Today, I read two analyst reports about the Hyflux and Epure from different broker. The timing is quite coincident that they feature the water stock on the same day. Water related stock has been quite a hot sector, on and off. Since year 2004 till now, I think. But if you bother to check on their performance, think one should be disappointed.
When the sector is hot(a usual stock market behaviour), the valuation get a little bit out of hand. At the current market condition, every stock is back on ground again. Often we hear, the world is short of water etc etc. It is logical to think the water related stock would do well.
Think again. If you are hoping for consistent earning growth, maybe this is not your cup of tea. Water treatment company operate on projects and the earning could fluctuate from quarter to quarter. Many wants to go into operating treatment plant and receiving recurrent cashflow. However, that also means they have to invest heavily upfront. It is a capital intensive business.
One should really think long term to do well. Having said that, the two companies mentioned seem to be the strongest on SGX right now.
Monday, 30 June 2008
Sunday, 29 June 2008
Stock market roundup 29 June 08
Last Friday, Dow drop another 100 points. I am not Oracle, so not possible to predict the future trend and whether any turn around is inside. But, what I do believe is, we are in another cycle of pessimism. Meaning? It means stock is likely to drift lower further. Sentiment is very powerful in stock market. No matter how great is the stock, when the feel is not right, it would just go together with the general market.
Sentiment aside, the outlook has indeed turned dimmer. They are couple of reasons. Credit crunch (more financial write down?), fallen US dollar, rising inflation (commodity, oil). Maybe so much excess has been built up over the years, and we need a recession to correct all these? Hopefully the China oil price hike would help to trim the demand. Possible for them to curb the speculative oil trading? This is one of the suggestion they quoted, but difficult to implement in this free market. Everybody should cut down consumption, in order to control this.
I shall watch on the sideline, until things are clear. It is impossible to catch the bottom. But I do believe, the more it fall, it is good for long term investor. But, you really need to work hard, to pick the right stock.
Sentiment aside, the outlook has indeed turned dimmer. They are couple of reasons. Credit crunch (more financial write down?), fallen US dollar, rising inflation (commodity, oil). Maybe so much excess has been built up over the years, and we need a recession to correct all these? Hopefully the China oil price hike would help to trim the demand. Possible for them to curb the speculative oil trading? This is one of the suggestion they quoted, but difficult to implement in this free market. Everybody should cut down consumption, in order to control this.
I shall watch on the sideline, until things are clear. It is impossible to catch the bottom. But I do believe, the more it fall, it is good for long term investor. But, you really need to work hard, to pick the right stock.
Tuesday, 24 June 2008
China oil price hike is good for the economy
China decided to hike the oil price last week, finally. It was a good move.
Usually, when the fuel price increases, the inflation would follow. Because the logistic cost would go up and that's not good for the general economy. But this time round, the situation is a bit different.
The current oil price is driven by speculative interest, geo political uncertainties and strong demand. If the government does not do something, the oil price might just keep increasing and hurt the world economy. After adjusting for the oil price, there would be a short term inflation spike, but it should help to curb the oil price increase in long run. Hopefully, the price would return to sanity soon.
In the short term, continuous financial market volatility seems to be the best bet.
Usually, when the fuel price increases, the inflation would follow. Because the logistic cost would go up and that's not good for the general economy. But this time round, the situation is a bit different.
The current oil price is driven by speculative interest, geo political uncertainties and strong demand. If the government does not do something, the oil price might just keep increasing and hurt the world economy. After adjusting for the oil price, there would be a short term inflation spike, but it should help to curb the oil price increase in long run. Hopefully, the price would return to sanity soon.
In the short term, continuous financial market volatility seems to be the best bet.
Wednesday, 18 June 2008
The fallen rice price
It was in the news. After a few months of surge, the rice price has started to go down now. Actually, there was no shortage of supply. But because of the kiasu-ism of some countries which wants to stock up the rice, it cause the temporary demand surge. Once they have stocked up enough rice and new season harvest going into market, those restrictions have been removed slowly. We shall see the continuous fall of the rice price, which is a good news to the investor. Because we need Asia to remain socially stable.
Day would come for commodities. There would be an end to the commodity bull, the only million dollar question is when? If the following factors which driving up the price start to wane, then we shall see rationale return to the market.
1. Speculative buying by hedge fund and investor
2. Increase demand all over the world
3. The bio fuel madness
4. Shortage of farm land
All these could be summarized to only one factor - demand. If the inflation goes out of hand, there won't be long when demand would reduce drastically.
Day would come for commodities. There would be an end to the commodity bull, the only million dollar question is when? If the following factors which driving up the price start to wane, then we shall see rationale return to the market.
1. Speculative buying by hedge fund and investor
2. Increase demand all over the world
3. The bio fuel madness
4. Shortage of farm land
All these could be summarized to only one factor - demand. If the inflation goes out of hand, there won't be long when demand would reduce drastically.
Sunday, 15 June 2008
China New Town unappreciated
Last Friday, Dow closed at the positive region, the coming week should see some rebound. After that, the bad news might get investor nervous again.
The only transaction I did last month was to buy China New Town share. After watching it plunging from 80 cents to near 20 cents, I think it is a good buy. My buying time also coincide with major shareholder purchase.
As highlighted in the listing prospectus before, one of the risk is investor don't understand the business and don't know how to value it. It looks like that is the case right now. Surprisingly no analyst has started coverage on the stock.
When the company decided to list in Singapore, obviously it did not aim to fail. It has an ambitious plan and unique business model. The institution demand was huge and they count the major fund manager as investor. But it was a bad timing, the subprime crisis erupted and the lumpy earning disappoint the investor. Maybe those are just excuses, since if you really understand what they are doing, then you should be aware that they have funding risk and have to wait for land sales for revenue.
I bought at 0.21 which I think is relatively cheap. However, I didn't really go and calculate how much the company worth. The usual way for property stock valuation is to take the RNAV. But, since they get the money after land sales, is there a proper valuation of the current land? I have no answer, but buying a small stake for the future. Key reasons:
- After fallen more than 75%, I think the downside is limited. If the fortune turns, it should perform strongly
- Major shareholder purchase.
- Once the town they developed maturing in years to come, the land they hold would rise in value
It is a long term play. I think patience would pay off, we have to watch out for future development.
The only transaction I did last month was to buy China New Town share. After watching it plunging from 80 cents to near 20 cents, I think it is a good buy. My buying time also coincide with major shareholder purchase.
As highlighted in the listing prospectus before, one of the risk is investor don't understand the business and don't know how to value it. It looks like that is the case right now. Surprisingly no analyst has started coverage on the stock.
When the company decided to list in Singapore, obviously it did not aim to fail. It has an ambitious plan and unique business model. The institution demand was huge and they count the major fund manager as investor. But it was a bad timing, the subprime crisis erupted and the lumpy earning disappoint the investor. Maybe those are just excuses, since if you really understand what they are doing, then you should be aware that they have funding risk and have to wait for land sales for revenue.
I bought at 0.21 which I think is relatively cheap. However, I didn't really go and calculate how much the company worth. The usual way for property stock valuation is to take the RNAV. But, since they get the money after land sales, is there a proper valuation of the current land? I have no answer, but buying a small stake for the future. Key reasons:
- After fallen more than 75%, I think the downside is limited. If the fortune turns, it should perform strongly
- Major shareholder purchase.
- Once the town they developed maturing in years to come, the land they hold would rise in value
It is a long term play. I think patience would pay off, we have to watch out for future development.
Tuesday, 3 June 2008
China Taisan IPO
China Taisan Technology IPO comprises of
- 8,000,000 Offer Shares at S$0.24 each by way of public offer; and
- 225,000,000 Placement Shares at S$0.24 each by way of placement
China Taisan Technology Group Holdings Limited (”China Taisan”) is one of the leading manufacturers in the PRC of knitted fabrics used for sports and leisure apparel. Knitted fabrics are stretchable and mostly used in sports and leisure apparel.
They are approved suppliers of fabrics used in the manufacturing of apparel for reputable international and local sports and leisure apparel brands such as Umbro, Nike, Puma, Anta (安踏), Kappa, Lotto, Wanjielong(万杰隆) and E•Land.
Competitive strength
- approved suppliers for reputable international and local apparel brands
- strong R&D capabilities
- established track record and reputation
- experienced management team
- strategically located in Jinjiang City
- advanced technologies and equipment in our production process
- able to manufacture products that conform to various international standards
Risk
- may be affected by major disruptions and accidents at our production facility
- vulnerable to fluctuations in polyester yarn prices
- dependent on the protection of our proprietary technical know-how
- dependent on the apparel industry
- R&D efforts may not lead to successful development and/or commercialisation of new products
- lack of long-term purchase orders or commitments from customers could adversely affect our Group’s business if demand is reduced
- dependent on certain key personnel for our continued success
Facts
NAV after post invitation 927,900,000 shares : 10.75cts
Historical EPS for 704,700,000 Shares : 5.11cts
Historical PE : 4.69
EPS for 927,900,000 shares : 3.88cts
PE base on above : 6.19
Market capitalization base on offer price : 222.7 million
Base on market cap, it is bigger than C&G Industrial Holdings which is trading at PE of 3.6 and smaller than China Sky which trade at PE of 6.0. I can say 6.19 is not very expensive, but not cheap either compare to the peers. Business wise, they are not direct comparable, since China Taisan operate in performance fabric segment.
Textile and fiber stocks have not received favourable response on SGX. Unless you have long investment horizon, oil price increase would make you nervous.
- 8,000,000 Offer Shares at S$0.24 each by way of public offer; and
- 225,000,000 Placement Shares at S$0.24 each by way of placement
China Taisan Technology Group Holdings Limited (”China Taisan”) is one of the leading manufacturers in the PRC of knitted fabrics used for sports and leisure apparel. Knitted fabrics are stretchable and mostly used in sports and leisure apparel.
They are approved suppliers of fabrics used in the manufacturing of apparel for reputable international and local sports and leisure apparel brands such as Umbro, Nike, Puma, Anta (安踏), Kappa, Lotto, Wanjielong(万杰隆) and E•Land.
Competitive strength
- approved suppliers for reputable international and local apparel brands
- strong R&D capabilities
- established track record and reputation
- experienced management team
- strategically located in Jinjiang City
- advanced technologies and equipment in our production process
- able to manufacture products that conform to various international standards
Risk
- may be affected by major disruptions and accidents at our production facility
- vulnerable to fluctuations in polyester yarn prices
- dependent on the protection of our proprietary technical know-how
- dependent on the apparel industry
- R&D efforts may not lead to successful development and/or commercialisation of new products
- lack of long-term purchase orders or commitments from customers could adversely affect our Group’s business if demand is reduced
- dependent on certain key personnel for our continued success
Facts
NAV after post invitation 927,900,000 shares : 10.75cts
Historical EPS for 704,700,000 Shares : 5.11cts
Historical PE : 4.69
EPS for 927,900,000 shares : 3.88cts
PE base on above : 6.19
Market capitalization base on offer price : 222.7 million
Base on market cap, it is bigger than C&G Industrial Holdings which is trading at PE of 3.6 and smaller than China Sky which trade at PE of 6.0. I can say 6.19 is not very expensive, but not cheap either compare to the peers. Business wise, they are not direct comparable, since China Taisan operate in performance fabric segment.
Textile and fiber stocks have not received favourable response on SGX. Unless you have long investment horizon, oil price increase would make you nervous.
Sunday, 1 June 2008
Best performing unit trust could be your worst investment
I read in the news last week. The worst may not be over for Vietnam’s stock market. Morgan Stanley said Vietnam was heading for a “currency crisis” and Fitch Ratings cut its outlook on the country’s debt rating. The country is experiencing strong inflation and maybe overheating. The once best performing stock index has fallen 55% this year.
I remember that when the market was best performing among the region, the market keep going up and the foreign investor money keep pouring in. It was similar with India, when the valuation is no longer cheap, the money inflow keep the market up.
If we back track a few years more, we can remember the year 2000 bubble. The higher the market went, the more money people pour in until the tipping point. I think at that time, banks were aggressively pushing technology related unit trust and result in many investors losing money. That might explain the poor reputation of unit trust as an investment approach in the local market.
Investor who bought the Vietnam fund might be sitting on loses now. As the over valuation unwind continues, it has more downside to go. That brings an interesting questions: Why did fund house launch fund at the peak of the cycle? Many times, we can see the peak of the market when there are many new fund launch. I remember we had properties fund, infrastructure fund, climate change fund etc etc.
We can look at it using common sense. The business of fund management is to get as many people as possible to invest in the fund. As the asset under management grow, the annual management fee also grow. So, it is in the fund manager interest to attract new investment and to grow the portfolio.
So, when is the good time to attract new investment money? That's when the investor interest is the highest. For example, when properties market was hot, many people wants to get into properties investment. So, that's the good time to launch properties related fund and the brochure would tell you that it present a strong long term investment case. Most of the time, people get attracted by new fund launch and stuck with the under performing fund for many years.
Timing does matter in unit trust. Before buying, it is good to get some basic information about the region you are investing, whether it is cheap or expensive. As we don't usually buy/sell unit trust frequently, buying at low is safer than when the market has run up a lot. Some site actually offers information on market PE which could be an useful indicator.
Otherwise, better to invest in global diversified fund than special sector fund. From my experience, the sector or single country fund does not necessary offer superior return, but you have to bear extra risk. So, avoid chasing hot fund, that could be your worst investment.
I remember that when the market was best performing among the region, the market keep going up and the foreign investor money keep pouring in. It was similar with India, when the valuation is no longer cheap, the money inflow keep the market up.
If we back track a few years more, we can remember the year 2000 bubble. The higher the market went, the more money people pour in until the tipping point. I think at that time, banks were aggressively pushing technology related unit trust and result in many investors losing money. That might explain the poor reputation of unit trust as an investment approach in the local market.
Investor who bought the Vietnam fund might be sitting on loses now. As the over valuation unwind continues, it has more downside to go. That brings an interesting questions: Why did fund house launch fund at the peak of the cycle? Many times, we can see the peak of the market when there are many new fund launch. I remember we had properties fund, infrastructure fund, climate change fund etc etc.
We can look at it using common sense. The business of fund management is to get as many people as possible to invest in the fund. As the asset under management grow, the annual management fee also grow. So, it is in the fund manager interest to attract new investment and to grow the portfolio.
So, when is the good time to attract new investment money? That's when the investor interest is the highest. For example, when properties market was hot, many people wants to get into properties investment. So, that's the good time to launch properties related fund and the brochure would tell you that it present a strong long term investment case. Most of the time, people get attracted by new fund launch and stuck with the under performing fund for many years.
Timing does matter in unit trust. Before buying, it is good to get some basic information about the region you are investing, whether it is cheap or expensive. As we don't usually buy/sell unit trust frequently, buying at low is safer than when the market has run up a lot. Some site actually offers information on market PE which could be an useful indicator.
Otherwise, better to invest in global diversified fund than special sector fund. From my experience, the sector or single country fund does not necessary offer superior return, but you have to bear extra risk. So, avoid chasing hot fund, that could be your worst investment.
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