL
SEMBCORP INDUSTRIES, uob remains a HOLD with target price $2.85(from
$4.70)

SEMBCORP MARINE, daiwa maintain UNDERPERFORM with target price $2.25

SIA, cimb maintain NEUTRAL with target price $13
SIA, citi maintain SELL with target price $9
SIA, cl maintain BUY
SIA, csfb maintain OUTPERFORM with target price $14($19)
SIA, db downgrade to SELL from Buy with target price $9.60($15.70)
SIA by gs
SIA, ms maintain EQUAL WEIGHT with target price $12

SINGTEL, dbs maintain FULLY VALUED with target price $2.34

VENTURE, csfb maintain OUTPERFORM with target price $7.13
VENTURE, dbs maintain HOLD with target price $6.80($10)
VENTURE, jpm maintain OVERWEIGHT with target price $10.50($11)
VENTURE, nom maintain NEUTRAL with target price $6.21
VENTURE, ocbc upgrade to BUY with target price $7.36($11.21)
VENTURE, ubs maintain BUY with target price $9

singapore stock market

Alex — Tue, 11 Nov 2008 04:02:08 +0000

singapore stock market ,singapore stock market news,singapore stock market blog ,singapore market

CHINA HONGXING, cimb maintain OUTPERFORM with target price $0.4($0.53)

CHINA TAISAN, daiwa maintain BUY with target price $0.24

FIBRECHEM, dbs downgrade to HOLD with target price $0.28($0.32)

FRASERS COMMERCIAL TRUST, jpm maintain NEUTRAL with target price $0.36
($0.83)

HI-P, csfb maintian OUTPERFORM with target price $0.82
HI-P, nom maintain NEUTRAL

HOUR CLASS, uob downgrade to HOLD with target price $0.54($1.19)

IFS CAPITAL, dmg maintain NEUTRAL with target price $0.43

KEPPEL CORP, csfb maintain NEUTRAL with target price $7.10($7)

KEPPEL LAND, jpm maintain UNDERPERFORM with target price $1.56($3.50)

NOBLE, csfb maintian OUTPERFORM with target price $3.45

OCBC, cimb maintain UNDERPERFORM with target price $5.50
OCBC, citi maintain SELL with target price $4.80($6)
OCBC, cl maintain UNDERPERFORM with target price $5.90($8)
OCBC, csfb maintain NEUTRAL with target price $5($8)
OCBC, db maintian HOLD with target price $5.70
OCBC, dbs maintain HOLD with target price $4.40
OCBC, dmg maintain BUY with target price $6.80
OCBC, jpm maintain NEUTRAL with target price $6.50
OCBC, mac maintain OUTPERFORM With target price $7.56
OCBC, nom maintain NEUTRAL
OCBC, uob maintian HOLD with target price $5.4($5.66)

OLAM, csfb maintain OUTPERFORM with target price $3.65

SEMBCORP MARINE, citi maintain HOLD with target price $2.50($2.85)
SEMBCORP MARINE, csfb maintain NEUTRAL with target price $2.80($2.70)
SEMBCORP MARINE, dbs maintain BUY with target price $2.50($2.26)

SIA, ubs maintain BUY with target price $20

STARHUB, cimb upgrade to NEUTRAL with target price $2.50
STARHUB, citi maintain BUY with target price $2.65
STARHUB, cl maintain OUTPERFORM with target price $2.95
STARHUB, csfb maintian NEUTRAL with target price $2.38
STARHUB, daiwa maintain OUTPERFORM with target price $2.94
STARHUB, db maintain BUY with target price $3.3
STARHUB, dbs maintain FULLY VALUED with target price $2.34
STARHUB, jpm maintain OVERWEIGHT with target price $3($3.50)
STARHUB, ms maintain OVERWEIGHT with target price $3.20
STARHUB, nom maintain NEUTRAL with target price $2.50
STARHUB, ocbc maintain BUY with target price $2.81($3.19)
STARHUB, ubs maintain BUY with target price $2.80($3.10)

UOL, cimb maintain UNDERPERFORM with target price $2.02($2.16)
UOL, cl maintain OUTPERFORM with target price $3.06
UOL, dbs maintain FULLY VALUED with target price $1.90($1.95)
UOL, ocbc maintain BUY with target price $2.88($3.83)

VENTURE, ubs upgrade to BUY with target price $9($11)

B&B - Will it Survive?

Alex — Tue, 11 Nov 2008 03:58:14 +0000

We haven’t mentioned it in a while, but things don’t seem to be getting any better at Babcock & Brown [ASX:BNB]. It has turfed out some - not all - of its old management, and is desperately trying to offload some of its satellite funds.

Or maybe the funds are trying to get rid of B&B. We aren’t completely sure which party is the most desperate.

Now B&B can hear the sound of the death rattle from the ratings agencies. Standard & Poor’s has downgraded the company’s credit rating to ‘BB’ due to the “impact of the financial market dislocation on the pace of asset sales required for BBIPL’s debt reduction plans.”

This morning the B&B share price is down by 26% to just 55 cents. There must now be a serious question about whether it can survive… or whether it will go the same way as Allco Finance and ABC Learning.

China Shows the World How to Stimulate

Alex — Tue, 11 Nov 2008 03:57:03 +0000

China Shows the World How to Stimulate
Australia bails out economy - Bad.

US bails out economy - Bad.

Europe bails out economy - Bad.

China bails out economy - Good.

Well, not quite. For a start, the AU$849 billion ’stimulus package’ proposed by the Chinese sounds like a lot of money. And it is. It is more than the US government is spending on its TARP initiative to bail out the credit market.

But at least the Chinese money might be spent on something useful. The US government is spending nearly the same amount just to buy dodgy debt.

The one thing we don’t know about this package is how much of the USD$586 billion is additional money to what had already been promised.

For instance, back in July US investment firm Merrill Lynch estimated Chinese infrastructure spending to be USD725 billion per year over the next three years. Sure, things have changed a bit since July, but there is no evidence yet that this is entirely new money.

Even so, it is still significant. So if we suppose the USD586 billion is added funds then it will likely take Chinese infrastructure spending to north of USD$1 trillion per year.

The upside is twofold. First it is being spent on things that country needs. Second, if it wants to, China can pay for it in cash, unlike in the US, Europe and now Australia where ’stimulus’ packages will have to come from debt.

And then we have the Australian government version of a stimulus. Give the money to a basket case industry and hope for the best.

The one positive about the hand-out to the three Australian based car manufacturers is that it involves them spending $3 to get $1 of government funding. To be honest, we’re not sure that is likely so the taxpayer’s $6 billion should be safe.

The automotive industry in Australia employs about 60,000 people directly and up to another 200,000 in related industries. It is a big employer. But does it warrant special treatment by the government on this basis alone? We don’t think so.

Our guess is that government’s view vehicle manufacturing the same way as they view national airlines: a ‘badge of honour.’

How Quick Can $22 Million Be Spent?

Alex — Mon, 10 Nov 2008 04:10:54 +0000

How are does $22 million go in the child care industry? Not far if the company involved is ABC Learning. Unfortunately, the company still hasn’t released its most recent financial results so we have to go back to the last statement released in December 2007.

For the year it had total expenses of $1,057,400,000. Those expenses helped the company to generate revenue of $1,106,900,000. After tax ABC Learning achieved a profit of $37 million. In other words a 3% profit margin.

So based on these numbers the company could eat through the government support money within about 10 days. In reality it won’t as we are sure it will still achieve some revenues of its own.

But is there any guarantee that taxpayers will get any of that $22 million back? If so then it will be at the expense of other creditors to the company.

Federal Department of ABC Learning

Alex — Mon, 10 Nov 2008 04:10:21 +0000

Which is more important in the current economic conditions? The government being seen to ‘do something’, or allowing private enterprise to take advantage of market conditions.

Based on the evidence of last Friday it is the former. As you may have read, the federal government is tipping $22 million of taxpayers’ money into a failed private business. To be fair, it isn’t much. It is only a few dollars for each taxpayer.

But there is a bigger problem with it. First, does it represent the beginning of the beginning for government sanctioned bail outs? We’ve seen in the US how once the flood gates are opened, there is no stopping it. Remember the USD$700 billion Troubled Asset Relief Program (TARP) which was supposed to provide liquidity to credit markets? Now it seems as though it will be providing relief to Ford, General Motors and Chrysler as well.

Just as important is the message it sends to other businesses. What about all those successful child care centres out there? Many of them are run on a for-profit basis, and many are run on a not-for-profit basis. Most of them have not gone through with a stock market listing, and they have not put themselves into hock in order to go on a frenetic domestic and international expansion programme.

Instead they have grown their businesses responsibly and have provided a reliable service to the community. Their reward for running a good business? They now face competition from the new government backed ABC Learning Centres. Of course, they had competition from ABC before, but now they are being denied the opportunity to take on new business from ABC centres that would have closed, plus they are being denied the opportunity to potentially buy these centres at bargain basement prices.

The argument from government is that they are helping working families. The reality is that they are helping to save the bacon of a failed business.