It’s Time To Take Profits on Singapore Banks.

Singapore banking stocks opened lower on Thursday (Feb 24), in view of extending losses on Wall Street amid Russia and Ukraine confrontation.

The recent results of Singapore banks have not been fantastic, with both DBS and OCBC bank missing analysts’ expectations.

DBS (SGX: D05): DBS Earnings Miss Forecasts Despite Plunging Allowances

DBS Group recent results showed its net profit for the fourth quarter grew 37 percent from a year earlier to S$1.39 billion, missing a forecast from a Reuters poll of four analysts.

The miss came despite total allowances tumbling after repayments of what the bank called two significant non-performing loans in the quarter.

But all of that wasn’t enough to overcome the negative impact of interest rate cuts early in the pandemic and the exceptional investment gains afterward when markets posted a stunning recovery.

Source: Finews.asia, Smartkarma

DBS (SGX: D05) exhibited technical breakdown yesterday (24 Feb 2022) after a 3-month uptrend (establish since end of Nov 21), the uptrend channel line has been broken and the stock is exhibiting a technical breakdown yesterday (24 Feb 2022).

Resistance is capped at 36.50, could correct to 33.81 and 32.70 in the short term from its current price of 34.95 (at the point of this write up), if weakness persist the stock could correct back to 31.05 and 29.87 in the longer term.

Cut loss above 36.50.

OCBC (SGX: O39) - Another Weak Print

OCBC reported 4Q21 net profit of SGD 973 million, an SGD 251 million (20.5%) decrease on a linked quarter basis.

If not for the 51.8% decline in Singapore not performing loans (NPLs), credit quality would have been disastrous for OCBC, reserves would appear to now be waning by more than SGD 2.8 billion or nearly three quarters of bottom-line results.

Source: Finews.asia, Smartkarma

OCBC (SGX: O39) similar to DBS exhibited bearish price action yesterday (24 Feb 2022) , after a 3-month uptrend (established since end of Nov 21), the uptrend channel line was broken upon their results announcement (23 Feb) and the stock is exhibiting further short-term bearish price action yesterday when it broke the 12.38 support level.

Resistance is capped at 12.69, could correct to support levels of 11.70, 11.38 and 10.98 in the short term from its current price of 11.92.

Cut loss above 12.69.

All posts and charts are for educational and illustration purposes only

Bloomberg Commodity Index - The Commodity Super Cycle Uptrend in full swing.

Conviction buy call to signal the start of the multiyear bull run was made on 18 Feb 2021. The index has gone up 100% but the bull is still young. Next target 115 and 135.

All posts and charts are for educational and illustration purposes only

Crude oil prices looks set to hit 100 and the commodity index will continue to charge ahead.

Russia is world top wheat producer and Ukraine is world 3rd largest producer of corn and 4th largest producer of wheat.

 

All posts and charts are for educational and illustration purposes only

Alibaba (9988 HK, NYSE: BABA) will be posting their results on 24 Feb 2022 (next Thursday). What are the street expectations? What do the analysts say?

Optimistic Analysts: Overly Impacted, Accumulate Before 3Q22 Result

Alibaba shares at current price is trading at 2017 price levels even though their revenue grew 5.5 times of that in 2017. Optimistic Analysts believe that Alibaba's current P/E for Fiscal 2022 (ending March 2022) at 15.9x is trading twice lower than the average P/E from 2017 to date at 31.3x.

Another more conservative method in valuing Alibaba shares to measure Alibaba’s P/E average before the pandemic (from Alibaba’s IPO to 2019) at 26.9x which is 68.5% higher than the P/E 2022.

As such, using the above valuation matrix above, Optimistic Analysts believe that the correction in Alibaba shares is over with a 68% upside potential target price of US$206.

In addition, they expect Alibaba’s revenue to grow 14% YoY in Q3, 2022 and 22% YoY for FY2022 with operating margin to stabilise (between 22.4-22.6%) over the next two years, as the group continues to dispose non-profitable business (i.e. Possibility to sell part of their media holdings Weibo Corp (HKEx: 9898, Nasdaq: WB)).

Pessimistic Analysts: But, The Street's Most Pessimistic Forecasts on Alibaba Have Been Right

Pessimistic analysts view that Alibaba average consensus price targets (PT) have often been "too optimistic" over the past three years. It seems that BABA stock has trended closer to its most pessimistic price targets (PT), notably since BABA stock's November 2020 peak. Moreover, Alibaba's PT has also been revised downwards consistently, as its fundamentals have gotten worse as China's economy continues to slow.

In addition, Alibaba's reducing margins and investments in lower margins businesses have contributed to their consistent deterioration and diluted margins over the last three years.

Amid macroeconomic impact from China's slowing growth coupled with the need for more aggressive investments to fend off competition and develop new long-term growth drivers, pessimistic analysts believe that Alibaba lack a near term catalyst and there aren't enough near-term catalysts to turn more positive over its medium-term outlook yet. They believe that there is still a period of digestion for Alibaba until its revenue estimates reach a bottom.

They think it could come nearer to the end of 2022, as certain macro headwinds could start to unwind. These include the supply chain disruption and regulatory clarity.

The most pessimistic PT for BABA stock is $140, representing a 14.5% implied upside.

But, if you take a meaningful discount to account for Alibaba stock headwinds, then it's at most fairly valued, if not overvalued.

Therefore, pessimistic analysts encourage investors to remain patient for more data points before jumping into Alibaba stock again.

Moreover, the growth stocks correction in the US market has presented a plethora of alternative opportunities to consider. So, they believe that there's no need to rush into Alibaba stock for now.

Source: Smartkarma/Seeking Alpha

(Disclaimer: the above is for informational purposes subject to errors and omissions, and does not constitute an offer to sell or a solicitation of an offer to purchase any financial instrument.) 

All posts and charts are for educational and illustration purposes only

US Dollar Index - One Year Rally Could Be Over!

Macro Trend Cycle was hit at 94.5, get set for the down trend cycle which will see dollar crash to 92.00.

All posts and charts are for educational and illustration purposes only