3 Bearish Counters, but before that, can Wilmar be my Santa Claus this Christmas?

Personally, I think these 3 counters have huge potential to fall further. But,
since this is a 'feel good' period, I will lay off shorting stocks. However, 1 candidate (Wilmar) stands out during this run-up to the festive season. I have realised a bottoming pattern for the past week, and is now waiting for a good time to get in.

Downgrade to Underperform from Buy; PO S$2 -UNDERPERFORM - Singapore
Downgrade to Underperform from Buy; PO of S$2
We reduce our PO on SPC to S$2 from S$10 to reflect our new cautious view on the Asian refining sector and SG Complex margin revisions in 2009/10. Additionally, we sight the company's accounting complexity and rapidly rising working capital as major risks. Thus, we change our PO basis from DCF to trough cycle valuation applying 2.5x 2009E EV/EBITDA, which is a 50% discount to the sector's benchmark valuation and implies 2009E P/B of 0.5x. 2008-10E earnings revisions and valuation changes. Assuming that Asia's growth will slow on the back of OECD recession, we forecast SG Complex margins at $7.2/bbl (down 20% from previous estimate) for 2009 and $7.0/bbl (down 10%) for 2010. Reflecting this, we lower SPC's 2009 and 2010 net profit estimates by 32% and 17%, respectively. Currently SPC is trading at 2009E P/E of 3.9x, EV/EBITDA of 2.9x and P/B of 0.6x. Worst case scenario, margins can fall to US$4/bbl . Our base case assumes Asian GDP and oil demand would still grow in 2009. Assuming Asia too falls into a recession, we believe SG complex refining margins could fall to US$4/bbl. SPC's 2009E EBITDA and net profit could potentially fall 51% and 75% respectively below our current estimates. No earnings visibility; taking a prudent stance. SPC was our regional refining top pick. However, the higher-than-expected accounting risks, rapidly increasing working capital and the sharp turn in both refining and E&P business outlook lead us to alter our stance. The unusual extent of the profit deterioration in 3Q08 and the lack of catalyst from a sector perspective lead us to recommend investors to exit the stock.

0253 GMT [Dow Jones] NOL (N03.SG) off 1.6% at S$1.27 in thin trade as latest weak operating data turns off investors. Shipping volume for period of 4 weeks ended Oct. 17 down 1% on-year, off 9.0% on-month due to weaker demand on Transpacific, Asia-Europe trade lanes. Despite stock's 60% tumble since beginning 2H08, investors appear to be in no hurry to pick up shares, especially after NOL's recent dismal 3Q08 results, prospect of loss in 4Q08. "We recommend investors stay on the sidelines until the shipping storm subsides," says Citigroup; "the risk/reward balance does not appear compelling for investors to take the plunge in shipping stocks in the near term." Cuts target price to S$1.10 from S$2.70, based on 0.45X FY09 P/B, keeps Sell call. Support expected at S$1.20 (last closed below this level on Oct. 29). (FKH)


DJ MARKET TALK: Parkway Off 7.2% Post 3Q Results; S$1.48 Support
0427 GMT [Dow Jones] Parkway Holdings (P27.SG) heads lower, underperforms market after hospital operator reports 95% on-year fall in 3Q08 net profit to S$10.2 million, warns outlook challenging; shares down 7.2% at S$1.54 vs FTSE ST All Share Index down 3.1%. JPMorgan says core net profit well below expectations, cuts target price to S$1.80 from S$2.20 on lowered earnings estimates; maintains Neutral rating, says sale of Novena medical suites is key area of uncertainty. DBS Vickers cuts target price to S$1.39 from S$1.85, says results below expectations, maintains Fully Valued rating; warns, "a drop in foreign patients and slower/negative admission growth has not been fully priced in." Chart shows decent traded volume, suggests shares may have downwards momentum; next support tipped at Oct. 29 intraday low of S$1.48. (KIG)

Wilmar ($2.73) – double bottom and downtrend channel breakout suggest stock on track to test $2.99

First TP $2.99
Next $3.18
First Support $2.67
Next $2.51

Although stock is overbought following the 62.6% surge from $1.79 near end to $2.91 yesterday, it is on course to test the nearest quarterly resistance of $2.99.

The 20-day moving average is rising well while the 50-day should soon flatten out due to the good gains with the confirmation of a double bottom at $1.76 on Oct 10 and $1.79 on Oct 28.

In fact the earlier swift bounce to $2.75 in mid-Oct was a buy signal on test of lows as the stock’s strength was proven when the RSI which dipped to 20 on Oct 10 stayed well above 30 to around 40 even during the Oct second half weakness leading to a test of the $1.76 low, halting at $1.79.

Now that the RSI has climbed to above 55, some pullback is taking place and it is noteworthy that today’s $2.67 low is at an important quarterly support of $2.69/67 last year.

As the objective of $2.99 has not been met, this support should be a buy signal but in the event of another market plunge next support is at $2.43-51, also quarterly support as well as the edge of the old downtrend channel (in red) which has been overcome.

In fact the more affirmative trend channel (in green) shows Wilmar poised to touch the higher line which is around $3. Next target after $2.99 is $3.18.

Personal Insights:
Pros: Double Bottom (although short)
LT trend: shifting from down to neutral
ST trend: up
ROC: Positive
Vol. MA: Average
Good fundamentals: Good results, bottoming palm oil prices
Risk-Reward: Cut Loss: 2.35 (based on recent low on 7/11)
Take Profit: 3.26 (based 0n 61.8% Fib retracement)
Price to buy: 2.49-2.58
Risk: 0.14-0.23
Reward: 0.68-0.77
Risk-Reward Ratio: 2.9-5.5 times, very attractive
Cons: Partial Dark Cloud Cover (14/11)
RSI almost in overbought area, prone to profit-taking