i was looking for bombed out stocks in SGX lately (many to choose from……feel like walking through pasar malam) when i stumbled upon this one with a funny name called Babcock&Brown…..a name that is easy to recall i suppose.

usually i prefer to “trade” stocks based on technical analysis (TA) but sometimes, i do take a look at reits that pay yield >10% to put my money to work for me in the long run.  last year, i was not looking hard to buy reits in SGX since the yield then was pathetic……but with stock prices crumbling down, maybe it’s time to take a closer look at some of them.  in fact, one would notice over the past few days that some reits no longer drop as fast as stocks since their yield has reached attractive levels.

back to Babcock, i think this stock may be worth a look due to:
1.the management has said that they intend to pay 3c dividend in 2H08, which means the yield is >10% based on that alone

2.NAV is S$0.70.  So babcock is trading at almost 60% discount to NAV…..this may be one of the highest discount to NAV for REITS listed in SGX

3.babcock has been writing down one of its investments in a US listed company called “Babcock&Brown Air Limited” as the stock price of the company in US has been dropping inline with the overall markets globally.  But interestingly, this write off is merely an accounting treatment and does not affect the cashflow of the singapore listed babcock&brown…..which explains why babcock says it will pay out 3c dividend in 2H08.

4. the stock price of the US listed company has rebounded from a low of US$8 in middle of july to a recent high of about US$12, a rebound of almost 50%. this means that in 3Q08, there is unlikely to be any write off due to this investment.

having said all these, one must wonder why then has the stock price not recovered much from the all time low of S$0.26?

i do not have the answer to this one……maybe there could be more write off due to other investments……or maybe the market has not realized yet the worst maybe over for babcock

anyway, i plan to put in a few dollars in this one and am prepared to lose my penny if i am wrong with my personal analysis should the worst happens for babcock ie more write offs and reduced dividend.

but if i am right, then the reward is worth the risk i am taking since the potential yield could be as high as 20% (assuming oil prices have peaked and they are able to pay 3c dividend every six months)……you need to do your own homework and decide yourself if you like this badcock…..erh i mean babcock.

rooney

p/s : this is not an inducement to buy, please do your own homework

Singapapore stock market wrap 4th sept08

As i look at the closing prices across the board for SGX, especially singapore listed S-chips today, i cannot help but feel glad i manage to follow my TA signals strictly.  Recall 2 days ago i mentioned that there could be a “potential” rebound on the cards based on the closing prices.  But valid entry signals for some of the singapore listed stocks that i like such as ferrochina, sino environment and china XLX will only present themself provided the breakout signals are triggered!

Since the breakout signals were not triggered, it means we just sit back and wait again…… I am determined not to make some of the mistakes that i have made before.  In the past, when i saw stock prices sliding down to levels which i thought look attractive based on fundamental analysis, but even when TA signals look bad, I would try to justify or anticipate that a rebound just have to come since they look so “cheap”.  I have learnt and paid the price few times for these mistakes and realized that “cheap” is a relative term based on FA.  A stock can trade at 25x PE and still go higher when market is hot and vice versa……it can trade at 5x PE and still drop to 2.5x PE when market is cold!!  This is exactly what is happening right now……….for many singapore shares which reported strong earnings only to see the stock prices sliding down further.

I would say market liquidity and sentiment are bigger drivers of stock price movement than corporate earnings.

I am now back to square one again…..because the potential rebound signals that i saw have been invalidated with the sell down today.  I just have to wait patiently for the next signals……..just like Alex Ferguson had to wait patiently before he finally capture Dimitar Berbatov.

happy waiting

rooney