Hong Leong Asia (HL Asia): Breakout from Double Bottoms?

Hong Leong Asia or HL Asia just broke the neckline resistance of a Double Bottoms chart pattern after breaking the down trend channel (gray lines) resistance. The price target of the successful Double Bottoms Breakout is $3.16. This target is also the 200D MA resistance. Currently HL Asia may experience a pull back to the 20D/50D MA support at about $2.73. If this support is reliable, this is a good entry level to long this stock.

This Post Has 7 Comments

  1. Roy

    In my personal opinion, although there has been continuous growth in revenue for the past 10 years, the net income and hence the EPS hasn’t had growth coorelated to it but exhibiting cyclical pattern.

    With the current EPS of o.325 comparing last qtr of 0.538, the EPS yield has drop to its past year average and deem not suitable for value investor (I think).

    Taking into consideration on the multiple of EPS (average ~ 8 times) that investor (& trader) are willing to invest in, the price is also deem to be at around its fair value.

    In addition to above, without seeing change of trend in money putting into this counter that is on the decreasing trend, Hong Leong could less likely see a trend for the up.

  2. Marubozu

    Hi Roy,
    Agree with you that HL Asia is not for Value Investing.
    My plan is to trade base on chart pattern only.


  3. Liu

    Hi, Marubozu

    I have a question on value investment.

    I have identified and bought shares of a great company like Mencast Holdings. However, for the quarterly financial results released, Mencast’s cash flow operations dropped drastically for 2010 as compared to 2009. This pushes down its latest 2010 intrinsic value way below its current price (it used to be an undervalue stock upon my purchase). So, for this case, any advice to me on whether to hold/sell the stock?


  4. Marubozu

    Hi Liu,
    You need to check the detail on what is the reason that Mencast net operating cash flow drops significantly for that particular quarter or financial year. You need to make your judgement whether this reduction in cash flow is one time event or the company has lost its competitive advantage. If the core competency and the competitive advantage of this company business are still valid, you need to ignore this outlier of this one time event. After you have removed this outlier, check your assumption of the annual cash flow growth rate to see whether it is still valid. You also need to monitor for the next two quarters whether the company net operating cash flow back to the previous financial year before you make your decision to sell or hold. Value investing is for long term and you don’t need to rush to sell the stock in a hurry.
    Hope it helps.


  5. WK

    Well.. it does look cheap for HL Asia now…

  6. gg

    I bought HL Asia at 3.60 last year using CPF and now 2.33. should I sell it now since it keep keep dropping?

  7. Marubozu

    Sorry for the late update on the HL Asia.

    Double Bottom Pattern Failure for HL Asia.
    Currently the chart pattern for HL Asia looks bearish and it is on down trend.

    gg, I can’t recommend you to buy or sell and you have to make your own decision.

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