Waseong- a good trading BUY

According to the Starbiz, Wah Seong Corp Bhd ('Waseong') has submitted a bid to buy over Italian company Socotherm SpA ('Socotherm') three weeks ago. The later appears to be in a tight financial position as it had sold off its 32.5%-stake in its JV, PPSC Industrial Holdings Sdn Bhd to Waseong. According to the Starbiz:

Listed on the Italian Stock Exchange, Socotherm has a strong foothold in South America and Gulf of Mexico. However, the group has been weighed down by debts of some 250 million euros and been making losses since its 2007 fiscal year. On Socotherm’s strengths, Maccagno said it was in markets that Wah Seong was presently not.

“The integration of Wah Seong’s and Socotherm’s pipe coating businesses would catapult us to be the biggest in terms of geographical spread and the second largest global player of this sector in the oil and gas industry,” said Maccagno.

I would rate the chance of success for Waseong's bid to be fairly good due to the following:
1) Waseong & Socotherm have a close working relationship;
2) Waseong's deputy MD, Maccagno was a former employee of Socotherm; and
3) Both companies are in the same business of pipe-coating and would derive tremendous synergies if both companies merged.

From the daily chart (Chart 1), it appears that Waseong has broken above its horizontal resistance of RM2.48 this morning. From the weekly chart (Chart 2), we can see that Waseong may encounter some resistance from a slanting 'horizontal line' ('AA') at about RM2.50. If it can convincingly break above these 2 resistances, Waseong would likely to enter into its next upleg. The next resistance & the minimum target is at RM2.70-75.


Chart 1: Waseong's daily chart as at Mar 18, 2010_9.10am (Source: Quickcharts)


Chart 2: Waseong's weekly chart as at Mar 15, 2010 (Source: Tradesignum)

Based on technical breakout, Waseong could be a trading BUY.