Thursday, April 19, 2012

Sembcorp Industries

The idea of this post is to outline a trading idea on Sembcorp for the coming twelve months.

This is a picture of Sembcorp's performance in the period from April 2011 to Nov 2011.

Sembcorp was at 5.4 in April 2011, it fell to below 3.5 to around 3.4 in October.

Okay, was this a one-off ?

In 2010, also, after April it sold off from around 4.4 to around 3.8.

Did this happen in 2009 ?

Yes, it did.

It fell from around 2.8 to 2.6 as you can see from the above chart.

Why does it fall in May ?

Short answer is that it goes ex-dividend in May.

The fall is always more exaggerated than just the dividend amount.

So, the trading idea is as follows :-

Assuming the world does not go to hell in a handbasket, buy Sembcorp anywhere from May till November.

The range of fall could be 5.06 or 4.66 or 3.66

My prediction for whatever it is worth, is that it would fall from around 5.4 as on date i.e. 20th April 2012 to around 4.35 by November 2012.

Ideally, buy at a price below 4.5 and sell it anywhere from November 2012 onwards till April 2013 when it hits 5.5.

The return on capital is around 22%, good enough for a year holding period.

Have fun.

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