Parkway – Sell into Strength

Conviction sells using the following criterions: 1) Hold of Fully Valued recommendation 2) Trading >15% above fair value 3) Outperformed STI by more than 15% on both a 1-wk and 1-mth basis, which makes the stock technically overbought and finally 4) Technical analysis supports the sell view.

Shares of Parkway stick out like a sore thumb. The stock currently trades at 22% above our fair value of $2.71 and is expensive at 27.2X (30.4X ex-Novena sales) FY10 and 16.7X (28.3X ex-Novena sales) FY11 earnings. The stock had gained 9.5% last week and 23% on a m-o-m basis after Indian healthcare group Fortis became a major investor with a 23.9% stake and on news that Parkway had sold its medical suites located at Novena at SGD3588 - 3828psf during the recent phase 1 launch. Our analyst believes that positives for Parkway are more than priced in.

Shares of Parkway have a weekly stochastics reading of 81 (above 80 considered overbought) and the 8-wk RSI meter registers 82.4 (above 70 considered overbought). In addition, negative divergences have appeared on the weekly MACD and 8-wk RSI, which hint of a potential downward reversal ahead. Shares of Parkway are not just looking overbought; they are becoming ‘obese’.