Bargain Hunting

As per my usual routine, I went to the stock market looking for a bargain hunt. I found a few that I quite like, mostly for their dividend yield, and potential dividend yield. Sadly, most of them seem to have already moved up too much. Although not much research was put into these counters, but their dividend yield enticed me, even at their current price levels.

What I done today was to scan through SGX for the company’s dividend yield before looking into the share price of the particular counter. After which, I would begin drawing support and resistance lines for the counter to see the levels I would consider purchasing them.

Some of the counters that made into my watchlist today:

  1. Transit Concrete (570)
  2. Super Group (S10)
  3. Religare HTrust (RF1U)
  4. Neratel (N01)
  5. Lee Metal (593)
  6. Hafary (5VS)
  7. Duty Free Intl (5SO)

Most of these counters are still quite some time away from the prices I want to buy them at. Some of these companies have very little volume or bad fundamentals – I have not gone into research. But, I will, when the prices fall enough for me to consider buying them. Thought it’ll be good to share my findings this weekend.

If you’re interested in my opinion of where I put my support levels for any of these counters, feel free to leave a comment on this post and I’ll get back to you!

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24 thoughts on “Bargain Hunting

  1. hi Aloypro what would you think its a good price to enter Neratel? I bought some at 0.78 and prices has dropped a little..thanks regards

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    1. Hi Patricia,

      Thanks for the question! Neratel is currently trading on an uptrend where prices for the past 3 days were on the trendline support. Your first immediate resistance would be the 0.800-0.805 mark.

      The current pattern is an ascending triangle, which is a good sign of further upside should the resistance line be penetrated with high volume. Do watch out for intra-day false penetration because it happens quite often for Neratel. Resistance level as mentioned is quite strong as it has yet to be successfully broken since July 2013 when it first made the high.

      Upside: If the resistance level is broken on strong volume, you’ll see potentially ~20% upside
      Downside: Possibility of seeing it test the 0.68 support

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  2. Hi aloypro,

    I used to have 6/7 of the same counters on my watchlist. Now I only keep tabs on Super, Religare, Neratel and Hafary.

    Lee Metal has a very ugly balance sheet to me. Hupsteel, followed by Nam Lee looks to have a much better balance sheets. Can I ask why Lee Metal?

    I think the wait for Religare might be rather long. From my own observations, it tracks the Indian indices quite closely, so I am waiting for a pullback in the indices to materialize, but it has been on a tear the whole year.

    Super looks like the most likely to be a buy in the near future, care to share your thoughts on that?

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    1. Hi GMGH,
      I took a quick look at Lee Metal’s balance sheet and I agree with you that it looks quite ugly! However, what caught my eye on this counter is its’ dividend yield. In 2014, it paid out 0.035 in dividend, representing a 10.93% dividend yield. Hupsteel and Nam Lee on the other hand, either did not give out dividend (Hupsteel) or had low dividend yield(Nam Lee @ 5.26%) compared to Lee Metal.

      Thanks for sharing your observation on Religare! I absolutely agree that the wait for Religare will be rather long especially due to its’ 35% move since the start of 2014 and still upward trending. At 7.7% dividend yield and at current price levels, the yield would be incredible when prices makes a big correction.

      What caught my eye on Super was the increase in dividend. It paid out 0.071 in 2013 and 0.08 in 2014. Assuming it maintains/increases dividend for 2015, the aid of the decreasing share price will be a big boost to the dividend yield! Super is quite special, it fell 50% from its’ high on August 2013 to it’s current price of 1.13. It’s quite hard to tell at what level should one buy it, but I’ll definitely keep watch for the $1 mark to see if it will be broken. An interesting point to note is that, at current price level, it’s P/B is still 2.731. If I take a multi-year investment view of Super, I’m looking to buy it at the 0.5-0.6 levels instead of current prices because of it’s ongoing downtrend.

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      1. Hi Aloypro, I also have similar counters in watchlist – 5/7 of them.

        For Super, it fell 50% I believe it’s due to its 1-1 bonus issue. If we take dividend of 0.08, the upcoming dividends is like to be in the range of 0.04.

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      2. Correct me if I’m wrong.

        The announcement was made on 24 Feb 2014 and prices were trading at 1.95. From there, prices began gradually trading down. On the date of the bonus issue, 26 May 2014, it closed at 1.145. After which, the prices continued to trend down. Shouldn’t the effect be immediate? Or am I missing something?

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      3. Yes, you are right. The down trend continued even after adjusting for the bonus. I think the triggering catalyst was its poor 2Q earnings. The 0.08 dividend was before the consideration of the bonus i believe. With double the amount of shares floating, I think the yield based on current price is about 3%+

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      4. Hi aloypro,

        Yup, my calcs give me Lee Metal at 10.94%, Nam Lee at 5.26% and Hupsteel at 4.88%. Hupsteel goes ex-div at the end of the month, probably why you missed it out. I think that Lee Metal with dividends pushing 11% is very attractive! Dividend yields seems to be almost an exact function of how much leverage each company has. But I think I will spend some time to look under the hood at these stocks.

        I actually think Religare is quite fairly priced, but a margin of safety would be nice to have. I would dare say that I am looking to eagerly enter at the next stall!

        I also got 8c dividends for Super, which translates to 7.08% yield. I doubt the P/B would ever reach parity since companies like these are rarely valued with the P/B metric. With high PE’s the norm for this stock, a lot of growth is being priced in, but the $1 mark does look like a support that I would be interested in for a nibble.

        Looking forward to more of your posts!

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      5. Ahh yes, that’s probably why I missed out on Hupsteel! Yes, I’ll definitely look deeper into the companies mentioned. Double digit dividend yields are hard to come by, and they typically come along with a catch. I’ll do my research and write about it in my next few posts!

        Religare is looking great and I wish you all the best!

        Regarding Super, if you received the bonus issues, your yield shouldn’t be affected I suppose since now you have double the number of shares while they reduced their dividend down by half as seen in August 2014, where typically the August dividend issue is 0.02. It’s now 0.01 after the bonus issue.

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      6. My bad. Because share price did not drop by 50%, your yield is affected negatively. However, since share price didn’t fall by 50% accordingly, you would have benefited from it. Lower yield but more dividend, without cost.

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    1. Hi Richard,

      There’s no clear support levels for Super, but I’m playing on the safe side at 0.5-0.6 levels where there is a resistance-turned-support level. This is not to say that prices will go all the way down. I think the important thing to do now is to watch for divergence or formation of reversal chart patterns like double bottom or inverse h&s.

      Cheers!

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  3. Hi Aloy

    Why not take this time to research first then when market tanks we can enter on the opportunity? šŸ˜€

    I am vested only on Neratel from you lists above and even so, 6 cents/share dividends are not sustainable. They are above 100% payout ratio and depleting cash if they keep doing that.

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    1. Hi B,

      Great to hear from you again! Yes, I’ll definitely work on this list over the next few posts and begin analysing the companies one by one! I didn’t have any companies in mind to research on prior to this post haha! So I thought it’ll be nice to list them all out and work on them perhaps 1-2/week over the next few weeks. šŸ™‚

      Thanks for sharing! I’ll keep that in mind! It’ll be nice to see the 80c resistance get broken!

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  4. Hi Aloy,
    I’m vested in duty, calculated n it’s undervalued by almost 50%, balance sheet seems strong. Dividend is attractive. Vested at 0.285. Major shareholders like Atlan Holdings Bhd are holding more than 80% ownership, which is the reason for low volume. I feel that there is a chance for privatizing too? The only question is; for Msia company listed in Sg, with the currency devaluation how will it likely to affect the company profit and share price?

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    1. Hi Louis,

      I looked into the DFI’s 2013 annual report and found this part on sensitivity analysis on page 114. As of 2013, 57% of the Group’s purchase is denominated in SGD and USD. Strengthening 3% of USD/RM = RM1.4m damage to DFI’s profit net tax. Strengthening 3% of SGD/RM = RM0.7m damage to DFI’s profit net tax.

      From this, we can see that devaluation of RM will increase their cost. Assuming prices of their goods do not change, then DFI will likely feel the hurt in the profits. Which would affect the share price of the company eventually.

      DFI also have loans denominated in SGD and USD so this will also have a negative impact on DFI’s ability to repay it’s loans.

      Profit will definitely feel the hurt, and share price should feel it too if the company does not do anything about the devaluation of their currency.

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      1. Hi Aloy, Noted with thanks! Hope the management will do something about that like increasing prices and hedge against the fx losses. Actually besides currency issues, I feel that this business will still work well as it’s total debt to equity ratio is 0.154, which is healthy, it’s current ratio is 2.349 which means that it’s cash flow is high but it’s current ratio is 0.211 (slightly low but should be ok) also with their ongoing expansion for instance; Shops at the newly opened Kular Lumpar Airport terminal 2 should help revenue; the winning of contracts. Hmm, what is your take on this counter? Actually I quite like the business.

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      2. Hi Louis, I have not looked properly into the company yet, but I will follow up on it with a review on it in weeks to come! I like it that they have a low debt level but the current ratio is quite worrying. I will definitely look into this counter. Do keep a lookout for my post on it!

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    1. Hi Desmond,

      I have yet to look into Hafary’s dividend policy, but I should be writing up on Hafary in my next few posts in weeks to come! Do keep a look out for it!

      Like

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