Tuesday, December 06, 2011

Orient may have seen a bullish reversal

Orient, another stock involved in the auto sector, saw a sharp rally on thin volume this morning. Orient has seen some accumulation over the past 3 weeks with the price traded between RM4.30 & RM4.50. This morning, Orient broke above the horizontal resistance at RM4.50 & hit a high of RM4.79. As at 10.30am, the stock is trading at RM4.68 & volume traded was relatively thin at 3888 board lots.


Chart 1: Orient's 120-min chart as at Dec 6, 2011_9.40am (Source: Quickcharts)

The weekly chart shows that Orient is still in a downtrend. However, the sharp rally had caused a drastic change in the indicators reading. This could be a prelude to a reversal in the share price.


Chart 2: Orient's weekly chart as at Dec 6, 2011_9.40am (Source: Quickcharts)

I am not very clear on how Orient is now involved in the auto trade. I believe it is a dealer for Hyundai & Honda cars. It may have a share in a JV to assemble Honda cars in Malaysia. The current rally may be due to the spilling effect of the rally in Proton share price. Alternatively, the market may be anticipating the additional business which may flow to Orient due to the recent flood in Thailand.

Based on the above, I believe the safer way to play the possible reversal in Orient is to buy the stock slowly & as close to the current breakout level of RM4.50 as possible.
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4 comments:

  1. limkoTuesday, December 06, 2011 3:07:00 PM

    Is this a typo mistake when you said ' buy as close to the breakout level of 3.50', when the lowest Oriental ever made recently is around 4.30?

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  2. Alex LuTuesday, December 06, 2011 3:25:00 PM

    Hi limko,

    You are right. The breakout level is RM4.50.

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  3. William WangTuesday, December 06, 2011 4:56:00 PM

    Alex, I have been following this counter for some time now, hope you dont mind if I add my opinion. The main reason Orient is dragged to the price of RM4.30, is b'cos, the management is very unreasonable in rewarding shareholders & EPF is unloading for the last 6 months. Orient main revenues are from Auto, plantation & healthcare. Automotive is the worst performing in its sectors, in fact they are better off selling this sector and each shareholder can perhaps get back RM4.00 per share in captital distribution. The bulk of earnings are from plantation, Healthcare & Property which basically worth 30sens. If I were Warren Buffet, I would plan a hostile take over.

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  4. Alex LuTuesday, December 06, 2011 5:21:00 PM

    Hi William Wang,

    Thanks for sharing.

    The auto business of Orient used to be pretty good. Since losing the Honda distributorship, the auto segment is nothing to shout about.

    Its main profit contributors are Plantation & Financial Services. The latter maybe the income from provision of HP or leasing facilities to car buyers. Its NTA is pretty high at about RM7.00 per share.

    I did an initial coverage in 2008 which I have not updated. The link is: http://nexttrade.blogspot.com/2008/02/orient-attractive-value-stock.html

    ReplyDelete