Ying Li’s chart seems to be consolidating nicely around $0.14. Where will it go from here?
Personal Chart Observation
With reference to Chart 1 below, Ying Li surged to an intraday high of $0.164 on 28 November 2017 immediately after the divestment announcement (See elaboration and announcement link below), before profit taking set in. Since then, Ying Li seems to be consolidating in the region of $0.14. Since 16 May 2017, Ying Li has been setting higher lows and higher highs. All the exponential moving averages (EMAs) have either stopped declining, or are moving higher. Although Ying Li’s share price has languished this year with a year to date (YTD) loss of 2 percent (as compared to Yanlord’s YTD return of 21 percent), Ying Li’s OBV is near 20-year high which may signify accumulation. Amid positively placed direction indicators, Ying Li’s ADX is around 31.8, indicating a trend.
Ying Li has been testing the supports of $0.142 – 0.145. Based on my personal interpretation, there seems to be a strong layer of supports around $0.140 – 0.145. On balance, it seems to be on a gradual uptrend. However, it has to breach $0.156 on a sustained basis and with volume for the chart to be more positive. Ying Li closed at $0.146 on 12 December 2017. A sustained break below $0.134 with volume is negative for the chart.
Near term supports: $0.146 / 0.144 / 0.141
Near term resistances: $0.147 / 0.150 / 0.154 – 0.156
Chart 1: Touching $0.164 Immediately After The Divestment Announcement
Do note that as with all chart reading, it is extremely subjective. Furthermore, as small caps are usually less liquid, chart reading may not be that accurate.
Some Noteworthy Developments Or Points For Your Attention
Proposed sale of International Commercial Centre
On 28 November 2017, Ying Li announced that it was going to divest its International Commercial Centre (ICC) project and to transfer a piece of land (Land Parcel) to the Purchaser. The total consideration amount is approximately Rmb3.3 billion, split over six tranches. The amount is equivalent to approximately $672 million, based on the announcement. (Click HERE for the announcement).
If this is successful, Ying Li will be able to
a) Recycle its capital and pursue new ventures and investment opportunities in Tier 1 and fast-growing Tier 2 cities in the PRC;
b) Strengthen its balance sheet by paring its debt and for general working capital;
c) Recognise an approximate gain of Rmb343 million (equivalent to $70 million);
d) Subject to approval, Ying Li can get the first two tranches of the divestment amount fairly quickly. Based on the total cash consideration of Rmb3 billion, Ying Li can get 49.3 percent of the sales consideration (5 days plus 30 days after completion of the proposed divestment), equivalent to RMB1,622 million ($332 million). Ying Li’s current market capitalisation (market cap) is around $373 million.
For the deal above, it is noteworthy that:
a) Ying Li has written to Singapore Exchange (SGX) for a waiver of the need to obtain shareholders’ approval so that the transaction can be completed in an expedient manner. As of now, Ying Li has not obtained SGX’s waiver yet. If it cannot get SGX’s approval and needs to hold an Extraordinary General Meeting, the deal could take longer to complete;
b) As with any proposed deal, there is no 100 percent certainty that it will go through. Even if it goes through, there may be some changes to the deal;
c) On 7 December 2017, Ying Li announced that it has maintained close communication with the relevant PRC authority throughout the tender and acquisition process for the Land Parcel and has received favourable response. However, in the remote event that the acquisition of the Land Parcel is unsuccessful, there will be changes to the amount of the consideration and the terms of payment. Please click HERE for the details.
It is noteworthy that Ying Li’s market cap is only $373 million. Thus, this proposed divestment with a total consideration amount of approximately Rmb3.29 billion ($672m equivalent) is substantial and I deem it to be likely positive in the short term, should it materialise. Coupled with its chart development, it seems to be an interesting trading idea.
Do take note that this is not a fundamental write-up. Ying Li catches my attention due primarily to the above proposed divestment and its chart development. Readers should do their own research and be cognisant that there are many risks, or questions to consider such as (but not limited to) the following:
a) Illiquidity risk;
b) S-chip risk;
c) Possibility of the proposed divestment falling through;
d) I have no access to Ying Li’s management. Readers who have specific questions should direct their queries to Ying Li’s management;
e) What is next for Ying Li after this sale?
P.S: I am vested.
Please refer to the disclaimer HERE
Ernest Lim is an avid investor, trader cum remisier. As a Chartered Financial Analyst® charterholder, as well as, a Chartered Accountant of Singapore, Ernest is also a columnist at Shares Investment, publishing articles on a wide range of topics on finance and investment, ranging from market to sector outlook, technical analysis and fundamental analysis.