With reference to my writeup on Guocoleisure (“GLL”) dated 27 May 2015,, I wrote that the measured technical target price was S$1.050, should it break the four month trading range of $0.910 – 0.980 on the upside. In line with my expectations, GLL reached 1.045 on 8 June 2015 (one bid away from my target) before profit taking set in.
With reference to Chart 1, GLL has been consolidating around $0.990 – 1.045 since 28 May 2015. Its exponential moving averages have been rising and have formed golden crosses in the last two weeks of May. This is supportive of a medium term uptrend. The price seems to have found support around $0.990 – 0.995. The next push (if it happens) is likely to take it to around $1.075 – 1.100. Supports are at $1.000 / 0.990. Resistances are at 1.020 – 1.025 / 1.050. GLL closed -$0.005 to $1.005. Day range was $1.000 – 1.015.
The bullish setup of the chart will be negated if it breaches S$0.970 with volume and on a sustained basis.
Other noteworthy points on GLL
a) GLL is hosting a corporate presentation tomorrow (18 Jun 2015) to update the investment community of its developments;
b) Mr Quek Leng Chan has bought back 350,000 GLL shares at an average approximate price of $0.950 over the period of 21 – 25 May 2015. This was the first purchase since Oct 2012;
c) According to the analysts, the average analyst target is around 1.180; RNAV is around 1.68-1.80.
d) GLL has been giving S$0.02 dividends annually for the past four years. Financial year end is in June hence the dividend payout is likely to be announced in Aug and payout in Nov.
Chart 1: GLL has been consolidating around $0.990 – 1.045
Source: CIMB chart as of 17 Jun 2015
2. Resources Prima
Since 17 Apr 2015, Resources Prima (“RPG”) has traded within a potential flag formation (See Chart 2 below). RPG has dropped around 19% since the intraday high of $0.141 on 4 Jun 2015 to close $0.114 today. The weak ADX, coupled with relatively low readings of MFI, RSI and oversold indicator such as MACD likely indicate that the selling pressure (if any) is unlikely to be strong. In addition, the recent drop is typically not accompanied with much volume on a relative basis. Support is around 0.110 - 0.114. Resistance 0.122 / 0.130 - 0.132.
Notwithstanding the above, the chart outlook is still uncertain with a tinge of bearishness, especially with the declining EMAs. It will be positive if RPG can breach $0.137 on a sustained basis. On the flip side, if it breaks below $0.110 with volume and on a sustained basis, the outlook is likely to be bearish from a chart perspective.
Other noteworthy points on RPG
a) Mgmt outlined four major steps in getting the IPPKH2 licence in their 4QFY15 financial results. They have completed the first three steps and have commenced the final step with an application submitted to the Ministry of Forestry. According to RPG, the first two steps were the most difficult to clear. Based on personal estimate, I would think we should be able to hear from RPG in the next 2-6 weeks if they are successful.
b) Although the coal industry remains in the doldrums, there are reasons to be optimistic in RPG.
- Based on an Apr 2014 JORC report, RPG has coal resources and reserves amounting to about 24m tons and 6.9m tons respectively for the *309 ha of land available for mining. Once the IPPKH2 for the remaining 1,624 ha is approved, RPG’s coal resources and reserves are expected to jump.
*309 ha includes the logistics aspect e.g. coal loading conveyor, stockpile etc. Current effective area for mining is around 280ha +.
- Cost reduction effects – more significant in FY16F than FY15. The reduction in waste mining rate which results in a potential cost saving (including value added tax) of between US$2.70 – 3.40 per MT will be applicable in FY16F.
- Provision of coal mining facilities to 3rd party mine owners expects to gain traction in FY16F with at least another one coal mining owner likely to lease their facilities in 1HFY16F.
- High coal content allows blending opportunities: RPG’s high calorific value of 5,600 places it at an enviable position to cooperate with other mine owners whose calorific values are lower by blending both coal together to get an acceptable quality. It is noteworthy that there is a likelihood that the remaining 1,624 ha may contain coal of higher calorific value than **5,600.
** Indonesia coal has typically five coal grades viz. 6,500 (ICI 1), 5,800 (ICI 2), 5,000 (ICI 3), 4,200 (ICI 4) and 3,400 (ICI 5) kcal/kg GAR. ICI1 is the most premium coal. RPG’s coal is at ICI2 level.
- Depending on management’s schedule, there may be a site visit for analysts to their Indonesia coal mine in the next 1-3 months.
Chart 2: RPG has dropped around 19% since 4 Jun 2015
Source: CIMB chart as of 17 Jun 2015
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