Friday, 13 April 2012

Kepcorp gets big mojo from Brasil - spending one night with 750 lots of kepcorp warrants

Today, Kepcorp announced what is probably the biggest oil rig deal clinched in her corporate history .. a USD 4.12bn letter of intent to build 5 semi-sub oil rigs for Sete Brasil , owned by  Brazil's national oil company- PetroBras..

For some months I have been tracking the chart of Kepcorp  , probably the bluest of Singapore blue chips. 
Observant readers of my past trades would have noticed i had always kept  2 Kepcorp wrts on my watch list.  

In a post dated 6 Mar , I noted that Kepcorp had responded to my short term peak of $11.10 and crashed down 50c from there. I reproduce the old kepcorp  chart with its old annotations in that post here. 

In the same post , I also noted that her little twin sister company Sembmarine had responded to another of my short term peak of $5.40 , overshot by 6c and then crashed down,  coincidentally also by 50c  right after an announcement that Temasek holdings is trimming a 3% stake in sembmar. I also reproduce the old sembmar chart with its old annotations in that post here. 

Then came last Friday and this Monday , Kepcorp made its first attempts to cross $11.10 but failed towards market close  .( see kepcorp chart below)  

On Tuesday , kepcorp finally crossed the $11.10 barrier towards the closing minutes of trade to close at $11.14 and I took notice.

Now, on hindsight with this USD4bn deal , I suppose some kepcorp operator or insider must have got wind of the impending announcement of the deal and decided to buy at all costs, nevermind one or two days too early and nevermind if his buying towards close caused a technical false breakout ahead of a 200 pt Dow crash and nevermind if what he is doing complies with MAS rules of a transparent market and level playing field.

Probably the insiders are rodeo cowboys from Brasil and they didn't know what MAS stands for and didn't care.

I was not tempted to enter on tues despite noticing the breakout in the closing minutes.( email me for the reasons)  This is despite the STi demonstrating much gung-ho strength all day to close at day high for a gain of almost 1% on tues. 

True enough , that tues nite the Dow came crashing down 200+ points .

Kepcorp's reaction on the next day to the 200 pt Dow crash  was very interesting.... 

 (  email me for what i observed. )

Now if you have not seen "relative strength" in action before , this is the USD 4bn poster moment to watch. It tells you something big & positive  is about to happen with the stock but exactly what that might be, I haven't had the slightest clue and I didn't care.

On Wed nite, the Dow rebounded about 1%. 

The very next day, in the morning I did not participate in Kepcorp partly because I had some chores to attend to .. and partly because I was distracted by some shorting opportunity on yoma at the open at 63c and covering back at 60c. see prev post on dumping yoma 

Kepcorp opened at $11.09 and stayed below $11.12 all morning . By mid afternoon , probably with some encouragement from china ( up >2%)  and HK,  it started to show signs of breaking out again but was blocked by one big sell queue block of about 340 lots  at $11.20...

While waiting for this big block to clear,   I realised something .. ( email me for what it is)   So without hesitation,  before any breakout north of this $11.20 block , I quickly accumulated about 300 lots of   "in-the-money" Kepcorp MBeCW120702 wrts at about 13.1-13.2c from 1430hrs - 1500 hrs ( see below order book) .
At 15:18:04 , one kepcorp operator  found the time ripe to snap up the 340 lots at $11.20 on the sell queue. 

What motivated him to do it ? - i don't know me for some ventured guesses. .

At any rate, whatever the reasons, immediately once the big block was cleared , without the slightest inkling of the deal, I averaged up and bought another 300 lots at 13.3c -13.4c.  and towards the close, I averaged up further and bought another 100 lots at 13.9c making a total of 700 lots at avg price of 13.4c .( see above order book and below trade summary  )

Towards the close,  I noticed the other kepcorp wrt on my watchlist , kepcorp  BPeCW120703  also exhibited some participation , this one had an "out-of-the-money" strike price but being very late into the game for this wrt  ,  I took only100 lots at 11.1c .

But soon after my purchase , I noticed the wrt was behaving a bit erratically against the underlying price change .  Immediately I cut loose 50 lots at the same price that I bought. True enough the very next day , the bid-ask spread of this wrt widened from 0.1c to 0.2c .

Today due to some drowsy flu medicine I took last nite, I woke up late at about 11am , blissfully unaware of any kepcorp news .  When i switched on my pc screen, I was pleasantly surprised to find that Kepcorp had gap up to $11.64 soon after open , up a whopping 40c. The overnite Dow had also rallied >1%. 

 A quick and dirty calculation tells me my kepcorp wrts should translate to a gain of 2.8c from 13.9c close yesterday which it did soon after open to 16.8c..( see day high of wrt  in third item of watchlist below ),  

Upon further checks , I realised kepcorp had announced the deal last nite .. if only i had known ..i would have woken up early to dump,  flu or no flu.. 

At any rate ,  I dumped my kepcorp wrts in double quick time after reading the news,  at a respectable price making some 19% return on my capital in just one nite. It could have been more at 30% return , but then sleep is just as important.

Why did I dumped as soon as i woke up to the news ? email me for the reasons. 

To that effect , in my dumping frenzy,  I accidentally shorted 300 lots of the kepcorp BP wrts  at 13.7c only to cover back after a drop of only  0.2c.( see above trade summary on the right column intraday close P/L )  It could have been more if I had waited longer ( it eventually closed at 13.1c , see second item in above watchlist ) but then it was lunch time and I didn't like the erratic widening in bid-ask spread of this wrt.

At the same time , while dumping kepcorp, i noticed little twin sister sembmarine today is climbing up more than kepcorp - percentage wise,  despite no announcement from sembmarine. (see percentage gain from kepcorp 2% vs sembmar 2.7% in above watchlist at market close )  

Nonetheless towards close the sembmar rally also lost some steam and fell back without breaking my $5.40 barrier. 

Are there some expectations from sembmar operators of an impending announcement of similar magnitude from sembmar ( some analysts were expecting some drillships from Sete Brasil )  like kepcorp's ( 5 semi-sub oil rigs ) or  is it just pure mimicry / sympathetic move in action ?

This , we will find out hopefully by next week. 

 I am not too hopeful of any big deal announcement from sembmar anytime early next week (   email me for the reasons ..) but i may be wrong let's watch.... like a hawk on its prey and react accordingly .

*for answers to queries above, please email to   .. put email subject title as "Queries on post : Kepcorp gets big mojo from Brasil - request from xxx yyy "... insert your name: xxx and hp no: yyy  if you want into the subject title..  otherwise leave it as xxx yyy..  TQ.  

contra statement appended 18 April 

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