(15-05-2015, 07:50 PM)thinknotleft Wrote: [ -> ]Hopefully, it can drop to 1.50-1.60, so that I can buy more to add to my position.
I'm not sure how you derived your basis of 1.50 to 1.60.
The core logisitcs business is very stable based on 778m (in 2011) to 987 m (in 2014). Assuming all else constant, the most apparent possible catalyst for a price drop has to be an immediate and sudden drop in commodity trading revenues. Then again, commodity trading margins are very thin 2 % and less. Lower commodity trading volumes may not necessarily cause a big dent, (for example, if) there is a major drop in revenues back to 2011 level of 1765 m from commodity trading. 2014, commodity trading made up 14 b of revenues.
Considering such a major drop in revenues, 2% margin (from commodity trading) will make a very big dent. Then again, that is catastrophic. Also, at the same time, the commodity division trades in all sorts of commodities, via MRI and Straits Financial. Its quite difficult to foresee an outright drop in demand for the full range of commodity products.
Having being designated as an approved LME warehouse operator also ensures that there is steady stream of demand for warehousing services. The recent port fraud was also to some extent to CWT's favour.
https://sg.finance.yahoo.com/news/port-f...13957.html
Assuming worst case of no commodity trading activity in fy2015 vs fy2014, the impact on net margin is approx 14b x 2% = 280m. That will wipe out net margins and result in a loss of 167k, assuming all else constant. Quite scary and unthinkable.
If commodity trading revenues in 2015 recedes to 2013's level of 8.1 b commodity revenues, net impact on net margin is about 8.1b x 2% = 162 m negative impact on bottomline margins. 162k impact seems like the worst possible. correct me if i'm wrong.
Comparing 2013 and 2014 results, even if commodity trading revenues retreat to 2013's 9b, CWT still managed a 108m of net margins. The risk of adverse impact due to fall in commodity trading volumes seems quite controlled.
Aside from fluctuation in commodity trading revenues, its quite hard to comprehend why prices should recede to 1.5- 1.6 level and its a significant drop by fri close of 1.88. Perhaps, there is another point of view that you could share?
Regards.