Tuesday, February 18, 2014

Scomies or Scomi- which one is a better bet?

Over the weekend, we read that Quek Leng Chan has acquired a stake in Scomi Energy Services Bhd ('Scomies'). His stake is about 3.4% while a friendly party, Paul Poh also acquired a 4.6%-stake in Scomies. What is Quek's intention in regards to his investment in Scomies? Is it a speculative investment or is it a strategic investment?

We can see from Chart 1 below that Scomies has been trending higher quite nicely over the past 2 years after it broke above the 'horizontal line' at RM0.35 in the middle of 2012. With the recent breakout of the psychological level of RM1.00, Scomies may continue its uptrend. It could potentially hit the RM2.00 mark.

Chart 1: Scomies's weekly chart as at Feb 18, 2014 (Source: Tradesignum)

Meanwhile, Scomi group Bhd ('Scomi'), which owns 65%-stake in Scomies, also rallied yesterday and today. From Chart 2 below, we can see that Scomi has strong resistance at the horizontal line at RM0.44-0.45. this morning it broke above the strong resistance. At the time of writing, scomi is pressing against the next resistance is at RM0.50. Can it charge through that resistance?

Chart 2: Scomi's weekly chart as at Feb 18, 2014 (Source: Tradesignum)

Based on newsflow and positive technical outlook, both Scomi & Scomies could be good trading BUY, especially if they pullback a bit towards the breakout level (of RM0.44-0.45 for Scomi & RM1.00 for Scomies).

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Scomies & Scomi.


Bee said...

Alex, isn't Scomi Engineering be "Scomien" which is at 0.495 currently?

Bee said...

Oh blunder! It's Scomi Energy !!

Phish said...

Hi Alex,

Could you do some analysis on Scomi mother share to know whats the fair price before Quek's buy into Scomis?


Phish said...

Hi Alex,

I followed your trading advice and unfortunately scomi went downhill after that.

Maybe you can mention the fair value in the stock picks before publishing so people can make better judgement?


Alex Lu said...

Hi Phish,

If I say a stock has a fair value that is higher than the present price, and you should consider buying it; that's fundamental analysis.

If I just say that there is a breakout in the chart (or the outlook is bullish as per technical analysis) and that the stock may go in a certain direction, that's technical analysis. There are endless debates on TA & FA and I don't want to go into that. It suffice to say that there are merits to both systems.

Ideally, I like to have both fundamental and technical analysis in agreement before I make a call. Sometimes they do not agree. That's when you have to make a judgement call.

In the case of Scomi, you have a technical breakout at RM0.44-0.45. The company owns a 65%-stake in Scomies which must be a decent stock because Quek Leng Chan bought into the stock. Is it speculation? YES, but a well-calculated speculation where the reward may outweigh the risk. Say, you bought in at RM0.45 and it didn't work out. You cut loss at RM0.42 and take a loss of RM0.03. On the other hand, if this works out, and the stock flies up. A RM0.10-gain is possible, given the play in the O&G sector.

If I did not put a fair value on my calls - and I must admit I seldom do that - it is because it is not easy. If you look at the analysts who cover stocks or sectors, they only have 2-3 sectors or 20-30 stocks to look at. I look at everything. In the current result reporting season, I look at 600-700 stocks. I am sorry to say that I don't have their fair value at my fingertips.

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