Technical Analysis of LINDE on 15 Dec 2016

Technical Analysis of LINDE on 15 Dec 2016 (after trading hours)

This is no buy/sell recommendation – just a trial to see if Technical Analysis (works to an extent) in Dhaka Stock Exchange.

This analysis is mainly based on the Fundamentals of Linde.

Fundamentally, it is one of the best companies in Bangladesh. Profit and EPS has been growing from 2014 onward. After doubling capacity, we could see huge growth in Linde’s EPS.

Furthermore, it has sold land at Tejgaon and plans to build the new plant with its own funds (however, it could have used leverage with current low interest rates in the country). 

Now it is sitting on a pile of cash (I think, Peter Lynch, would have loved this). 

The only depressing thing I see is that it has not increased its Dividend. Hope it does so soon.

Profit	2012	2013	2014	2015	Till Q3 '16
Annual	482	739	611	641	622
Growth		53%	-17%	5%	-3%
EPS	32.13	49.27	40.73	42.74	41.46
Growth		53%	-17%	5%	-3%
Dividend	310% C	310% C	310% C	310% C
NOCFPS	32.0	55.0	51.0	67.0

The following is a line from the article in the link below, “The plant will more than double Linde's existing production capacity, strengthening its position as the leading player in Bangladesh”.

http://www.thedailystar.net/business/linde-starts-construction-new-plant-1204897

News from DSE web site given below:

Trading Code:    LINDEBD: With reference to their earlier news (disseminated by DSE on 28.04.2016) regarding land sale, the Company has further informed that the Board of Directors has approved the sale of a portion of land at Tejgaon site, Dhaka measuring 2.31 acres at an agreed value of Tk. 265.65 crore. Post Date:    2016-05-12

Trading Code:    LINDEBD: With reference to their earlier news (disseminated by DSE on 26.11.2015), regarding their Investment Approval, the Company has further informed that discounted pay-back period of the said investment is 6.4 years, IRR before tax is 20.9% and IRR after tax is 18.90%. Expected date of commercialization is by 1st January, 2018. Post Date:           2015-11-29

Trading Code:    LINDEBD: The Company has informed that the Board of Directors of the Company has approved total investment of Tk. 1,237.00 million for a new ASU plant at Rupganj, Bangladesh with total production capacity of around 100 TPD. Projected investment of Tk. 1,237.00 million is to be funded from the Company's own fund at this stage. Expected date of commercialization is by 1st January 2018. Post Date:        2015-11-26

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Now, if we try to look at the product portfolio of Linde (from a Product Manager’s perspective), we see that PG&P accounts for 80% of revenue while “Health” and “Bulk” accounts for 10% respectively each.

(+) Health has higher Gross Profit % and Higher Growth %. With increased development in the Health Sector of Bangladesh, I think if Linde focuses more on this sector, then profit could be optimized.

(-) Bulk experienced 27% de-growth in 2015 and contributed only 9% of total profit. Operational efficiency might be needed to increase profit from this segment or else focus could be reduced.

Let us look at the numbers:

2015	Bulk	PG&P	Health	Total
Revenue	351	3,110	472	3,933
Gross Profit	150	1,290	249	1,689
Operational Profit	33	1,036	176	1,245
Gross Profit %	43%	41%	53%	43%
Profit %	9%	33%	37%	32%

2014	Bulk	PG&P	Health	Total
Rev	352	3,202	431	3,985
Gross Profit	148	1,230	205	1,583
Operational Profit	45	932	131	1,108
Gross Profit %	42%	38%	48%	40%
Profit %	13%	29%	30%	28%

Growth (2015 over 2014)
Bulk	PG&P	Health	Total
0%	-3%	10%	-1%
1%	5%	21%	7%
-27%	11%	34%	12%

Risks: It has cash reserve in Great Britain Pounds – Brexit might affect this due to exchange rate fluctuations.

Now, let us look at the Technicals.

Technically, the pattern is not yet complete!

The daily chart – somehow, I feel that it might be good! The weekly chart does not look good.

However, as the market is heated at the moment, I am not able to find many shares at low prices. Thus, I think it would be better to monitor Linde’s movement. 

A couple of green candles early next week might indicate that supply at 1,300 level is exhausted and we could say that the downtrend is over.

Entry at 1,100 level would probably have been risk-free (to loosely use the term) but with a growth story and abundance of cash, we might see an uptrend in Linde sooner rather than later.

If bought around 1,290 to 1,310, I think tight stop loss would be 1,275 (sell if it goes below 1,275).

Let us see what happens . . .