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.
Sunday, 15 June 2008
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4 comments:
Same thoughts on China New Town. I think in the long run, this business model will pay off and the downside to this stock is really limited. It is already at a very low valuation and the only way it can most possibly go is up.
I think that this is a good time to really pick up stocks that are on the downside. REITs are a good choice. All the best for your portfolio.
On the short term, there might still be some selling pressure, not sure who are the sellers. But, the company provide a strong case for "long term" investment. We need to wait for it to perform.
Talking about downside, I think it is limited. But we have to watch out for any bad news which might affect the business model.
REIT wise, I think CapitaRetail China is quite attractive. Yielding at 4-5%, with the strong growth potential, it should be a long term winner.
China New Town is now at 7 cents, is it worth buying ?
7 cts is a bargain. But always remember there is risk. No low is too low. Recently, they issued new shares to pay off the bond, there are share dilution to consider also.
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