June 20-24, FA/TA for Mermaid

June 22-24, TA for Mermaid,

• Trend - Downtrend (Confirmed by MA and MACD)
• Momentrum - Oversold but upward slope forming
• Support - 0.295
• Resistance - 0.360
• Candlestick - NA
• Volume - NA

Note: This stock analysis is a requested by MW. I hope it will provide you a reason to LONG, to speculate it or Don;t Touch it.

In fact, TA for such low volatility is not quite effective. If you need to participate this stock, you can use the support/resistance or momentum as your entry/exit. 

Understanding the Financial Ratio of Mermaid, 

From the first FA simple scan, it has

1. Negative earning
2. No Dividend
3. 50% Discount NAV

So a 50% Discount NAV, it is attractive for you to investigate more. So I would say, Let's study about the Annual Report to give a fair Valuation. 

So what's actually happened in 2010 for Mermaid?
- Key Management resigned - this is what you want to note.
- Share Resources. (This explains why it's ROA (-2.6) is poor) - it has poor utilisation of Asset.

How it make Money?
- From it Asset, as it is a Off-shored Rigs Rental company. (If it generate a negative ROA, this is a serious problem. It's like a taxi company cannot rent out its fleets, parking at carpark).

Is the Off-shore Industry that bad?

- This article is an extraction of the Supply and Demand Curve for Off-shore rigs from the Annual Report. 

What it means?

- It is as simple as 

1. Supply more than Demand.  
2. Very competitive, low margin business

What is the intrinsic Value of the stock?

- Since it has negative earning, no dividend - All formula for Intrinsic Valuation cannot be used.

In short, it is a value buy?

- Yes, as it has a 50% discount NAV and Enterprise Value is more than Market Capital. 

- Yes, provided that you know that the new CEO and it's Asset Utilisation must improve, else this company is heading for trouble. 

From a General Value Investing standpoint, always avoid such company.

 - Negative Earning

 - Negative ROA

 - Current Asset < Total Liability, which means if it is to liquidate now, it just goes burst immediately. Shareholders will get ZERO dollars but a "thank you" note. 

My personal comment, don't touch this stock. As there are many others better value stocks that is being highlighted in this blog. Why you need to risk your investment for such company?