Armstrong - Fundamental Analysis

Armstrong announced a strong set of Q2 results where 2Q2010 net profit soars 125.9% to $7.1m. The first half net profit of $14.168m already exceeded the 2009 full year net profit of $14.1m! This was achieved on increased revenue and improved margins and the management has for the first time recommended an interim dividends of 2 cents per share! Assuming a full year dividend of 4 cents per share and based on today’s closing price of 41.5 cents, that will translate into a yield of 9.6%!

  

The analysts are bullish on this counter and  are summarised as follows based on 41.5c closing price:

31 Dec 2010F	Kim Eng	CIMB	DMG	1H 2010 x 2
Sales ($m)	213.6	231.4	215.7	222.4
Net Profit ($m)	24.6	26.6	23.1	28.3
EPS (S cents)	4.9	5.2	4.62	5.66
PER	8.5x	8.0x	9.0x	7.3x
EV/EBITDA	7.5x	5.1x	5.6x	5.0x
Target price	$0.57	$0.56	$0.49
Date of report	21 Jun 10	18 Jun 10	18 May 10

(Source: respective research reports adjusted for current share price).

Fair value

The high yield of 9.6% will provide support to the current share price as it is much higher than the deposits as well as some REITs!

PE – Assuming a fair value range of 8-10x PE, the fair value will range between $0.45 to $0.57.

M&A – Private Equity firms are acquiring or privatising listed companies at around 7x EV/EBITDA. Assuming a similar benchmark for Armstrong, the potential ‘buyout’ price will be around $0.58.

Chartwise

Chart-wise, the charts doesn’t look pretty in the near term (with down side bias) but is likely to trade sideways between 40c (Support) and 44c (Resistance) based on today's results and dividend announcement. From a longer term perspective, the company does look attractive from a fundamental perspective.

Chart - SoundGlobal

The chart of Sound Global looks extremely bearish with a critical support at 73 cents. The 2^nd quarter profits fell short of expectations due to dual listing expenses incurred. DBS lowered its target price to $0.84 (from $1.20 previously) and the $0.84 was based on 12x historical PE average!

A break of 73c support will likely see it heading towards the 65c levels.

Chart - Straits Times Index (STI)

A test posting via email.

The STI looks weak in the short term and likely to face correction pressure back to the 2900 levels in the short term.

Straits Times Index

STI has made a spectacular run since 10 March for a good solid 3 months and magically, it has crossed the neckline at 1941 and hit the double bottom target of around 2427. A correction would be healthy for the index at this juncture. The first target for this correction should be around 2220. A break of 2,200 support will mean a more severe correction to around 2050.

It has been a long time!

It has been a long time since i last updated this blog. No excuses but i just couldnt find the energy and motivation to update it being busy with work, with my life and with my kids.

I have always been thinking of how to retire early since i was young. When i was in my teens, i was always on the look out for quick bucks. How to make fast money but to be honest, it is easy to get burnt when you want 'fast money' and i for one, have been burnt. Luckily, it occured while i am still young, and i have nothing much to lose. There is no such thing as "fast and safe" money unless you know how to "print" money which is what the US government is doing now - printing money to spend its way out of the recession. It is amazing that the US/SGD is still not 1 to 1 now.

It is important to have a dream because it keeps you going. I have always been 'dreaming' of travelling round the world. I am still far from it but i am working towards it (both the financial freedom and the travel-round-the-world part) hahaha and trust me, i dont "scrimp and stinge" to work towards this dream. I personally think that to live a life of a miser just to be rich is so miserable and this is not the life i want to lead.

I have spend many months thinking how i can retire early. For sure, to retire early, i will need some passive income. Passive income means that whether you work or dont work, you get the money. I realised that i have been very lacking in that regard, i.e. to create a portfolio of stocks that can give me a passive income. Since this website is entitled "the inspiration for financial freedom", i better inspire myself first. hahaha.

I will update more again in another date, now need to be driver for my kid's CCA during holidays.... I better be more 'on-the-ball' in updating this blog. :) TTYL.

Take care!

I realised how "untimely" my blog is. Since my last update, i have to cut loss on Raffles Education :( and also took a small profit in Midas. In addition, i have shorted Cosco at 86 and Noble at 120 on Monday.

The Straits Times Index looked really ugly to me and i believe it will retest the 1,500 levels in the coming days. Take care and if you are still a "long-only" investors, you may want to learn how to long "STI put warrants" to protect your stock portfolio.

S Chips going to run?

I have this feeling that the FT China index looks set to run. While i have not loaded up on S-Chips, i have bought into 2 "proxy" S Chips, Midas and Raffles Education. Let's see on it will perform in the coming days.