After Synear announced the FY07 result, market has rewarded it with big sell down and many broker downgrade. Key reason is the result below expectation. We have to admit that buying stock is based on rule of expectation. When company outperform the expectation, share price increases. Otherwise, it is the other way. Imagine that I bought a few lot at well above 2+, you should know what expensive lesson means.
However, faith is not lost yet. I still believe the brand name is superior and the consumer trend. Here are some analyst take. If you have believed them blindly, the result is guaranteed to be disastrous. Have your independent view and judgment. I think many time, stock with cheap valuation should be safer than expensive one. Although, in short term, I expect more fluctuation.
SYNEAR, cimb maintain TRADING SELL with target price $1.14($1.75)
SYNEAR, db maintain BUY with target price $2.19
SYNEAR, ml maintain SELL
SYNEAR, uob maintain BUY with target price $1.74($2.45)
Assessment of full year result:
Revenue +18.9% (4th Q only +1.3%)
4th Q profit actually decreases
Full year EPS RMB 35.5cts -4.3%
Full year cashflow increased strongly from 289,850 to 514,373
Little bank borrowing
Dividend RMB0.0727
The fourth quarter result is why the bearishness. Because the growth trend has some what being broken.
The increase of distribution point and higher selling price was offset by raw material cost, higher selling & distribution cost. Main reasons for higher cost are intensified competition and severe winter which affect the business.
Future expansion plan intact – Building more factories, warehouse to increase production capacity. Future earning depends on the raw material cost to come down, launch of new product, increase of selling price and increase of production capacity. Things should clear up at 3Q. Assume 10% earning growth next year at RMB 39cts. At current price of 0.70, PE is 8.9 only. HOLD. Buy on weakness.
Wednesday, 27 February 2008
Monday, 25 February 2008
China lady shoe maker – Hongguo FY07 result
Total revenue +24.36%
Net Profit +21.56%
Operating cashflow before movement in working capital +21%
Earning per share (0.28 RMB) + 21.7%
Sales of C.Banner increased 21.38%
Sales of E.Blan increase 38.5%
Gross margin expanded to 40.57%
Profit before tax rose 18.28% dragged down by 50.17% increase of cost.
The bigger sales increase of E.Blan brand shows that the mid tier market expand more quickly. The black spot of this result is the fast expansion of cost. The group design output is increased to 6000 models per year. This couple with new retail information system and another 200 new outlets in year 2008 would further drive the earning forward. The joint venture company to produce Naturalizer and Via Spiga would also start contributing to earning.
The dividend payment is increased from 0.73 cents to 0.97 cents. The most comforting fact of Hongguo is it has achieved another year of 20% increase of profit. As long as you didn't buy expensive. This is a stock worth to keep. Assume they are able to increase the EPS to 0.336 next year. At the current price of 0.635, it is selling at next year PE of 9.4. BUY!
Net Profit +21.56%
Operating cashflow before movement in working capital +21%
Earning per share (0.28 RMB) + 21.7%
Sales of C.Banner increased 21.38%
Sales of E.Blan increase 38.5%
Gross margin expanded to 40.57%
Profit before tax rose 18.28% dragged down by 50.17% increase of cost.
The bigger sales increase of E.Blan brand shows that the mid tier market expand more quickly. The black spot of this result is the fast expansion of cost. The group design output is increased to 6000 models per year. This couple with new retail information system and another 200 new outlets in year 2008 would further drive the earning forward. The joint venture company to produce Naturalizer and Via Spiga would also start contributing to earning.
The dividend payment is increased from 0.73 cents to 0.97 cents. The most comforting fact of Hongguo is it has achieved another year of 20% increase of profit. As long as you didn't buy expensive. This is a stock worth to keep. Assume they are able to increase the EPS to 0.336 next year. At the current price of 0.635, it is selling at next year PE of 9.4. BUY!
Sunday, 24 February 2008
Stock beginner guide – Final word
Part 7
This guide is just a basic pointer to what you need to do to start stock investing. I would dedicate it to my friends who are keen to learn about stock investing.
Stock investment is a big subject. Around the world, so many people are crazy about it, because of the potential return. Yet, we often heard people losing money in stock market. The problem lies with the fact that many are rushed into the market thinking they can make quick money. Without spending time to understand the basic concept and risk of stock.
I believe in order to excel in one subject, one has to spend a great effort to learn it. A successful stock investing journey needs
Patience
Back to Index
This guide is just a basic pointer to what you need to do to start stock investing. I would dedicate it to my friends who are keen to learn about stock investing.
Stock investment is a big subject. Around the world, so many people are crazy about it, because of the potential return. Yet, we often heard people losing money in stock market. The problem lies with the fact that many are rushed into the market thinking they can make quick money. Without spending time to understand the basic concept and risk of stock.
I believe in order to excel in one subject, one has to spend a great effort to learn it. A successful stock investing journey needs
Patience
- wait for the long term compounding effect to kick in
- stick to one's game plan
- know when to buy and sell, not following the herd blindly
Back to Index
Stock beginner guide – IPO
Part 6
IPO (Initial Public Offering) is a way for the company to get listed on the stock exchange. There would be an underwriter to help the company prepare the listing process. Once the approval is given for the company to list, they would start offer the share to public by IPO.
You can apply the IPO by using ATM or internet banking. Some broker house which underwrite the issue would also offer the client to take up the IPO. You can buy the share at IPO price. Once the allocation is successful, the share would be deposited directly to the CDP account holding. There is no brokerage charge but commission charge, typically $1 or $2.
Another way for a company to list is via RTO (Reverse Take over). A listed shell company would propose to buy a private company by offering large amount of share. Eventually, the private company's shareholder would get the majority of share and become major shareholder.
Back to Index
IPO (Initial Public Offering) is a way for the company to get listed on the stock exchange. There would be an underwriter to help the company prepare the listing process. Once the approval is given for the company to list, they would start offer the share to public by IPO.
You can apply the IPO by using ATM or internet banking. Some broker house which underwrite the issue would also offer the client to take up the IPO. You can buy the share at IPO price. Once the allocation is successful, the share would be deposited directly to the CDP account holding. There is no brokerage charge but commission charge, typically $1 or $2.
Another way for a company to list is via RTO (Reverse Take over). A listed shell company would propose to buy a private company by offering large amount of share. Eventually, the private company's shareholder would get the majority of share and become major shareholder.
Back to Index
How to pick good stock?
Just read a good and interesting blog post today about How to pick good stock? The original article is written in chinese. >>Read original
In essence, the author list down six types of company competitive advantage.
1.Monopoly. It is easy to see why. Because you can only get the product/service from this company.
2.Resource advantage. The company that is close to key resource needed for the manufacturing process would have unfair advantage over others.
3.Brand. Brand itself is not enough, you need a strong brand. Warren Buffett called it a consumer monopoly. One would not bother the goods/service is slightly more expensive than others. This is also one of my most used stock selection criteria.
4.Strong capability. The company's technology and capability is simply superior than others.
5.Special protection. Some company's product received special protection from government.
6.Industry advantage. Some industries are less cyclical than the others. Some because of the industry dynamic would not be able to earn lots of money. Take the example of local IT company, the competition is intense and the price is dirt cheap.
Next time, when you buy your next stock, remember to think through what is the unique advantage that it holds. When I first started investing, I would spend time to analyse the financial statement etc. Nowadays, I just quickly glance through. As long as the company has low debt, good cashflow position and strong product/service, the chance of going down is quite slim.
The key point is the company key competitive advantage and industry outlook.
In essence, the author list down six types of company competitive advantage.
1.Monopoly. It is easy to see why. Because you can only get the product/service from this company.
2.Resource advantage. The company that is close to key resource needed for the manufacturing process would have unfair advantage over others.
3.Brand. Brand itself is not enough, you need a strong brand. Warren Buffett called it a consumer monopoly. One would not bother the goods/service is slightly more expensive than others. This is also one of my most used stock selection criteria.
4.Strong capability. The company's technology and capability is simply superior than others.
5.Special protection. Some company's product received special protection from government.
6.Industry advantage. Some industries are less cyclical than the others. Some because of the industry dynamic would not be able to earn lots of money. Take the example of local IT company, the competition is intense and the price is dirt cheap.
Next time, when you buy your next stock, remember to think through what is the unique advantage that it holds. When I first started investing, I would spend time to analyse the financial statement etc. Nowadays, I just quickly glance through. As long as the company has low debt, good cashflow position and strong product/service, the chance of going down is quite slim.
The key point is the company key competitive advantage and industry outlook.
Thursday, 21 February 2008
Osim - Over confidence
Today, Osim released the FY07 result. As a long time shareholder, the result is very disappointing. They try to put it in a positive way, but that does not disguise the fact that the year earning down 90%.
When one try to chew more than it could swallow, the indigestion is quite serious. I am staring at the share price, counting loss. I was at fault too.
1. Too confident on the brand value and company prospect.
2. Should sell out when the long term profit predictability trend has been broken.
3. Didn't really think through the cause and effect of the business.
Now, the only solution is to hope for the best. The discouraging part of the announcement was management didn't sound confident in turning the situation around in a short time.
When one try to chew more than it could swallow, the indigestion is quite serious. I am staring at the share price, counting loss. I was at fault too.
1. Too confident on the brand value and company prospect.
2. Should sell out when the long term profit predictability trend has been broken.
3. Didn't really think through the cause and effect of the business.
Now, the only solution is to hope for the best. The discouraging part of the announcement was management didn't sound confident in turning the situation around in a short time.
Wednesday, 20 February 2008
Bio Treat right issue
I saw the report from UBS on Bio-Treat technology. Market reacted negatively towards the right issue. As the big projects need more fund to support, they have turn to the market for capital.
The usual practises are such as fresh equity, corporate bond, convertible bond, right issue etc. Depends on what is the structure they want to take. Interestingly, market has its own view on these capital raising activities. Sometime, even fresh equity issue could pop up the share price (although existing share would be diluted), if a strong shareholder comes on board.
At the current valuation of 7.5x 2008 estimate PE, the stock is cheap. However, cheap stocks are plenty in the market right now. The share price could only move if they show some significant result and the risk appetite return.
The usual practises are such as fresh equity, corporate bond, convertible bond, right issue etc. Depends on what is the structure they want to take. Interestingly, market has its own view on these capital raising activities. Sometime, even fresh equity issue could pop up the share price (although existing share would be diluted), if a strong shareholder comes on board.
At the current valuation of 7.5x 2008 estimate PE, the stock is cheap. However, cheap stocks are plenty in the market right now. The share price could only move if they show some significant result and the risk appetite return.
Saturday, 16 February 2008
2008 Singapore budget
2008 Budget was announced yesterday. To many and my disappointment, the personal income tax rate was not reduced. Looks like I still have to strive hard to cope with the inflation pressure.
The focus is again turn to low income group, with measures to help them to cope with high inflation.
Brief summary of change
The focus is again turn to low income group, with measures to help them to cope with high inflation.
Brief summary of change
- Personal income tax rebate of 20%, up to $2000
- No estate duty
- Bursary scheme for lower income student
- Bonus for National Lifelong income scheme
- Growth dividend
- Other top ups
Tuesday, 12 February 2008
US recession fear
US recession – the most dreaded word in financial market now. The recent financial market volatility and little bear are all because of recession fear and the sub prime write down. According to Associated Press survey, 61% of the public believe US is already into recession since 2001. Economists are worried about the reduce consumer spending and investment which would push the economy into deeper recession. >> Zaobao story >> AP story
Until the picture is clearer, I think we are not going to see any significant rally. Once some bad news is let out, the market would fall further and follow by small rebound. Picking fundamental strong company and focus on internal/Asia demand is paramount in stock investing. Consensus is everything should clear up in second quarter.
For Singapore economy, economists still forecast Singapore would be able to obtain 4% to 6% economic growth. Minister mentor Lee Kuan Yew said that Asia won't go into recession, since China and India demand is strong and SEA countries economy also perform well.
Recent big investments in the island like new MRT line, integrated resort, foreign investment in chemical industry would create jobs and business opportunities. >> Zaobao story
Pick the companies that could benefit from the changing Singapore. Those like financial, construction, hospitality and retail stock could provide investor with respectable return.
Until the picture is clearer, I think we are not going to see any significant rally. Once some bad news is let out, the market would fall further and follow by small rebound. Picking fundamental strong company and focus on internal/Asia demand is paramount in stock investing. Consensus is everything should clear up in second quarter.
For Singapore economy, economists still forecast Singapore would be able to obtain 4% to 6% economic growth. Minister mentor Lee Kuan Yew said that Asia won't go into recession, since China and India demand is strong and SEA countries economy also perform well.
Recent big investments in the island like new MRT line, integrated resort, foreign investment in chemical industry would create jobs and business opportunities. >> Zaobao story
Pick the companies that could benefit from the changing Singapore. Those like financial, construction, hospitality and retail stock could provide investor with respectable return.
Monday, 11 February 2008
Severe winter effect on China economy and stock
Before the severe winter condition, China already experienced higher inflation and run away food price. Now, the winter that paralyzed certain part of the country should have impact on the economy. The direct impact of the winter are disruption of food, electricity and transport.
As the snow damaged road and structure, rebuilding would cost money and the construction stock should do well. Especially those have operation near the southern part of the country.
The disruption to the transport system would cause rising cost and food price hike. Agriculture and food stock might take a hit for the short term. Food consumption pattern would also be affected, since people is unwilling to pay higher price for food.
CIMB has cut the target price of Synear to 1.75 from 3.10 citing potential impact of hash winter and rising risk aversion. This highlight that the analyst target price is transient in nature, because it depends on many assumption which they would adjust from time to time. One should not follow blindly. Since my last purchase of the stock, the macro environment has changed some what, but I remained convinced on the long term potential of the stock. If the market is willing to sell me at 0.8 or 0.9, I would be happy to pick up some.
I think another notable stock for the winter impact would be Guangzhao IFB. I read in the news that one tenth of the forest was destroyed by the winter. This make us wonder what would happen to the company forest? Checked the company IR site, some of the forest is near the southen part of the country. Looks like the market didn't price this news in, as the share price still holds firm. This is the risk of agriculture business, as it is depending on the good weather.
As the snow damaged road and structure, rebuilding would cost money and the construction stock should do well. Especially those have operation near the southern part of the country.
The disruption to the transport system would cause rising cost and food price hike. Agriculture and food stock might take a hit for the short term. Food consumption pattern would also be affected, since people is unwilling to pay higher price for food.
CIMB has cut the target price of Synear to 1.75 from 3.10 citing potential impact of hash winter and rising risk aversion. This highlight that the analyst target price is transient in nature, because it depends on many assumption which they would adjust from time to time. One should not follow blindly. Since my last purchase of the stock, the macro environment has changed some what, but I remained convinced on the long term potential of the stock. If the market is willing to sell me at 0.8 or 0.9, I would be happy to pick up some.
I think another notable stock for the winter impact would be Guangzhao IFB. I read in the news that one tenth of the forest was destroyed by the winter. This make us wonder what would happen to the company forest? Checked the company IR site, some of the forest is near the southen part of the country. Looks like the market didn't price this news in, as the share price still holds firm. This is the risk of agriculture business, as it is depending on the good weather.
Tuesday, 5 February 2008
McDonald's and McCafe
Recently, McDonald's has opened many McCafe over the island. The new cafe mainly situated at the same location as the fast food restaurant. I was surprised at the setup and the quality of coffee it offers.
For the past few decades, McDonald's has grown quite steadily, expanding from its home to almost every part of the world by selling burger. With its efficient operating model and recognized franchise, it is able to earn good money and grow the business. By selling burger and soft drink, it is able to command a operating margin of 17% (from Google finance)
When consumer health consciousness picked up, it starts to sell green tea, corn and apple. When the growth stalled, it starts the coffee venture to capture wider market. It was once viewed by analyst as a value property play since its restaurants are all in very good location.
I think this shows that it is important to invest in business. Yes, business, not just stock. Pick a company which has unique competitive advantage, good product, good management and discounted price. In the long run, you would definitely win.
For the past few decades, McDonald's has grown quite steadily, expanding from its home to almost every part of the world by selling burger. With its efficient operating model and recognized franchise, it is able to earn good money and grow the business. By selling burger and soft drink, it is able to command a operating margin of 17% (from Google finance)
When consumer health consciousness picked up, it starts to sell green tea, corn and apple. When the growth stalled, it starts the coffee venture to capture wider market. It was once viewed by analyst as a value property play since its restaurants are all in very good location.
I think this shows that it is important to invest in business. Yes, business, not just stock. Pick a company which has unique competitive advantage, good product, good management and discounted price. In the long run, you would definitely win.
Sunday, 3 February 2008
Stock beginner guide – Buy and sell stock
Part 5
Once the broker account is opened, you are ready to buy/sell stock. You are excited and raring to go, but what to buy?
If you are following the fundamental analysis way, this is the typical process.
Research -> Wish list -> Buy -> Hold -> Sell
Research – Perform research on the market to identify stock that you are interested.
Wish list – Compile a buy list base on the research and set the entry price for each of them
Buy – When the price is right, you start buying the share
Hold – You continue to hold on to the company share
Sell – When the stock price hit your target or does not meet your objective anymore, sell it
This is just an illustration on the steps you can take. Many investors have their own decision making system. Of course, at the end of the day, everyone wish to make money.
Back to Index
Once the broker account is opened, you are ready to buy/sell stock. You are excited and raring to go, but what to buy?
If you are following the fundamental analysis way, this is the typical process.
Research -> Wish list -> Buy -> Hold -> Sell
Research – Perform research on the market to identify stock that you are interested.
Wish list – Compile a buy list base on the research and set the entry price for each of them
Buy – When the price is right, you start buying the share
Hold – You continue to hold on to the company share
Sell – When the stock price hit your target or does not meet your objective anymore, sell it
This is just an illustration on the steps you can take. Many investors have their own decision making system. Of course, at the end of the day, everyone wish to make money.
Back to Index
Saturday, 2 February 2008
Stock beginner guide – Open a broker account
Part 4
Now, you have learned the basic and understand the fundamental concept of stock. You want to start buying stock, but how?
In Singapore, the stock exchange is SGX. Stock listed and traded on a stock exchange. It is a common platform to enable investor to buy/sell stock.
First, open a CDP account. CDP stands for Central Depository. In the early days, investors would receive a physical certificate on company share they hold. This has been transformed into a paperless way by having CDP to keep track of the share you own.
After that, you need to open a broker account. You can go to individual broker website to know the details of account opening. Generally, there are two types of account. You can choose to have a broker to service you or open an online trading account. The broker account would have to link to your CDP account.
Personal broker – More personalized service and broker can advise you on the investment decision. The minimum brokerage charge is higher, at about $40.
Online trading – Basically, it is a DIY method to buy/sell on internet. You would use user name and password to log on to online trading account to buy/sell stock. The minimum charge is about 25.
You can check whether the broker would help you to open the CDP account at the same time. Then, step 1 CDP account opening can be skipped. During the broker account opening, you can link the broker account to bank account via EPS (Electronic Payment for Share). This would allow you to pay the broker through bank account.
Here is a list of broker available (not an exhaustive list).
Lim & Tan
Philip
Kim Eng
UOB Kayhian
DBS Vicker
OCBC Securities
CIMB GK
Example online trading charge:
Minimum $25
First 50k 0.28%
Next 50k 0.22%
100k onwards 0.18%
In a typical transaction, you instruct the broker to help you buy/sell a stock. You pay/receive the money to/from broker. Once the transaction is cleared, your CDP account balance is updated with latest holding. You can refer to SGX website for more information ww.sgx.com
After the account opening, you are ready to buy/sell stock.
Back to Index
Now, you have learned the basic and understand the fundamental concept of stock. You want to start buying stock, but how?
In Singapore, the stock exchange is SGX. Stock listed and traded on a stock exchange. It is a common platform to enable investor to buy/sell stock.
First, open a CDP account. CDP stands for Central Depository. In the early days, investors would receive a physical certificate on company share they hold. This has been transformed into a paperless way by having CDP to keep track of the share you own.
After that, you need to open a broker account. You can go to individual broker website to know the details of account opening. Generally, there are two types of account. You can choose to have a broker to service you or open an online trading account. The broker account would have to link to your CDP account.
Personal broker – More personalized service and broker can advise you on the investment decision. The minimum brokerage charge is higher, at about $40.
Online trading – Basically, it is a DIY method to buy/sell on internet. You would use user name and password to log on to online trading account to buy/sell stock. The minimum charge is about 25.
You can check whether the broker would help you to open the CDP account at the same time. Then, step 1 CDP account opening can be skipped. During the broker account opening, you can link the broker account to bank account via EPS (Electronic Payment for Share). This would allow you to pay the broker through bank account.
Here is a list of broker available (not an exhaustive list).
Lim & Tan
Philip
Kim Eng
UOB Kayhian
DBS Vicker
OCBC Securities
CIMB GK
Example online trading charge:
Minimum $25
First 50k 0.28%
Next 50k 0.22%
100k onwards 0.18%
In a typical transaction, you instruct the broker to help you buy/sell a stock. You pay/receive the money to/from broker. Once the transaction is cleared, your CDP account balance is updated with latest holding. You can refer to SGX website for more information ww.sgx.com
After the account opening, you are ready to buy/sell stock.
Back to Index
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