28 July 2023
For the last 2 trading days, SembCorp’s price has tried hard to recover from its
recent fall caused by the termination of Sembwaste’s divestment plan. The price movement has almost covered up the candlestick
gap created by the last fall except it fell short of S$ 0.01 as shown in this
attached chart.
Going forward, we are expecting SembCorp’s price to range-bounced, testing either the Trendline T1 or Trendline
T2 while waiting for the 1H 2023 results to be announced on 4 August 2023.
Technical Analysis
Technically, SembCorp’s price is trapped in a horizontal symmetrical triangle as shown in the attached chart. SembCorp’s price can either fully recover from the recent fall if the price can break Trendline T1 or continue to fall for lower lows. It can even test the various price support lines until it reaches the price when SembCorp first announces the divestment of Sembwaste. Meantime, we rexpect SembCorp’s price to go sideways until the 1H 2023 result is announced on 4 August.
Why the Candlestick is not fully closed?
The trading on 27 July had almost closed the candlestick gap except for the gap of S$0.01 which is awestrickening to many traders. This is because the filling of a gap is just about 1 or 2 keystrokes away.
The only description that could fit SembCorp's trading pattern is the "Downside Tasuki Gap pattern".
In a Downside Tasuki gap pattern, the Bears will push down the price so strongly to form a candlestick gap on the first day. The Bulls will then try to push the price up the next day, But they failed to cover the gap convincingly. If the subsequent attempts also failed to cover the gap, it would mean that the bulls have likely fleed and the price would continue to fall.
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We are now observing and monitoring if this Downside Tasuki Gap is the right trading pattern for SembCorp and if a good SembCorp's 1H 2023 will negate this downtrend.
26 July 2023
Today, SembCorp’s price dropped to close at S$5.46. This price is near to what we had expected earlier.
The following chart suggested that there is a Support S2 that SembCorp’s price might want to test next. There is also a trendline T2.
Will the price continue to fall?
The price drop today is S$0.20 or 3.36%. Is this price drop done? Has the price drop
taken care of the capital gain for the disposal of SembWaste?
To answer, it would be
good to know what is the “weight” of the disposal deal and how much it will be worth
in turn of stock price.
1) The CGS-CIMB Target Revision
To start off, we noticed Business Times has an article report about CGS-CIMB revising its target after hearing about the SembWaste disposal news on 5 June.
The report said:
a) CGS-CIMB has upped its price target for Sembcorp Industries 3.36% to S$6.20 from S$5.12 following news of the group’s potential divestment of its waste management business, SembWaste;
b) The disposal is estimated to have a divestment gain of S$225 million to S$250 million.
In other words, CGS-CIMB expected SembCorp’s target lifting price to be S$1.08 if SembWaste was disposed of. The divestment would add some S$250 million as capital gain.
2) Converting the Estimated Divestment gain of S$250 million
As the S$250 million is a gain or earning. It must be converted to share value for comparison purposes.
There are presently 1.7 billion SembCorp shares in existence.
This S$250 million will work out to be S$ 0.147 (250 million/1.7 billion) per share. The PE ratio on 5 June was 11.9 Rightly speaking, this S$250 million divestment gain when converted to share price is S$0.147 x 11.9 or S$1.75. This S$1.75 is higher than the CGS-CIMB’s target lifting price of S$1.08.
Therefore, if we were to base on CGS-CIMB’s estimation and if there is correction, we would have to move the final target priceby S$1.08 to S$4.57 as shown in the attached chart. This target price was close to the price at which the divestment of SembWaste was first mooted on 9 May.
Will the Price Ever Recover?
The answer is definitely a yes. This is because there is a big and glaring candlestick gap of about S$0.16 as shown in the following chart. This gap was created with a moderate trading volume. This gap can be considered as a normal gap which will be covered in due time.
When will the Gap be Covered?
This will be everybody’s guess. If the price is to drop further in days to come, we might expect the price to move slowly down testing the various supports. We also expect the gap will not be covered within a week unless there is other good news coming ahead before or after the 1H 2023 result presentation on 4 August
As the candlestick has already tested and bounded from T2, the price might want to make an attempt to cover the gap, failing which it would want to fall back and retest T2 again,
Disclaimer: This article is for information and educational purposes. Readers are advised to conduct their own research and study to make their own investment decisions.
25 July 2023
After the trading hours, SemCorp
announced it would drop the plan to sell its waste management company, Sembwaste.
On
May 9, when Reuter said there were interested
parties to buy Sembwaste, SembCorp's price
went up by 3.1% or S$0.14. It hit an
all-time high. But when
SembCorp came out the next day to clarify that there were no definite deals to sell
SembWaste, the stock price dropped
back immediately as shown in the following picture
However, Straits Times in its news on 10 May added that “the first round of non-binding bids was expected to be early June. This might have given hope to the traders that the discussion would be ongoing, The price continued to climb. So, when SembCorp announced again on 5 June that the sale discussion had begun, SembCorp's price jumped 2.9% to close at S$ 5.34 on that very dayGivenof the above, we are expecting SembCorp's price to drop around 2 – 3 % tomorrow.
Technical Analysis
Technically, we found SembCorp
having great difficulties crossing over the T1 and T2 to make a higher high. The traders might be waiting for the result of the discussion
on SembWaste disposal.
Since the disposal of SembWaste has been terminated, we will expect SembCorp's price to test S1 and maybe S2 too.
Disclaimer: This article is for information and educational purposes. Readers are advised to conduct their own research and study to make their own investment decisions.
8 July 2023
Yesterday, we saw traders continuing to sell SembCorp shares and ignoring JP Morgan’s unsupported assumption about SembCorp's earnings. This event was reported in the 7th July article. Yesterday's price action reflected that the traders were expecting a pathetic market to come ahead rather than worrying about SembCorp's performance.
Yesterday's price dropped to about S$5.12 which
is shown as support S2 in the following chart. The price then recovered more than 2/3
of the morning drop and closed at S$5.31, just managed to recover the support at S1. This S$5.31 is 1.3% or 7 cents below yesterday’s closing price of S$5.38.
Because the price support at S$ 5.38 had been broken, SembCorp's market sentiment has now changed from bullish looking to slightly bearish looking. This is because the price is now closer to the trendline T1 as shown in the following chart.
If this trendline T1 support is to break for some reason, we would expect SembCorp to find lower lows, testing S3 and S4 before going down further.
On the other hand, we noted the strong recovery of Friday's price movement after hitting the TI trendline. It could be due to traders wanting and preparing to account for the hefty drop on 6th July caused by the unsupported assumption made by JP Morgan to set its target price.
Going forward, we hope the support S1 would hold. If SembCorp can break the resistance R1, we should see SembCorp attempting to make higher highs.
6 July 2023
SembCorp's price has broken the rising channel as described earlier on 4 July. The price fell 4.95% from yesterday's S$5.66 to S$5.39 or a total loss of S$0.28 in today's trade.
What had Happened?
The price took a tumble today because JP
Morgan Singapore has set a target price of S4.50. JP Morgan said that SembCorp:
a) Is trading at 11 times its
EBITDA;
b) Singapore's electricity tariff
has peaked.
It claimed that Conventional power generation had contributed
about 85% of SembCorp’s earnings, JP
Morgan was convinced that SembCorp’s earnings would be significantly affected when Singapore
revised the electricity tariff downwards. It has also been said that SembCorp’s price has risen more than 70% this year but it added that inclusion
as a component in MSCI Singapore is a positive catalyst.
The attached was an extract from Sharejunction as the original JP Morgan report could not be located by googling
For the trading day, SembCorp’s price dropped sharply after the opening. It reached a low of S$5.30 momentarily just before noon and recovered to close at S$5.38 as shown in the attached.
About SembCorp’s Power Generation Portfolio
It is true that SembCorp’s income from Conventional Power
generation like the Co-generation plant in Sakra, Singapore, is contributing roughly about 85 % of Sembcorp’s earnings. The breakdown is as shown
in this picture extracted from SembCorp’s annual report 2022.
But SembCorp has under its management a total generating capacity of about 12,600 MW, of which 2,600 MW are renewable energy plants according to this Wikipedia. For the remaining 10,000 MW of conventional energy plants, SembCorp only has only two gas-fired cogeneration facilities (totaling 1,219 MW) in Jurong Island. Singapore.
In other words, the conventional energy plant in Sakra is contributing to a small part of SembCorp’s earnings in 2022. Therefore, JP Morgan’s reasoning about SembCorp’s earnings would be greatly affected when Singapore revises the electricity tariff cannot be entirely supported.
Technical Analysis
The
following chart shows that SembCorp’s price has broken the resistance
@ S$5.38. This resistance has now turned into support for tomorrow’s trading
session. Therefore, if SembCorp’s price can stay above this S$5.38 support S1 from now on, there is a good chance for SembCorp to scale higher high and make an attempt to cover the candlestick gap G1.
4 July 2023
SembCorp Industries Pte Ltd (SCI) is one of the favorite hot stocks on the SGX Stock Exchange. It has almost doubled its price since the end of 2022, just before China reversed and ended its "Zero Covid policy.
Today, it has nearly recovered all its previous shines and it is poised to make an all-time high price as shown in this monthly chart
The Recent Price Movement
SCI is technically bullish except for the recent fall caused by EMA's announcement about the Temporary Capacity Cap (TCP) on 19 June 2023. As most investors are not familiar with TCP, they sold their holdings probably on "Sell now ask later" mode to protect their capital. This caused SCI to lose a total of about S$0.52 or about 9% on 20 June 2023. When they realized on the next trading day that TCP did not have any material impact on SCI's operation, the price gradually recovered from S$5.15 to today's S$5.69-S$5.72.
Technical Analysis
The SCI's hourly Technical Chart is shown as follows.
The chart shows that the SCI price has been trapped in an up-rising channel. It has just broken the resistance S1 which has now turned to become the support. SCI will likely stay within the price channel until it breaks R1. As long as SCI's price can stay above the lower trend line (shown in red) and above the support S1, there is a good chance for SCI to break R1 and seek higher highs.
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