Saturday, April 17, 2010

COSCO VS Yangzijiang – Which One is Under Value and Have Higher Upside Potential?

China shipping stocks have been on crazy run up recently. It really gave me a big knock and made me think what has happened to trigger this bullish run. One of the my lesson learnt is never chase the stock when it is over value. Thus, I have to go back to the stock fundamental and stock chart to see whether I am too early or too late to catch this mini bull run on shipping stocks.

Comparison of COSCO & Yangzijiang Fundamental and Stock Value.
Base on FY09 Financial Report (ended Dec 2009):

Fundamentally Yangzijiang (Net Profit %, Net Cash from Operation, ROA, ROE) are much better than COSCO and the stock is still under value (PE < 15 for past two to three years). If YZJ is to reach the 2008 PE of 15.85, the fair intrinsic value should be about $2.20 (base on $0.139 EPS in 2009). COSCO current PE is 35.2 which is extremely over value. The fair intrinsic value of COSCO should be $0.735 using PE of 15 & $0.049 FY09 EPS.

Base on Yangzijiang stock chart, YZJ has just broken an important resistance at $1.26 recently and the next significant resistance is at $1.472 (123.6% Fibonacci Retracement Level). There are also no other significant resistance when I extend the chart to 2 years period. Thus, there is still about 8% upside potential to the next resistance technically and 62.5% upside potential to reach $2.20 fundamentally (base on Intrinsic Value).

As for COSCO chart, the stock price has reached resistance of 138.2% Fibonacci Retracement Level. If COSCO clears this resistance, the next one will be $1.81 (150% Fibonacci Retracement Level). As the stock price is impossible to keep going up, I would expect COSCO to have big difficulty to clear this level. Thus, upside potential is about 5% technically. In addition, RSI and Stochastic indicated COSCO is Overbought.

Fundamentally, the downside potential for COSCO is very high as COSCO is over value base on the intrinsic value calculation. If there is no significant EPS improvement in the coming quarter earning announcement, I expect heavy selling will start in COSCO soon.

The above article is food for thought esp with the "play" still on for Chinese shipping/shipyard stocks listed here.
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2 comments:

wINtoTo N aLSo 4D...yEAh! said...

CLARIFICATION WITH REGARDS TO RECENT NEWS REPORTS IN GENERAL

The Board of Directors (the “Board”) of Yangzijiang Shipbuilding (Holdings) Ltd. (“YZJ” or the “Company”) would like to clarify with regards to the recent news reports in general about the Company considering/planning alternative listing options.

The Board of YZJ wishes to highlight that a number of investment banks and financial advisors have approached the Company with proposals for a dual listing on the Hong Kong Stock Exchange and/or a listing of Taiwan Depository Receipts on the Taiwan Stock Exchange. The Company has only conducted preliminary talks with these parties and no decision has been made on this matter. The Company will make further announcements if there is any development on the subject matter. The Company is continuously exploring a range of business avenues and opportunities in order to enhance shareholders’ value. Discussions with various counterparties from time to time are part and parcel of YZJ’s continuing efforts in this regard.

Accordingly, shareholders and investors should exercise caution when dealing in the shares of the Company and should refrain from taking action in relation to their shares on the basis of or in reliance of any rumours in the market

2:18 PM
wINtoTo N aLSo 4D...yEAh! said...

Fundamentally, the downside potential for COSCO is very high as COSCO is over value base on the intrinsic value calculation. If there is no significant EPS improvement in the coming quarter earning announcement, I expect heavy selling will start in COSCO soon.

So, if you only have ONE torpedo to sink one ship, which one will you go? COSCO or Yangzijiang?

I have my target locked on already anyway……..

2:43 PM

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tO hAVe FuN wiTH mY liFe aND aLsO wAnT mY loVED oNeS tO hAVE tHE SaME tOO. :) bUt iN rEAL LiFe tHaT sHouLd bE sOOn.