SembCorp Testing the Support S1

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

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.

Other Articles about SembCorp

Is SembCorp Suffering from a Pump and Dump?

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Where Keppel's Price Would be Heading Next?

 

20 July 2023

Keppel's price climbed from S$4.50 in February 2023  to an all-time high of  S$7.40 in August.  This is a price rise of about 65% in the last 6 months.   It is quite a price jump.

We are now beginning to witness Keppel starting to do a serious correction.  This is because Keppel’s price chart:

a)   has not only broken the supporting trendline T2, it has also broken the 50-day moving average;

b)   has it's the Bollinger band started to expand;

lastly,  we are beginning to see the global market prices doing their corrections.  The US market was down lately, and one US analyst expected the US market to correct as much as 10%.   We are also beginning to see the Chinese Economy losing its steam in the 2^nd quarter of 2023.

(Note that we have been using the newer charting tool because the chart from investing.com has not been price adjusted for the distribution in specie (DIS) of SembCorp Marine shares in February 2023) 

When was the last Serious Correction?

The last serious correction happened in 2022.  That was when China's economy was badly affected by the zero Covid policy. Then there were protests going on in many cities against the Chinese Government.  

Reuter has this news report that China's 2022 economic growth was one of the worst on record.   

During that difficult period,  we have seen Keppel’s prices not only breaking the 50-day moving average but also touching the 200-day on 2 occasions (marked as Pt1 and Pt2 in the following chart).

But the news that China was about to end the zero Covid policy and open its doors towards the end of December 2022 lifted the market sentiment.   This has not only stopped Keppel’s prices from sliding further but also seen a 20% price jump in February 2023.  Since then,  Keppel's prices changed their track.  This is because the Chinese Economy was predicted by the official news to recover and run much faster in the post-Covid period  

 

Where would the Price be going? 

Moving forward,  we expect Keppel’s price to test S1 @ S$6.45.  This is also where the 100-day moving average is located.  It might want to test S2 @ S$ 6.25 if the global market condition has not improved.

For the moment, we expect Keppel’s price will leave the 200-day moving average alone,  not until the global market has turned for the worst.  This is because the Distribution in species (DIS) of Keppel Reit announced recently will resist the falls. 

 

When will be the right time to re-enter the market?

The technical book is advising us to wait until :

a)  the MACD and its signal line have completely closed up and started its upward climb just like those good days before,  plus,  most importantly; 

b)  the MACD's climb must be supported by a rising Chaikin Money flow to show that smart money is flowing into the market.

Presently,  the Keppel’s MACD and its signal line have a tendency of widening which could mean the fall might be extended;  also,  the falling of the Chaikin Money flow is supporting such a move.

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

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a)  Singapore Stock:  Keppel Corporation Limited (SGX: BN4)

Is SembCorp Suffering from a Pump and Dump?

15 August 2023

SembCorp’s price rose about 8.8% from S$5.60 to S$6.09 in one single bounce on 7 August, breaking not only the symmetrical triangle but also making the All-Time-High price that many were hoping for.   Some traders attributed this price jump to the good 1H 2023 report that SembCorp just presented on 4 August.   Unfortunately, the price leaps and bounces turned out to be nothing but a “pump and dump” like exercise.  

What is a Pump and Dump?

It is a technique usually used by some rogue traders who want to make more money by pumping up the price of a stock and then dumping the stock they were holding at inflated prices.  As a result,  the price of the stock will go back down or even go below where the pumping of the stock started. 

Isn’t the Pump and Dump Scheme Illegal?

There are rules about the pump and dump scheme and the Authority has been warning people about such scheme being used.  For example,  SGX RegCo has warned about some illegal pump and dump schemes being spread in the Telegram Chat Group.

However, the “Pump and Dump” technique has never died.  It has been used all the time, and even on stocks such as Gamestop.   The use of such a technique is more prevalent in penny stocks where Corporate information is not always available.

Is this SembCorp’s Pump and Dump Case Illegal?

Most  Rule books are actually more referring to pump-and-dump schemes that manipulated the market and not the pump-and-dump technique used by rogue traders to earn some quick bucks.   There is nothing illegal about using the pump-and-dump technique if there is no evidence of market manipulation. 

A good example is GameStop Corp's pump and dump case.   Gamestop has a US$6.0 billion market cap today.  It was reported that an investor boosted the price of Gamestop from US$ 20 to US$483 in 2021.  The price fell soon after by 90% to US$53 in a few days.  Many traders lost their pants.  Federal Authorities were reported to have investigated but there were no results reported.  There was even a Congressional Hearing and some law sues. Those interested in the case can refer to this Wikipedia report.

  

In the case of SembCorp,  there were no reports so far about any market manipulation on the pump and dump exercise.  The trader(s) who pumped and dumped could be making use of the excellent news report of  SembCorp’s 1H 2023 result to carry out their work.   As the information is publicly available,   there is nothing illegal about using such information. 

More About SembCorp’s 1H2023 result

SembCorp announced a profit surge of 56.3% for its first-half 2023 report on 4 August 2023.  It was also reported that The most significant profit contributor to the surge is the conventional energy business.

From SembCorp's financial report,  we can extract the following 2 pictures.

Picture 1:  The balance sheet 

Picture 2:   The Income and Expense Report 

SembCorp's net profit was mainly from the lower gas costs.  There was a saving of about S$763 million YOY.  This amount is more than enough to cover the profit gained.  The higher cost of sale on HOH was 12.1% was seasonal.  Singapore weather is always colder toward the end of the year.

Hence,  if traders were observant and had studied SembCorp carefully,  they would have avoided this recent pump-and-dump exercise.

 

Technical Analysis

Technically,  we are seeing SembCorp’s price resting on the trendline T1 which has now turned into a support after the price has broken up on 7 August.  

We are expecting the price to make a rebound from the support although the picture may be a bit “shaky”.  This is because the price uptrend is still intact with MACD and Chaikin Money Flow in the positive region.  The exception is that the price has broken the 15-day moving average as shown in the following chart, 

Maybe if the global market condition is good,  SembCorp's price can rebounce from Trendline T1.  However,  the global market is not looking good at the moment.  It is about to do a serious correction.   

Should SembCorp's price decides to break the support T1,  we might expect it to test trendline  T2 and maybe even the supports, S1 and S2.

 

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.

Other Articles about SembCorp

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Is the US Market Rally over?

25 August 2023

This US market correction started around the 1st of August and has been going on for over 3 weeks.  In between,  it has rallied when some major stocks reported better-than-expected earnings.     

For example, the DOW jumped over 1% on 6 August when Berkshire Hathaway Inc. posted record earning results,  beating the estimates.  Again on 23 August, the Nasdaq jumped over 1% when NVIDIA posted its record-breaking earnings and the DOW went up by about 0.5%.    

Unfortunately,  the rally lost its steam the next day after DOW and other US bourses shed their gain.   Nasdaq lost about 2% and S&P and DOW over 1%,  wiping out their gains for the week. 

All-in-all,  DOW has lost a total of about 4.5% from its peak around 1st August. 

Where DOW would be heading?

In the last article on 5 August 2023,  we spotted that DOW has 3 candlestick gaps to cover.   There is also a supporting Trendline T1.  If this Trendline T1 is broken,  DOW will want to go lower.  On its way down,   those candlestick gaps will be covered if the supports S2 @  33,718 or thereabout failed to hold the price slides.

Let's look at the picture of DOW today

 Click picture to enlarge

In this new chart,  we are introducing 4 technical indicators to chart our direction.  These are

a) The Bollinger Band indicator;

b) The 20-day,  50-day,  100-day and 200-day moving average indicators;

c)  The MACD momentum indicator,  and

d)  The Chaikin Money Flow indicator

From the chart,   we saw readily that 

a)  DOW's Candlestick G1 was covered on Tuesday;

b)  DOW has broken the 20-day and 50-day moving average and now resting at the 100-day moving average;

c)  The Bollinger band is still expanding, and 

d)  There were no signs that the MACD had begun to pick and the money was flowing into the market.

With such conditions prevailing,  we are expecting that 

a)  DOW will continue to slide and test Trendline T1 today or next week;

b)  The bulls will put up a fight,  trying to recover lost ground and preventing DOW from testing the Trendline T1.  

c)  DOW to test the support  S2 @ 33,716 If T1 cannot hold the sliding;  

d)  Dow will proceed to cover up the candlestick gap G3 if S2 cannot hold the price slide.  

By then,  DOW would have shed by about 8% from its peak on 1st August 2023.  

5 August 2023

The US market has had a good time for the past 10 months since October 2022 when DOW hit the bottom @ 28,700.   Since then,  the US market has rallied up 18%.  Today,  it is at around 35,000 which is just a few stone's throw away from the all-time high of 36,990 in 2022.    

Now many traders noted that the US market has started to soften, significantly after Fitch downgraded the US Credit rating from AAA to AA+ on  Tue 01 Aug 2023.  They were wondering if this was the end of the rally or if it was just another correction.

 

US Credit Rating Downgrade- A Non-Event

On 24 May 2023, Fitch placed the United States 'AAA' Rating (IDR) on Rating Watch Negative.   This was mainly because the US Treasury said it would run out of money by 1 June 2023.   At that time, Fitch already had a ‘AAA” rating on the U.S. country ceiling.  It said that the US rating would still remain at 'AAA' even when there was a debt default.   However,  Fitch had some negative comments about the high and rising US Debt burden. 

On the other hand,   Analysts at Singapore’s DBS were dead sure that Fitch’s downgrade on the US’s rating was a non-event for the equity market.  They wereprettye sure that the equity market,  going ahead, would be driven by the Corporate earnings, and the prevailing macro conditions.

Wasn’t there a Downgrade in 2011 sending Stocks Tumbling 7%?

There was a similar downgrade in August 2011. That time,  it was S&P who degraded the US's credit rating.   That downgrade caused the S&P500 to lose 7% on a Monday,  8 August  2011,  which was popularly known to be the “Black Monday” in the history of the stock market.   Then there was a debt ceiling crisis during the era of President Barack Obama.  However, the US Government official pointed out that S&P had made an error of USD 2 Trillion error in its calculation.   As a result,  many Analysts were of the view that this S&P downgrade was more or less politically motivated.  

 

Why This Time is Different?

Anyway,  the situation is very different today.  We can see from the following 2 Fred charts that: 

a)   The market liquidity is much better off today as compared to those days in 2011.  Then  the US was just started to introduce QE. They were careful doing it and the liquiditiy run out soon after;

 

b)   The present National Financial Condition has improved and started to ease after the market recovered in October 2022.  Unlike those days in 2011,  the financial condition then was rising at a very fast rate,  just like those days before the 2008 market crash. 

Also,  many traders in 2011 didn’t quite understand the power of Quantitative Easing (QE).  They tended to panic quickly, especially when they had had a wrong time just two years ago. 

The recent Fitch downgrade of the US rating to "AAA" was already speculated in May 2023.  Fitch was just confirming it on 1 August.  Also,  the damages done by the 2011 downgrade were recovered within a week.

Given the above,  we tend to agree with the Analysts in DBS that this Fitch downgrade on the US credit rating is not likely to have a serious impact on the equity market.

 

Technical Analysis

On the technical front,  we are seeing DOW testing the support S1 at 35,100 in the weekly chart.    If this support S1 is bleached,  DOW would want to test the support at trendline T1.  The other support S2 and S3 are shown in the following chart. 

Here is another picture of the technical chart in a daily plot.

 

 Candlestick Gaps

We found 3 candlestick gaps when DOW was making its way up the “ladder”.  These are namely,  G1,  G2, and G3 respectively in the following chart.

We expect these gaps would be filled when DOW were to break below trendline T1.  They are just ordinary gaps.   This is provided the key support S2 cannot hold the price slides.

 

When will the market recover?

We can’t read directly from the DOW’s chart when will the market recover from the present falls but we found both the S&P500 and Nasdaq had already broken their Trendline T1 as shown in the following chart.   This was about a week ago.

From the S&P chart,  we are expecting the price to test the support S1 @ 4,340 which is just a stone's throw away.  It would be the time when DOW is about to test its trendline T1.   We would expect DOW to fill up gaps G1 and might be G2 on its way down.

 

 

SembCorp Announced Profit Surge of 56% for First-Half 2023

 4 August 2023

SembCorp announced a profit surge of 56.3% for its first-half 2023 report.  However,  the market was not excited by this good profit news.  It opened today at a price of S$5.60 and went up as high as S$5.62, which is only 2 Singapore cents up from yesterday’s closing price.  What went wrong?

Possible reasons

1. The biggest profit contributor to the surge is the conventional energy business;
2. The proposed interim dividend is only 5 Singapore cents per share;
3. Technical reasons. 

Profit Contributors

As reported by the StraitsTimes,  the biggest profit contributor is the conventional energy business, These are profits from its conventional power generation.   

As this profit is a recurring profit generated by higher electricity tariffs which may include some profits from fuel hedging,  the traders might have already priced in the earlier pricing.    

As Energy prices have been falling since they reached their peak last May, traders could have expected these earnings from conventional energy businesses will drop in the future.

For information,  JP Morgan suggested SembCorp's price would drop down to S$4.50 when they speculated the electricity tariff would drop in the near future.

Interim Dividends

Many traders were of the view that the interim dividend of 5 Singapore cents was a disappointment.   At a price of S$5.60 today,  it is only about 0.8%.  It is a far cry compared to the 56% profit surge that SembCorp was making in the first half of 2023. 

 

Technical Reasons

Technically,   we see SembCorp’s price having difficulties getting above the trendline T1 in the past few trading days.  It climbed as high as S$5.80 during the day just to find the price dropped below S$ 6.20 by the closing time.  

The price is presently trapped in the horizontal symmetrical triangle waiting for the trendlines to be broken.  It has 2 immediate support,  S1 and S2 as can be seen from the following chart.  Unless there is better news coming out for SembCorp,  it is unlikely that SembCorp’s price will break T1.

 

 

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.

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SingTel (Z74) 's Performance vs Telkomsel's Performance

4 August 2023

Following Citi's comment on the softness in net profit from Telkomsel would affect SingTel's profit,  SingTel came out to clarify that Telkomsel’s 21 percent year-on-year decline in net profit as reported was caused by fair value revaluation of its investment in consumer Internet company GoTo.   Such revaluation will not affect Singtel’s net profit or underlying net profit. 

It was reported that Telkomsel’s net income for the second quarter ended Jun 30 fell to 5.41 trillion rupiah (S$476.2 million) from 6.82 trillion rupiah.

Technical Analysis

The false news about SingTel's falling profit had caused a candlestick gap (Not adjusted see note) with about 5.5 million trading volume on 2 August.    

The volume is about 3 times the 100-day average,  The gap can be considered to be a normal gap with high trading volume that might take only weeks to cover the gap.  This is because a runaway gap that would take months to cover would normally have a trading volume of more than 4 times the average.  

As the gap is caused by false news,  we expect the gap to be filled in a much shorter time than it used to be.

Note:  The closing price of SingTel on 1 August was S$2.64.  After adjusting for the dividends,  it should be read as  S$2.56.

3 August 2023

SingTel’s price dropped from S$ 2.64 on 1 August to close at S$ 2.46 on 2 August, a drop of about  6.8%.    This is because

a)   It was an Ex-Dividend day for SingTel.   There were altogether 2 Dividend payouts,  one for S$ 0.025 and the other for S$ 0.053.  The total dividend was S$0.078.

b)   Citi has flagged softness from Telkomsel,  its regional associate in Indonesia.

 

SingTel’s Shares in Telkomsel

Telkomsel is owned by Telkom.  Indonesia and SingTel.  Presently, SingTel has a share of 30.5% in Telkomsel under its subsidiary,  Singapore Telecom Mobile.

 

How Telkomsel’s performance will affect SingTel?

According to the 2022 annual report,  Telkomsel has a table showing the following profit and loss for the last 5 years.   

 

We can see that Telkomsel’s net income has slid from Rup 26,160 billion (S$  2.3 billion) in 2021 to Rup 18,367 (S$ 1.6 billion) in 2022.  This is about a 30% drop or a drop of Rup 7.800 billion (S$ 690 million).   

However,  the EBITDA has increased slightly.   As the revenue increase with lower Net Income,  it would suggest that the competition for Telkomsel was quite keen in 2022.  As EBITDA is still growing,  the long-term performance for Telkomsel appears to be on track for better performance in the future.

As the loss of income in Telkomsel will reflect as a loss in SingTel’s revenue,  we expect SingTel’s revenue loss for 2022 as compared to 2021 was only S$210 million (S$690 x 30%).

As SingTel’s revenue for 2022/23 was S$14.62 billion,  this S$210 million loss in revenue was only 1.4% (210/14,620) of SingTel revenue for 2022/23.

 

SingTel’s FY 2023 performance

SingTel,  in its FY 2023 presentation in May 2023 said,

1)   Full-year net profit was up 14% to S$2.23 billion;

2)   Regional associates’ pre-tax contributions up by 10% to S$2.27 billion;

3)   EBITDA and EBIT increased by 3% and 8% respectively;

It would appear SingTel’s earning has not been affected at all by the lower net income of 1.4% from Telkomsel.  

For information,  Telkomsel’s FY 2022 result was reported in December 2022 and SingTel's FY 2023 was reported in May 2023.

Given the above,  we do not expect Telkomsel’s performances will have much impact on SingTel’s performance going ahead.

 

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.

Other Articles about SingTel

Technical Analysis for SingTel on 26 July 2023

 

 

SembCorp (U96) Establishing S$5,000,000,000 EURO MEDIUM TERM NOTE.

31 July 2023

SembCorp Industries (SCI) just announced that it has established a S$5,000,000,000 Euro Medium Term Note (MTN)  Programme today and DBS Bank Ltd. has been appointed as the sole arranger and dealer under the Programme.   This MTN is guaranteed by SCI.  Henceforth, SCI’s subsidiaries,  together with SCI  may raise money from this MTN from time to time, subject to certain conditions having been fulfilled.

 

What is the difference between MTN and Bonds?

Both MTN and Bonds are instruments to raise funds except MTN is simple to issue because it is a discrete fund between the 3 parties,  the issuer,  the agent, and the investor.  On the other hand, the issuing of bonds will need a public offering. In the past,   the issuing of bonds had often been perceived as the company was in financial distress.

MTNs are usually sold in small amounts, either continuously or intermittently.

Some companies still prefer to issue bonds because it is more cost-effective;  also,  the bonds allow investment banks to buy the entire issue from the companies and then sell it to the public to earn commissions, etc. The risk of selling is therefore transferred from the companies to the investment bank. 

For more information,  please refer to this article.

 

How will it affect stock prices?

As MTN are like Bonds,  they are instruments of debt.  They will invariably affect stock prices.   But,  the effect of MTN is usually much less than Bonds for the main reason that a public offering of bonds often gives the impression that the company is in distress.   On the other hand, MTN is usually carried out discretely.   Presently,  SCI is only establishing the MTN program.  There are no raising of any debts mentioned.  

The effect may be more only when traders are aware of the real purpose for raising the MTN is not for expansion but for debt servicing. 

 

Examples

When SCI established a S$3 billion Multicurrency Debt Issuance Programme on April 3, 2020,  it caused little or no reaction to the SCI’s prices as shown in the attached chart.  Also,  we have observed no appreciable reactions when SCI or its subsidiaries issued Notes or debts in other periods using this instrument.  

This is also the case when SIA established its $10 billion MTN during the pandemic.  It is only when SIA issued a bond from the MTN that sent the stock price tumbling by as much as 20%

 

Given the above,  we do not foresee that this S$ 5 billion MTN established by SCI will have any material impact on SCI’s trading price at the moment. 

 

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.

 

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