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Top 3 Tradeable Ideas For The Week
Tradeable, Tradeable Ideas | 13 August 2014
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By: Tradeable
Articles (256)

Geopolitics remained the key focus for world markets over the past week. Both Iraq and Ukraine offered flash points as investors scurried to and fro equity markets. Both the American and Singapore markets seem to have hit an invisible ceiling and have refused to move further north.

While some analysts are predicting a near-term correction, as usual, we here at Tradeable struggle to find reasons for a complete collapse. Barring such a complete collapse (choi! touch wood), we reckon that volatility could be a trader’s best friend.

We look at three of the top read ideas that were posted on Tradeable and give our own two cents (without GST).

1. Nam Cheong’s Low Valuations A Cause For Further Bullishness

  1. Since the beginning of 2014, Nam Cheong has been able to win contracts for about 13 vessels. This represents a strong winning streak for the company.
  2. Nam Cheong could be poised to be a key beneficiary as Malaysia’s Petronas pushes forward capital expenditure plans.
  3. The company has a forward FY15E PE of about 8x. This is compared to its closest competitor, Coastal Contracts’s 12.5x.

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What we think: Nam Cheong appears to be one of those oil and gas growth stories. But as with so many others (Vard, Ezion to name but two), there is a danger that the company does not live up to expectations. Granted, the above reasons mentioned by the author appear to be very legit. However, we note that analysts seem to have been fairly slow to upgrade the counter’s TP as can be seen in the graph below.

Source: FactSet, chart on analysts' estimates of Nam Cheong's share price

We also want to point out the fact that Nam Cheong is considered a “speculative” ship builder. In that, the company estimates how many ships it can sell, arrange to build them first, and then sell them as best they can. So far the formula has been working, and well, true, the advantages of such a model (ability to deliver vessels in a tight schedule) is founded. But will it be able to sustain such a business model?

2. IREIT Global IPO: Another Good Choice For Long Term Holding

  1. Joint underwriters, DBS and Barclays are top banks and their underwriting provides additional confidence in the listing.
  2. Manager’s fees are based on performance (usually based on assets under management), this ensures that the managers act for the interest of the trust’s shareholders.
  3. Investors will be paying a slight premium over the trust’s NAV per share.

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What we think: IREIT looks to be an interesting way for Singaporeans who are looking to diversify their REIT holdings beyond Singapore’s shores. Do note that Singapore’s office space have been rather topsy turvy of late. With this new listing of a REIT with German assets, Singaporean dividend-oriented investors could lap it all up.

Also a point to note, the office S-REIT’s average forward yield is about 6 percent. This is opposed to the 8 percent forward yield offered by IREIT at its listing price.

3. OCBC poised for more upside

  1. OCBC broke its previous resistance of $9.80.
  2. The local banking giant has since crossed the $10 mark. This despite the STI retracing some of its gains in the past few days.
  3. The next resistance level appears to be the $10.50 region. Traders should note that this will hold if OCBC continues to trade above $9.80

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What we think: Both DBS and OCBC have been performing relatively well in the advent of their fairly good financial results this earnings season. However, analysts have been quick to point out that the increasing cost of deposits (the paltry banks pay for deposits) could ultimately hurt bottom lines. This can be seen quite readily from the chart below reflecting updates by analysts post-results announcement.

Source: FactSet, chart on analysts' estimates of OCBC's share price

That being said, OCBC’s dividend payouts are still relatively attractive in the absolute sense. The yield however, not so much.

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Nam Cheong  -- -- --   
Business: An offshore marine group specialising in the building of offshore support vessels. [FY18 Turnover] Shipbuilding (59.2%), vessel chartering (40.8%).

Insight: May-19, 1Q19 revenue jumped multiple times to RM29... Read More
Oversea-Chinese Banking Corp  10.740 +0.09 +0.85%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More

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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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