Tuesday, June 28, 2011

On the right track

Most of the portfolio holdings were resistant to the decline except for World Precision. I guess holders were trying to take profits. Fundamentals intact and not fudgy like other S chips. Only time will tell if this firm is foolproof from the S chip debacle.

The use of certain business and psychological indicators did help warn about the decline in the past 2 weeks and usage is rather satisfactory, I shall stick to it and see how it performs over time. Right now, the portfolio is a third in cash atm.

Did not buy into Marathon Oil, ex date was yesterday 27th June 2011. Its splitting into MPC and MROx, the refinery and E&P arms respectively. This is unique since combined entity is undervalued. I was not able to explain why the firm is at such low valuations though so I stayed clear.

Lastly, spoke to a few fund people on some control investment ideas. Hope I will be able to work on the deals and be involved. Best if I can own a stake in it :)

    Friday, June 24, 2011

    RHB Capital - Msia

    Was looking at the takeover possibilities with Maybank and CIMB and did some analysis. The deal price was expensive (in terms of PBR ROE and other growth metrics) but I did anticipate a high possibility of it going through with Maybank as the buyer due to political factors.

    Further, with the deal being a mix of cash and stock, I was bidding for time to enter the position due to the unfavorable economics of the deal, payment methods to shareholders as well as poor macro backdrop (especially for such deal mechanics). Alas the deal was called off. It was said that the high deal price and complications from Abu Dhabi SWF's holdings resulted in the deal being called off.

    Last I looked, the lowest entry price was at RM 9.80 and currently its at RM 8.87 or a 9.5% decline which I have fortunately avoided for the portfolio. We can expect to see further weakness in the price of this counter until it reaches a reasonable enough level to allow for value creating consolidation within Malaysia's banking industry.

    Wednesday, June 22, 2011


    Doesnt take a genius to know that longer trading hours (starving people) will be futile or even counterproductive.
    Singapore soon to follow HK.

    Monday, June 20, 2011

    Some thoughts for July

    The selling seemed random given the prior selling has discounted much for the end of QE2.

    Contrary to popular beliefs, I think end of QE2 is actually positive to US which in turn flows down and is positive to Asian nations. Demand is holding and many of Asian companies are having stronger than before growth with yoy growth of some 15 - 30% in those I was keeping tabs on.

    Further, I think QE3 is not coming and is unnecessary. QE2 did little in its purpose except for inflation. Fed seems more likely to either stop QE2 or let it run and at the same time selling some of the structured assets it stocked up during the crisis gradually.

    Also noted many of portfolio holdings getting hit, many stocks were being sold lower on very thin volumes ...selling steam running out. Shorts beware?

    Have been following Pertama/GPG and Portek guys for while, proven to be taken over. A real pity I did not get in for both. Decision to not buy Portek was due to the high support from previous buyers which may result in sharp losses in event the anticipated deal falls through. Pertama is a mistake I should never have made.

    Wednesday, June 15, 2011

    Dapai international (FP1 SGX)

    Hi all, ill write a short post today as I am under the weather.
    I am starting a negative view on this firm (formerly named Zaino bags) and I have mentioned this firm on the blog before on they cash sucking abilities given the following:
    • They make luggages and bagpacks and is based in China, Fujian
    • 9 June 2011 - 1 for 4 rights at $0.08 per share, 43% discount to market price of $0.14 to raise RMB 100m despite their cash hoard
    • Major shareholder has 51.5% stake 
    • Super normal profit margins and return on investments, both in high 20+% when average is 5-10%/ <15% ROI
    • Additional expenses from opening 500 new stores (RMB 230m) and prepaid rental (RMB 160m)are depreciated/amortized on a 5/2 year basis straight line. Seems odd that prepaid rental is amortised and depreciation of stores is over 5 years and why the sudden 500 stores?. (Massaging figures)
    • May 2010 - raised S$11.8m in new share placement of which S$2.5m or 21% was spent on exploring secondary listing opportunities - which failed subsequently. 
      • This was when firm has cash of RMB 552m and debt of RMB 24m 
      • Interest earned on cash is sub 0.1% when China interest rate is much higher 
      • 2010 dividend paid out was about S$10m
      • (Whats going on??)
    • Net cash of RMB 504m or $0.0965 per share vs. NAV of $0.37 per share (Too cheap to be good)
    • Firm paid dividend per share of RMB 0.088 / 0.063 in 2009 and 2010and committed to pay only 10% of profits

    Monday, June 6, 2011

    Some June news

    I was talking about Guangzhao bio forest (G21 SGX) to some of the readers about the following a few weeks back. Their concerns were on the sudden price surge then. (My apologies, I should post it immediately after discussion):
    • Investors, including some well known ones have bought into the counter
    • CEO Song Xue Meng is a former lumberjack, post Arts degree at Beijing university turned finance and business whizz, CFO and GM of Shanghai Sihua plant gene engineering company and Heilongjiang Land Resource Co. (Heilongjiang is Northern China, near Harbin). 
    • The Chairwoman, Su Min has a degree in literature (Zhongshan university), Oriental medicine (Intnl martial arts medical university). She also completed a postgraduate degree in Ethics (Fudan university) in July 2003, just right before assuming the chairwoman post. Shes a former DGM of Shanghai Sihua.
    • I highlighted its doubtful asset valuations and its highly discretionary accounting? 
    • Poor cash flows and need to seek constant refinancing 
    • There was a shift to fertilizers business away from the timber, which sold little since start of firm
    • However firm also wanted a shift to Jatropha agriculture which 0 was heard thereafter
    • Firm also owes US$3.5m to the credit entity of Goldman Sachs
    And today, auditors flagged some risks resulting in counter being suspended. In the long run, the market is indeed a weighing machine.

    We also talked about Willas Array (W12 SGX), about the oddity of raising cash through rights only to pass it back as dividends. The other candidate is Fuxing China (DC9 SGX) which decision to go for a TDR just makes me wonder if the management is indeed focusing on the business operations or not. 

    And guess what, our favourite topic Olam International (O32 SGX) is going to be placing out S$740m new shares at S$2.60 each. Thats the reason for the halt today. Will continue to keep that short up in the portfolio. 

    Have a good week ahead.