Monday, July 09, 2007

STI + 64 pts...choffshore breakout

Really surprised to see STI cheong up so much today! It rose up 1.82%, up 64 points to close at 3626, only 24 points away from all time high. I really hope to see STI rise up above 3650, the next resistance level, so as to invalidate the head and shoulders formation.

Isn't it a coincidence that I just talked about CHoffshore, and today it went up? Not really. If you believe in the power of ascending triangle breakout, you'll believe this and many others which had broken out before (e.g yongnam, csc, swiber among others). The breakout level is at 0.81, and today it closed at 0.815 (intraday high of 0.82) with double the average volume. It would be nice to see the price go up a little more and then go back to test the breakout line (which is now the support level). That would be the best chance to enter this stock again.

The breakout can be attributed to the announcement CHoffshore made today. They disposed their 1983 build 4800 hp vessel for US$3.25 million when the net book value of the vessel is only at US$0.13 million. From this transaction, they made a gain of around 3.05 US million, which will contribute to their fundamentals in 2 ways.

First, as the ship is quite old, and thus unlikely to charter out on a long term basis, this disposal of the asset would mean they will not have to incur expenses to maintain it. Secondly, and more importantly, this disposal will realise an immediate gain of approximately 23 times the net book value of the vessel. This will contribute straight to the income of the company.

From moderate168 (cna forum user), the company still have 7 vessels build before 1984 that the company wishes to dispose of by 2009. Since these older vessels had been fully depreciated (some have book value of 300k only), and the market value of such 2nd hand vessels (at around the same age) is worth US$1.5 million to US$4.5 million (depending on the horsepower hp), they should make a rather huge exceptional gain over the next 2 years till 2009.

A rough estimate of 3 million per vessel for a total of 7 vessel would mean an exceptional gain of US$21 million over the next 2 years. Remember, we haven't even counted the profit from their other business.

I believe this is a good stock to hold at least for the next 2 years. This financial year looks set to be more than the last financial year results already. Their 4Q results should be out around end of July, so stay tuned. Target price set earlier by a broker house (can't remember which) is $0.85.

Swiber went up a lot today, broke all time high of 2.96 to close at $3 (intraday high of 3.08). Once $3 is reached, the bid jumps to 0.020, so the rise/fall would be even faster than before. Swissco, sister company, also went up to break record high. Swiber really is powerful. I hope it is the next cosco to power up.

I decided to sell of my yellow page. From now on, everyday I'll queue at 1.40 to sell off my yellow page. Not point keeping it anymore, might as well use the locked capital to invest in other stocks. Can yield better returns than the dividend that yellow page gives. Anyway, I don't believe in their business, so no point holding the stock. If I sell at 1.4, I'll make a loss of around $320, but it's okay.

Dow +20, europe mostly green. With earnings season coming, I don't think dow or sti would do too badly. It's after earnings season and the traditionally weaker aug-oct period that I'm worried. Anyway, walk one step, calculate one step, no need to be unduly worried or excessively happy.