Saturday, December 18, 2010

Week 50: Portfolio Drifts Down As CAH, GMG Sold Down

Went for my company's Christmas dinner last night at the Mandarin Oriental's Melt The World cafe. We did not get the ala carte but chose the buffet menu which was very popular with everyone from the office. I remember going for a few rounds at the food station myself. However, I guess that the bill would be very expensive as it was close to a hundred dollars per person before the charges!

The portfolio was not as happy as I was last night. Compared to the previous week, the portfolio pared about $530 as a result of the sell down of several counters. China Animal Healthcare, which had fared so well last week, so a sell down of its shares from a high of 41.5 cents to close 39.5 cents, as investors took profit. GMG Global also lost 2 cents in trade.

The spotlight for the past few weeks have really been the stellar performance of Amtek Engineering and STX OSV. Despite critical comments from others and myself, the stock has performed much better than the first few days of listing, with the re-listing at $1.13 and the shipbuilder at $1.12. Interestingly, while their shares were initially falling - below a dollar for Amtek and 80 cents for STX OSV - due to poor sentiment, there was plenty of stabilisation trades.

From my limited understanding, stabilization trades are trades carried out to ensure that the IPO price does not fall too much due to open market selling. The opposite will be the over allotment option which allows the vendor or the issue manager to sell more shares, if they see that there is as strong demand for it.

Both Amtek and STX OSV have also recently posted good results. Amtek's earnings for the first quarter of its financial year doubled to $12 million on the back of a 11 per cent increase in revenue. STX OSV revenue was up by 6 per cent for the first nine months of its financial year, with the ship builder turing around to record a profit of NOK 740 million (approx SGD 162 million) from a loss of NOK 40 million.

2011 should see more IPO in the local market. This is contingent on how the proposed merger between ASX and SGX pans outs. In the unlikely event that the deal goes through, we could see more Australian companies list here to tap liquidity, Whether there will be anymore S-Chips coming to town is another question. But the lesson I have learned from my poor calls on IPOs, is that we should not under estimate the strong hands behind the scene. They have the ability to keep a stock from falling underwater through their sheer financial resources. Meanwhile, I will try my best to keep my mouth shut. Lol.

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