17th Dec 2007

The markets have closed for the day, and its another bloodbath today in the STI. Most of the other markets closed with more than a 2% drop, while STI dropped a total of 102.54 points (2.96%). HSI has been showing weakness for the past 1 week, dropping a total of about 3500 points ever since it touched the 30,000 mark.

As for my holdings in Celestial, a mistake was made during my trading. As I mentioned earlier, when it touched the $1.24 mark, which was right at the 20MA, if it didn't managed to close above that the next day, I should have cleared out. This was one of the resistance point in determining its movement. As shown, it didn't managed to close above that and it started downtrend all the way, and today's closing is at $1.02, which is already out of the money for me. However, I have no intentions of selling it to cut loss or whatsoever, as there are some other factors to consider.

Firstly, what constituted to this selling down to this counter? There wasn't any bad news at all relating to the company, with the only news of UBS lowering their holdings to less than 5%.

Next, there isn't any negative news towards the general business of the company (soya beans or biofuel), and these few days of selling was due to the bad market sentiment. The only china related news was about the banks increasing its reserve ratio rate, which probably triggered this selling across the board.

Today's support level was at $1.01, where there was heavy buying when it was at $1.01. I worry about this resistance, as it may not be able to withstand even more selling if it really does occur tomorrow.

Some basic background for the company:

*Manufactures and retails protein powders, canned protein beverages, soybean milk powders, high protein biscuits for the consumer market sold as “Sun Moon Star”……in 29 provinces and over 150 cities in the PRC through major local supermarket chains and international chains such as Carrefour… protein powder is sold as a health product...touted to have 20% more protein than others due to R&D….used as substitute for those with lactose intolerance…

*Produces and wholesales…..soy protein isolate, soy functional protein, biochemical feedstuff are targeted at industrial users. *The Soybean Zone Phase 1 development has been completed and operations commenced in June 2006. The new Soybean Zone facility has boosted Celestial's capacity from 53,000 tonnes to 213,500 tonnes per annum… In 2006 only 30% capacity was utilized… expected to increase to 70% in 2007…

*Bio-diesel plant to start by 4Q07…..Soybean oil…is a by product which they sold off as cooking oil but in Sept 2006… …. they have started building a biodiesel plant… equipment installation starts in May 2007. And by 4Q 07…. the soybean oil a by-product will be used as inputs for the bio-diesel plant. The Group’s soybean oil production can supply up to 50% of the bio-diesel plant’s input needs.

The last one was something that is very interesting. Bio-diesel is something that is out of their company's main focus, and this form of alternate energy may prove to be worthwhile, especially when it is using the by product from the soya bean.

Lastly, I will check the PE and EPS for Celestial, and I believe it should be below its current value and more potential for growth. As quoted from one of the forumers, he stated a PE of less than 10 for 2007. I was also talking about the call warrant which was related to Celestial as well, which is going to be due in 3rd March 2008. As the issuer, I will be wondering, it is going to be due in 3 months time, and looking at how things go, will anyone actually buy the warrant? Take note that the strike price for this warrant is at $1.80, and the ratio is 1 share : 2 warrants. But the other issue is it is dependent on who is the issuer itself too.

Finally, as far as I know, the management of Celestial is still quite good in terms of its growth but the only thing to worry is on the input prices (the cost of soya beans). As shown in the global markets, commodities are rising rapidly and this will increase the cost of production. This is the 1 factor that I worry about. But looking at the other signs, the probability of this counter reviving is much higher.

Currently, YEN/USD at 113.14-113.17 + 0.78, which is rising slowly as compared to last week. I'm still unable to find a website that talks about the LIBOR rate in general and I find that this may be quite interesting to know as it is one of another key factor to whether the feds are doing the right thing with the rate cut.