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Top Trading Ideas For The Week
Tradeable, Tradeable Ideas | 20 August 2014
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By: Tradeable
Articles (256)

Global markets seem to have improved as concern about geopolitics seemed to have ebbed. This could have been helped with the entry of the US in a limited combat role in the Iraqi conflict. Elsewhere, the Isreali-Gaza, and Ukrainian conflicts also seemed to have been tuned down a notch as negotiations continue on all sides.

That said, monetary policy could come into focus again as central bankers around the world converge at Jackson Hole. Minutes of the US Fed’s meeting will also be closely watched. Amidst such a backdrop, we look at three of the top read ideas that were posted on Tradeable during the past week and give our own two cents (without GST).

1. Bumitama Agri – A Long Term Value Buy

  1. Bumitama Agri recently announced 2Q14 results which beat expectations of the market. Revenue grew 90 percent while core net profit grew 131 percent.
  2. Bumitama’s management maintained its growth guidance for fresh fruit bunches despite the exceptionally good harvest. This could be a good sign of prudence on the part of the company.
  3. The company continues to present a long-term value proposition owing largely to its young tree profile.

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What we think: Bumitama Agri appears to be having a field day with analysts as its recent exceptional financial performance surprised many. While we agree with the analysts at Maybank Kim Eng that the Bumitama’s young tree profile is a positive note, we are not so bullish about the palm oil industry.

Although crude palm oil prices may have enjoyed a slight improvement in 1H14, we can see in the graph below that prices have since fallen back to pre-2014 levels. Historically, we also note that crude palm oil prices are quite volatile and can affect counters exposed to them rather adversely.

Source: Index Mundi, chart on CPO futures end of day settlement price

2. Long CDL As A Value Play

  1. Forward profits from top selling Coco Palms and Commonwealth Towers have already been locked in for future quarters.
  2. In spite of the above, CDL still managed to book 89.7 percent gains in core earnings in its 2Q14 financial report.
  3. CDL’s hotel operations (M&C Group) have been growing steadily. CDL could ultimately be more reliant on its hotel operations as cooling property measures start to bite.

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What we think: Property stocks have not been enjoying much good press lately as the government moved to rein in soaring prices. While it is true that in Singapore, land is always going to be held to a premium, the days of past riches should be gone by now. It is no wonder that about 35 percent of analysts think that City Development is not exactly a stock you would want to hold for now.

Source: FactSet, analysts' calls on CDL

3. Attractive Gains As Ying Li Hits Support

  1. Ying Li marked a return to profits in 1H14 as its revenue grew by more than two fold.
  2. The company boasts relatively undemanding valuations with its PE, PB and PSR ratios all below industry and sector levels.
  3. From its chart, Ying Li appears to have hit a strong support level at $0.24 and could be poised for a rebound.

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What we think: The S-chip appears to be doing relatively well in terms of its turnaround in its financial report card. However, investors might want to know that the company is on schedule to issue additional shares (381 million shares at $0.26 apiece) as well as convertible debt securities (worth $185 million).

The issuance of these instruments could work both ways for the company. For one, it could help increase liquidity of the stock but at the same time, dilute existing holdings of the stock.

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Bumitama Agri  0.565 -- --   
Business: Co produces and trades in crude palm oil (CPO), palm kernel (PK), and related products for refineries in Indonesia.

Insight: Feb-19, FY18 revenue increased 3.1% mainly due to ... Read More
City Developments  9.730 -0.12 -1.22%   
Business: Co is an international property & hotel conglomerate. [FY18 Turnover] Property development (48.4%), hotel operations (39.8%), rental properties (8.5%), others (3.3%).

Insight: May-19, 1Q19 decreased 29.5% to $746.2m compared t... Read More
Ying Li Int'l Real Estate  -- -- --   
Business: Property developer based in Chongqing. [FY18 Turnover] Property development (74.6%), property investment (25.4%).

Insight: May-19, 1Q19 revenue fell 53.8% to Rmb143m attribu... 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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