Oct[3] - G Invacom (Potential Turnaround)

COUNTER: Global Invacom Group Limited

OVERVIEW:
Listed on SGX (2012) and AIM market of London Stock Exchange (2014), the group is a designer and manufacturer of fully integrated satellite communications ground equipment ("SGE"). It is one of seven companies worldwide involved in R&D, design and supply of Sat Comms products to large-scale satellite broadcasters. Having 30 years track record in pioneering new products, it has now 58 patent applications and 63 granted patents.

HIGHLIGHTS:
[1] Due to technology changes in satellite sector and one-off expenses from acquisition (Skyware Global, US manufacturer), its FY2015 saw net loss of USD1.1m. In latest quarter result, 2Q16 saw revenue contribution ~USD11.3m from the new acquisition. It significantly improved the group's revenue with net gain in profit.

[2] Its R&D activity is mainly in UK, manufacturing in Asia, and clients are from US. Sales are predominantly transacted in USD.

[3] Its borrowing USD5.6m shall be settled by cash this year. No more borrowing to fulfill thereafter.

INVESTMENT THEMES:
[1] Current valuation: Book value - USD0.20 || Earning per share (2Q16) - USD0.0008
      Latest shares price ~ 0.158 translates to deep discount into book value.

[2] To address with new technical changes which caused de-stocking among existing clients (impact to loss of FY2015), the group has completed its research and development for new solution. Pending for qualification approval, management indicated confidence to improve sales and access wider customer base.

[3] The group has secured new orders from major telecommunications service providers and suppliers in US and Indonesia. a leading US broadcaster will launch two satellites later this year. All these factors could contribute to exciting FY2016.

PRICE TREND:
Accumulation activities were spotted during last April and June. Price broke up from 0.124 with significant volume on early July. Strong support at 0.144 afterwards. Accumulation activities are still undergoing as highlighted in below chart. Interestingly, recent mid-small cap counters rally were mostly seen with similar price volume movement. It would be hard to exempt the counter from expectation of second breakup.

Oct[2] - Market Updates

Crude Oil:
Following OPEC announced willingness to have production cut from last week meeting. Market is awaiting further details from OPEC meeting on November. As interest rate hike is seeing slim chance till year end, Oil movement could determine market direction on the month. Price surged >7% last week. It is hitting a downward resistance ~ USD48. Shall this be broken, next ceiling would be USD50. US election could be another major factor affecting market sentiment.

  
Market Calendar on coming week:
(SG: Singapore; CH: China; UK: United Kingdom; US: USA)

Oct[1] - SGX (Cash Generator)

COUNTER: Singapore Exchange Limited

OVERVIEW:
The counter operates an integrated securities exchange and derivatives exchange in Singapore and related clearing houses. It provides listing (IPO), trading, clearing, depository, market data, etc. Security products includes stocks, business trust, REIT, ETF, notes, etc. Derivative products comprise of foreign exchange and interest rate products, commodities, forwards contracts, etc.

ANALYSIS:

[1] Although profit margin has been sliding, the counter delivered stable earning result over past five years. Return of Equity maintained at average 36%.

[2] Its share price movement has been closely tracking STI index before 2015. While index fell to five years bottom range, the counter managed to maintain at middle range since 2015. Its diversified product range contributed to such stability.

[3] With acceptance among shareholders of Baltic Exchange, the acquisition is pending for approval from UK authority. Baltic Exchange owns benchmark indexes for global shipping rate and provides trading platform for freight derivatives market. A successful acquisition would enhance SGX's products and services, including futures trading and thus boost earnings going forward.

[4] Impending commencement of Shenzhen-Hong Kong Stock Connect could help raise trading volume in China A50 Index Futures.

[5] Management aims to distribute 80% of earning or 0.2 per shares as annual dividend, whichever is higher. Investor could expect annual dividend at 0.28 per share.

PRICE vs YIELD CHART:
Generally, the counter price moves in channel from 7.3 to 7.7 when there is not much unexpected turbulence. STI has been quiet ever since crude oil rebounded from 16 year bottom last Feb. It showed its resilience in few panic moment, such as Brexit, FOMC, etc. Blue chip counters were seen stagnant, but mid to small counters were experiencing huge surge in buying interest since 2Q16. Considering such market condition, it is expected SGX shall maintain current earning, thus current price (3.8% dividend) presents opportunity to accumulation. A defensive play while waiting market to change bullish.

*** Note: Same counter has been mentioned in Jun[6] 2016 ***

Chart[25] - SingMedical

Accumulation activities seems continuing on the counter. Last trading day saw price up 8% with significant volume. Current price is consolidating within 0.3 to 0.34. It would be interesting to see whether buyer could pull it from the narrow zone for next record high over past five years.

*** Note: Same counter has been mentioned in Chart[24] @ 2016 ***

Sep[8] - Market Updates

Crude Oil:
Oil price has been bouncing within a descending triangle over past one month as below. Opec members shall meet non Opec member, Russia on 28 Sep. The decision from meeting might decide which direction shall price break out from the consolidation zone.

Singapore:
Market generally cheered with dovish stance from US Federal Reserve. STI moved up on last week, but capped with down sliding resistance line. Price shall break up 2900 to show some up moving strength.

Market Calendar on coming week:
(SG: Singapore; CH: China; UK: United Kingdom; US: USA)

Sep[7] - Tianjin ZX USD (Attractive Discount)

COUNTER: Tianjin Zhong Xin Pharmaceutical Group Corporation Limited

OVERVIEW:
The company produces and sells traditional Chinese medicines (TCM, which is its core business), western medicines and healthcare products primarily in China. It has a complete industrial chain, product chain around its core business. Some of its units which engage in chemical drug, bio-medicine are operated jointly with world famous pharmaceutical giants like GlaxoSmithKline.

With its product variety, 4 have been honored as National Treasure like creation; 10 are stated protected Chinese medicines, 67 listed in National Basic Medicine Catalog, 267 are available in national medicine insurance service system. It has one state-level enterprise technology center, five municipality-level enterprise technology engineering center on China. It was listed in SGX on 1997 and on Shanghai Exchange on 2001.

HIGHLIGHTS:
[1] Its latest result registered 1H2016 revenue and profit at RMB3.2b and RMB288m, which maintained year on year. Its income has been very stable over past 4 years.

[2] On April 2016, HK Department of Heath announced that one batch of TCM tablets from the counter containing traces of Western drug which is not listed in its authorized prescription. Relevant product was recalled from HK and production ceased thereafter. Investigation ended on June, the factory has resumed and relevant certifications was reinstated.

[3] It's in net cash position, since cash on hold can fully meet debts.

INVESTMENT THEMES:
[1] Current S-shares (listed in SG) valuation:
Book value - USD0.79 || Earning per share (1H2016) - USD0.051 || Dividend (2016) - SGD0.031
At shares price USD0.75, it translates to P/B ~ 0.95, P/E ~ 7.5, Dividend yield ~ 3%

[2] Its A-shares price (listed in Shanghai) is generally valued at P/B > 3, PE > 20.
By comparison, its shares price in SG looks over-discounted. Considering recent de-listing activities in domestic market, it would be hard not to speculate when the counter becomes next candidate.

[3] The counter shares is denominated in USD. Recent exchange rate of USD-SGD hovers at its one year bottom. The falling of exchange rate coincided with price weakening moment of the cash rich counter. The timing looks just perfect.

PRICE TREND:
The counter's S-shares actually rebounded from its three years support ~ USD0.73.

It's A-shares price movement as below. Difference price trend shown.

Sep[6] - Market Updates

US:
After two months of deep sleep, Dow Jones woke up with emerging selling pressure. Ahead of FOMC meeting on coming week, it swung drastically in 400 points. Rate hike used to be time bomb to securities market. Immediate support ~ 18022. Local market is expected to react accordingly as well.

Crude Oil:
Besides rate hike worries, weakening oil price is another factor which pressurizes market. Immediate support ~ USD43, followed by USD40.

Market Calendar on coming week:
(SG: Singapore; CH: China; UK: United Kingdom; US: USA)