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
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.
Saturday, 24 May 2008
Investment strategy for the second half of 2008
This is not meant to be a long analysis article. At the point of writing, Dow is down 134 for the Friday trading. If not surprise or bargain hunting, it would most likely ended the week at the lowest point. After the relief rally, the stock market is again focusing on the bad news. Credit crunch seems to be over but the inflation worry persist.
At this point, these are the most prominent worries:
- High inflation or stagflation which erode the spending power
- High oil price and commodities price which have cascading negative effect on the overall economy
- The falling US dollar which could magnify the effect of above two
This is definitely not the situation that we are hoping for. But, now is also one of the moment where you can pick stock bargain. Look at CMT, the largest REIT in Singapore, it has acquired the Atrium at Orchard to be linked with Plaza Singapura. This would certainly enhance the rental return even more.
So, don't worry too much, just focus on evaluating the company fundamental to pick winning stock. In my opinion, there aren't many more downside risks, and the reward is favorable for the long term investor. I am definitely looking at picking up stock in my watch list when they are on sale again.
In the second half of 2008, there is only 50% chance that market would start to recover strongly. We shall see better time into year 2009.
At this point, these are the most prominent worries:
- High inflation or stagflation which erode the spending power
- High oil price and commodities price which have cascading negative effect on the overall economy
- The falling US dollar which could magnify the effect of above two
This is definitely not the situation that we are hoping for. But, now is also one of the moment where you can pick stock bargain. Look at CMT, the largest REIT in Singapore, it has acquired the Atrium at Orchard to be linked with Plaza Singapura. This would certainly enhance the rental return even more.
So, don't worry too much, just focus on evaluating the company fundamental to pick winning stock. In my opinion, there aren't many more downside risks, and the reward is favorable for the long term investor. I am definitely looking at picking up stock in my watch list when they are on sale again.
In the second half of 2008, there is only 50% chance that market would start to recover strongly. We shall see better time into year 2009.
Tuesday, 20 May 2008
How to accumulate 1 million?
Do you ever have the dream to become a millionaire or you aspired to retire rich as a millionaire? That's not a dream. It is certainly achievable through good financial planning. But, you have to start early. As early as possible and let the magic of compounding does its work.
Let's say you are not that investment savvy. You can still invest in a global diversified equity portfolio. If you are more adventurous, investing in Asia equity portfolio might do the job faster.
How does it work? First, you need some patience. Second, start investing now at fixed amount regularly. The following example illustrates that a person with initial amount of $2,000, investing $500 per month, for a period of 35 years at the rate of return 8%(common to equity portfolio) would be able to get 1 million dollars. If you start at the age of 30, you should be able to retire rich at 65 years old. If you are lucky enough and picked a good fund, you might be able to achieve that way ahead of time.
Let's say you are not that investment savvy. You can still invest in a global diversified equity portfolio. If you are more adventurous, investing in Asia equity portfolio might do the job faster.
How does it work? First, you need some patience. Second, start investing now at fixed amount regularly. The following example illustrates that a person with initial amount of $2,000, investing $500 per month, for a period of 35 years at the rate of return 8%(common to equity portfolio) would be able to get 1 million dollars. If you start at the age of 30, you should be able to retire rich at 65 years old. If you are lucky enough and picked a good fund, you might be able to achieve that way ahead of time.
Saturday, 17 May 2008
Banyan Tree – The luxury tree
Banyan Tree posted 38% increase in Q1 net profit for FY08. Total revenue rose 34% because of strong growth in hotel investment and property sales. The company is expanding the resort and hotel business into new location.
The hotel business remain stable despite the cloudy global economic environment. They expect good response to the branded residence sales and property sales. In the result presentation, management has shown the planned expansion strategy. It looks pretty impressive. There should be a significant growth on the number of hotel they are going to manage.
The company has 3 business segment – hotel investment, hotel residence and property sales. The company first started as resort operator in Phuket and slowly diversify the business into related area. It is now trying to capitalize on the strong brand name it has built to expand and grow. I think the growth strategy is well articulated and with the strong management focus, it is more likely to succeed in the mid term. The key risks are funding issue and demand for the luxury resort and hotel.
I once owned a few lot from the IPO allocation. Unfortunately, I am not that familiar with the hotel and property business, so I sold off my position. It looks like a wrong decision now. I am considering to add it back to my portfolio base on the following points
The hotel business remain stable despite the cloudy global economic environment. They expect good response to the branded residence sales and property sales. In the result presentation, management has shown the planned expansion strategy. It looks pretty impressive. There should be a significant growth on the number of hotel they are going to manage.
The company has 3 business segment – hotel investment, hotel residence and property sales. The company first started as resort operator in Phuket and slowly diversify the business into related area. It is now trying to capitalize on the strong brand name it has built to expand and grow. I think the growth strategy is well articulated and with the strong management focus, it is more likely to succeed in the mid term. The key risks are funding issue and demand for the luxury resort and hotel.
I once owned a few lot from the IPO allocation. Unfortunately, I am not that familiar with the hotel and property business, so I sold off my position. It looks like a wrong decision now. I am considering to add it back to my portfolio base on the following points
- Strong luxury brand. As Asia people get richer, they would find way to indulge themselves. The luxury resort business should not be affect greatly by economic condition.
- Dedicated management who is focusing on growth. Look at the expansion plan, they have lots of work to do. If everything goes nicely, we shall see a different company 3 years later.
Thursday, 15 May 2008
SIA, good company in a difficult industry
I just saw the analyst report on SIA result for FY08. The key points are
Operating profit up 62%
Net profit grew 40%
Turnover up 10%
Dividend of $1
I am not a fan of SIA or the aviation industry. That's because aviation industry has traditionally being a very difficult industry to earn money. Invest your money in the sector would prove to be a tough call, because you don't know when the tide could turn against you.
Purely from the result point of view, it reminds us something. A good company in a difficult industry would still perform and deliver shareholder value. So, the moral of the story? The management capability is up most important in stock picking. You pick a good company with great management, you would be taken care of in the long run.
Hold on, but how do we pick the company with great management? That's the million dollar question! Maybe try to flip the Philip Fisher book to see the clue. I would say it is through long term observation, we can gage what is the management capability.
How they make decision?
How they treat the minority shareholder?
How they present themselves in report, analyst meeting?
Of course, ultimately, they should deliver.
Operating profit up 62%
Net profit grew 40%
Turnover up 10%
Dividend of $1
I am not a fan of SIA or the aviation industry. That's because aviation industry has traditionally being a very difficult industry to earn money. Invest your money in the sector would prove to be a tough call, because you don't know when the tide could turn against you.
Purely from the result point of view, it reminds us something. A good company in a difficult industry would still perform and deliver shareholder value. So, the moral of the story? The management capability is up most important in stock picking. You pick a good company with great management, you would be taken care of in the long run.
Hold on, but how do we pick the company with great management? That's the million dollar question! Maybe try to flip the Philip Fisher book to see the clue. I would say it is through long term observation, we can gage what is the management capability.
How they make decision?
How they treat the minority shareholder?
How they present themselves in report, analyst meeting?
Of course, ultimately, they should deliver.
Sunday, 11 May 2008
Market update 11 May 08
There were few notable events for the last week:
Oil price hit record high again. This doesn't sound like a big news as most of us has get used to the record price news. However, the higher it goes, the more threat it posed for the inflation situation.
AIG big loss. AIG suffered big losses due to credit derivative linked to mortgage. Although most of the people believed the worst is over. It looks like the problem needs a longer time to settle down. Even the subprime situation has stabilized, we still don't know the full impact to other area of the market.
The inflation situation is still worrying. Citigroup announced more asset sales. Last Friday, Dow fell another 120 points. I think the recent rebound could be short lived. The economic situation is far from clear and more bad news might be coming back to market.
I still don't think it is a good time to be aggressive buyer, but depends on company situation and valuation. From the start of the year till now, I only bought some shares in FJ Benjamin. The valuation has fallen to more attractive level, the major shareholders like Peter Lim and Frank Benjamin were buying and the business still looks good for 2010. I also like the in house brand RAOUL, it might be a wild card.
Still waiting and hopefully market would correct to a more attractive level. Then, the margin of safety would be bigger.
Oil price hit record high again. This doesn't sound like a big news as most of us has get used to the record price news. However, the higher it goes, the more threat it posed for the inflation situation.
AIG big loss. AIG suffered big losses due to credit derivative linked to mortgage. Although most of the people believed the worst is over. It looks like the problem needs a longer time to settle down. Even the subprime situation has stabilized, we still don't know the full impact to other area of the market.
The inflation situation is still worrying. Citigroup announced more asset sales. Last Friday, Dow fell another 120 points. I think the recent rebound could be short lived. The economic situation is far from clear and more bad news might be coming back to market.
I still don't think it is a good time to be aggressive buyer, but depends on company situation and valuation. From the start of the year till now, I only bought some shares in FJ Benjamin. The valuation has fallen to more attractive level, the major shareholders like Peter Lim and Frank Benjamin were buying and the business still looks good for 2010. I also like the in house brand RAOUL, it might be a wild card.
Still waiting and hopefully market would correct to a more attractive level. Then, the margin of safety would be bigger.
Tuesday, 6 May 2008
China Oilfield Tech FY08Q1 result
I do not own the share of China Oilfield, but I did study a little bit about the company during the IPO time. Basically, it has an interesting business. That is to use the tertiary oil recovery technique to extract more oil from the mature oil well and their main business is focusing on Daqing area.
Today I saw this research report regarding the company for FY08Q1. Main points:
- No revenue
- RMB15million loss, 10million for stock option grant expense
- 2H for 80% of full year turn over
- little earning visibility
The stock expense is more accounting related and does not affect the cashflow. That means you could loss money but there is no cash outflow incurred for the company. Likewise for company which report earning increase, but there is no cash coming into the company really.
Lumpy earning is too much to my liking. Investor has to ask himself how much he understand about the company business model and whether can make an educated and reliable forecast of the earning.
Today I saw this research report regarding the company for FY08Q1. Main points:
- No revenue
- RMB15million loss, 10million for stock option grant expense
- 2H for 80% of full year turn over
- little earning visibility
The stock expense is more accounting related and does not affect the cashflow. That means you could loss money but there is no cash outflow incurred for the company. Likewise for company which report earning increase, but there is no cash coming into the company really.
Lumpy earning is too much to my liking. Investor has to ask himself how much he understand about the company business model and whether can make an educated and reliable forecast of the earning.
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