Yesterday I poster that Pad 5 will have 4 wells. It is incorrect. There will be only 3 wells on Pad 5. Well GY678 which supposedly will be the fourth well to be drilled on Pad 5 will instead be drilled on Pad 3, the site where Well GY670 was drilled and delivered a gusher at 1,000 bopd.
However, it is best that we refrain from having any high expectations and let's await the results towards the third or fourth week of August.
Thursday, July 30, 2015
SAUDI ARABIATO CUT PRODUCTION BY 300,000 BARRELS BY THE END OF SUMMER
Saudi Arabia is planning to cut production by as much as 300,000 bopd by the end of summer.
This should lend some support to the price of crude.
Iran on the other hand will add 500,000 - 1 million bopd by 2016. So the reduction by Saudi Arabia could help the market absorb the increase of production by Iran.
An article by oilprice.com shale oil production in the US is expected to decline up to 830,000 bopd in the next six months. however this decline could be made worse in October when bankers are due to review many of the shale oil companies balance sheets and assess the risks of the loans given.
Link: http://www.thestreet.com/video/13236846/saudi-arabia-to-cut-oil-production-levels-at-the-end-of-summer.html
This should lend some support to the price of crude.
Iran on the other hand will add 500,000 - 1 million bopd by 2016. So the reduction by Saudi Arabia could help the market absorb the increase of production by Iran.
An article by oilprice.com shale oil production in the US is expected to decline up to 830,000 bopd in the next six months. however this decline could be made worse in October when bankers are due to review many of the shale oil companies balance sheets and assess the risks of the loans given.
Link: http://www.thestreet.com/video/13236846/saudi-arabia-to-cut-oil-production-levels-at-the-end-of-summer.html
Wednesday, July 29, 2015
LGO DRILLING UPDATE
Well GY 676, the second well on Pad 5 has reached TD. Total oil net pay is 472 feet of which 250 feet were in the Goudron Sands and 222 feet, in the C-Sands.
Total production in Q2 averaged at 951 bopd, far lower than many expected, hence the short attack immediately upon the announcement. This was a far cry from the 1,550 bopd averaged in Q1. In the absence of any management news to address the decline, many decided that it was due to steep decline in pressure and that the wells were unprofitable in the long run. This is NOT TRUE.
LGO has always maintained that they would optimise the flow to preserve the longevity of the well, and therefore would always look at the most optimum output to maintain the integrity of the well. Therefore it is my believe that LGO wants the well to be free flowing for as long as it could do so, even if it means choking back the flow.
The other explanation is to preserve the oil in the ground rather than selling it at such a ridiculously low price.
This is just conjecture on my part but the truth is not far off as the 5,000 barrels sales tank will be in place towards September end and we will see if LGO would increase the output from the 8 wells drilled last year. If they remain the same, then likelihood is that the pressure within the well dissipates very fast and therefore affect the overall production. Then LGO may opt to have pumps on standby the pump from the wells.
Baring in mind that the 951 bopd does not include wells from Pad 4 & Pad 5. Well GY672 on pad 4 is producing at 240 bopd, so let's assume that all the 7 wells on Pad 4 & 5 will produce an average of 200 bopd. So that would give us an extra 1,400 bopd.
LGO has also confirmed that they have found a smaller rig to start drilling in the Goudron Sands later in the year. There are 15 wells remaining and likely all these 15 wells will target the Goudron Sands.
If we study the cost, the cost of drilling deep into the C-sands cost US$1.5 million last year. This year there is a savings of 30% - 40%, so let's assume the cost of drilling into the C-Sands is US$1 million per well. Now, compare that to the cost of drilling into the Goudron Sands which is estimated at between US$35,000 - US$40,000 per well.
If we study the decline rate, wells drilled targeting the C-Sands last year are averaging less than 100 bopd per well today. A well in the Goudron Sands will yield about 60 bopd with a pump. Isn't it more economical then to produce from the Goudron Sands? So it seems LGO is also aware of this, hence the start of a drilling campaign in the Goudron Sands later in the year.
Assuming 60 bopd per well for Goudron Sands, 15 wells will yield a production of 900 bopd.
Adding all the 30 wells,
Last year drilling ( 8 wells C-Sands) 951 bopd
This year drilling (7 wells C-Sands) 1,400 bopd
This year drilling (15 wells Goudron Sands) 900 bopd
Total 3,251 bopd going into 2016
So I would expect that future drilling of the next 30 wells (awaiting permit approval) will be a combination of 15 Goudron Sands wells and 15 C-Sands wells. The C-Sands wells are important because they will determine the how the waterflood programme will run. The waterflood programme will eradicate the issue of lack of pressure and will increase the production from the C-sands dramatically. However this will not happen until 3 years later. At this point it is worthwhile to note that a pilot project will start in 2016.
LGO also stated in the previous announcement that drilling in the Cedros will also commence in 2016.
So there are still a lot of positives surrounding LGO, but perhaps we need to scale back our expectation.
At current price of 1.59 pence, it is a BUY. But the 12 months target will now be scaled back from 10 pence to 6 - 7 pence at this current oil price.
My disclosure: I own shares of LGO.
Total production in Q2 averaged at 951 bopd, far lower than many expected, hence the short attack immediately upon the announcement. This was a far cry from the 1,550 bopd averaged in Q1. In the absence of any management news to address the decline, many decided that it was due to steep decline in pressure and that the wells were unprofitable in the long run. This is NOT TRUE.
LGO has always maintained that they would optimise the flow to preserve the longevity of the well, and therefore would always look at the most optimum output to maintain the integrity of the well. Therefore it is my believe that LGO wants the well to be free flowing for as long as it could do so, even if it means choking back the flow.
The other explanation is to preserve the oil in the ground rather than selling it at such a ridiculously low price.
This is just conjecture on my part but the truth is not far off as the 5,000 barrels sales tank will be in place towards September end and we will see if LGO would increase the output from the 8 wells drilled last year. If they remain the same, then likelihood is that the pressure within the well dissipates very fast and therefore affect the overall production. Then LGO may opt to have pumps on standby the pump from the wells.
Baring in mind that the 951 bopd does not include wells from Pad 4 & Pad 5. Well GY672 on pad 4 is producing at 240 bopd, so let's assume that all the 7 wells on Pad 4 & 5 will produce an average of 200 bopd. So that would give us an extra 1,400 bopd.
LGO has also confirmed that they have found a smaller rig to start drilling in the Goudron Sands later in the year. There are 15 wells remaining and likely all these 15 wells will target the Goudron Sands.
If we study the cost, the cost of drilling deep into the C-sands cost US$1.5 million last year. This year there is a savings of 30% - 40%, so let's assume the cost of drilling into the C-Sands is US$1 million per well. Now, compare that to the cost of drilling into the Goudron Sands which is estimated at between US$35,000 - US$40,000 per well.
If we study the decline rate, wells drilled targeting the C-Sands last year are averaging less than 100 bopd per well today. A well in the Goudron Sands will yield about 60 bopd with a pump. Isn't it more economical then to produce from the Goudron Sands? So it seems LGO is also aware of this, hence the start of a drilling campaign in the Goudron Sands later in the year.
Assuming 60 bopd per well for Goudron Sands, 15 wells will yield a production of 900 bopd.
Adding all the 30 wells,
Last year drilling ( 8 wells C-Sands) 951 bopd
This year drilling (7 wells C-Sands) 1,400 bopd
This year drilling (15 wells Goudron Sands) 900 bopd
Total 3,251 bopd going into 2016
So I would expect that future drilling of the next 30 wells (awaiting permit approval) will be a combination of 15 Goudron Sands wells and 15 C-Sands wells. The C-Sands wells are important because they will determine the how the waterflood programme will run. The waterflood programme will eradicate the issue of lack of pressure and will increase the production from the C-sands dramatically. However this will not happen until 3 years later. At this point it is worthwhile to note that a pilot project will start in 2016.
LGO also stated in the previous announcement that drilling in the Cedros will also commence in 2016.
So there are still a lot of positives surrounding LGO, but perhaps we need to scale back our expectation.
At current price of 1.59 pence, it is a BUY. But the 12 months target will now be scaled back from 10 pence to 6 - 7 pence at this current oil price.
My disclosure: I own shares of LGO.
Tuesday, July 28, 2015
CAPITARETAIL CHINA TRUST 1H 2015 RESULTS
Revenue increased 9.7% y-o-y
Net Income increased 6.1% y-o-y
Distribution S$0.0537 and increase of 7.6% y-o-y
On target to achieve a Distribution of S$0.1083
Based on my BUY call at S$1.64, it represents at yield of 6.6%
Still maintain BUY position up to S$1.65. This is the NAV per Unit. Any price above S$1.65 will erode the yield.
Balance sheet remains sound with gearing at 27.7%.
However, economists are expecting China's growth to take a hit due to the stock market's volatility. This could impact the 2H 2015 results negatively, but will be mitigated by a pro-active management team. Recent new tenants include Tommy Hilfiger and Nike at Capitamall Wangjing, The Bellagio restaurant at Capitamall Xizhimen, British retailer New Look and Korean cosmetic brands Etude and Innisfree at Capitamall Grand Canyon, among others.
My disclosure: I own shares of CapitaRetail China.
Net Income increased 6.1% y-o-y
Distribution S$0.0537 and increase of 7.6% y-o-y
On target to achieve a Distribution of S$0.1083
Based on my BUY call at S$1.64, it represents at yield of 6.6%
Still maintain BUY position up to S$1.65. This is the NAV per Unit. Any price above S$1.65 will erode the yield.
Balance sheet remains sound with gearing at 27.7%.
However, economists are expecting China's growth to take a hit due to the stock market's volatility. This could impact the 2H 2015 results negatively, but will be mitigated by a pro-active management team. Recent new tenants include Tommy Hilfiger and Nike at Capitamall Wangjing, The Bellagio restaurant at Capitamall Xizhimen, British retailer New Look and Korean cosmetic brands Etude and Innisfree at Capitamall Grand Canyon, among others.
My disclosure: I own shares of CapitaRetail China.
Monday, July 27, 2015
LEG UPDATE
LEG recently announced that its investee company, Virtual Stock has entered into contract with a leading NHS Teaching Hospital Trust to deliver cost saving efficiencies within its supply chain.
I see this as being extremely positive.
I am hopeful that this will be the first step into providing solutions to the broader medical supplies market.
I maintain my BUY rating up to 0.0012 pence. The exit point will be upon the listing of Virtual Stock.
My disclosure: I am long LEG.
I see this as being extremely positive.
I am hopeful that this will be the first step into providing solutions to the broader medical supplies market.
I maintain my BUY rating up to 0.0012 pence. The exit point will be upon the listing of Virtual Stock.
My disclosure: I am long LEG.
Sunday, July 26, 2015
ARE OPEC SHORTS DRIVING DOWN THE PRICE OF CRUDE?
News had surfaced that the recent fall in oil price was primarily driven by unabashed shorting by none other then Sovereign Wealth Funds (SWF) from OPEC. Sources believed that the shorting was sponsored by two of the largest SWF in the world: SAMA Foreign Holdings (Saudi Arabia) and Kuwait Investment Authority, which was done through a series of intermediaries. This subsequently led to further shorting in the market by other funds which noticed the trend. Eventually oil gave up more than US$13 per barrel in three short weeks.
Here's the BIG question: Why would OPEC shoot itself in the foot?
We can only deduce the reasons why.
1) When oil was trading above US$60 per barrel we saw three weeks of consecutive increase in oil rigs being put to work in the US. This means that some shale oil companies are comfortable to generate profit at that level. Perhaps the short was a means to remind the shale oil companies that the game was not over yet.
2) Many shale oil companies will have their credit line and financing reviewed by financial institutions in October. This is perhaps a strategy to force them to sell their assets in the event of any financing being withdrawn or greater collaterals being demanded by the financial institutions. Meanwhile many shale oil companies are cutting their reserves level, which will impact their balance sheets.
3) Incidentally, Saudi Arabia and Russia will meet on 30 July to discuss about Iran, OPEC and price of oil. Saudi Arabia had indicated previously that they had spoken to Russia to reduce their oil output but the Saudi Arabia's request was refused. Subsequently oil price plummeted and Russia is now in recession. In a report by Daily Telegraph, Russia could be bankrupt if oil price continues to stay this low till the end of 2016. Perhaps this was a means to get Russia to agree to a cut in production.
Yesterday we discussed about the Iran implications. As new reports surface, it seems the game of chess is being slowly revealed one piece at a time. I for one, believe that the OPEC countries need to boost up the price of oil fast as all are running on a budget deficit due to their respective country's welfare system. To do that, they must eliminate the threat of the shale oil companies as a major producer.
The above is just my opinion.
Link: http://www.marketoracle.co.uk/Article51581.html?
Here's the BIG question: Why would OPEC shoot itself in the foot?
We can only deduce the reasons why.
1) When oil was trading above US$60 per barrel we saw three weeks of consecutive increase in oil rigs being put to work in the US. This means that some shale oil companies are comfortable to generate profit at that level. Perhaps the short was a means to remind the shale oil companies that the game was not over yet.
2) Many shale oil companies will have their credit line and financing reviewed by financial institutions in October. This is perhaps a strategy to force them to sell their assets in the event of any financing being withdrawn or greater collaterals being demanded by the financial institutions. Meanwhile many shale oil companies are cutting their reserves level, which will impact their balance sheets.
3) Incidentally, Saudi Arabia and Russia will meet on 30 July to discuss about Iran, OPEC and price of oil. Saudi Arabia had indicated previously that they had spoken to Russia to reduce their oil output but the Saudi Arabia's request was refused. Subsequently oil price plummeted and Russia is now in recession. In a report by Daily Telegraph, Russia could be bankrupt if oil price continues to stay this low till the end of 2016. Perhaps this was a means to get Russia to agree to a cut in production.
Yesterday we discussed about the Iran implications. As new reports surface, it seems the game of chess is being slowly revealed one piece at a time. I for one, believe that the OPEC countries need to boost up the price of oil fast as all are running on a budget deficit due to their respective country's welfare system. To do that, they must eliminate the threat of the shale oil companies as a major producer.
The above is just my opinion.
Link: http://www.marketoracle.co.uk/Article51581.html?
THE SIGNIFICANCE OF A DEAL WITH IRAN AND RUSSIA'S OIL PREDICAMENT
Below are two interesting articles which is a MUST read.
Having read through both, I would like to share my opinion of the significance and impact of the deal with Iran.
I tend to agree that there is a potential for a major oil spike if all Capex are put on hold or cancelled due to the depressed oil price. A major spike could actually result in a global crisis of epic proportion, including a super inflation.
I believe the depressed oil price will result in a wave of bankruptcies among shale oil companies. This could result in many being taken over by Big Oil, several of which have recently enlarged their war chest to potentially take over weak and failing shale oil companies with attractive assets.
Some have opined that the current oil crisis was engineered to destroy the US shale oil companies. I think it was more than that. In collusion with who I have no idea. But here are some interesting outcomes which could happen:
1) US shale oil companies become attractive take over targets by Big Oil.
2) The oil crisis has resulted in a recession in Russia which could deepen into a depression if the current crisis is prolonged (read the Daily Telegraph article).
3) Venezuela is in a state of financial meltdown due to the oil crisis.
4) Due to 2) and 3), two major oil producers are now in dire straits. Cut off from the world without foreign investment and import of new technology, oil production will continue to worsen and continue to damage the economy.
5) Oil companies from US and Europe have indicated interest to help Iran pursue its agenda to increase production. In the Middle East Eye article, it was mentioned that several oil executives from US were in discussion with Iranian officials many months prior to discuss post-sanctions co-operation to tap on the oil bonanza. Included in the deal with Iran would likely be a condition to grant access for foreign oil companies to invest in Iran oilfields.
6) A resurgent Iran would act as a balance of power in the Middle East.
There is now doubt that Iran can quickly increase its production as feared by many. In fact, the Mid East Eye article states that production could only come online a few years after the sanctions are lifted which most probably will be next year. By then global economy would perhaps be able to absorb the excess supply.
Interestingly, supposing Big Oil have acquired large enough shale assets, have rights to Iran's oil, and with Venezuela and Russia seeing their production continue to decline, would we not see a sense of stability returning to the price of oil? And of course a gradual and coordinated increase in price as well.
The above is just my opinion.
Link 1: http://www.telegraph.co.uk/finance/economics/11759391/Oil-and-gas-crunch-pushes-Russia-closer-to-fiscal-crisis.html
Link 2: http://www.middleeasteye.net/columns/iran-deal-about-staving-coming-oil-shock-1366649799
Having read through both, I would like to share my opinion of the significance and impact of the deal with Iran.
I tend to agree that there is a potential for a major oil spike if all Capex are put on hold or cancelled due to the depressed oil price. A major spike could actually result in a global crisis of epic proportion, including a super inflation.
I believe the depressed oil price will result in a wave of bankruptcies among shale oil companies. This could result in many being taken over by Big Oil, several of which have recently enlarged their war chest to potentially take over weak and failing shale oil companies with attractive assets.
Some have opined that the current oil crisis was engineered to destroy the US shale oil companies. I think it was more than that. In collusion with who I have no idea. But here are some interesting outcomes which could happen:
1) US shale oil companies become attractive take over targets by Big Oil.
2) The oil crisis has resulted in a recession in Russia which could deepen into a depression if the current crisis is prolonged (read the Daily Telegraph article).
3) Venezuela is in a state of financial meltdown due to the oil crisis.
4) Due to 2) and 3), two major oil producers are now in dire straits. Cut off from the world without foreign investment and import of new technology, oil production will continue to worsen and continue to damage the economy.
5) Oil companies from US and Europe have indicated interest to help Iran pursue its agenda to increase production. In the Middle East Eye article, it was mentioned that several oil executives from US were in discussion with Iranian officials many months prior to discuss post-sanctions co-operation to tap on the oil bonanza. Included in the deal with Iran would likely be a condition to grant access for foreign oil companies to invest in Iran oilfields.
6) A resurgent Iran would act as a balance of power in the Middle East.
There is now doubt that Iran can quickly increase its production as feared by many. In fact, the Mid East Eye article states that production could only come online a few years after the sanctions are lifted which most probably will be next year. By then global economy would perhaps be able to absorb the excess supply.
Interestingly, supposing Big Oil have acquired large enough shale assets, have rights to Iran's oil, and with Venezuela and Russia seeing their production continue to decline, would we not see a sense of stability returning to the price of oil? And of course a gradual and coordinated increase in price as well.
The above is just my opinion.
Link 1: http://www.telegraph.co.uk/finance/economics/11759391/Oil-and-gas-crunch-pushes-Russia-closer-to-fiscal-crisis.html
Link 2: http://www.middleeasteye.net/columns/iran-deal-about-staving-coming-oil-shock-1366649799
Saturday, July 25, 2015
US OIL RIGS INCREASED BY 21
US oil rigs increased by 21 last week which put pressure on the price of oil. Oil closed to its lowest in recent months at US$48.14 per barrel. Total count is now 659. analysts had expected a pull back in the number of rigs.
It is an irony actually. Just before the decline started in early July, oil was sitting at US$58 - US$62 per barrel. This led many US producers into believing that the oil price had finally stabilised and it was safe to resume drilling. With oil falling below the psychology US$50 per barrel, we could see the oil rigs count falling yet again in the next few weeks.
The coming weeks could see oil testing its lowest level since March 2015.
Could it be that the market was over reacting towards the possibility of Iran adding another 1 million barrels of oil into the market in 2016?
Opec did say that will will maintain production at 30 million bopd, but in fact, total production is somewhere around 31 million bopd. Will Iran's 1.0 million bopd result in total production reaching 32 million bopd or will it remain at 31 million bopd, with other members reducing their production to accommodate Iran? If the latter is the case, there won't be any additional 1 million bopd added into the market which could be sigh of relief for all.
How this play out remains to be seen. But definitely we will see an upheaval in the US shale oil as Q2 earnings disappoint, with many operators running out of cash,and financing becoming increasing difficult. Equity sales too will likely draw flak from existing shareholders. Banks will also review their lending to shale oil companies as early as October 1. This will put a tight squeeze on the shale oil companies' financials. With limited options, we could well see some assets sales or mergers down the road. Only recently one listed Chapter 11 filing as an option. I expect several more companies to file for Chapter 11.
The above is just my opinion.
It is an irony actually. Just before the decline started in early July, oil was sitting at US$58 - US$62 per barrel. This led many US producers into believing that the oil price had finally stabilised and it was safe to resume drilling. With oil falling below the psychology US$50 per barrel, we could see the oil rigs count falling yet again in the next few weeks.
The coming weeks could see oil testing its lowest level since March 2015.
Could it be that the market was over reacting towards the possibility of Iran adding another 1 million barrels of oil into the market in 2016?
Opec did say that will will maintain production at 30 million bopd, but in fact, total production is somewhere around 31 million bopd. Will Iran's 1.0 million bopd result in total production reaching 32 million bopd or will it remain at 31 million bopd, with other members reducing their production to accommodate Iran? If the latter is the case, there won't be any additional 1 million bopd added into the market which could be sigh of relief for all.
How this play out remains to be seen. But definitely we will see an upheaval in the US shale oil as Q2 earnings disappoint, with many operators running out of cash,and financing becoming increasing difficult. Equity sales too will likely draw flak from existing shareholders. Banks will also review their lending to shale oil companies as early as October 1. This will put a tight squeeze on the shale oil companies' financials. With limited options, we could well see some assets sales or mergers down the road. Only recently one listed Chapter 11 filing as an option. I expect several more companies to file for Chapter 11.
The above is just my opinion.
Friday, July 24, 2015
SHALE OIL AND THE US$500B QUESTION
This is an interesting read.
Apparently in the last few years during the boom cycle, US oil companies had amassed total debts amounting to more than US$500B.
Will the continued depression in oil price trigger a recession in the US which could impact the world economy or will it be restricted within the industry itself?
Link: http://www.investing.com/analysis/oil-beckoning-recession-259290
Apparently in the last few years during the boom cycle, US oil companies had amassed total debts amounting to more than US$500B.
Will the continued depression in oil price trigger a recession in the US which could impact the world economy or will it be restricted within the industry itself?
Link: http://www.investing.com/analysis/oil-beckoning-recession-259290
KEPPEL REIT H1 2015 RESULTS
Keppel REIT just announced its H1 2015 results:
Revenue decreased 9.3%
Profit decreased 4.8%
Distribution Income S$0.0172
Distribution decreased 9.5% y-o-y
Current Ratio 0.69
Gearing Ratio 0.36
Net Asset Value per Unit $1.17 (excluding Distributable Income)
Number of Units increased by 386 million in a year
The results were unimpressive and it goes to show that Keppel REIT still needs to get its finacials into order, particularly by improving its Current Ratio,
Meanwhile, it has completed 100% refinancing requirements for 2015 and early refinanced about 70% of loans due in 2016 as well as commenced early refinancing for loans due in 2017. This of course has lengthened the weighted average term to maturity to 3.9 years (increase of 0.8 years). Interest rate remained steady at 2.5%.
It seems that the lower AUD too is impacting its profitability. To this extent, Keppel REIT has also hedged almost 100% of Distributable Income from Australia for the remaining 2015 to mitigate currency fluctuations.
Keppel REIT will also embarking on a maiden Distribution Reinvestment Plan for the Q2 distribution to strengthen the balance sheet and converse cash.
Achieved rental reversion of 18% on the average for H1 2015.
I maintain my HOLD rating. Although the current Unit Price (S$1.12) remains below it NAVPU, the weak earnings and financials do not lend the support required to get a BUY rating.
My disclosure: I am long Keppel REIT.
Revenue decreased 9.3%
Profit decreased 4.8%
Distribution Income S$0.0172
Distribution decreased 9.5% y-o-y
Current Ratio 0.69
Gearing Ratio 0.36
Net Asset Value per Unit $1.17 (excluding Distributable Income)
Number of Units increased by 386 million in a year
The results were unimpressive and it goes to show that Keppel REIT still needs to get its finacials into order, particularly by improving its Current Ratio,
Meanwhile, it has completed 100% refinancing requirements for 2015 and early refinanced about 70% of loans due in 2016 as well as commenced early refinancing for loans due in 2017. This of course has lengthened the weighted average term to maturity to 3.9 years (increase of 0.8 years). Interest rate remained steady at 2.5%.
It seems that the lower AUD too is impacting its profitability. To this extent, Keppel REIT has also hedged almost 100% of Distributable Income from Australia for the remaining 2015 to mitigate currency fluctuations.
Keppel REIT will also embarking on a maiden Distribution Reinvestment Plan for the Q2 distribution to strengthen the balance sheet and converse cash.
Achieved rental reversion of 18% on the average for H1 2015.
I maintain my HOLD rating. Although the current Unit Price (S$1.12) remains below it NAVPU, the weak earnings and financials do not lend the support required to get a BUY rating.
My disclosure: I am long Keppel REIT.
Thursday, July 23, 2015
CHINA'S PMI FELL BELOW FORECAST
China's PMI fell below forecast in July, dropping to 48.2, very much below the forecast of 49.7. This is a 15 month low.
This could be an indication that China's Third Quarter GDP is under threat and may well fall below the 7% target.
The Second Quarter GDP just barely made 7%, but most of it was driven by investment and consumption due to the stock market's fantastic run during the First Half of the year. We all know what happened in July - the stock market crashed wiping off US$4T of wealth.
If anything, the July PMI is possibly giving indications that China's economy will remain weak.
What happens in China will reverberate across the region, including South East Asia. Singapore recently reported a GDP of -4.6% which caught everyone by surprise. It remains to be seen how the other Asian economies will fare, but I doubt there could be any significant upside.
Increasingly a number of indicators are already showing that Asian economies will continue to soften.
1) Baltic Index remains slightly above the 1,000 points. At one time it was above 10,000 points.
2) Interest rates reduction across major Asian economies
3) Weakness in several Asian currencies across the board
Investors should be aware of the potential slowdown in Asia which could erupt into a huge debt crisis due to the hefty debts incurred in the last few years.
Investment should be prudent with focus in liquidity and less of physical hard assets.
Just my own opinion, of course.
This could be an indication that China's Third Quarter GDP is under threat and may well fall below the 7% target.
The Second Quarter GDP just barely made 7%, but most of it was driven by investment and consumption due to the stock market's fantastic run during the First Half of the year. We all know what happened in July - the stock market crashed wiping off US$4T of wealth.
If anything, the July PMI is possibly giving indications that China's economy will remain weak.
What happens in China will reverberate across the region, including South East Asia. Singapore recently reported a GDP of -4.6% which caught everyone by surprise. It remains to be seen how the other Asian economies will fare, but I doubt there could be any significant upside.
Increasingly a number of indicators are already showing that Asian economies will continue to soften.
1) Baltic Index remains slightly above the 1,000 points. At one time it was above 10,000 points.
2) Interest rates reduction across major Asian economies
3) Weakness in several Asian currencies across the board
Investors should be aware of the potential slowdown in Asia which could erupt into a huge debt crisis due to the hefty debts incurred in the last few years.
Investment should be prudent with focus in liquidity and less of physical hard assets.
Just my own opinion, of course.
Wednesday, July 22, 2015
Tuesday, July 21, 2015
WILL OIL DROP FURTHER?
Oil is now trading at US50.17 per barrel.
The sharp drop was brought about by two factors:
1) The conclusion of the Iranian deal to lift sanctions.
2) The increase of US crude in storage vs a forecast of a fall.
The Iranian deal came as a surprise as Iran's parliament earlier voted not to allow the inspectors access to its military bases. In fact, a few analysts (UBS & Boone Pickens) have expected that oil will recover steadily towards year end to about US$70 per barrel. The surprise deal means that Iran can immediately release oil still in storage to the market and may add between 500,000 to 1.0 million barrels a day by 2016.
This has led many to believe that oil will stay in the US$50 - US$60 for a very long time.
However, there appears to have a strong reaction from Congress, and there could be some resistance against the deal. However, the President can veto any move against the deal.
Across the divide, there is Gary Ross from PIRA who predicted that oil could return to US$100 per barrel in 5 years.
The recent increase in crude production could be due to the shale oil producers needing to produce more and more before their hedging expires this year. Many are already scaling back dividend payment, capital expenditure and laying off staff in order to meet the debt payments. And increasingly Wall Street is getting impatient with the shale oil companies and may review their financial position in Q4 this year. If the Federal Reserve increase interest rate then, the pressure will be even greater as the shale oil companies need to source for funds to continue drilling amidst funding becoming more and more expensive. There is a debt crisis in the making here and likely we will see many filing for Chapter 11 by Q4 this year.
I believe that oil could stay at US$48 - US$55 levels in the short term as the impact of Iran is priced in, but oil could move above this band as the shale oil industry collapse under its own weight due to its high debt to EBIDTA ratio. Even when oil was at US$100 per barrel many were hardly generating positive cash flow.
So the year end forecast would likely see oil trading at around US$55 - US$65 per barrel.
I very much agree with Gary Ross that oil could return to the high of US$100 per barrel, not in 5 years but perhaps in the 3 -5 years period as Big Oil cut their Capex on deep water exploration and drilling in the costly areas such as the Arctic. In the absence of such explorations to discover new productive wells, we could see supply falling behind demand. This will tip the price of oil on the high side..
The above are just my opinion.
The sharp drop was brought about by two factors:
1) The conclusion of the Iranian deal to lift sanctions.
2) The increase of US crude in storage vs a forecast of a fall.
The Iranian deal came as a surprise as Iran's parliament earlier voted not to allow the inspectors access to its military bases. In fact, a few analysts (UBS & Boone Pickens) have expected that oil will recover steadily towards year end to about US$70 per barrel. The surprise deal means that Iran can immediately release oil still in storage to the market and may add between 500,000 to 1.0 million barrels a day by 2016.
This has led many to believe that oil will stay in the US$50 - US$60 for a very long time.
However, there appears to have a strong reaction from Congress, and there could be some resistance against the deal. However, the President can veto any move against the deal.
Across the divide, there is Gary Ross from PIRA who predicted that oil could return to US$100 per barrel in 5 years.
The recent increase in crude production could be due to the shale oil producers needing to produce more and more before their hedging expires this year. Many are already scaling back dividend payment, capital expenditure and laying off staff in order to meet the debt payments. And increasingly Wall Street is getting impatient with the shale oil companies and may review their financial position in Q4 this year. If the Federal Reserve increase interest rate then, the pressure will be even greater as the shale oil companies need to source for funds to continue drilling amidst funding becoming more and more expensive. There is a debt crisis in the making here and likely we will see many filing for Chapter 11 by Q4 this year.
I believe that oil could stay at US$48 - US$55 levels in the short term as the impact of Iran is priced in, but oil could move above this band as the shale oil industry collapse under its own weight due to its high debt to EBIDTA ratio. Even when oil was at US$100 per barrel many were hardly generating positive cash flow.
So the year end forecast would likely see oil trading at around US$55 - US$65 per barrel.
I very much agree with Gary Ross that oil could return to the high of US$100 per barrel, not in 5 years but perhaps in the 3 -5 years period as Big Oil cut their Capex on deep water exploration and drilling in the costly areas such as the Arctic. In the absence of such explorations to discover new productive wells, we could see supply falling behind demand. This will tip the price of oil on the high side..
The above are just my opinion.
Monday, July 20, 2015
SHALE OIL DRILLERS FACE ANOTHER HURDLE AS WALL STREET GROWS IMPATIENT
Interesting article in Bloomberg.
Read it here:
http://www.bloomberg.com/news/articles/2015-07-20/wall-street-lenders-growing-impatient-with-u-s-shale-revolution
Read it here:
http://www.bloomberg.com/news/articles/2015-07-20/wall-street-lenders-growing-impatient-with-u-s-shale-revolution
BUY RATING FOR CAPITARETAIL CHINA TRUST (AU8U)
CapitaRetail China Traust (SGX Code AU8U) has seen it price dropped from a high of S$1.77 to S$1.64 (Present).
It is due to report its H1 2015 results on 29 July.
I expect the report to be good in comparison to last year's. The Distribution too has ticked up nicely vs the previous year's.
You can either trade, buying now and exiting upon the announcement of the Distribution or hold, to enjoy it. Based on current price, the Distribution Yield for the year is estimated at 6%.
My disclosure: I own shares of CapitaRetail China. But still always do your own research.
It is due to report its H1 2015 results on 29 July.
I expect the report to be good in comparison to last year's. The Distribution too has ticked up nicely vs the previous year's.
You can either trade, buying now and exiting upon the announcement of the Distribution or hold, to enjoy it. Based on current price, the Distribution Yield for the year is estimated at 6%.
My disclosure: I own shares of CapitaRetail China. But still always do your own research.
Sunday, July 19, 2015
CHINA'S CORPORATE DEBT LEVEL COULD BE A DANGEROUS THREAT
Below is an interesting article about China's corporate debt levels. US$16T!
It is therefore important that any investment into Chinese companies should be based on companies with track record of growth, have zero debt or minimal debt (Debt to Equity ratio of less than 1.0)
http://www.cnbc.com/2015/07/18/manage-meddle-or-magnify-chinas-corporate-debt-threat.html
It is therefore important that any investment into Chinese companies should be based on companies with track record of growth, have zero debt or minimal debt (Debt to Equity ratio of less than 1.0)
http://www.cnbc.com/2015/07/18/manage-meddle-or-magnify-chinas-corporate-debt-threat.html
Saturday, July 18, 2015
WHY iKANG HEALTHCARE GROUP IS A BUY
About iKang
iKang is listed on the NASDAQ under the code KANG. it is a provider of preventive healthcare services in China.Through the company's integrated service platform and established nationwide network of medical centres and third party service provider facilities, the company provides preventive healthcare solutions, including a range of medical examinations services and value added services, including disease screening and other services. The company also markets its services directly to individual customers. The company has 56 self owned medical centres in operation across China.
Here's a look of its FY financials:
Revenue Growth 43.7%
Profit Growth 25.5%
EPS US$0.41
Current Ratio 1.71
Debt to Equity Ratio 0.52
Net Asset Value per Share US$9.62
Current Share Price US$17.60 (1.8x NAVPS)
iKang's financials are quite impressive. What are the compelling reasons to buy iKang?
1) China's healthcare service is still in its infancy stage.
2) Preventive healthcare services is expected to grow as the population's wealth level increases
3) The healthcare industry is less vulnerable compared to other industries against a backdrop of slowing growth in China
4) iKang's solid financials has the strength to weather through a potential slowdown
5) Good opportunity to tap into China's 1.35 billion population market when the industry is in its infancy stage.
6) Recent ease of the one child policy to boost births should create greater demand for healthcare services in the future.
The above are just my opinion.
My disclosure: I do not own any shares of iKang.
iKang is listed on the NASDAQ under the code KANG. it is a provider of preventive healthcare services in China.Through the company's integrated service platform and established nationwide network of medical centres and third party service provider facilities, the company provides preventive healthcare solutions, including a range of medical examinations services and value added services, including disease screening and other services. The company also markets its services directly to individual customers. The company has 56 self owned medical centres in operation across China.
Here's a look of its FY financials:
Revenue Growth 43.7%
Profit Growth 25.5%
EPS US$0.41
Current Ratio 1.71
Debt to Equity Ratio 0.52
Net Asset Value per Share US$9.62
Current Share Price US$17.60 (1.8x NAVPS)
iKang's financials are quite impressive. What are the compelling reasons to buy iKang?
1) China's healthcare service is still in its infancy stage.
2) Preventive healthcare services is expected to grow as the population's wealth level increases
3) The healthcare industry is less vulnerable compared to other industries against a backdrop of slowing growth in China
4) iKang's solid financials has the strength to weather through a potential slowdown
5) Good opportunity to tap into China's 1.35 billion population market when the industry is in its infancy stage.
6) Recent ease of the one child policy to boost births should create greater demand for healthcare services in the future.
The above are just my opinion.
My disclosure: I do not own any shares of iKang.
WHY CROESUS RETAIL TRUST IS A BUY
Croesus Retail Trust is a REIT listed on the SGX (S6NU). It has 7 shopping malls in Japan, 2 of which is in Tokyo, 3 in Greater Tokyo, 1 in Osaka and 1 in Suzuka, Mie.
4 of the malls are currently enjoying 100% occupancy while the other 3 with occupancy of 95% and above.
Things are finally looking up for Croesus REIT.
Below are some compelling financials which support my BUY rating
YTD Revenue Growth 20.7%
YTD Profit Growth including Net Gains in Assets Value -35.6%
YTD Profit Growth excluding Net Gains in Assets Value 32.2%
Distribution Yield (Tax Free) 8.5%
Current Ratio 1.91
Gearing Ratio 0.23
Net Asset Value per Unit S$0.86
Current Price S$0.93
I often discount the Net Gains in Assets Value when assessing a REIT because it has nothing to do with the business operations. The value of properties can go up aggressively, then less aggressively. This type of fluctuations give a wrong picture of the profitability of a REIT.
As you can see, Croesus' Current Ratio is very strong. Its Gearing is also very low, which indicates it can still take on liabilities to acquire assets without damaging the company's balance sheet unfavourably.
Most noteworthy is its Dividend Yield which is 8.5%, higher than many other REITs. This is against a backdrop of inflated prices which affects the yield of many stocks.
Other compelling reasons to invest in Croesus are:
1) Japan's GDP is improving. It's Q1 2015 GDP grew by 2.4%, better than the 1.5% forecast.
2) Assets price are increasing.
3) Potential rent reversion in 2015. This could see an increase in rent reversion, which will contribute positively to its revenue
4) Fixed rate financing for 5 years. This will offset any interest rate increases in the medium term.
5) First right of refusal two acquire two properties which are currently in negotiation.
As I mentioned above, Croesus Gearing is low, so any acquisition should not impair its balance sheet, but will contribute to an increase in its revenue.
The above is just my opinion.
My disclosure: I am long Croesus Retail Trust.
4 of the malls are currently enjoying 100% occupancy while the other 3 with occupancy of 95% and above.
Things are finally looking up for Croesus REIT.
Below are some compelling financials which support my BUY rating
YTD Revenue Growth 20.7%
YTD Profit Growth including Net Gains in Assets Value -35.6%
YTD Profit Growth excluding Net Gains in Assets Value 32.2%
Distribution Yield (Tax Free) 8.5%
Current Ratio 1.91
Gearing Ratio 0.23
Net Asset Value per Unit S$0.86
Current Price S$0.93
I often discount the Net Gains in Assets Value when assessing a REIT because it has nothing to do with the business operations. The value of properties can go up aggressively, then less aggressively. This type of fluctuations give a wrong picture of the profitability of a REIT.
As you can see, Croesus' Current Ratio is very strong. Its Gearing is also very low, which indicates it can still take on liabilities to acquire assets without damaging the company's balance sheet unfavourably.
Most noteworthy is its Dividend Yield which is 8.5%, higher than many other REITs. This is against a backdrop of inflated prices which affects the yield of many stocks.
Other compelling reasons to invest in Croesus are:
1) Japan's GDP is improving. It's Q1 2015 GDP grew by 2.4%, better than the 1.5% forecast.
2) Assets price are increasing.
3) Potential rent reversion in 2015. This could see an increase in rent reversion, which will contribute positively to its revenue
4) Fixed rate financing for 5 years. This will offset any interest rate increases in the medium term.
5) First right of refusal two acquire two properties which are currently in negotiation.
As I mentioned above, Croesus Gearing is low, so any acquisition should not impair its balance sheet, but will contribute to an increase in its revenue.
The above is just my opinion.
My disclosure: I am long Croesus Retail Trust.
SABINE OIL & GAS FILES FOR BANKRUPTCY
Sabine Oil & Gas became the sixth company to file for bankruptcy protection amidst drop in oil price.
More bankruptcies could follow suit as oil price stays in the low, and more shale oil companies collapse under the weight of debts.
Read it here:
http://www.wsj.com/articles/sabine-oil-gas-files-for-bankruptcy-1436958021
More bankruptcies could follow suit as oil price stays in the low, and more shale oil companies collapse under the weight of debts.
Read it here:
http://www.wsj.com/articles/sabine-oil-gas-files-for-bankruptcy-1436958021
Friday, July 17, 2015
LEG'S VIRTUAL STOCK SIGNS CONTRACT WITH ARGOS
LEG's investee, Virtual Stock recently signed a contract offering its Virtualstock Edge solutions to Argos, UK's leading digital retailer.Argos is a member of the Home Retail Group PLC, UK's leading home and general merchandise retailer.
This follows a recent contract with Maplin.
My disclosure: I am long LEG.
This follows a recent contract with Maplin.
My disclosure: I am long LEG.
Thursday, July 16, 2015
LGO PAD 4 UPDATE
LGO yesterday announced that Well GY674 has started production. Open hole flow rate was 500 bopd and choked backed to 240 bopd.
It is estimated that both GY672 and GY673 may require a down hole pump each.
While the amount of net oil pay is high from Pad 4, the lack of pressure could be the reason why a down hole pump may be required for each of the remaining two wells.
The need for a pump may result in investors drawing to a conclusion that production will be low due to the lack of pressure. Thus, there were a series of sells, made worse by the price oil which has fallen by more than US$10 per barrel in last few days.
Unknown to many, 96% of oil wells in the US use pumps from the very beginning. Read the article here:
http://www.rigzone.com/training/insight.asp?insight_id=315&c_id=4
As for me, any increase in bopd will continue to add to the revenue, and LGO remains a low cost producer. My disclosure: I am long LGO.
It is estimated that both GY672 and GY673 may require a down hole pump each.
While the amount of net oil pay is high from Pad 4, the lack of pressure could be the reason why a down hole pump may be required for each of the remaining two wells.
The need for a pump may result in investors drawing to a conclusion that production will be low due to the lack of pressure. Thus, there were a series of sells, made worse by the price oil which has fallen by more than US$10 per barrel in last few days.
Unknown to many, 96% of oil wells in the US use pumps from the very beginning. Read the article here:
http://www.rigzone.com/training/insight.asp?insight_id=315&c_id=4
As for me, any increase in bopd will continue to add to the revenue, and LGO remains a low cost producer. My disclosure: I am long LGO.
Wednesday, July 15, 2015
CHINA'S GDP GREW MORE THAN FORECAST AT 7% BUT INVESTORS WERE UNIMPRESSED
Economists were predicting 6.8% GDP growth for China, but despite the beat at 7% , there was a sell down in both the Shanghai and HK stock markets.
If anything, it showed that investors are skeptical of China maintaining its growth rate at 7%.
There could be several underlying reasons:
1) The sell off of China stocks occurred in July, which falls in Q3. Prior to that, the stock market was in a roll, therefore many of the core indices in the GDP rose.
2) The sell off resulted in a loss of wealth amounting to US$4T. This could impact consumption and investment in Q3.
3) Despite the many reductions in interest rates and bank reserve ratios, the economy is still faced with many challenges. This could mean further easing which serves only to inflate an already inflated debt bubble.
This is an interesting article from Bloomberg which is worth a read.
http://www.bloomberg.com/news/articles/2015-07-15/could-china-be-the-next-japan-
If anything, it showed that investors are skeptical of China maintaining its growth rate at 7%.
There could be several underlying reasons:
1) The sell off of China stocks occurred in July, which falls in Q3. Prior to that, the stock market was in a roll, therefore many of the core indices in the GDP rose.
2) The sell off resulted in a loss of wealth amounting to US$4T. This could impact consumption and investment in Q3.
3) Despite the many reductions in interest rates and bank reserve ratios, the economy is still faced with many challenges. This could mean further easing which serves only to inflate an already inflated debt bubble.
This is an interesting article from Bloomberg which is worth a read.
http://www.bloomberg.com/news/articles/2015-07-15/could-china-be-the-next-japan-
Tuesday, July 14, 2015
PPHM FINANCIAL YEAR END RESULTS 2015
Revenue increased 20.0%
Loss increased 36.4%
Cash at Hand US$68 million
Net Cash Reduction vs Previous Year: US$9.5 million (2014 Cash at Hand: US$77.5 million)
Current Ratio 2.16
Debt to Equity Ratio 0.63
The revenue growth is driven primarily by Avid Bioservices. In the 4th quarter its revenue grew an astounding 44%. In fact, the manufacturing backlog has now increased to US$40 million from a previous backlog of US$20 - US$30 million. Total revenue for 2016 is estimated at US$30 - US35 million. The amazing thing about this is all the backlogs are based on just the existing facility , discounting the new and expanded facility entirely. Although the new facility will be used mostly to commercialise Bavituximab (Bavi), the Management also mentioned that it will be used to manufacture third party drugs, which could generate additional source of revenue for the company.
The loss is expected as PPHM continues with it enrollment for the Sunrise Phase III Trial. The cash burn is also subdued with the increase in revenue generated by Avid Bioservices.
Sunrise Phase III Trial
Target to complete enrollment by year end 2015. Did the management accidently dropped a hint or two when they discussed about Sunrise?
CEO Steve King said, "Sunrise Phase III Trial is estimated to be unblinded in late 2016"
Joe Shan, VP Clinical and Regulatory Affairs, said, "Continue to receive positive feedback from investigators who are excited by both the safety profile and immunomodulating properties in Bavi." When pressed by a question, he reiterated he was referring to the recent ASCO and nothing to do with Sunrise.
PPHM will initiate new clinical trials in the second half, including one combining Bavi with chemotherapy for breast cancer in a seamless Phase 2/3 trial This means that as soon as Phase 2 results are positive Phase 3 will be activated. Another, combining Bavi with Opdivo for the treatment of lung cancer. For the uninitiated, Opdivo is a drug owned by Bristol-Myers Squibb.
There has also been interests shown in combining Bavi with treatments for ovarian, pancreatic and other forms of cancers.
PPHM's direction is to partner for overseas market but retain 100% rights for the US market.
Perhaps, Steve King said it best, "We are more confident than ever in the Bavi's potential."
Now for some numbers crunching (Entirely my own opinion)
Total revenue from cancer treatment worldwide = US$150B
Assuming PPHM captures 10% of the market = US$15B
Assume 30% Net Profit per year = US$4.5B
Adopting a PE Ratio of 10 = US$45B
Current Market Cap = US$255M
Share price potential = 176x current share price = $237.60 per share
Interesting isn't it? But of course it all hinges on Bavi securing the FDA approval. This, in my opinion is a high reward low cost stock but you should also have the nerve to wait and swallow any disappointment.
My disclosure: I am long PPHM.
Loss increased 36.4%
Cash at Hand US$68 million
Net Cash Reduction vs Previous Year: US$9.5 million (2014 Cash at Hand: US$77.5 million)
Current Ratio 2.16
Debt to Equity Ratio 0.63
The revenue growth is driven primarily by Avid Bioservices. In the 4th quarter its revenue grew an astounding 44%. In fact, the manufacturing backlog has now increased to US$40 million from a previous backlog of US$20 - US$30 million. Total revenue for 2016 is estimated at US$30 - US35 million. The amazing thing about this is all the backlogs are based on just the existing facility , discounting the new and expanded facility entirely. Although the new facility will be used mostly to commercialise Bavituximab (Bavi), the Management also mentioned that it will be used to manufacture third party drugs, which could generate additional source of revenue for the company.
The loss is expected as PPHM continues with it enrollment for the Sunrise Phase III Trial. The cash burn is also subdued with the increase in revenue generated by Avid Bioservices.
Sunrise Phase III Trial
Target to complete enrollment by year end 2015. Did the management accidently dropped a hint or two when they discussed about Sunrise?
CEO Steve King said, "Sunrise Phase III Trial is estimated to be unblinded in late 2016"
Joe Shan, VP Clinical and Regulatory Affairs, said, "Continue to receive positive feedback from investigators who are excited by both the safety profile and immunomodulating properties in Bavi." When pressed by a question, he reiterated he was referring to the recent ASCO and nothing to do with Sunrise.
PPHM will initiate new clinical trials in the second half, including one combining Bavi with chemotherapy for breast cancer in a seamless Phase 2/3 trial This means that as soon as Phase 2 results are positive Phase 3 will be activated. Another, combining Bavi with Opdivo for the treatment of lung cancer. For the uninitiated, Opdivo is a drug owned by Bristol-Myers Squibb.
There has also been interests shown in combining Bavi with treatments for ovarian, pancreatic and other forms of cancers.
PPHM's direction is to partner for overseas market but retain 100% rights for the US market.
Perhaps, Steve King said it best, "We are more confident than ever in the Bavi's potential."
Now for some numbers crunching (Entirely my own opinion)
Total revenue from cancer treatment worldwide = US$150B
Assuming PPHM captures 10% of the market = US$15B
Assume 30% Net Profit per year = US$4.5B
Adopting a PE Ratio of 10 = US$45B
Current Market Cap = US$255M
Share price potential = 176x current share price = $237.60 per share
Interesting isn't it? But of course it all hinges on Bavi securing the FDA approval. This, in my opinion is a high reward low cost stock but you should also have the nerve to wait and swallow any disappointment.
My disclosure: I am long PPHM.
Friday, July 10, 2015
JUST A THOUGHT
I always like to share a though in my books.This is taken from "Invest In REITs!"
"In any investment, study the facts for they will lead to a logical conclusion. But keep your emotions in check, for they will lead you to many illogical decisions."
"In any investment, study the facts for they will lead to a logical conclusion. But keep your emotions in check, for they will lead you to many illogical decisions."
US RIG COUNT ROSE FOR SECOND WEEK
US rig count rose by 5 for week ending July 10, 2015 after rising 12 in the prior week. Oil rigs now numbers 645 after hitting a low of 628. This invariably puts pressure in the price of oil which has fallen to US$52.81 after being in the range of US$58 - US$62 per barrel for several weeks.
Will oil head lower?
I think the Iran talks will not meet the deadline as several military related issues remain a thorn in the discussion. We will know in the next few days. Should the talks fail, then we can expect to see some support for oil.
Over the weekend the EU will deliberate on Greece's latest proposals. I really hope that all parties have come to their senses and a breakthrough is reached. With the overhang in China (despite two consecutive rises in the stock market), we do not need a crisis on another front. A positive outcome will also give oil a boost.
China remains weak, We need to see a sustained rally in the stock market to ease concern. Should the measures taken by the government to instill confidence in the market, we could see oil going up. But if the current rally is short lived, then we should see oil under pressure again.
Anything worse coming out of Greece and China, then we could see the key US$50 support level breached.
With rigs count added, it could be a sign that shale oil producers have managed to bring the costs down substantially to be comfortable to continue drilling. This will continue to put the lid on the oil price.
Alternatively it could also mean that unless they increase production, their cash flow will continue to deteriorate due to falling prices as lately there has been some signs of falling production. This is a sign of desperate measure which could spell trouble further down the road for these companies.
Which of the two is any ones guess. We just have to wait to digest the Q2 reports from these companies which will be out in the coming weeks.
Will oil head lower?
I think the Iran talks will not meet the deadline as several military related issues remain a thorn in the discussion. We will know in the next few days. Should the talks fail, then we can expect to see some support for oil.
Over the weekend the EU will deliberate on Greece's latest proposals. I really hope that all parties have come to their senses and a breakthrough is reached. With the overhang in China (despite two consecutive rises in the stock market), we do not need a crisis on another front. A positive outcome will also give oil a boost.
China remains weak, We need to see a sustained rally in the stock market to ease concern. Should the measures taken by the government to instill confidence in the market, we could see oil going up. But if the current rally is short lived, then we should see oil under pressure again.
Anything worse coming out of Greece and China, then we could see the key US$50 support level breached.
With rigs count added, it could be a sign that shale oil producers have managed to bring the costs down substantially to be comfortable to continue drilling. This will continue to put the lid on the oil price.
Alternatively it could also mean that unless they increase production, their cash flow will continue to deteriorate due to falling prices as lately there has been some signs of falling production. This is a sign of desperate measure which could spell trouble further down the road for these companies.
Which of the two is any ones guess. We just have to wait to digest the Q2 reports from these companies which will be out in the coming weeks.
Thursday, July 9, 2015
LGO CEDROS UPDATE
LGO today made further progress on its Cedros Peninsula interests where it has entered into a further agreement with Beach Oilfield Ltd (BOLT) to acquire all of BOLT's interests in oil and gas leases with rights to deep targets below 7,000 feet. The agreement dictates that LGO will pay BOLT US$2.5 million for the rights. In November 2014, LGO paid US$400,000 to BOLT and today LGO has agreed to pay a further US$200,000, with the remaining amount due at US$1.9 million. In this regard, LGO will issue 3.89 million LGO shares at 3.30 pence a share to BOLT as consideration for the payment.
In furtherance to that, LGO's title to its 100% owned Cedros leases have now been accepted by the Ministry of Energy and Energy Affairs who are in the process of issuing a Petroleum Rights Licence for the leases which cover approximately 3.850 acres.
According to LGO's CEO, Neil Ritson, the indications form the geochemistry and airborne gravity surveys have shown multiple prospects from which LGO can choose its first well target and drilling could take place 2016 and beyond.
For those who are unacquainted with the Cedros Peninsula please revisit my post in April 2015: Why the Cedros Peninusla is such a big deal to LGO.
My disclosure: I am long LGO
In furtherance to that, LGO's title to its 100% owned Cedros leases have now been accepted by the Ministry of Energy and Energy Affairs who are in the process of issuing a Petroleum Rights Licence for the leases which cover approximately 3.850 acres.
According to LGO's CEO, Neil Ritson, the indications form the geochemistry and airborne gravity surveys have shown multiple prospects from which LGO can choose its first well target and drilling could take place 2016 and beyond.
For those who are unacquainted with the Cedros Peninsula please revisit my post in April 2015: Why the Cedros Peninusla is such a big deal to LGO.
My disclosure: I am long LGO
LEGENDARY INVESTMENT (LEG)
On September 22, 2014 (Invest In Foreign Shares FB), I recommended a BUY on LEG, UK stock listed on the AIM at 0.10 pence. Since then, the stock has moved up to a high of 0.13 pence in January, 2015 before settling in the range of 0.08 - 0.09 pence currently.
I have a few compelling reasons to buy LEG, the main one being the director's remuneration. The directors were paid in shares which can be exercised at 0.20 pence. So for the directors to cash out, LEG has to earn more than 0.20 pence, which means any investment you made today could potentially earn you more than 100% profit.
LEG has investments into 3 major companies: Virtual Stock, Bosques Energeticos and Amedeo Resources.
Virtual Stock is the jewel in the crown. LEG has a 5.6% interest in Virtual Stock, an up and coming inventory and retailing solutions provider in the UK. Today (9 July, 2015), Virtual Stock announced that it has signed a contract to provide Virtualstock Edge solutions to the Maplin Electronics, a specialist consumer electronics retailer in the UK.
Some of Virtual Stock's customers include Office Depot and Tesco.
There is talk that the NHS is in discussions with Virtual Stock to provide inventory solutions to the former. Should this materialise into a contract it could mean millions of revenue.
The true value of Virtual stock will be realised through an eventual IPO and which result in LEG getting a tremendous boost to its revenue.
Bosques Energeticos is a bio fuel company whereas Amedeo resources is a player in the offshore engineering and ferrous metal trading.
As in any stocks in the UK AIM, you need to take a long term view. In LEG case about 2-3 years which could see the eventual listing of Virtual Stock. I would expect by then a potential return of a minimum of 3x the investment.
My disclosure: I am long LEG
I have a few compelling reasons to buy LEG, the main one being the director's remuneration. The directors were paid in shares which can be exercised at 0.20 pence. So for the directors to cash out, LEG has to earn more than 0.20 pence, which means any investment you made today could potentially earn you more than 100% profit.
LEG has investments into 3 major companies: Virtual Stock, Bosques Energeticos and Amedeo Resources.
Virtual Stock is the jewel in the crown. LEG has a 5.6% interest in Virtual Stock, an up and coming inventory and retailing solutions provider in the UK. Today (9 July, 2015), Virtual Stock announced that it has signed a contract to provide Virtualstock Edge solutions to the Maplin Electronics, a specialist consumer electronics retailer in the UK.
Some of Virtual Stock's customers include Office Depot and Tesco.
There is talk that the NHS is in discussions with Virtual Stock to provide inventory solutions to the former. Should this materialise into a contract it could mean millions of revenue.
The true value of Virtual stock will be realised through an eventual IPO and which result in LEG getting a tremendous boost to its revenue.
Bosques Energeticos is a bio fuel company whereas Amedeo resources is a player in the offshore engineering and ferrous metal trading.
As in any stocks in the UK AIM, you need to take a long term view. In LEG case about 2-3 years which could see the eventual listing of Virtual Stock. I would expect by then a potential return of a minimum of 3x the investment.
My disclosure: I am long LEG
Wednesday, July 8, 2015
INVEST IN REITs! IS OUT!
It's finally out. Available at all Popular bookstores nationwide (Malaysia only).
It's been a wonderful (sometimes agonising) trip writing and publishing it.
Join me at my book sharing session at Popular Bookfest, KLCC on 14 July, at 12 noon.
See ya!
It's been a wonderful (sometimes agonising) trip writing and publishing it.
Join me at my book sharing session at Popular Bookfest, KLCC on 14 July, at 12 noon.
See ya!
NEWS OUT OF LGO'S AGM
The following are postings made by the attendees of LGO's recent AGM:
1) The CEO remained tight lipped on the prospect of production despite many asking how much oil LGO will produce going into 2016. He reiterated what had been publicly announced; ie: 2,000 bopd. Perhaps this was what caused the share price to decline as many expected an upgrade in the production.
From my standpoint, I understand that a CEO cannot divulge more than what have already been mentioned in official announcements. At the end we just have to look at the various fundamentals:
The site for the two 5,000 barrels sales tanks has been identified and the site cleared. The construction of the foundation and bund to hold the tanks are now in progress. The first tank should be operational around mid September. This will improve the sales tank capacity to 7,750 bopd and subsequently with the second sales tank in place in 2016, 12,750 bopd (FACT).
The 4" pipeline crossover is still pending. It seems Petrotrin has the approval to cross over one existing pipeline with another one to go. The enlarged pipeline together with the LACT meter can allow unrestricted flow of between 8,000 - 10,000 bopd to Petrotrin (FACT).
Current production is circa 2,000 bopd. We have Pad 4 (3 wells) and Pad 5 (4 wells) coming into production this year. The CEO would not upgrade so much infrastructure if he does not want to increase production. My guess is that he does not want to immediately trigger the US$2 million payment to the previous owner with bopd just surpassing the 2,000 mark. If any, I think his intention is to flood all the tanks once the infrastructure is ready so that the US$2 million payment can hardly impact upon's LGO's cash flow.
2) LGO has made an application to the Spanish authorities to renew the permit on a 10 + 10 year basis. The current permit expires in 2017. During its peak, the oil field in Spain could produce about 4,900 bopd. The development of the oil field in Spain will only add to LGO's growth and profitability.
3) Pad 6 and Pad 7 with 10 wells in total will likely be drilled in 2016. After the production on Pad 5 comes on line in September, LGO will start to drill the Goudron Sands (GS). The GS is shallower, thus to drill it would only require a few days (5 approx.). Since it is a shallow well, the production will be likely be below 100 bopd due to the absence of high pressure. The GS well will add on to the production incrementally. LGO has a series of wells in mind.
4) LGO is still pursuing acquisitions, but because oil price has dropped does not want to overpay for the assets.
5) The feedback from the attendees was that the BOD were upbeat on LGO's prospects but were unwilling to divulge more. When asked by an investor what will be the incentive for long term investors to continue holding onto the share well into 2016, this was the reply, "there will a substantial news in 6 months."
So my personal take? I believe the CEO will increase the production by mid September, otherwise why waste the money on developing the infrastructure when it is not needed? Definitely we will see significant upgrade in that sense which will impact the share price positively. And of course "what is that substantial news?" A takeover from Big Oil? An acquisition of another oil field? A farm in by a partner in Cedros? New licence granted by Petrotrin? We could only guess at this moment.
My disclosure: I am long LGO
1) The CEO remained tight lipped on the prospect of production despite many asking how much oil LGO will produce going into 2016. He reiterated what had been publicly announced; ie: 2,000 bopd. Perhaps this was what caused the share price to decline as many expected an upgrade in the production.
From my standpoint, I understand that a CEO cannot divulge more than what have already been mentioned in official announcements. At the end we just have to look at the various fundamentals:
The site for the two 5,000 barrels sales tanks has been identified and the site cleared. The construction of the foundation and bund to hold the tanks are now in progress. The first tank should be operational around mid September. This will improve the sales tank capacity to 7,750 bopd and subsequently with the second sales tank in place in 2016, 12,750 bopd (FACT).
The 4" pipeline crossover is still pending. It seems Petrotrin has the approval to cross over one existing pipeline with another one to go. The enlarged pipeline together with the LACT meter can allow unrestricted flow of between 8,000 - 10,000 bopd to Petrotrin (FACT).
Current production is circa 2,000 bopd. We have Pad 4 (3 wells) and Pad 5 (4 wells) coming into production this year. The CEO would not upgrade so much infrastructure if he does not want to increase production. My guess is that he does not want to immediately trigger the US$2 million payment to the previous owner with bopd just surpassing the 2,000 mark. If any, I think his intention is to flood all the tanks once the infrastructure is ready so that the US$2 million payment can hardly impact upon's LGO's cash flow.
2) LGO has made an application to the Spanish authorities to renew the permit on a 10 + 10 year basis. The current permit expires in 2017. During its peak, the oil field in Spain could produce about 4,900 bopd. The development of the oil field in Spain will only add to LGO's growth and profitability.
3) Pad 6 and Pad 7 with 10 wells in total will likely be drilled in 2016. After the production on Pad 5 comes on line in September, LGO will start to drill the Goudron Sands (GS). The GS is shallower, thus to drill it would only require a few days (5 approx.). Since it is a shallow well, the production will be likely be below 100 bopd due to the absence of high pressure. The GS well will add on to the production incrementally. LGO has a series of wells in mind.
4) LGO is still pursuing acquisitions, but because oil price has dropped does not want to overpay for the assets.
5) The feedback from the attendees was that the BOD were upbeat on LGO's prospects but were unwilling to divulge more. When asked by an investor what will be the incentive for long term investors to continue holding onto the share well into 2016, this was the reply, "there will a substantial news in 6 months."
So my personal take? I believe the CEO will increase the production by mid September, otherwise why waste the money on developing the infrastructure when it is not needed? Definitely we will see significant upgrade in that sense which will impact the share price positively. And of course "what is that substantial news?" A takeover from Big Oil? An acquisition of another oil field? A farm in by a partner in Cedros? New licence granted by Petrotrin? We could only guess at this moment.
My disclosure: I am long LGO
CURRENT MARKET TURMOIL
The current market turmoil seems to be driven by news coming out of Greece and China.
We will know the outcome for Greece tomorrow as the Greek government propose a reform package tied to a 3 year bail out. I doubt the European Union will accept any change from the original proposal outlined prior to the referendum as signals coming out from several countries within the union reaffirmed the EU's desire not to budge from the original deal. It remains to be seen how this will play out. While some would hope for an eleventh hour solution, I personally believe it has reached a state of "take it or leave it."
If a Greek exit occurs, I expect a global knee jerk reaction and we may yet see some drubbing in the stock markets, but as the world acknowledges the exit is not as much feared as expected, then we can see some uptick in the global markets. The ECB and EU in fact are preparing for the worst case scenario.
The major concern is actually China. In the recent crash, many have seen their livelihood fall into pieces and savings dramatically trimmed. The problem with China's market is that it is retail investor driven and not institutional driven. So this create a highly dynamic environment not based on sound fundamentals but on sentiments. And right now fear rules. Unfortunately China is highly restrictive of foreign participation in its listed companies. In the absence of this, there is also the absence of institutional and hedge funds providing a key support level.
The crash may burden the economy further as China is a highly indebted country. It remains to be seen what measure the government would take to arrest the problems of a slowing economy, high indebtedness among its population, and the problem of shadow banking.
I still see the Shanghai Index falling further, perhaps below 3,000 points and this will continue to impact upon the Asia Pacific markets, most notably Hong Kong's. I think the HKEX is oversold, most probably due to fear of China's economic collapse. But I think the Chinese government will put in all measures to stop the decline and may open up the market for foreign participation. The government should let more companies (local and international) and entrepreneurs participate in building the economy and not rely on government spending or government linked companies to take the lead. Having too restrictive an economy will kill the entrepreneurial spirit and without it, will limit the potential for growth. Most importantly, the government should intensify its role in improving the environment and ensure food safety and healthcare standards are met.
You should also observe the HKEX. If it falls below 21,000 points, it is a good time to buy into several high dividend stocks like Regal REIT, Bossini, Hopewell and Giordano, Also look out for Nagacorp dropping to the HK$4s region. It pays 70% of its net profit as dividend.
These are all my opinions.
We will know the outcome for Greece tomorrow as the Greek government propose a reform package tied to a 3 year bail out. I doubt the European Union will accept any change from the original proposal outlined prior to the referendum as signals coming out from several countries within the union reaffirmed the EU's desire not to budge from the original deal. It remains to be seen how this will play out. While some would hope for an eleventh hour solution, I personally believe it has reached a state of "take it or leave it."
If a Greek exit occurs, I expect a global knee jerk reaction and we may yet see some drubbing in the stock markets, but as the world acknowledges the exit is not as much feared as expected, then we can see some uptick in the global markets. The ECB and EU in fact are preparing for the worst case scenario.
The major concern is actually China. In the recent crash, many have seen their livelihood fall into pieces and savings dramatically trimmed. The problem with China's market is that it is retail investor driven and not institutional driven. So this create a highly dynamic environment not based on sound fundamentals but on sentiments. And right now fear rules. Unfortunately China is highly restrictive of foreign participation in its listed companies. In the absence of this, there is also the absence of institutional and hedge funds providing a key support level.
The crash may burden the economy further as China is a highly indebted country. It remains to be seen what measure the government would take to arrest the problems of a slowing economy, high indebtedness among its population, and the problem of shadow banking.
I still see the Shanghai Index falling further, perhaps below 3,000 points and this will continue to impact upon the Asia Pacific markets, most notably Hong Kong's. I think the HKEX is oversold, most probably due to fear of China's economic collapse. But I think the Chinese government will put in all measures to stop the decline and may open up the market for foreign participation. The government should let more companies (local and international) and entrepreneurs participate in building the economy and not rely on government spending or government linked companies to take the lead. Having too restrictive an economy will kill the entrepreneurial spirit and without it, will limit the potential for growth. Most importantly, the government should intensify its role in improving the environment and ensure food safety and healthcare standards are met.
You should also observe the HKEX. If it falls below 21,000 points, it is a good time to buy into several high dividend stocks like Regal REIT, Bossini, Hopewell and Giordano, Also look out for Nagacorp dropping to the HK$4s region. It pays 70% of its net profit as dividend.
These are all my opinions.
Tuesday, July 7, 2015
UKOG BROKERAGE UPGRADE
Dowgate Capital Stockbrokers to day has an upgrade of SRTONG BUY for UKOG with a base case of 13.10 pence and a high case of 87.9 pence.
You can access the report here:
http://www.ukogplc.com/docs/default-source/default-document-library/ukog-dowgate-strong-buy-research-note-070715.pdf?sfvrsn=2
My disclosure: I am long UKOG
You can access the report here:
http://www.ukogplc.com/docs/default-source/default-document-library/ukog-dowgate-strong-buy-research-note-070715.pdf?sfvrsn=2
My disclosure: I am long UKOG
Monday, July 6, 2015
LGO DRILLING UPDATE
LGO today announced that Well GY675 the first well of four on Pad 5 has reached TD. electronic logging revealed a total net oil pay of 330 feet at the Goudron Sands and 260 feet at the C-Sands. Total net oil pay was 590 feet.
According to the CEO the ongoing flow test at Pad 4 involving 3 wells are showing encouraging results.
My disclosure: I am long LGO
According to the CEO the ongoing flow test at Pad 4 involving 3 wells are showing encouraging results.
My disclosure: I am long LGO
Friday, July 3, 2015
OIL DROPPED TO US$55.52 PER BARREL. WHY?
Oil price continued its decline over the week as a number of factors emerged that put a damper on the price of oil.
1) Baker Hughes reported that the US put an additional 12 new rigs to work in the previous week. This is the first increase in rig count since October 2014. The total count now numbers 640.
2) The Greek Crisis. In the event it turns from bad to worse, it is likely to impact the EU economy in the short to medium term. Oil price thrives on good economy news. In the absence of such, it is likely to decline.
3) US officials are confident of reaching a deal with Iran soon. It is expected that Iran will ramp out production upon the lifting of sanctions. This invariably, will pressure the oil price and put a damper on its price.
4) Improvement in methods of extracting oil by shale producers, which allow some producers to comfortably produce oil at US$60 - US$65 per barrel.
However, as the hedges run dry in the coming months, many shale oil producers will find it even more difficult to generate positive cash flow and for those who cannot produce profitably at US$60 - US$65 per barrel their very existence will be challenged.
Bond activities among shale oil producers in recent months have been slow (read The Economist article below), and this means that banks are lending less for fear of collapse or interest rate has gone up, making it meaningless for shale producers to borrow and refinance their existing debts.
This is a very interesting article by The Economist, and it is worth a read.
I would advise all to stay out of US shale companies as their debt levels are just too high. If you should invest in oil companies, go for those which are onshore with conventional plays.
http://www.economist.com/news/business/21656671-americas-shale-energy-industry-has-future-many-shale-firms-do-not-fractured-finances
1) Baker Hughes reported that the US put an additional 12 new rigs to work in the previous week. This is the first increase in rig count since October 2014. The total count now numbers 640.
2) The Greek Crisis. In the event it turns from bad to worse, it is likely to impact the EU economy in the short to medium term. Oil price thrives on good economy news. In the absence of such, it is likely to decline.
3) US officials are confident of reaching a deal with Iran soon. It is expected that Iran will ramp out production upon the lifting of sanctions. This invariably, will pressure the oil price and put a damper on its price.
4) Improvement in methods of extracting oil by shale producers, which allow some producers to comfortably produce oil at US$60 - US$65 per barrel.
However, as the hedges run dry in the coming months, many shale oil producers will find it even more difficult to generate positive cash flow and for those who cannot produce profitably at US$60 - US$65 per barrel their very existence will be challenged.
Bond activities among shale oil producers in recent months have been slow (read The Economist article below), and this means that banks are lending less for fear of collapse or interest rate has gone up, making it meaningless for shale producers to borrow and refinance their existing debts.
This is a very interesting article by The Economist, and it is worth a read.
I would advise all to stay out of US shale companies as their debt levels are just too high. If you should invest in oil companies, go for those which are onshore with conventional plays.
http://www.economist.com/news/business/21656671-americas-shale-energy-industry-has-future-many-shale-firms-do-not-fractured-finances
Thursday, July 2, 2015
UKOG TO ACQUIRE A 20% INTEREST IN UK ONSHORE LICENCE PEDL143
UKOG announced that it has executed a Farm-In agreement with Egdon Resources to acquire 20% interest in UK onshore licence PEDL143 (Holmwood Prospect), further increasing its interest in the Weald Basin.
The prospect is 91.8 sq km (35.5 square miles) and lies immediate West of Horse hill, and immediate South of the Brockham oil field which UKOG also holds an interest via its 6% interest in Angus Energy.
Subject to the approval of the oil & Gas Authority in UK, UKOG wll pay 40% share (1.2 million Pounds) of the Holmwood-1 well exploration cost which is estimated at 3 million Pounds.
Wednesday, July 1, 2015
BALTIC DRY BULK INDEX DOWN 6 POINTS TO 794 - WHAT ARE THE IMPLICATIONS
For those who invest in dry bulk shipping companies the Baltic Index is a good indicator of the present demand for dry bulk cargo.
The index has had a high of 1,484 points on 4 November, 2014 before coming down to its 52 weeks low of 509 points on 18 February, 2015. Since then it has recovered marginally to its current level.
Inadvertently, it shows that the global economy is still struggling. In the past, China's demand for commodities was what put the index in the highs of more than 10,000 points. Those days are gone, and the present situation looks bad.
Therefore, I would refrain from any investment into dry bulk shipping companies as global fundamentals are weak.
I would also avoid investing in mining companies as the demand for iron ore and other similar minerals are simply not there.
However, I will be on the look out for gold mining companies in Australia which are grossly undervalued and have a strong Balance Sheet. I would not however invest aggressively but accumulate slowly in manageable quantities. The reason?
AUD is at its lowest vs the USD in 5 years, due to the poor demand for commodities. Gold currently is less than USD1,200 per oz because of the strength of the USD. The greater the strength of the USD, the lower will be the price of gold. The only time when gold will shine is when there are great risks in the global economics and financial stress in major economies. As demand for gold rises, so too will be the demand for gold mining stocks and the AUD. You can potentially earn from the capital appreciation and FOREX.
That day is not too far off. China will continue to weaken as the past reductions in interest rates and capital ratio requirements for banks have failed to lift the economy from its present predicament. Asia itself, is swimming in a sea of liquidity with many countries seen lowering their interest rates to lift their respective economies which are clearly showing signs of a slowdown. Asia too is facing unprecedented high levels of debt due to the cheap money being made available since the last Global Financial Crisis and of course, property speculation.
Besides gold, you can also look at high dividend stocks or REITs which are financially strong and remain undervalued to this day. These will help you weather through the financial storm ahead.
These are just my opinions. It is advisable to do your own research before investing.
The index has had a high of 1,484 points on 4 November, 2014 before coming down to its 52 weeks low of 509 points on 18 February, 2015. Since then it has recovered marginally to its current level.
Inadvertently, it shows that the global economy is still struggling. In the past, China's demand for commodities was what put the index in the highs of more than 10,000 points. Those days are gone, and the present situation looks bad.
Therefore, I would refrain from any investment into dry bulk shipping companies as global fundamentals are weak.
I would also avoid investing in mining companies as the demand for iron ore and other similar minerals are simply not there.
However, I will be on the look out for gold mining companies in Australia which are grossly undervalued and have a strong Balance Sheet. I would not however invest aggressively but accumulate slowly in manageable quantities. The reason?
AUD is at its lowest vs the USD in 5 years, due to the poor demand for commodities. Gold currently is less than USD1,200 per oz because of the strength of the USD. The greater the strength of the USD, the lower will be the price of gold. The only time when gold will shine is when there are great risks in the global economics and financial stress in major economies. As demand for gold rises, so too will be the demand for gold mining stocks and the AUD. You can potentially earn from the capital appreciation and FOREX.
That day is not too far off. China will continue to weaken as the past reductions in interest rates and capital ratio requirements for banks have failed to lift the economy from its present predicament. Asia itself, is swimming in a sea of liquidity with many countries seen lowering their interest rates to lift their respective economies which are clearly showing signs of a slowdown. Asia too is facing unprecedented high levels of debt due to the cheap money being made available since the last Global Financial Crisis and of course, property speculation.
Besides gold, you can also look at high dividend stocks or REITs which are financially strong and remain undervalued to this day. These will help you weather through the financial storm ahead.
These are just my opinions. It is advisable to do your own research before investing.
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