Monday, December 1, 2014

Keppel Corporation share price takes a battering

As I am on leave today, I have a great time watching Keppel Corp share price takes a battering in the stock market.

Keppel Corp closed at S$9 last Friday.

It opens at S$8.82.  I watch it goes all the way down to S$8.51 before it closes at S$8.56.

I think those who bought it at closing price last Friday will be crying now.

They have a paper loss of S$440 per lot by now.  It is just one trading day difference. 

If you add in the transaction cost, the total loss is S$500.

I start to pay attention to Keppel Corporation now because of the low price.

I will not buy into Keppel Corp as long as Brent crude oil price is still falling.

There is a risk of order cancellation as long as the Brent crude oil price remains below $70.  I think the market has not factored in the bad news yet, since the bad news is not out yet.

The worst is yet to be.

If Keppel Corp announces a cancellation order, the share price will go into a free fall again.

It may lead to an avalanche of order cancellations, and Keppel Corp will be forced to retrench some workers.

The only country that can save Keppel Corp now is Saudi Arabia.

As long as Saudi Arabia agrees to cut supply, Brent crude oil price will stop the free fall.

Having said that, there is little risk that crude oil price will fall below $40. 

Many shale oil producers in United States have a production cost of $70.  The best of them still need a production cost of $40.

That means when crude oil price goes to $40, shale oil production in US will come to a halt, and the oil price will increase.

If that day comes, the share price of Keppel Corp will probably be just S$3.  That will be a great bargain.

If you are a current shareholder of Keppel Corp, I feel your pain.  It is hard to see money vanishes within a few hours.

If you are a marine worker of Keppel Corp, you probably will fear losing your job and your fat bonus.