Yangzijiang (BS6.SG) - Current price looks attractive

Like most of the other counters, the price of Yangzijiang went downhill after October 2007 last year. The average price in October last year was at about $2.64 and after 5 months in March, it fell to $0.80 or 69.5%. It then rebounded and rallied to about $1.18 in May before declining again to settle at $0.805 today after hitting a low of $0.765 a few days ago. Price range was around this price since early July.

The trend indicator, the moving average has been bearish since December last and is still currently bearish. The price is currently near the short term 30 day average while the longer term averages (60 and 90 day moving average), which acts as strong resistance is currently between $0.91 and $0.94. However, the resistance this time may not be strong because it has started to move sideways instead declining since late last year.

The bullish divergences on the momentum indicators like the Relative Strength Index (RSI), MACD and Momentum shows that there is a strong support in the current price action. The trading volume seems to have eased. These are signs that the price may have bottomed out.

Here are some recent developments for this company. On the July 29 international broker UBS cuts its target to $1.30 from $2.65, changing its valuation method from Discounted Cash Flow (DCF) to Price to Book (P/B) value. On July 2, the company said that it secured shipbuilding contracts worth $226.9 million in June. On July 1 King Eng Securities tips a technical sell. On June 30, HSBC starts Yangzijiang at Neutral with S$1.05 target. One June 3, the company said that it secured $514 million in contracts to build 12 vessels during April and May. You can refer to chart below for these developments.

Technically, the current price looks attractive as the downside risk is $0.04 (5%) if a stop is placed at 0.760, which is a new historical low. The price has a high potential of climbing to $1.00, which gives a $0.20 or 25% upside potential gain. A more optimistic target is $1.18. From the previous paragraph, HSBC’s target is $1.05 and UBS target is $1.30.

Daily YangziJiang chart as at 30 July 2008, using NextVIEW Advisor

Commentary and analysis by Benny Lee