DBS Vicker analyst went to visit Nanjing Puzhen Plant of MIDAS and issue another buy report.
Outlook over the next 3-5 years is very bright. We believe that Nanjing SR Puzhen is in the process of looking at bidding for 4 to 5 more projects with a total potential 700-800 cars, which could lead to a doubling of Nanjing SR Puzhen’s current order book of RMB3.5bn. Whilst we can expect more clarity on the delivery of trains in FY08 for Nanjing SR Puzhen only in 1Q08, we are very confident about its prospects in FY09 and beyond (when most of its current order books will begin delivery).
Reiterate BUY and S$1.84 target price, which is based on 24x FY08 earnings, translating to 0.4x PEG on EPS CAGR of 50% over FY06-FY09F. We continue to like Midas as a play on China’s booming railway sector.
>> It is no secret that China government is set to spend lots of money in building the railway infrastructure across the country. MIDAS would be a key benefiary of this plan. The advantage of this investment theme is, it is unlikely to be affected by internal economy slow down or US slow down. Valuation has came down and become more reasonable now.
Thursday, 29 November 2007
Tuesday, 27 November 2007
if you want to buy a bank now
If you want to buy a bank now, what should you buy? First name come to my mind is citigroup. I know people would say about the problems it has - massive write down and leadership problem. But, that's the time you can pick up a financial group cheaply, isn't it? They have a strong franchise some more.
The capital base was weaken by the recent write down. Today, it announces the capital injection by Abu Dhabi fund. It proves that people have confidence in the brand.
Recall when Amex had the trouble and Warren Buffett went in to buy the company. Because they have strong franchise and it present a rare opportunity to buy cheaply. I think the situation is similar here. Of course, you need to have holding power for the counter for long term. When the financial market sorts itself out, it would come back.
Only pity thing is the stock is listed in US. Not convenient to buy from Singapore. It might drop some more depends on the degree of problem. One can accumulate over different period. Do your own home work first!
The capital base was weaken by the recent write down. Today, it announces the capital injection by Abu Dhabi fund. It proves that people have confidence in the brand.
Recall when Amex had the trouble and Warren Buffett went in to buy the company. Because they have strong franchise and it present a rare opportunity to buy cheaply. I think the situation is similar here. Of course, you need to have holding power for the counter for long term. When the financial market sorts itself out, it would come back.
Only pity thing is the stock is listed in US. Not convenient to buy from Singapore. It might drop some more depends on the degree of problem. One can accumulate over different period. Do your own home work first!
Monday, 26 November 2007
Sport player, priced for perfection?
A short note on today's Kim Eng report on China Sports Intl. China Sports is rolling out new product and plan to raise retail price. They also sponsoring the Slovakian Olympic team and raising advertisement spending. The outlook remains positive.
In last paragraph, "While China Hongxing’s recent placement has dampened sector sentiment somewhat, we believe the sportswear sector will still do well. It is a matter of balancing growth and costs, taking into account stock valuation as well. While both companies are participating in the sector’s growth, CHHS is priced for perfection and cannot afford to slip up. As such, we believe the risk-reward is tilted more in CSI’s favour."
"Priced to perfection" is what usually the market do, when people become overly enthusiastic with the company and the story it is selling. It does not protect one with the margin of safety advocated by value investment guru. How true it is! At the peak, one could not afford to slip up too much. While at the bottom, room for going down is limited, but there is high probability to charge upwards.
In last paragraph, "While China Hongxing’s recent placement has dampened sector sentiment somewhat, we believe the sportswear sector will still do well. It is a matter of balancing growth and costs, taking into account stock valuation as well. While both companies are participating in the sector’s growth, CHHS is priced for perfection and cannot afford to slip up. As such, we believe the risk-reward is tilted more in CSI’s favour."
"Priced to perfection" is what usually the market do, when people become overly enthusiastic with the company and the story it is selling. It does not protect one with the margin of safety advocated by value investment guru. How true it is! At the peak, one could not afford to slip up too much. While at the bottom, room for going down is limited, but there is high probability to charge upwards.
Saturday, 24 November 2007
Inflation has caught us
These two weeks, the news topic which I come across most often is inflation. The situation is turning bad now.
US inflation hit 14 month high, driven by higher fuel cost. The falling US dollar cause the imported good and oil price to go higher. By right, to curb the inflation, Fed should increase the interest rate. But, given the current subprime problem, they are likely to cut the interest rate instead. This could give rise to faster inflation which threaten the economy. I really hope US won't end up in recession but only to slow down.
In China, situation is no better. Inflation has picking up, driven by the food price increases. A very good example is the pork price, which has increased a lot. Consumer price index rose 6.5% in Oct. The economy remains red hot and further cooling is needed.
Singapore's inflation is targeted to hit 5% next year, driven by the housing cost increase. The economy is doing very well. We see tight labour market, congested road and rising rent. The wage has increased, but the cost has gone up quite significantly also. In fact, the whole Asia's inflation has picked up some what.
These two years of fast economy growth in the region, has increased the demand for commodity like soy bean and oil. Low interest rate also contribute to the excess liquidity which flowing through Asia and prop up the asset price. We really need a global slow down to cool the fast rising price.
I think we are at the critical juncture now. If the thing is not managed properly - subprime, oil price, interest rate, inflation. We would have more surprises ahead. It is now inappropriate to risk more capital in the market. Because if the liquidity dried up, asset price could fall a lot. Better if the picture could become clearer. Consider to invest only on fundamental solid company with strong cashflow to weather the storm. Cheaper price could go cheaper, buy/trade with care. Having said that, of course, the best time to buy is when the stock is down.
US inflation hit 14 month high, driven by higher fuel cost. The falling US dollar cause the imported good and oil price to go higher. By right, to curb the inflation, Fed should increase the interest rate. But, given the current subprime problem, they are likely to cut the interest rate instead. This could give rise to faster inflation which threaten the economy. I really hope US won't end up in recession but only to slow down.
In China, situation is no better. Inflation has picking up, driven by the food price increases. A very good example is the pork price, which has increased a lot. Consumer price index rose 6.5% in Oct. The economy remains red hot and further cooling is needed.
Singapore's inflation is targeted to hit 5% next year, driven by the housing cost increase. The economy is doing very well. We see tight labour market, congested road and rising rent. The wage has increased, but the cost has gone up quite significantly also. In fact, the whole Asia's inflation has picked up some what.
These two years of fast economy growth in the region, has increased the demand for commodity like soy bean and oil. Low interest rate also contribute to the excess liquidity which flowing through Asia and prop up the asset price. We really need a global slow down to cool the fast rising price.
I think we are at the critical juncture now. If the thing is not managed properly - subprime, oil price, interest rate, inflation. We would have more surprises ahead. It is now inappropriate to risk more capital in the market. Because if the liquidity dried up, asset price could fall a lot. Better if the picture could become clearer. Consider to invest only on fundamental solid company with strong cashflow to weather the storm. Cheaper price could go cheaper, buy/trade with care. Having said that, of course, the best time to buy is when the stock is down.
Friday, 23 November 2007
Personal finance part 2 – Protect what is important
The next step to do is to have protection in the form of insurance.
Why everyone needs protection? One is bound to have dependent like parents, husband/wife or children. If one is the bread winner of the family, what would happen if disaster strike? Even you are single, what happen if unfortunate event like permanent disability happen? When that happens, would you have enough financial resource to cope with it?
If you don't have any policy, suggest you find an insurance agent to access your insurance need. Typically people would get insurance for
Seriously I don't like whole life plan, endowment plan or investment linked plan. I would advocate buy term and invest the rest in unit trust. What happen when you buy a whole life plan? The premium is split into two parts. First portion used to pay the term premium, another portion is used for investment. The investment portion is the part which they used to return you the premium after 20 years. But generally, the investment return for whole life policy is low, around 3-5%. A term insurance should be cheap and have a bigger coverage.
Rule 2 - Buy enough insurance coverage
In the next part, I would discuss about investment.
***Updated 26 Sep 2008
Why everyone needs protection? One is bound to have dependent like parents, husband/wife or children. If one is the bread winner of the family, what would happen if disaster strike? Even you are single, what happen if unfortunate event like permanent disability happen? When that happens, would you have enough financial resource to cope with it?
If you don't have any policy, suggest you find an insurance agent to access your insurance need. Typically people would get insurance for
- Death
- Permanent disability
- Critical illness
- Hospitalisation
Seriously I don't like whole life plan, endowment plan or investment linked plan. I would advocate buy term and invest the rest in unit trust. What happen when you buy a whole life plan? The premium is split into two parts. First portion used to pay the term premium, another portion is used for investment. The investment portion is the part which they used to return you the premium after 20 years. But generally, the investment return for whole life policy is low, around 3-5%. A term insurance should be cheap and have a bigger coverage.
Rule 2 - Buy enough insurance coverage
In the next part, I would discuss about investment.
***Updated 26 Sep 2008
Wednesday, 21 November 2007
Sea of red
Today is another sea of red. In the morning bus, when I saw the early East Asia trade, I knew this is going to be another day of sell down. As I am busy at work, I don't bother to look at any market news.
The current problems(or excuses) are
- Weak economy outlook in US
- Afraid of more subprime loss
- Unwinding of yen carry trade amid rising risk
You name it, they have it. At the sametime, there is a wide spread of pessimism in the forum also. It is as good as tomorrow the world would be in total recession. Next year, US is either going to slow down or go through a recession to correct the excess. Few years down the road, the bull would be back again, although I won't say it has died already. In the coming century, Asia is still where the action is.
Stock market tends to overshoot. Just as you think it is doom and gloom, we might be at the bottom and ready to resume the upward trend. Or just you think all is well, surprise would come. I believe after another few round of sell down, maybe looking at STI 3200, it would be worthwhile to start buying in different tranches. We must overcome the human instinct to buy high sell low. After all, behind a stock is company, behind a company is a business. Business grows over time!!
Let's find some examples. Around 21 Nov 06,
Olam, 2.0+
China Hongxing, 0.4+
Ezra, 1.8+
Despite the current sell down, they are unlikely to go back to previous level. Because business has grow, stock price would follow. The thing that fluctuate is the valuation. When market is optimistic, you get high PE valuation. Otherwise, it is the other way.
Have faith, focus on valuation and pray. The risk of buying low is less than buying high.
The current problems(or excuses) are
- Weak economy outlook in US
- Afraid of more subprime loss
- Unwinding of yen carry trade amid rising risk
You name it, they have it. At the sametime, there is a wide spread of pessimism in the forum also. It is as good as tomorrow the world would be in total recession. Next year, US is either going to slow down or go through a recession to correct the excess. Few years down the road, the bull would be back again, although I won't say it has died already. In the coming century, Asia is still where the action is.
Stock market tends to overshoot. Just as you think it is doom and gloom, we might be at the bottom and ready to resume the upward trend. Or just you think all is well, surprise would come. I believe after another few round of sell down, maybe looking at STI 3200, it would be worthwhile to start buying in different tranches. We must overcome the human instinct to buy high sell low. After all, behind a stock is company, behind a company is a business. Business grows over time!!
Let's find some examples. Around 21 Nov 06,
Olam, 2.0+
China Hongxing, 0.4+
Ezra, 1.8+
Despite the current sell down, they are unlikely to go back to previous level. Because business has grow, stock price would follow. The thing that fluctuate is the valuation. When market is optimistic, you get high PE valuation. Otherwise, it is the other way.
Have faith, focus on valuation and pray. The risk of buying low is less than buying high.
Monday, 19 November 2007
Company update 19 Nov 07
There are really lots of company news these two weeks. The economy is booming and every company wants to expand.
Update for Olam
From CIMB. Wilmar and Olam to form 50:50 JV to invest in integrated palm oil, natural rubber and sugar assets in Africa. Maintain target price of S$3.83; reiterate Outperform. We have estimated that Olam will make about S$600m in investments in FY08. YTD investments, including Nauvu, amount to S$245m, within our forecast. We have kept our earnings estimates intact as we earlier incorporated such acquisitions in our model as mature existing businesses grow at a slower rate. Maintain target price of S$3.83, still based on DCF valuation (WACC of 9.4% and terminal growth rate of 2%).
From DBS, We maintain our BUY recommendation, leaving our target price of S$3.80 intact, which is based on 30x FY09 earnings. We continue to like Olam for its strong earnings growth prospects, driven by both organic expansion and via acquisitions.
>> Fantastic. Having missed the Olam ipo at 60c, scared of the high valuation of 80c, didn't buy during the pull back at 1.80. Olam is one of the stock I want to own but dare not have the courage to take up. One notable about the company is the business model, which is hard to find and consistently increase the earning. At the current PE, I still won't buy, only wait until it is more reasonable. Normally, when people cannot justify the buy call using PE, they would use other means like discounted cashflow, enterprise value etc etc. However, the final return won't be great either, and you are subjected to the PE de-rating if something does happen to the company.
Update on China Hongxing again.
From CIMB, Target price lowered to S$1.32 from S$1.48; downgrade to Neutral from Outperform. Our new target continues to price the stock at 27 CY09 fully-diluted earnings, which is at a slight premium to the average valuation for the sports-shoe sector. Given the limited upside to our target price, we downgrade the stock to a Neutral. However, we continue to like Hongxing as a key beneficiary of the Olympics and China’s rising consumption spending.
From DBS, Valuations now look stretched against larger, more established peers. Downgrade to HOLD. The stock is now trading at 32x FY08 and 24x FY09 earnings, which is similar to Anta’s 32x FY08 FY08 and 23x FY09 earnings. As such, with valuations now at par with Anta, which is a larger and more established peer, we believe that valuations for China Hongxing are now fair and downgrade the stock to a HOLD, TP S$1.25 (24x FY09 PER).
>> Like I mentioned early, the risk has increased. Both to company and investor. Company faces the aggressive expansion risk and investor face the share over hang & earning dilution. Having said that, I believe the company is doing the right thing. They might become the sport shoe giant.
DBS on Boustead. We have resumed coverage on Boustead with a fair value of S$2.74, based on sum-of-the-part valuation. This would translate to 15xFY08 PER and 13xFY09 PER and offers 21% potential upside. Recommend Buy.
>> When company is doing well, analyst would come back to cover it. At current price, and given the project risk(project always face unexpected situation), wait for a better entry point. I was caught by the recent property down turn by a small amount. This proves that the theme play could swing very fast. For example, shipping, technology, oil & gas, who knows? I think the consumer stocks are more resilient.
Old Chang Kee Pte Ltd – The curry-puff maker is headed for an IPO. The food and beverage group announced Friday that it has lodged its preliminary prospectus with the MAS, and intends to list its shares on Sesdaq, the secondary board.
>> Unless you aspire to support the local brand, I see no reason to subscribe to this issue. F&B business is tough. Just look at the peers listing on SGX, and you would know the answer.
SembCorp Industries – Intends to increase its piped Indonesian gas imports by 26% to meet growing demand for natural gas from petrochemical plants on Jurong Island, and expects to conclude a gas sales agreement for this by the first quarter of next year.
>> The petro chemical industry is growing in Singapore. If you are keen on the idea, can explore which are the companies doing business in Jurong island. The support industry should get the major deals and increase the earning. Base on recent report from Kim Eng, they still view Rotary as the primary beneficiary of this boom.
According to zaobao news today, Brothers Holdings' "Singapore City" at Shenyang China received an overwhelming response on the first five days. More than 250 units already sold with 70% of buyers are the city's people. The project is a mid to high end integrated property project, leveraged on Singapore good brand name.
>> I expect the project to do well. However, I have yet to have time to study fully on the company. It should be a worthwhile bet. After I have done my research, I shall post my finding here.
Update for Olam
From CIMB. Wilmar and Olam to form 50:50 JV to invest in integrated palm oil, natural rubber and sugar assets in Africa. Maintain target price of S$3.83; reiterate Outperform. We have estimated that Olam will make about S$600m in investments in FY08. YTD investments, including Nauvu, amount to S$245m, within our forecast. We have kept our earnings estimates intact as we earlier incorporated such acquisitions in our model as mature existing businesses grow at a slower rate. Maintain target price of S$3.83, still based on DCF valuation (WACC of 9.4% and terminal growth rate of 2%).
From DBS, We maintain our BUY recommendation, leaving our target price of S$3.80 intact, which is based on 30x FY09 earnings. We continue to like Olam for its strong earnings growth prospects, driven by both organic expansion and via acquisitions.
>> Fantastic. Having missed the Olam ipo at 60c, scared of the high valuation of 80c, didn't buy during the pull back at 1.80. Olam is one of the stock I want to own but dare not have the courage to take up. One notable about the company is the business model, which is hard to find and consistently increase the earning. At the current PE, I still won't buy, only wait until it is more reasonable. Normally, when people cannot justify the buy call using PE, they would use other means like discounted cashflow, enterprise value etc etc. However, the final return won't be great either, and you are subjected to the PE de-rating if something does happen to the company.
Update on China Hongxing again.
From CIMB, Target price lowered to S$1.32 from S$1.48; downgrade to Neutral from Outperform. Our new target continues to price the stock at 27 CY09 fully-diluted earnings, which is at a slight premium to the average valuation for the sports-shoe sector. Given the limited upside to our target price, we downgrade the stock to a Neutral. However, we continue to like Hongxing as a key beneficiary of the Olympics and China’s rising consumption spending.
From DBS, Valuations now look stretched against larger, more established peers. Downgrade to HOLD. The stock is now trading at 32x FY08 and 24x FY09 earnings, which is similar to Anta’s 32x FY08 FY08 and 23x FY09 earnings. As such, with valuations now at par with Anta, which is a larger and more established peer, we believe that valuations for China Hongxing are now fair and downgrade the stock to a HOLD, TP S$1.25 (24x FY09 PER).
>> Like I mentioned early, the risk has increased. Both to company and investor. Company faces the aggressive expansion risk and investor face the share over hang & earning dilution. Having said that, I believe the company is doing the right thing. They might become the sport shoe giant.
DBS on Boustead. We have resumed coverage on Boustead with a fair value of S$2.74, based on sum-of-the-part valuation. This would translate to 15xFY08 PER and 13xFY09 PER and offers 21% potential upside. Recommend Buy.
>> When company is doing well, analyst would come back to cover it. At current price, and given the project risk(project always face unexpected situation), wait for a better entry point. I was caught by the recent property down turn by a small amount. This proves that the theme play could swing very fast. For example, shipping, technology, oil & gas, who knows? I think the consumer stocks are more resilient.
Old Chang Kee Pte Ltd – The curry-puff maker is headed for an IPO. The food and beverage group announced Friday that it has lodged its preliminary prospectus with the MAS, and intends to list its shares on Sesdaq, the secondary board.
>> Unless you aspire to support the local brand, I see no reason to subscribe to this issue. F&B business is tough. Just look at the peers listing on SGX, and you would know the answer.
SembCorp Industries – Intends to increase its piped Indonesian gas imports by 26% to meet growing demand for natural gas from petrochemical plants on Jurong Island, and expects to conclude a gas sales agreement for this by the first quarter of next year.
>> The petro chemical industry is growing in Singapore. If you are keen on the idea, can explore which are the companies doing business in Jurong island. The support industry should get the major deals and increase the earning. Base on recent report from Kim Eng, they still view Rotary as the primary beneficiary of this boom.
According to zaobao news today, Brothers Holdings' "Singapore City" at Shenyang China received an overwhelming response on the first five days. More than 250 units already sold with 70% of buyers are the city's people. The project is a mid to high end integrated property project, leveraged on Singapore good brand name.
>> I expect the project to do well. However, I have yet to have time to study fully on the company. It should be a worthwhile bet. After I have done my research, I shall post my finding here.
Sunday, 18 November 2007
Market review 18 Nov 07
I was really tied up for the past one week, not able to monitor the market. Sometime, it is good also, because as fundamental investor, you shouldn't really keep watching stock price. As it would prompt you to execute unnecessary buy/sell order.
Last Friday, STI close 36.63 points lower. Fears have slowly taken control, there is more fear of the yen carry trade unwinding starts again. At Friday close, US manage to close higher, I think it would provide an opportunity for rebound and it would head lower again. How ironic the thing is! Just as the market recover quickly from sub prime fear, and now the fear has taken control again as predicted.
I think this would persist for a while. Waiting for clearer direction now, before committing fresh capital into the market. Meanwhile, if a good stock is selling at good price, might consider to pick up some.
Lucky enough, I didn't manage to get the China New Town ipo and it got clocked down to 0.69. I would monitor the progress, if it is selling at a good discounted price, it would be worth to pick up and hold for long term. But, short term volatility would likely persist.
Another surprise is the fresh call of capital by China Hongxing. The earning is growing very well for the past few years. Look at the current balance sheet strength, they are actually raise the fund to expand the number of store. However, the aggressive roll out would increase the risk and the dilution of new share (18% of current share base) would cause the share price to drift lower in the coming period.
Last Friday, STI close 36.63 points lower. Fears have slowly taken control, there is more fear of the yen carry trade unwinding starts again. At Friday close, US manage to close higher, I think it would provide an opportunity for rebound and it would head lower again. How ironic the thing is! Just as the market recover quickly from sub prime fear, and now the fear has taken control again as predicted.
I think this would persist for a while. Waiting for clearer direction now, before committing fresh capital into the market. Meanwhile, if a good stock is selling at good price, might consider to pick up some.
Lucky enough, I didn't manage to get the China New Town ipo and it got clocked down to 0.69. I would monitor the progress, if it is selling at a good discounted price, it would be worth to pick up and hold for long term. But, short term volatility would likely persist.
Another surprise is the fresh call of capital by China Hongxing. The earning is growing very well for the past few years. Look at the current balance sheet strength, they are actually raise the fund to expand the number of store. However, the aggressive roll out would increase the risk and the dilution of new share (18% of current share base) would cause the share price to drift lower in the coming period.
Site layout updated
Spent quite sometime to update the blog layout. The standard blogger template layout is quite boring and waste lots of space. This new layout give more space to the blog post and utilise the rest of space better. I hope the visitor, you, would like it.
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