Tuesday, November 1, 2011

3Q 2011 - Nanyang Holdings (0212 HK)

I wrote up a detailed report on the firm and it is listed on my good friends and fellow value investors' website at  for which I am very thankful for. 

The report is listed at:

A very big thank you to Will Thrower and Ryan Gill!

They have been very supportive and truly global investors. Do visit their site for some good ideas as well. 
Once you read the report, you will have a better idea of the kind of undervaluation I am talking about. 

Note that there are many estimations of numbers and asset figures so hopefully my conservatism puts the valuation in range.  

3Q2011 Updates

This quarter was filled with much volatility, I did not expect that the chart I did up on Euro/ Global indebtedness would come in so relevant, more so than the bottom up pickings which were absolutely boring this quarter with the exception of Koon which announced a 15% JV into real estate development, not surprising which I mentioned since they bought GPS Alliance, the real estate agency and advisory firm in 1H2011. 

NY Times had one good article talking about the Euro problem (with a far more impressive and interactive chart) than my boring table.http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html. Well it appears by the reps of which countries are mentioned, Greece seems to be very crucial in the equation of solving the debt issues. However there's more than meets the eye. By absolute numbers, Spain and Italy send shivers down the spine, with related creditors such as Britain, Germany and France likely to be affected in a web of debt that makes Greece look really like David rather than the Goliath. 

I have also learnt many a thing during this quarter, one of which "Your selling price is only as good as how much you bought it for". Undoubtedly, Nanyang Holdings is an extremely undervalued counter and I mean "very", I ought to have bought it lower especially when I expected the Euro debt issue to be replayed. 

World precision had some good support on price level with its steady growth. News of China slowing down the infrastructure spending and words of worker with wages on credit also toned down the enthusiasm for the company which announced significant investment in railway and automotive machine production which currently contributes over 50% of revenue in 2011. Utilization figures also suggest the economy has not yet slowed down significantly however we do expect the numbers to slow down sometime in the next few quarters. World precision is currently China's 3rd largest precision stamping tool manufacturer with 2.9% market share and needs to triple sales to top the charts which should not be too difficult given its technological tie ups with PAMA Group and Aida from Italy and Japan. Management owning over 77% of total shares and its record of stable dividends have also been comforting. Price wise, the last attempted takeover was at S$0.70-75 per share or S$ 395-423 million in total which is in my opinion a low target for the firm. Management has also stated that replacement cost for the plants alone stand at over RMB 1.5 billion or about S$ 300 million. Order book is at RMB 1.2 billion with LTM net margins at 15.3%, lowest 12% in 2010. Market values the firm now at over S$200 million.

Lastly I have also exited a negligible position in Unidux with the takeover at S$ 0.143 per share for a good gain. Illiquidity of the counter did not allow for a good accumulation even though the case was clear.

I will also cover the shorts now to focus on the longs and their related experiments.

Feel free to email me any queries.