27 August 2023
The Pump and Dump sent SembCorp's price down by about 10% from a high of S$6.09 on 7 August to a low of S$5.19 on 23 August. As expected, it tested the support S1 @ S$5.24 and rebounded to close @ S$ 5.39 last Friday 25 August.
This article will examine the reason for the pump and dump action. It will try to find out where SembCorp's price would be heading next.
The 1H2023 Financial Report
SembCorp reported a profit surge of 56.3% in 1H2023. The profit surged mainly because SembCorp saved about S$1.25B due to the higher electricity tariff in Singapore. This better income boosted the operating profit but the revenue was not as good as compared to 1H2022 as shown in this chart from Teleview.
The joy for the boost in profits in 1H2923 was shortlived and apparently, has been offset by a reduction in the current and quick ratio. This "shortfall" in the company's short-term liquidity may be caused by an oversight in the accountant, resulting in the current asset of the company being lower than the current liability.
However, this short-term liquidity problem would not have much financial implication for a big Corporation like SembCorp because most creditors would be willing to extend the debt payment period or change their credit terms if there is a request.
Teleview has also flagged that the Trailing 12-month (TTM) revenue was 3% below the year 2022. Again, this difference is not going to have too much impact on the stock performance as long as SembCorp can show that it has the capability to meet the long-term goals.
Technically
We found SembCorp's price struggling to recover from the recent pump and dump. The price hit the support S1 and rebounded strongly on Friday with a price rise of more than 2%.
By this time, many would have thought that SembCorp's price would be on its way to recovery but the attached chart is telling us not to be too optimistic. This is because:-
a) The price has broken the strong Trendline support T1; it would have to climb back to cross Trendline T1 as the first step of the recovery process; then.
b) The textbook is telling us that the price must recover and go above the 61.8% Fibonacci retracement level to ensure that the stock has fully recovered. The 61.8% Fibonacci price is at S$5.78. This is about +7% of the present price of S$5.39; also.
c) There is still no significant sign of any recovery in the global markets.
Should the price not be able to satisfy the above 2 conditions, we would expect the price to fall back again to test the support S2 and other supports below S1. On its way down, it would test the support at the 100-day moving average.
click to enlarge the chart
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