Xingquan is another China sports shoe maker to seek a share listing, not in China, Hong Kong or Singapore, but in Malaysia.
China has many domestic shoe maker, which operate at different city tier. The competition is intense, even in the second or third tier city. To complete efficiently, many have gone the road of China Hongxing, that is to raise capital from the stock market.
The big shoe maker like Anta would go Hong Kong to list. The medium to smaller one came to Singapore. Xingquan took a different road to list in Malaysia, maybe to get more attention. Because it is among the very few China companies listed on the bourse.
Showing posts with label business news. Show all posts
Showing posts with label business news. Show all posts
Monday, 8 June 2009
Friday, 20 February 2009
Fish & Co Express and Starbucks selling instant coffee
In the tough time likes this, when consumer scale back the spending, business has to adapt and change. The traditional food and beverage sector is also affected, because people refrain from eating outside often.
Fish & Co Express was launched for the company to go into fast food business. This is a different business segment where most dominated by establish by fast food brand like Mac and KFC. Fish & Co guess its brand and taste would make it an attractive proposition for consumer to try its burger. Therefore, the Fish & Co Express was established at Downtown East. It is expected to draw the young crowd who fancy fast food and might not frequent the restaurant.
If Fish & Co can maintain the quality of the offering, this can be another way of bringing in more revenue. Time would tell whether this venture would succeed. I think the critical success factor of any business is whether do consumer get value for money.
On global front, we know Starbucks is running into trouble. Many outlets were closed in the rationalisation exercise. Those losing money or under performing outlets are closed and they urgently looking ways to boost the business. People used to believe that Starbucks is an affordable daily luxury that people cannot live without. The recession proves this belief is wrong.
The new product Starbucks wants to launch now is actually instant coffee. If you look at the market of instant coffee, it is growing. More people having the cup of instant coffee whether at home or office. Maybe because of the slowing business, they are trying to target this new market segment. Won't it be great if you can enjoy a cup of affordable premium coffee at home? Brand consultant questioned this move, whether it would erode the brand. It is a double edged sword, you could be gaining new customer but losing existing customer who sit in the cafe.
Business change everyday and a good management is out to act prudently to keep the company afloat and try to grow the profit. I am still an equity person and believe in stock investing.
Fish & Co Express was launched for the company to go into fast food business. This is a different business segment where most dominated by establish by fast food brand like Mac and KFC. Fish & Co guess its brand and taste would make it an attractive proposition for consumer to try its burger. Therefore, the Fish & Co Express was established at Downtown East. It is expected to draw the young crowd who fancy fast food and might not frequent the restaurant.
If Fish & Co can maintain the quality of the offering, this can be another way of bringing in more revenue. Time would tell whether this venture would succeed. I think the critical success factor of any business is whether do consumer get value for money.
On global front, we know Starbucks is running into trouble. Many outlets were closed in the rationalisation exercise. Those losing money or under performing outlets are closed and they urgently looking ways to boost the business. People used to believe that Starbucks is an affordable daily luxury that people cannot live without. The recession proves this belief is wrong.
The new product Starbucks wants to launch now is actually instant coffee. If you look at the market of instant coffee, it is growing. More people having the cup of instant coffee whether at home or office. Maybe because of the slowing business, they are trying to target this new market segment. Won't it be great if you can enjoy a cup of affordable premium coffee at home? Brand consultant questioned this move, whether it would erode the brand. It is a double edged sword, you could be gaining new customer but losing existing customer who sit in the cafe.
Business change everyday and a good management is out to act prudently to keep the company afloat and try to grow the profit. I am still an equity person and believe in stock investing.
Wednesday, 12 November 2008
Oil hit new low
Oil price dive below USD59 now. It is really a good news for everybody, since the transport cost is a big component on everyone's spending. The food price is also related to transport cost.
From 140 to 59, what has actually changed?
- Economy outlook
- Reduced demand
Actually these are the trigger point for speculative fund to exit the market. The actual demand does not reduce overnight. That's how the bubble burst. When the bubble is growing, everyone just keep pumping air. When it burst, everything suddenly is not true anymore.
Investor should not blindly chase the bubble.
From 140 to 59, what has actually changed?
- Economy outlook
- Reduced demand
Actually these are the trigger point for speculative fund to exit the market. The actual demand does not reduce overnight. That's how the bubble burst. When the bubble is growing, everyone just keep pumping air. When it burst, everything suddenly is not true anymore.
Investor should not blindly chase the bubble.
Monday, 27 October 2008
FerroChina trigger cashflow concern – Part 3: MIDAS, Hongwei
MIDAS
In the last half year result.
Asset:
Cash and equivalent 64mil
Trade and receivable 44mil
Amount repayable in a year 18mil (secured)
Cash before working capital 11mil
Cash after working capital and others 10mil
Net increase in cash for half year 6mil
The company has little debt and sufficient cashflow. No cause for concern.
Hongwei
This is another harshly battered down fiber stock. In the past half year.
Cash and deposit 66mil
Trade receivable 97mil
Amount repayable in a year 48mil
Cash before working capital change 36mil
Cash after working capital and others -17mil (cash outflow, because increase of trade receivable by 38mil)
Just by using the cash on hand, it is more than enough to pay off the debt. The negative cashflow is because of the increase of trade receivable as a result of sales increase. Looking at current environment, there might be impact on collection. We have to see the impact on next quarter announcement. The significant drop in oil price is a good news to fiber stock, but if the customer sales is geared towards export, there would be impact on the sales order.
In the last half year result.
Asset:
Cash and equivalent 64mil
Trade and receivable 44mil
Amount repayable in a year 18mil (secured)
Cash before working capital 11mil
Cash after working capital and others 10mil
Net increase in cash for half year 6mil
The company has little debt and sufficient cashflow. No cause for concern.
Hongwei
This is another harshly battered down fiber stock. In the past half year.
Cash and deposit 66mil
Trade receivable 97mil
Amount repayable in a year 48mil
Cash before working capital change 36mil
Cash after working capital and others -17mil (cash outflow, because increase of trade receivable by 38mil)
Just by using the cash on hand, it is more than enough to pay off the debt. The negative cashflow is because of the increase of trade receivable as a result of sales increase. Looking at current environment, there might be impact on collection. We have to see the impact on next quarter announcement. The significant drop in oil price is a good news to fiber stock, but if the customer sales is geared towards export, there would be impact on the sales order.
Tuesday, 21 October 2008
FerroChina trigger cashflow concern – Part 2: Hongguo, Synear, Celestial
Hongguo
In the latest second half result.
Asset:
Cash and equivalent 66mil
Trade receivable 128mil
FD 16mil
Current liabilities 144mil
Amount payable in one year 16mil (secured by FD)
Operating cashflow before working capital 81mil
Net cash from operating activities 10mil
Assume the trade receivable is easily collectable, the company should have sufficient cash to cover the liabilities. After the working capital change, the net cashflow is only 10mil. The cash are converted into form of inventories. Retail consumption might slow, but there shouldn't be a sharp drop till the company cannot convert the inventories into cash. Looks alright.
Synear
In the latest half year result.
Asset:
Trade receivable 261mil
Cash bank balance 1335mil
Current liabilities 285mil
Amount payable in one year 20mil
Cash from operation 162mil
Cash used in investing 652mil
Cash used in financing 150mil
The negative cashflow is the result of aggressive capacity expansion. The operating cashflow remain healthy, but negative consumer sentiment might affect sales. Earning might come down but loss is unexpected. The cash balance should last the company quite a while. Once the new factory is running and consumption recover, we might see a substantial surge of earning. The cashflow is not a concern to me.
Celestial
The company has two major business – industrial soy product and consumer product. In the last half year result.
Asset:
Cash and equivalent 1651mil
Trade and other receivable 488mil
Current liabilities 1690mil (Borrowing of 1277mil)
Amount repayable in one year 1257mil (Convertible bond)
Operating cashflow before working capital 352mil
Cash from operation 173mil
Cash used in financing activities 140mil
Looking at the convertible bond, it is possible for holder to do early redempt at June 2009. The holders are unlikely to convert them to share now given the market condition. Worst case if the bond is redempted after a year, the current cash should be sufficient to buffer it. Given the business is cash generating, this shall not be a big concern.
In the latest second half result.
Asset:
Cash and equivalent 66mil
Trade receivable 128mil
FD 16mil
Current liabilities 144mil
Amount payable in one year 16mil (secured by FD)
Operating cashflow before working capital 81mil
Net cash from operating activities 10mil
Assume the trade receivable is easily collectable, the company should have sufficient cash to cover the liabilities. After the working capital change, the net cashflow is only 10mil. The cash are converted into form of inventories. Retail consumption might slow, but there shouldn't be a sharp drop till the company cannot convert the inventories into cash. Looks alright.
Synear
In the latest half year result.
Asset:
Trade receivable 261mil
Cash bank balance 1335mil
Current liabilities 285mil
Amount payable in one year 20mil
Cash from operation 162mil
Cash used in investing 652mil
Cash used in financing 150mil
The negative cashflow is the result of aggressive capacity expansion. The operating cashflow remain healthy, but negative consumer sentiment might affect sales. Earning might come down but loss is unexpected. The cash balance should last the company quite a while. Once the new factory is running and consumption recover, we might see a substantial surge of earning. The cashflow is not a concern to me.
Celestial
The company has two major business – industrial soy product and consumer product. In the last half year result.
Asset:
Cash and equivalent 1651mil
Trade and other receivable 488mil
Current liabilities 1690mil (Borrowing of 1277mil)
Amount repayable in one year 1257mil (Convertible bond)
Operating cashflow before working capital 352mil
Cash from operation 173mil
Cash used in financing activities 140mil
Looking at the convertible bond, it is possible for holder to do early redempt at June 2009. The holders are unlikely to convert them to share now given the market condition. Worst case if the bond is redempted after a year, the current cash should be sufficient to buffer it. Given the business is cash generating, this shall not be a big concern.
Sunday, 19 October 2008
FerroChina trigger cashflow concern – Part 1: FerroChina, China Hongxing
China stock suffered another hit after Ferro China announced that the company is unable to repay working capital loan of 706 million and could default on another 4.52 billion of debt. Obviously, the company is unable to generate cash fast enough to repay debt dued. Give the economic condition and credit crunch, this became a big issue.
Looking at the company last half year result. (Figures in RMB)
Revenue rose to 6,516mil (+206%)
Net profit rose to 418.9mil (+186%)
EPS is 50.52 cents (+43%)
Selling and distribution expenses 25.6mil (+40%)
Administrative expense 64.2mil (+94%)
Finance expense 158.7mil (+174%)
Income tax expense 41mil (+327%)
Net debt/equity 55.7%
The usual numbers show a strong growth. However, the increase of expenses also quite staggering. If you just focus on the profit growth, you might thing the company is doing quite well. Let's look at the liabilities and cashflow.
Current liabilities 6,223mil
Non current liabilities 2,437mil
Amount payable in a year 2,336mil
Operating cashflow before working capital 611mil
Net cash from operating actitivites 198mil
Cash used in investing activities 948mil
Cash from financing activities 709mil
Cash at end of period 125mil
Fixed deposit 915mil
I didn't drill down further to their funding approach and timeline. But if you look at the figures above, you shall be alerted the company might have funding problem. The current cash, FD and operating cashflow is not enough to meet the payable within a year.
Looking at the profit figure is not enough, investor should also study the company cashflow. I am usually not comfortable investing in company with fair amount of debt. The use of debt would enhance the shareholder return, but at the same time increase the risk of default. As a result, I am more favourable to consumer stock which generate strong cashflow.
Questions were raising against other China companies whether they might hit the liquidity problem. Let's take a look at the companies inside my portfolio.
China Hongxing
I have done the Q2 review two months back. This round only focus on the liabilities and cashflow.
Current asset (all figures in RMB)
Bank and cash balance 2,201mil
Current liabilities 227mil
Amount payable in a year 18mil
Operating profit before working capital (6 months) 280mil
Cash used in operating activities (263mil)
The company have negative cashflow due to significant increase in prepayment, deposit and other receivable 592mil. The money was advanced to distributors to set up 219 new stores for six months ended June 2008. Taking into consideration of investing and financian activities, company has 392mil negative cashflow.
As the company complete the store expansion this year, the cash advancement amount should reduce. Together with distributors paying back the amount. Next year, the company should turn cashflow positive. Furthermore, there is cash balance of 2,201mil. No big concern.
Others in part 2 and 3...
Looking at the company last half year result. (Figures in RMB)
Revenue rose to 6,516mil (+206%)
Net profit rose to 418.9mil (+186%)
EPS is 50.52 cents (+43%)
Selling and distribution expenses 25.6mil (+40%)
Administrative expense 64.2mil (+94%)
Finance expense 158.7mil (+174%)
Income tax expense 41mil (+327%)
Net debt/equity 55.7%
The usual numbers show a strong growth. However, the increase of expenses also quite staggering. If you just focus on the profit growth, you might thing the company is doing quite well. Let's look at the liabilities and cashflow.
Current liabilities 6,223mil
Non current liabilities 2,437mil
Amount payable in a year 2,336mil
Operating cashflow before working capital 611mil
Net cash from operating actitivites 198mil
Cash used in investing activities 948mil
Cash from financing activities 709mil
Cash at end of period 125mil
Fixed deposit 915mil
I didn't drill down further to their funding approach and timeline. But if you look at the figures above, you shall be alerted the company might have funding problem. The current cash, FD and operating cashflow is not enough to meet the payable within a year.
Looking at the profit figure is not enough, investor should also study the company cashflow. I am usually not comfortable investing in company with fair amount of debt. The use of debt would enhance the shareholder return, but at the same time increase the risk of default. As a result, I am more favourable to consumer stock which generate strong cashflow.
Questions were raising against other China companies whether they might hit the liquidity problem. Let's take a look at the companies inside my portfolio.
China Hongxing
I have done the Q2 review two months back. This round only focus on the liabilities and cashflow.
Current asset (all figures in RMB)
Bank and cash balance 2,201mil
Current liabilities 227mil
Amount payable in a year 18mil
Operating profit before working capital (6 months) 280mil
Cash used in operating activities (263mil)
The company have negative cashflow due to significant increase in prepayment, deposit and other receivable 592mil. The money was advanced to distributors to set up 219 new stores for six months ended June 2008. Taking into consideration of investing and financian activities, company has 392mil negative cashflow.
As the company complete the store expansion this year, the cash advancement amount should reduce. Together with distributors paying back the amount. Next year, the company should turn cashflow positive. Furthermore, there is cash balance of 2,201mil. No big concern.
Others in part 2 and 3...
Tuesday, 30 September 2008
High note 5 - Know what you have invested
Recently, the hottest news in the press is about High Note 5 saga. As a result of bankruptcy of Lehman Brothers, the investors suddenly discover that the investment they thought was safe is actually not. Worse still, some lost their life long saving.
It is not exactly clear on the terms and condition of the product. But in a nut shell, these are the facts gathered on the web:
- The structured product is linked to a basket of banks and when the credit event trigger, investor is likely to lose money.
- If everything is fine, we get the 5% interest from this product.
- It is supposed to be a credit default swap(CDS) in disguise
A structured product is a combination of financial instrument to be sold as a package. They can package a lot of different instrument together and sell to investors. The key selling point is enhanced yield. This is the result of the income that some underlying instrument generates.
CDS is a form of insurance. The seller act as the insurance company, gives the buyer protection in return of a premium. If nothing happen on the protected asset, seller get to keep the premium.
The auntie uncle who bought the product was sold on the promise of 5% interest return. It is quite a high return consider the bank deposit interest rate in Singapore. Maybe the relationship manager did explain about the product features. However, how do you expect the man on street to understand CDS and credit event? Furthermore, the reference entities are all big names, which unlikely to fail.
The sales person often highlight more on upside rather than downside. Beside this, getting the customer to understand the product is also a tough job. More than often, if you cannot convice them, confuse them. Many investor claims that they are not aware that they could lose all the investment amount. It is either a form of ignorance or the risk is being down played. From another perspective, it is like putting all money into one basket. This basket was thought to be very safe, but is actually not.
Not an easy problem to solve.
- Bank has to refrain selling complicated product to people who cannot appreciate the product risk.
- There has to be constant education program for people to recognise that high risk high return.
When the sales person trying to sell you product, ask yourself, do you really understand the product. What I always believe is if it is too good to be truth, then it most probably is.
It is not exactly clear on the terms and condition of the product. But in a nut shell, these are the facts gathered on the web:
- The structured product is linked to a basket of banks and when the credit event trigger, investor is likely to lose money.
- If everything is fine, we get the 5% interest from this product.
- It is supposed to be a credit default swap(CDS) in disguise
A structured product is a combination of financial instrument to be sold as a package. They can package a lot of different instrument together and sell to investors. The key selling point is enhanced yield. This is the result of the income that some underlying instrument generates.
CDS is a form of insurance. The seller act as the insurance company, gives the buyer protection in return of a premium. If nothing happen on the protected asset, seller get to keep the premium.
The auntie uncle who bought the product was sold on the promise of 5% interest return. It is quite a high return consider the bank deposit interest rate in Singapore. Maybe the relationship manager did explain about the product features. However, how do you expect the man on street to understand CDS and credit event? Furthermore, the reference entities are all big names, which unlikely to fail.
The sales person often highlight more on upside rather than downside. Beside this, getting the customer to understand the product is also a tough job. More than often, if you cannot convice them, confuse them. Many investor claims that they are not aware that they could lose all the investment amount. It is either a form of ignorance or the risk is being down played. From another perspective, it is like putting all money into one basket. This basket was thought to be very safe, but is actually not.
Not an easy problem to solve.
- Bank has to refrain selling complicated product to people who cannot appreciate the product risk.
- There has to be constant education program for people to recognise that high risk high return.
When the sales person trying to sell you product, ask yourself, do you really understand the product. What I always believe is if it is too good to be truth, then it most probably is.
Tuesday, 29 July 2008
Thoughts on China Angel profit guidance
I read the recent China Angel profit guidance document with interest. The following points were quoted:
Following the preliminary assessment, group expect a net loss in 2Q2008 compared to profit in the same period last year. With their expansion plan, higher operating overhead and operating cost is incurred. There is rising raw material and labour cost.
It looks like the inflation has indeed taken its toll on the consumer company. The rising raw material and labour cost is eroding the profit margin. There is a limit to how fast the company can raise the selling price, especially in a very competitive environment.
Then, what should those people with China consumer stock do? Do nothing. We know the cost is rising, that's why the stocks were battered down. But, I don't expect further escalation of cost. I feel we already reach the peak of current cycle. So, the cost should at least come down in the next year or so. Selling at this juncture won't be a wise decision. We are waiting for the rebound now.
Following the preliminary assessment, group expect a net loss in 2Q2008 compared to profit in the same period last year. With their expansion plan, higher operating overhead and operating cost is incurred. There is rising raw material and labour cost.
It looks like the inflation has indeed taken its toll on the consumer company. The rising raw material and labour cost is eroding the profit margin. There is a limit to how fast the company can raise the selling price, especially in a very competitive environment.
Then, what should those people with China consumer stock do? Do nothing. We know the cost is rising, that's why the stocks were battered down. But, I don't expect further escalation of cost. I feel we already reach the peak of current cycle. So, the cost should at least come down in the next year or so. Selling at this juncture won't be a wise decision. We are waiting for the rebound now.
Thursday, 10 April 2008
Cosco Corp - the great plunge
This is what I read from Kim Eng news today.
Its 51%-owned Cosco Shipyard Group (CSG) unit has secured about US$292.3m worth of offshore and tanker building deals.
The second contract secured is to build two 59,000 dwt shuttle tankers for a Danish owner valued at 101.2m euros ($220m).
The group also announced yesterday that it will not be proceeding with a US$202m project to build a GM5000 semi-submersible rig hull for Norwegian owner Red Flag AS as announced last May.
Although the new contract secured is more than enough to cover for the lost contract, however, that's not the market think obviously.
Cosco down 15% to 2.850. 4 of the Cosco call warrant also on the top volume list losing 30+%.
Cosco has many supporters in the market, both fund managers and retail investor. Especially many retail investors have been eyeing for a stake for a long time. However, time has changed, the once easy to go up stock upon any good news is not doing that anymore. Instead, the bad news have been magnifying and follow by relentless sell down.
I think one has to think carefully and re access own situation before taking the plunge. Key questions to ask
1. What is my holding period and exit strategy?
2. Is the valuation attractive vs the prospective cost increase and slow order?
Its 51%-owned Cosco Shipyard Group (CSG) unit has secured about US$292.3m worth of offshore and tanker building deals.
The second contract secured is to build two 59,000 dwt shuttle tankers for a Danish owner valued at 101.2m euros ($220m).
The group also announced yesterday that it will not be proceeding with a US$202m project to build a GM5000 semi-submersible rig hull for Norwegian owner Red Flag AS as announced last May.
Although the new contract secured is more than enough to cover for the lost contract, however, that's not the market think obviously.
Cosco down 15% to 2.850. 4 of the Cosco call warrant also on the top volume list losing 30+%.
Cosco has many supporters in the market, both fund managers and retail investor. Especially many retail investors have been eyeing for a stake for a long time. However, time has changed, the once easy to go up stock upon any good news is not doing that anymore. Instead, the bad news have been magnifying and follow by relentless sell down.
I think one has to think carefully and re access own situation before taking the plunge. Key questions to ask
1. What is my holding period and exit strategy?
2. Is the valuation attractive vs the prospective cost increase and slow order?
Monday, 24 March 2008
Company update – Creative, China Energy, Bio-Treat
Creative issued a profit warning cited reasons like weakening of US dollar. I suspect the MP3 business continue to weaken. The market is obviously saturated now as whoever wants to own a MP3 player would have got his/her by now. Almost all the new cell phone is playing MP3 very well. So, who needs a MP3 player? I have been long avoiding technology company, because of the volatile business and often supply demand mismatch.
China Energy said it engaged the PWC to conduct review on the additional payment for acquiring Jiutai Energy (Guangzhou) Co. Ltd. Where does the 190m RMB have gone? Management offered some explanation, but I don't think anybody is listening. When a third party is called into action, people assume the worst case, sell first. Especially at the current choppy time, there is no way to go but down.
Bio-Treat is on the news again. This time on the ability to redeem S$206 million of bonds. Merrill Lynch maintained the sell call on the counter as there are few issues hanging in the air. Since I sold off the counter, it did surge a bit, but to give back the gain now. I always think if there are issues with the management, it create uncertainty and it is best to sell.
China Energy said it engaged the PWC to conduct review on the additional payment for acquiring Jiutai Energy (Guangzhou) Co. Ltd. Where does the 190m RMB have gone? Management offered some explanation, but I don't think anybody is listening. When a third party is called into action, people assume the worst case, sell first. Especially at the current choppy time, there is no way to go but down.
Bio-Treat is on the news again. This time on the ability to redeem S$206 million of bonds. Merrill Lynch maintained the sell call on the counter as there are few issues hanging in the air. Since I sold off the counter, it did surge a bit, but to give back the gain now. I always think if there are issues with the management, it create uncertainty and it is best to sell.
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.
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.
Wednesday, 30 January 2008
S&P on recent situation
S&P (Standard and Poors) said majority of the Asia economy is able to withstand the US economy slow down impact. Only export dependant economy like Taiwan, Thailand and Sri Lanka could be affected. Asia country's credit rating is in no danger of down grading.
China demand and individual country domestic demand should buffer the US slow down impact. The major risks to Asia economy are energy and food prices, credit squeeze and possible Euro zone slow down.
China demand and individual country domestic demand should buffer the US slow down impact. The major risks to Asia economy are energy and food prices, credit squeeze and possible Euro zone slow down.
Sunday, 16 December 2007
China New Town 3Q loss
Luckily I didn't buy into the company while it was 68 cts. Only a few days after, they announced the 3Q loss which cause the price to go into violent downward swing. Before the announcement, I was expecting them to show some good result. Especially that is the 1st result announcement after listing. I guess the price would drift down for quite a while. However, I suspect the fund manager would keep buying the company's share. This could provide some support to the price.
In year 2007, two of the most interesting China company listed on SGX should be China New Town and China Oilfield Technology. Valuation aside, both of them offer a good growth story to investor. However, listing timing is also important sometime. If they listed before subprime rout, the valuation should be much higher.
China Oilfield commands a high margin and have an unique niche in its own area. Valuation is at a compelling level now, but it could go cheaper if overall market remain weak. Company risk is higher than other China company, because the business is harder to understand and they rely on one big customer.
China New Town offers a good story on the urbanization which is a big and strong theme. The business is a little bit harder to understand, because it is different from your usual property developer and they have short operating history. Valuation has come down to a more manageable level, although I won't say it is cheap. Nevertheless, I think fund managers would think otherwise. Key risks are execution, getting more new projects and financing as the initial development requires huge capital. Having said that, I think key risk are mitigated by having strong connection and strong parent/shareholder. For short term, I don't expect it to fly. It is for long term holder.
Tuesday, 11 December 2007
GIC invest in UBS
This is another high profile capital injection exercise. GIC is invited to take a stake in UBS. Eventually, GIC could own up to 9% of the swiss lender. This news came after the citi group capital injection. Generally, the financial industry is well supported. There are deep pocket players willing to invest in the institution in trouble. Thus, there would be stronger confidence on the sector.
This is also a classic case of crisis means opportunity. When something is down and out, it is easier to make the buy decision. Once the tide turn and good time return, I think it would be quite rewarding.
May all the investor shake off the confidence crisis and pick some real bargain.
This is also a classic case of crisis means opportunity. When something is down and out, it is easier to make the buy decision. Once the tide turn and good time return, I think it would be quite rewarding.
May all the investor shake off the confidence crisis and pick some real bargain.
Sunday, 9 December 2007
Sembcorp Marine forex loss part II
Follow the initial announcement of the forex loss, the story is unfolding now. More banks/financial institutions start to lay claim and they are preparing for some court action. As predicted initially, the level of damage is unknown. Would the reputation being hurt? Would the legal proceeding charges eat into the bottom line? I think all is too complicated to predict and calculate. Broker has flip flopped with their recommendation also. One moment is buy, another moment is neutral What ever it is, I dislike uncertainty and not intend to risk my capital.
Part 1
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.
Thursday, 25 October 2007
Company news 25 Oct
There are few company news today.
Kim Eng on Rotary
Share price pull-back suggests good entry opportunity. We rate Rotary as one of the better proxies to the region and Singapore’s increasingrefinery/oil terminal capex cycle. We maintain our target price of S$1.79 based on aminimum ex-cash multiple of 17.6x 2007 PE (0.7x PEG). Valuation looks attractive asthe stock is trading at PE multiples of 13.8x and 11.5x for FY07-08 respectively.Reiterate BUY.
>> Rotary is one of the safe play on Oil & Gas, or more precisely Jurong Island. Accumulate on dip.
Technics Oil & Gas
Technics Oil & Gas yesterday said it now expects weaker revenue for the fiscalyear ended Sept 30 and that its earlier bullish forecast of a 10-15 per cent revenue growth cannot be achieved, due to further delays in its project work schedulesplanned for its yard operations. Hence, while the group will definitely be profitable for the fiscal second half, its financial performance during the period will not bebetter than that achieved for the fiscal first half, it said. But given continuing robust sector demand, the company said it maintains a positive outlook for fiscal 2008.
>> I am interested in the company on the basis that it involves in FPSO related projects. However, problem with project based company is they are affected by project delay and problem in securing new projects. I need to research into the company numbers first before decide on whether to buy into the company.
Kim Eng on Cosco
Cosco still a BUY
The significance of this order is that it is ahead of our previous assumption of the pace of order growth. Furthermore, Cosco clearly has capacity to utilise at its Dalian and Guangzhou shipyards, which differs from our previous assumption that further new buildingorders will mainly be the domain of its Zhoushan shipyard, where it is adding a massive amount of capacity and has the ability to expand that yard even further. Although we arenot changing our forward 3-year forecasts, we are upping our growth assumptions for FY10and beyond. This is therefore captured in our DCF valuation, where we are now adjustingour fair value upward target to S$8.10, from S$7.50. 3 year earnings CAGR stands at 43%p.a.
>> Just as we think it has run too fast and hit the road block, they charge forward again. However, I really not sure about the impact of shipping cycle and their business. Investor might exercise own judgement on whether the chase it up or buy on dip. Market seems to like big player, citing scale is key to growth.
Kim Eng on Rotary
Share price pull-back suggests good entry opportunity. We rate Rotary as one of the better proxies to the region and Singapore’s increasingrefinery/oil terminal capex cycle. We maintain our target price of S$1.79 based on aminimum ex-cash multiple of 17.6x 2007 PE (0.7x PEG). Valuation looks attractive asthe stock is trading at PE multiples of 13.8x and 11.5x for FY07-08 respectively.Reiterate BUY.
>> Rotary is one of the safe play on Oil & Gas, or more precisely Jurong Island. Accumulate on dip.
Technics Oil & Gas
Technics Oil & Gas yesterday said it now expects weaker revenue for the fiscalyear ended Sept 30 and that its earlier bullish forecast of a 10-15 per cent revenue growth cannot be achieved, due to further delays in its project work schedulesplanned for its yard operations. Hence, while the group will definitely be profitable for the fiscal second half, its financial performance during the period will not bebetter than that achieved for the fiscal first half, it said. But given continuing robust sector demand, the company said it maintains a positive outlook for fiscal 2008.
>> I am interested in the company on the basis that it involves in FPSO related projects. However, problem with project based company is they are affected by project delay and problem in securing new projects. I need to research into the company numbers first before decide on whether to buy into the company.
Kim Eng on Cosco
Cosco still a BUY
The significance of this order is that it is ahead of our previous assumption of the pace of order growth. Furthermore, Cosco clearly has capacity to utilise at its Dalian and Guangzhou shipyards, which differs from our previous assumption that further new buildingorders will mainly be the domain of its Zhoushan shipyard, where it is adding a massive amount of capacity and has the ability to expand that yard even further. Although we arenot changing our forward 3-year forecasts, we are upping our growth assumptions for FY10and beyond. This is therefore captured in our DCF valuation, where we are now adjustingour fair value upward target to S$8.10, from S$7.50. 3 year earnings CAGR stands at 43%p.a.
>> Just as we think it has run too fast and hit the road block, they charge forward again. However, I really not sure about the impact of shipping cycle and their business. Investor might exercise own judgement on whether the chase it up or buy on dip. Market seems to like big player, citing scale is key to growth.
Tuesday, 23 October 2007
Sembcorp Marine forex loss
When all seems going well, unexpected would happen. The moral of the story is never invest too heavily in a particular company, no matter how great the company is, unless it is your own company.
The biggest news today is the dismissal of Sembcorp Marine finance director. The unauthorised forex loss could be as high as US$248 million, US$83 million realised, US$165 million base on market to market info.
This is a shocking news. A big company like this should have its own proper internal control which prevent this sort of incident to happen. If you can recall, history tends to repeat itself. We have Baring and CAO went down, because of the internal control lapse. It is paramount that this is being fixed and proper control to be put in place. Full story.
In coming months, company share could be based down. Whether to do bargain hunt, it is up to you to decide.
CIMB:
Target price lowered to S$4.70 from S$4.90 following our earnings reduction;
downgrade to Trading Sell.
DBS:
Downgrade to Hold, TP cut to S$5.50, FY07F-09F estimates adjusted.
Kim Eng:
Downgrade to HOLD, TP revised down to S$4.80
Another notable news is Sembcorp Marine sold 39 million shares of Cosco for a gain of S$230 million. In some way, this is a view on Cosco share is much overvalued at current level. It has become too hot to handle.
The biggest news today is the dismissal of Sembcorp Marine finance director. The unauthorised forex loss could be as high as US$248 million, US$83 million realised, US$165 million base on market to market info.
This is a shocking news. A big company like this should have its own proper internal control which prevent this sort of incident to happen. If you can recall, history tends to repeat itself. We have Baring and CAO went down, because of the internal control lapse. It is paramount that this is being fixed and proper control to be put in place. Full story.
In coming months, company share could be based down. Whether to do bargain hunt, it is up to you to decide.
CIMB:
Target price lowered to S$4.70 from S$4.90 following our earnings reduction;
downgrade to Trading Sell.
DBS:
Downgrade to Hold, TP cut to S$5.50, FY07F-09F estimates adjusted.
Kim Eng:
Downgrade to HOLD, TP revised down to S$4.80
Another notable news is Sembcorp Marine sold 39 million shares of Cosco for a gain of S$230 million. In some way, this is a view on Cosco share is much overvalued at current level. It has become too hot to handle.
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