Oceanus released the 1st half result of 2008.
Sales surged 349% to RMB 181.4m
Profit before tax and goodwill up 303% to RMB180.4m
Plan to triple production capacity to 40,000 tanks in next 18 months
The group is specialised in producing premium Japanse Abalone in China. Accordingly, the cost is under control and group has cost advantage against the competitors. The group recorded a goodwill write off due to the RTO it has undertaken. This is an accounting item and does not affect cashflow.
The outlook remain robust and due to the shortage of wild abalone, the group is ramping up the production capacity quickly. The plan is to grow the capacity quickly and move into downstream processing to improve the margin.
The group looks interesting to me right from the beginning. These are the interesting points:
Chinese consumption of abalone is set to grow strongly
The group is one of the top producer and plan to grow capacity rapidly
Plan to move to downstream to capture even higher market share
Things look rosy for the group in the coming years. But the risk with agri stock remained. Comparing the current valuation against the projected growth, it does look attractive. More research needs to be done to uncover the competitive advantage and more facts.
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.
Wednesday, 23 July 2008
Crude oil price retreated
The market is showing sign of life again when crude oil price retreated significantly and couple with some other positive news. I guess we can be grateful that it doesn't add to the inflationary pressure further. So our transport cost and bread don't go up again.
But, the worse is not over yet, at least majority of the people believe so. US economy and the banking system is still in uncertain stage. Inflation pressure and credit crunch still hurting growth. No sign we are out of bear yet and doing nothing might be the best strategy. Take this time to read some more books to enhance your stock picking skill or your mindset might be a better option.
No hurry to pick up cheap stock, with the fear that it might go cheaper. Anyway, if you whole heartedly believe in your judgment and don't bother with the short term volatility, please go ahead. I believe by 3rd quarter or end of the year, the situation might be clearer.
But, the worse is not over yet, at least majority of the people believe so. US economy and the banking system is still in uncertain stage. Inflation pressure and credit crunch still hurting growth. No sign we are out of bear yet and doing nothing might be the best strategy. Take this time to read some more books to enhance your stock picking skill or your mindset might be a better option.
No hurry to pick up cheap stock, with the fear that it might go cheaper. Anyway, if you whole heartedly believe in your judgment and don't bother with the short term volatility, please go ahead. I believe by 3rd quarter or end of the year, the situation might be clearer.
Sunday, 13 July 2008
Is commodity fund a good investment now?
I chatted with a friend a couple of weeks ago. He was asking whether did I buy the commodity fund? I said no. Nowadays, I try not to go into exotic products, which I can't really predict the cycle. Maybe if you went in 1 year back, you are laughing non stop now.
But for the new investor, refrain from going into commodity fund should be the strategy. "What goes up must come down", everyone should remember this. Maybe we are really in the commodity super bull cycle. However, buying at the current time, the risk out weight the potential gain.
The high inflation, high commodity price should led to reduce demand. The growth is also slowing. There isn't a favourable factor to consider going into commodity now.
But for the new investor, refrain from going into commodity fund should be the strategy. "What goes up must come down", everyone should remember this. Maybe we are really in the commodity super bull cycle. However, buying at the current time, the risk out weight the potential gain.
The high inflation, high commodity price should led to reduce demand. The growth is also slowing. There isn't a favourable factor to consider going into commodity now.
Random thoughts on market 13 July
The stock market went from bad to worse. Dow dropped another 100 points and looks to break the 11,000 level. This was caused by IndyMac incident, a name you and I not familiar with. Could more write down on the way? Yeah, if the situation does get worsen, then it might just go a bit lower.
The valuation now has gone from overvalued to undervalued. People seems to have build a high level of risk premium in the equity price. You just find your stocks keep dropping day by day. But my gut feel is if we are not at the bottom, we should be near there. Valuation is at rock bottom and the Asia growth story is not going to taper off just like that. It is bargain time and refrain from buying too aggressively, because you might be caught off guard by more bad news. What I would do is just to wait patiently, and if it really get ridiculous, I might be going in again to grab some. Just make sure you are not going to use the money you want to buy stock in 3 years time.
The growth outlook just got a little bit dimmer. How much the earning would fall is anyone's guess. I have seen quite a fair bit of earning downgrade already happened. The once high flying stock was brought back to earth, follow by the market condition and analyst downgrade. The problem with analyst is they tend to magnify the stock price swing. However, that is their job.
Investors are not going to assign high valuation to even the great stock. So, tread with care. You look at Sino Env and Swiber, the earning outlook still look pretty robust, but the valuation has come down really a lot. Would the environmental concern in China goes away when US economy is down? Not likely. Would the oil major stop their exploration work around the Asia Pacific if oil price down at $100? Not likely. Having said that, high beta stock is not for the faint hearted.
The valuation now has gone from overvalued to undervalued. People seems to have build a high level of risk premium in the equity price. You just find your stocks keep dropping day by day. But my gut feel is if we are not at the bottom, we should be near there. Valuation is at rock bottom and the Asia growth story is not going to taper off just like that. It is bargain time and refrain from buying too aggressively, because you might be caught off guard by more bad news. What I would do is just to wait patiently, and if it really get ridiculous, I might be going in again to grab some. Just make sure you are not going to use the money you want to buy stock in 3 years time.
The growth outlook just got a little bit dimmer. How much the earning would fall is anyone's guess. I have seen quite a fair bit of earning downgrade already happened. The once high flying stock was brought back to earth, follow by the market condition and analyst downgrade. The problem with analyst is they tend to magnify the stock price swing. However, that is their job.
Investors are not going to assign high valuation to even the great stock. So, tread with care. You look at Sino Env and Swiber, the earning outlook still look pretty robust, but the valuation has come down really a lot. Would the environmental concern in China goes away when US economy is down? Not likely. Would the oil major stop their exploration work around the Asia Pacific if oil price down at $100? Not likely. Having said that, high beta stock is not for the faint hearted.
Monday, 30 June 2008
Water shortage, invest in water treatment stock?
Today, I read two analyst reports about the Hyflux and Epure from different broker. The timing is quite coincident that they feature the water stock on the same day. Water related stock has been quite a hot sector, on and off. Since year 2004 till now, I think. But if you bother to check on their performance, think one should be disappointed.
When the sector is hot(a usual stock market behaviour), the valuation get a little bit out of hand. At the current market condition, every stock is back on ground again. Often we hear, the world is short of water etc etc. It is logical to think the water related stock would do well.
Think again. If you are hoping for consistent earning growth, maybe this is not your cup of tea. Water treatment company operate on projects and the earning could fluctuate from quarter to quarter. Many wants to go into operating treatment plant and receiving recurrent cashflow. However, that also means they have to invest heavily upfront. It is a capital intensive business.
One should really think long term to do well. Having said that, the two companies mentioned seem to be the strongest on SGX right now.
When the sector is hot(a usual stock market behaviour), the valuation get a little bit out of hand. At the current market condition, every stock is back on ground again. Often we hear, the world is short of water etc etc. It is logical to think the water related stock would do well.
Think again. If you are hoping for consistent earning growth, maybe this is not your cup of tea. Water treatment company operate on projects and the earning could fluctuate from quarter to quarter. Many wants to go into operating treatment plant and receiving recurrent cashflow. However, that also means they have to invest heavily upfront. It is a capital intensive business.
One should really think long term to do well. Having said that, the two companies mentioned seem to be the strongest on SGX right now.
Sunday, 29 June 2008
Stock market roundup 29 June 08
Last Friday, Dow drop another 100 points. I am not Oracle, so not possible to predict the future trend and whether any turn around is inside. But, what I do believe is, we are in another cycle of pessimism. Meaning? It means stock is likely to drift lower further. Sentiment is very powerful in stock market. No matter how great is the stock, when the feel is not right, it would just go together with the general market.
Sentiment aside, the outlook has indeed turned dimmer. They are couple of reasons. Credit crunch (more financial write down?), fallen US dollar, rising inflation (commodity, oil). Maybe so much excess has been built up over the years, and we need a recession to correct all these? Hopefully the China oil price hike would help to trim the demand. Possible for them to curb the speculative oil trading? This is one of the suggestion they quoted, but difficult to implement in this free market. Everybody should cut down consumption, in order to control this.
I shall watch on the sideline, until things are clear. It is impossible to catch the bottom. But I do believe, the more it fall, it is good for long term investor. But, you really need to work hard, to pick the right stock.
Sentiment aside, the outlook has indeed turned dimmer. They are couple of reasons. Credit crunch (more financial write down?), fallen US dollar, rising inflation (commodity, oil). Maybe so much excess has been built up over the years, and we need a recession to correct all these? Hopefully the China oil price hike would help to trim the demand. Possible for them to curb the speculative oil trading? This is one of the suggestion they quoted, but difficult to implement in this free market. Everybody should cut down consumption, in order to control this.
I shall watch on the sideline, until things are clear. It is impossible to catch the bottom. But I do believe, the more it fall, it is good for long term investor. But, you really need to work hard, to pick the right stock.
Tuesday, 24 June 2008
China oil price hike is good for the economy
China decided to hike the oil price last week, finally. It was a good move.
Usually, when the fuel price increases, the inflation would follow. Because the logistic cost would go up and that's not good for the general economy. But this time round, the situation is a bit different.
The current oil price is driven by speculative interest, geo political uncertainties and strong demand. If the government does not do something, the oil price might just keep increasing and hurt the world economy. After adjusting for the oil price, there would be a short term inflation spike, but it should help to curb the oil price increase in long run. Hopefully, the price would return to sanity soon.
In the short term, continuous financial market volatility seems to be the best bet.
Usually, when the fuel price increases, the inflation would follow. Because the logistic cost would go up and that's not good for the general economy. But this time round, the situation is a bit different.
The current oil price is driven by speculative interest, geo political uncertainties and strong demand. If the government does not do something, the oil price might just keep increasing and hurt the world economy. After adjusting for the oil price, there would be a short term inflation spike, but it should help to curb the oil price increase in long run. Hopefully, the price would return to sanity soon.
In the short term, continuous financial market volatility seems to be the best bet.
Wednesday, 18 June 2008
The fallen rice price
It was in the news. After a few months of surge, the rice price has started to go down now. Actually, there was no shortage of supply. But because of the kiasu-ism of some countries which wants to stock up the rice, it cause the temporary demand surge. Once they have stocked up enough rice and new season harvest going into market, those restrictions have been removed slowly. We shall see the continuous fall of the rice price, which is a good news to the investor. Because we need Asia to remain socially stable.
Day would come for commodities. There would be an end to the commodity bull, the only million dollar question is when? If the following factors which driving up the price start to wane, then we shall see rationale return to the market.
1. Speculative buying by hedge fund and investor
2. Increase demand all over the world
3. The bio fuel madness
4. Shortage of farm land
All these could be summarized to only one factor - demand. If the inflation goes out of hand, there won't be long when demand would reduce drastically.
Day would come for commodities. There would be an end to the commodity bull, the only million dollar question is when? If the following factors which driving up the price start to wane, then we shall see rationale return to the market.
1. Speculative buying by hedge fund and investor
2. Increase demand all over the world
3. The bio fuel madness
4. Shortage of farm land
All these could be summarized to only one factor - demand. If the inflation goes out of hand, there won't be long when demand would reduce drastically.
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