Den of The Lion Investor

Anwell is a company based in Hong Kong/China that was listed on SGX in November 2004 at an offer price of $0.38. Back when it was listed, it’s primary business was in optical disc equipment manufacturing. Since then, it has branched out into the optical disc business, Organic Light-emitting Diode (OLED) equipment and Thin Film and Vacuum Coating technology.

The AGM was a pretty quiet affair, with only a handful of shareholders present. It was a useful session as I managed to ask the CEO and chairman, Mr Franky Fan, quite a number of questions. Here are some of the findings:

1. The last few years was a challenging time for the optical disc equipment industry. At the time of Anwell IPO, it had about a dozen competitors. Due to the industry consolidation, they are now left with one major competitor which is Singulus Technologies AG from Germany. This means that Anwell is now very well positioned to take advantage of the market recovery.
2. The announcement by Toshiba to stop the development and sales of their HD-DVD is good news for Anwell. Since the standard is now finalised, it will allow potential customers to move ahead with their purchase of the Blu-ray disc manufacturing machines. As the products from Anwell are better and cheaper than the ones from their competitors, they will be able to capture a good portion of the market share. Due to their location, they are also likely to be the vendor of choice for Asia customers. They will not have problems with their existing HD-DVD manufacturing product lines as most of the components can still be used for other products.
3. The purchase of the optical disc business will help ensure a steady stream of cashflow for the company. If industry conditions improve, it is likely that Anwell will be a cash rich company. This cash can then be used for more research, share buyback or dividends. The choice will depend on which option can bring the best value to the company.
4. The decision (announced earlier this month) to move into Thin Film and Vacuum Coating research is a major one. This is not really a completely new area for Anwell but it leverages on their current technology and research. The research and development for the thin film solar cell equipment is likely to be completed this year. The energy payback time and manufacturing cost of the thin firm solar cell is much lower than conventional silicon crystalline solar cell. If this new product line succeeds, it will be a very significant contribution to the bottomline of Anwell.
5. The share consolidation exercise proposed a few months earlier has been put on hold due to feedback/comments from shareholders.

Somehow, I forgot to ask the management the impact of the current US recession and financial markets liquidity problem on Anwell.

Based on the information I gathered from the AGM, it seems the solar cell research could be the next big thing (or dud) for Anwell. After a few years of disappointment with their financial results, hopefully shareholders will be able to see some good news in the next one or two years.

Anwell is currently trading at a price of $0.055 and has about 2.5 billion shares issued. The share is not so liquid as the top 20 shareholders (including nominees) already own about 90% of the company.

If you are looking to park some of your money into fixed deposits, then you might be interested in Qotion. Instead of checking with all the banks individually on their interest rates, the site qotion.sg does it all for you and puts up the information for your comparison.

Qotion does not charge any fee for the service but you do need to register as a member to use their services. At this point in time, registration is free.

They also provide some comparison of credit card, credit lines and loans.

Click here to visit Qotion.

Recently, Citrine Global Finance launched their Agriculture Booster Notes. The sponsor of the issue is Merrill Lynch with Citibank, OCBC Securities and Standard Chartered Bank as the main distributors.

With agriculture being the current fad now, it’s not surprising to see another product that offers investors a chance to invest into this hot sector.

Without going into the complex mechanism behind the notes, here’s a layman explanation of how the performance is derived.

The notes are linked to the performance of 6 commodity indices, namely:

• Merrill Lynch Asia Agriculture Index
• S & P GSCI Excess Return Index
  • Wheat
  • Corn
  • Sugar
  • Soybean
  • Cotton

The 80% and 90% level of the initial closing price of the indices will be called the lower and upper coupon barrier respectively.

On each index calculation day (denotes open trading days), you will accrue interest at the rate of 8%pa (S$ issue) and 12% (US$ issue) if all the 6 indices close above the upper coupon barrier. If all the 6 indices close above the lower coupon barrier but there is at least one which is less than the upper coupon barrier, you will only receive 4% pa (S$) and 6% ($US). If any of the indice falls below the lower coupon barrier, you will not receive any interest for that day.

Every 2 months (this is called the observation period), the accrued interest will be paid out and the process repeats.

The end of the observation period is also known as the observation date. If the value of the 6 indices are above their initial closing level on the observation date, the issuer will terminate the notes and return 100% of your capital plus any accrued interest.

Personally, I do not really like this product for a few reasons:

1. The amount of interest you receive is dependent on the worst performance of the 6 indices.
2. If all the indices do well and rise above their initial level, the issue will close the issue and return your money.
3. On the other hand, if just one index falls below the lower coupon barrier, you are stuck with the notes and will not receive any interest. The period of lock-in is as long as 4.5 years.
4. In other words, to earn the most interest, you need all 6 indices to trade between 90-100% of their initial starting prices. With commodity prices being so volatile, this is a tough act to meet.
5. Merrill Lynch may adjust the weightings of the stocks making up the Merrill Lynch Asia Agriculture Index. This means they can very much control the price of that index which will affect your return. As the notes are essentially used by the issuer to hedge their own positions, there is a potential for conflict of interest.
6. The return of your principal capital is not guaranteed. There are a few events that might result in early redemption and capital loss.

You can see that the risk of this product is high. If I’m bullish about agriculture commodities, I would rather invest via an index fund or unit trust.

For more information about the Citrine Agriculture Booster Notes, you can refer to the prospectus of the Citrine Agriculture Booster Notes.

One strategy that I learnt from Richard Kang during the Asia Trader and Investor Conference is on the use of pivot points to create your trade plan. This is a very simple trade plan that doesn’t require much monitoring of real time charts.

Before I go into the plan, let me first explain what a pivot point is.

A pivot point is a technical price indicator that is derived from the numerical average of the low, high and average price. Here’s the formula for calculating the pivot point:

Pivot point = (Previous high + Previous Low + Previous Close) /3

This indicator is used to predict the price direction for the next time frame and also to calculate the support and resistance level. The formula for calculating the support and resistance is as follows:

Resistance 1 = (2 x Pivot Point) – Previous Low

Support 1 = (2 x Pivot Point) – Previous High

Resistance 2 = (Pivot Point – Support 1) + Resistance 1
Support 2 = Pivot Point – (Resistance 1 – Support 1)

Resistance 3 = (Pivot Point – Support 2) + Resistance 2
Support 3 = Pivot Point – (Resistance 2 – Support 2)

Depending on the time frame you are going to predict, the respective low, high and closing prices will be used for the calculation.

For example, if you use the day’s low, high and closing price to calculate the pivot point, it can be used to predict the next day’s direction. If you are using the week’s data, then the week’s low, high and closing price will be a prediction for the following week’s price instead.

Richard mentioned that he prefers to use the weekly pivot points when he is trading stocks as a day’s data might have too much noise. For my forex trading, I prefer to use the daily pivot points. Remember a day in forex is 24 hours - this is almost 3 times the trading hours for the stock market.

Now that you know how to determine the pivot points, let’s move on to the trade plan.

The trade plan is extremely simple. The closing price is compared to the pivot point to predict the price direction.

1. If the closing price is above the pivot point, go long for the next trade. Buy only if price dips and hits the pivot point. Conversely, if the closing price is below the pivot point, go short for the next trade. Short only if price rises and hits the pivot point.
2. If you are long (after condition 1 has been triggered), take profit with a limit order set at R1. Stop loss level is just below S1. If you are short, take profit with a limit order at S1. Stop loss is just above R1.

As you can see from the trading rules, this plan is very simple to execute. It is purely mechanical with not much inputs or judgements required. Let’s look at one example. These are the latest daily pivot points of EUR/USD based on Friday’s close, high and low.

High 1.5958
Low 1.5711
Close 1.5814

R3 1.6192
R2 1.6075
R1 1.5945
Pivot 1.5828
S1 1.5698
S2 1.5581
S3 1.5451

The closing price is 1.5814, which is below the pivot point of 1.5828. Therefore, I will be looking for a short trade for the day.

If the price goes up to 1.5828, I will open a short position with a stop loss near R1 (1.5945) and limit order near S1 (1.5698).

The risk/reward ratio is 127:130 which is roughly equal. If you think it’s not good enough for you, you can alwasy choose to skip the trade. As it turned out, this trade will result in the stop loss being hit with a loss of 127 pips.

Some modifications to the basic plan might be possible. For example, if the closing value is very close to the pivot point, you might want to use R1 or S1 as the entry level instead. If that is the case, the stop loss and limit order will have to be shifted.

Based on the same example, I will use R1 as my entry level. R2 will be my stop loss and S1 my limit order. One characteristic of using this plan is that you will enter into trades much less often.

Another way is to use the pivot point in conjunction with the technical charts to detemine the exit prices.

No matter how you tweak the plan, be sure to test it out to determine the best strategy for yourself.

The AGM season is upon us! In this coming week, there are more than 100 companies that will be having their annual general meeting. Here’s a list for your quick reference. For the exact timing and venue, you will need to refer to your annual report.

Looking at the list, it makes me wonder how the directors holding numerous board seats manage to cope.

Monday 20 April 2008

• Apex-Pal International
• Asia Power Corporation
• Elec & Eltek International
• Furama
• GK Goh Holdings
• Lee Metal Group
• Raffles Medical Group
• Sinostar Pec Holdings
• Southern Packaging Group
• Wepco

Tuesday 21 April 2008

• Design Studio Furniture Manufacturing
• Keppel Telecommunications and Transportation
• Natural Cool Holdings
• Pan-United Corporation
• Sembcorp Marine
• Singapore Food Industries
• Soon Lian Holdings

Wednesday 22 April 2008

• Advanced Systems Automation
• Bonvest Holdings
• China Aviation Oil (CAO)
• China New Town Development
• China Sun Biochem Technology GP
• Dutech Holdings
• Enporis Greenz
• Haw Par Corporation
• HLG Enterprise
• Hong Leong Finance
• Hotel Plaza
• Overseas Union Enterprise
• Pan Asian Water Solutions
• Shining Corporation
• Showy International
• Singapore Petroleum Company (SPC)
• Sino Techfibre
• United Food Holdings
• UOL Group
• Yeo Hiap Seng

Thursday 23 April 2008

• AA Group Holdings
• Anwell Technologies
• Armstrong Industrial Corporation
• Asti Holdings
• Auric Pacific Group
• Babcock & Brown Structured Finance
• Ban Leong Technologies
• China Sky Chemical Fibre
• City Developments
• Dragon Group International
• Hiap Hoe
• Hoe Leong Corporation
• Hotung Investment Holdings
• Isetan
• Kim Eng Holdings
• Link Hi Holdings
• Matex International
• Mediaring
• Select Group
• Singapore Holdings
• Singapore Computer Systems
• Singapore Reinsurance Corporation
• Sinwa
• Straco Corporation
• Teckwah Industrial Corporation
• Transpac Industrial Holdings
• Trek 2000 International

Friday 24 April 2008 

• Advanced Holdings
• Alantac Technology
• Albedo
• Allied Technologies
• Aqua-Terra Supply
• Aspial Corporation
• Chemoil Energy
• China Diary Group
• China Haida
• China Hongxing Sports
• China Merchants Holdings (Pacific)
• China Print Power Group
• Creative Master Bermuda
• Eastern Asia Technology
• 8Telecom International Holdings
• Epure International
• Ferrochina
• Fuxing China Group
• Genting International
• Heeton Holdings
• Hong Fok Corporation
• Hor Kew Corporation
• Hwa Hong Corporation
• Hyflux
• IFS Capital
• Jishan Holdings
• Juken Technology
• Keppel Corporation
• King’s Safetywear
• Koh Brothers Group
• KS Energy Services
• Lafe Technology
• Leeden
• Manhattan Resources
• Metal Component Engineering
• Neratelecommunications
• Ocean Sky International
• Pacific Healthcare Holdings
• Pine Agritech
• PSC Corporation
• RH Energy
• Richland Group
• Riverstone Holdings
• Roxy-Pacific Holdings
• SembCorp Industries
• SHC Capital
• Sing Lun Holdings
• Singapore Land
• Singapore Tech Engineering
• Soilbuild Group
• Techcomp (Holdings)
• United Engineers
• United Fiber System
• Venture Corporation
• Yanzijiang Shipbuilding Holdings

Saturday 25 April 2008

• Armada Group
• EMS Energy