• Noble Group ($1.08) – Accumulate for upside potential to $1.48 in coming months
• Midas ($0.37) – Accumulate for upside potential to $0.48 in coming month
• Tiger Airways ($0.705) – Accumulate for upside potential to $0.93 followed by $1.14 in coming months

Don’t Despair

 Noble Group ($1.08) – Accumulate for upside potential to $1.48 in coming months

 Midas ($0.37) – Accumulate for upside potential to $0.48 in coming month

 Tiger Airways ($0.705) – Accumulate for upside potential to $0.93 followed by $1.14 in coming months

Cyclical stocks have generally underperformed the STI rally

that saw the index gained 350pts (13%) since early June.

These stocks have been side-lined by investors because of

the global economic uncertainties. However, there are

technical signs that some of them have priced in much of

the uncertainties. We look at 3 stocks that DBSV Research

analysts had turned positive on in the past 1-2 months and

whose prices have edged up slightly in recent weeks and

still show the potential for better gains.

These 3 are Noble Group, Tiger Airways and Midas. All 3

have undergone a lengthy correction period that spanned

16-26 months. At their recent low points, their stock prices

have also been slashed by a massive 50-75% compared to

their post-GFC bull market peak prices.

Bear markets progress in 3 stages – Disbelief, panic and

despair. We think the downtrend that started from

February this year signalled the start of the final despair

phase and there are signs that this last phase of the bear

market for them has either ended or about to end.

The end of a despair phase does not automatically signal

the immediate start of a new powerful bull market. At

times, the trend can still be sideways with sufficient

amplitude that offers ample trading upside if investors are

able to ride the upswing early. Upward retracement rally of

the previous bear market correction amplitude is common.

Give the significant correction amplitude since their bear

market started and that prices have not risen much from

the recent low, a 38.2% or even a low level 23.6% upward

retracement of their entire bear market correction should

offer ample upside.

The table below details the technical view. DBSV Research

fundamental target price and return are also shown.

1. Noble Group ($1.08) has upside potential to the

38.2% retracement level at $1.48 in coming months

2. Tiger Airways ($0.705) has upside potential to the

23.6% retracement level at $0.93 and we do not rule

out gains beyond that to the 38.2% upward

retracement level of $1.14 in coming months

3. Midas ($0.37) has upside potential to the 23.6%

retracement level at $0.48 in coming months

4. The short-term support is peg at the 15-day

exponential moving average (EMA). Firmer support is

found at the 65-day and 200-day EMA.r

DBSV FA view

15-D

EMA

65-D

EMA

200-D

EMA

Recent low

23.6%

retracement

38.2%

Price

DBS Group Research. Equity 6 August 2012

200-D

EMA

Recent low

23.6%

retracement

38.2%

Price retracement

($)

Tar

DBS Group Research. Equity 6 August 2012

Singapore Traders Spectrum

Technical Analysis

Singapore Traders Spectrum

Wired Weekly

Page 2

Macro-economic uncertainties persist despite current

resilience rally

Singapore’s GDP growth cut to 3%

Our economist lowers Singapore’s GDP growth to 3%

(previous 3.5%). Singapore is struggling with stagflation,

which is a combination of economic growth slowdown and

rising inflation. Singapore will be home to the weakest

growth (2012 GDP forecast 3%) and one of the highest

inflation rates (4.5%) in Southeast Asia.

There is also room for monetary policy to support growth,

given the authority’s tighter policy over the past two years.

Counter-cyclical measures are also on the cards for next

year’s budget if the external environment continues to

deteriorate.

Relative economic performance map, 2012 Growth below inflation – 30-yr history

Source: DBS Research, Irvin Seah, Singapore economist

A lot still has to happen to ‘save’ the Euro

The ECB will soon support the bond market in sufficient

quantities to ease the Eurozone’s debt crisis. Intervention

will start September and will depend on troubled countries

making a request and accepting strict conditions and

supervision. ECB President Mario Draghi added that

Germany had reservations about bond-buying and further

efforts would be needed to persuade the Bundesbank

before a final vote to take action.

This outcome from the ECB monetary policy meeting last

week failed to impress investors who expected a more

immediate and concrete action. Hopes were raised following

the ‘chest pounding’ statement made by ECB President

Mario Draghi last week to ‘do whatever it takes defend the

Euro’.

Investors had hoped that the ECB would issue a banking

license to Europe’s permanent bailout fund, which is the

European Stability Mechanism (ESM). Such a license would

have enabled the ESM to borrow from the ECB. Without this,

the remaining €400bil that is currently available to the ESM

is underpowered to face the €2800bil sovereign debt of Italy

and Spain.

Mix signals from US July job numbers

Despite the positive Wall Street reaction, the latest US July

employment numbers sent out a mixed signal. While the

163k increase in non-farm payrolls was smartly better than

consensus expectations of 100k, the unemployment rate

inched a notch higher to 8.3% from 8.2%.

Not all yields plays are still good bets…

Defensive and yield stocks have done well relative to cyclicals

through the year given the persistent macro-economic

uncertainties that stubbornly continues. Unsurprisingly, SREITs

have outperformed the broad market. The FTSE ST

REITs Index’s 35% gain YTD, clearly outpaced STI’s 15% rise

YTD.

While S-REITs may have become a popular choice among

investors, do remember that as stock prices move higher,

upside potential and dividend yield falls. Our analysts have

downgraded CCT, Cache Logistics, CMT and CDL HT to

Hold in recent weeks, mainly on valuation grounds.

While we like CMT for its big cap status and its defensive

earnings, the stock is trading close to our fundamental

target price. CCT has also risen close to our target price

despite its strong balance sheet and pro-active leasing

strategies. While growth momentum for CDL HT is expected

to continue in 2H12, this is at a moderate pace and the

stock now offers just limited upside to our fundamental

target price of S$2.09. Finally, Cache Logistics is also trading

close to our fundamental TP despite stable and resilient cash

flows.

As these stocks were downgraded due to limited upside to

their respective TP and not deteriorating fundamentals,

investors can look for re-entry opportunities again after

prices have retreated. A pullback to the stock’s 65-day or

200-day EMA support is a good re-entry guide.

Singapore Traders Spectrum CMT 1.99 2.05 2.8 6,628 Hold 4.9 1.2 1.95 1.88 1.84

CCT 1.38 1.40 1.7 3,920 Hold 5.5 0.9 1.34 1.28 1.24

CDL HT 2.01 2.09 4.0 1,945 Hold 6.1 1.2 2.00 1.91 1.83

Cache Logistics 1.11 1.21 9.4 775 Hold 7.7 - 1.10 1.07 1.02

Source: DBS Research

And not all cyclical are duds

Except in niche areas such as rig builders, cyclical stocks have

generally underperformed the current STI rally that saw the

index gained 350pts (13%) since early June. These stocks

have been side-lined because of the global economic

uncertainties. However, there are signs that a number of

them have priced in much of the uncertainties.

Our Singapore Strategy report dated 16 July highlighted

bombed out examples such as Midas and Tiger Airways.

There’s little or no more mystery left to the negative factors

that drove them down for nearly 2 years. In this current

backdrop, a potential catalyst can trigger a positive price

reaction.

Case in point is Hi-P. Despite reporting a weak 2Q, the stock

rose 14% last week after our analyst upgraded the stock to

Buy from Hold in anticipation of a signification rebound in

2H12.

Tiger Airways recently reported a narrower-than-expected

losses of S$14mil for the latest quarter as its Singapore

operations turned around. Demand has finally caught up

with the significant capacity expansion in Singapore last year,

pushing average load factor up to 85% in the quarter.

Looking forward, Tiger Australia will be ramping up services

by October 2012 to pre-grounding scale. Another positive is

that jet fuel price is currently about 12% lower than the

peak in early 2012. This should help the carrier to move

steadily towards profitability. Our analyst expects the group

as a whole to be profitable by the last quarter of CY2012

(3QFY13).

After declining to a low that matched the worst point during

the 2008 GFC in late June, Midas shares have started to

climb again on optimism that high speed passenger railway

projects will resume soon after recent moves by China’s

Ministry of Railways to raise funds in the bond market

(backed strongly by the State Council). This should hugely

benefit Midas, which derives 40% or more of its sales from

this segment.

We think Noble Group is another bombed out stock that

offers more upside potential than downside risk after it

suffered from a >18-mth decline that saw the stock price

decline to a mere 46% from its $2.40 glory days peak back

in Jan11. Our analyst upgraded the stock to Buy from Hold

in May this year, post 1QFY12 results as the quarter was

seen as an inflexion point and stock also trades at a more

attractive forward PE valuation compared to peer Olam.

Noble Group shares were trading at $1.14 when it was

upgraded. It’s $1.075 currently as the stock remains side

lined by investors given linger macro-economic uncertainties.

If $1.14 is good enough to upgrade, $1.075 looks even

more appealing.

Cyclical stocks with positive catalysts ahead

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still dare to say u uncle ... dunno how to type english .. damn kuart lo .. cheers bro ..

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