Sunday, October 31, 2004

Random Weekend Musings

ZHL SP: Hoped to keep track of the waste management firm after IPO but it rocketed on IPO debut - P/E of 15 [$0.30]. Surprised that investors was not adverse to the counter despite its field of business.

On this topic of staid industries and ticker names starting with "Z", would ZPI SP qualify?
ZPI SP is an agricultural equipment manufacturer in China. Is it a boring business? Maybe useful to recall the double digit growth "guaranteed" by its non-executive director prior to its IPO?

Red Star Portfolio Update: -1.25% [29 Oct 04]


Weekend Spotlight on SRAY SP

The story: Guangdong based medical apparatus, obsterics and gynecology system manufacturer.

P/E -> 5.6 [Price: $0.215; IPO: $0.32 on Nov 03];
Current ratio -> 10.32;
Quick ratio -> 9.2;
Operating margin -> 42.5%;
Div Yield -> 3%;
Stage in Business Cycle -> Growth;
Standards Certification -> ISO9001, ISO13485 and EN46001 [CE: Conform to EU stds];
Future Growth -> Targeting emerging countries of SE Asia and South America;
Auditor -> Ernest & Young.

Future growth plans unclear;
Free replacement of equipment if it breaks down during course of normal use;
Immediate repeated sale of equipment unlikely after customers' purchase;
Technology risk - Need constant R&D to keep ahead;


Thursday, October 28, 2004

What's with LFBZ SP?

Update on LFBZ SP - Had hogged "Top Volume" charts yesterday. Closed at $0.20. Suggestive of big movement ahead? Opps, that was my technical past catching up with me. Have you opened a position in it yet? As a pal said, "Don't be penny wise, pound foolish".

I first made mention of Osim when I talked about Global Active [GLA SP]. Its 3Q revenue growth of 3% was Ron's worst showing ever? But I do note that their net profit margin was 11% higher at an okay 7.3%. At a price of $0.965, its P/E is 12.1. Thus, its PEG is approximately 1. Not excellent by Lynch standards. But with the slightly negative sentiment hovering around the counter, I wish to commence a detailed study of it as a buying opportunity into a very good counter which has very good growth prospects:

  • Management has net profit growth target of 20-30% p.a.;
  • Started process to own 100% of its China operations;Has 154 outlets in 32 cities;
  • Total of about 500 outlets in over 20 countries;
  • Demostrated ability to penetrate overseas market - HK and Taiwan contributes 24% and 17% in market share. China is fourth with about 9%, Singapore is third with 13%;
  • Has major stake in GLA SP.

[Identifying growth drivers is a key in Philip Fisher's process.]

Had a quick feel of Sunray too. Despite its attractive valuation of P/E = 4, I have concerns about recurring revenue stream for the counter. Thus, its growth is very much dependent on repeated sales of its medical equipment. Its results have been good so far but I must add that I am also negative because of the concerns surrounding accounting processes of China firms. Another minus for it is that I can't have a "Lynch like" feel of the counter because I don't see its physical presence. :-)


Tuesday, October 26, 2004

Oil Rules?

Looked at the performance of Red Star yesterday. With oil prices spiking and hitting new highs every day, many counters got hit. However, it is commenable that the Red Star picks are still holding out. Learnt a valuable lesson about "value" picks: They appear to be more resilient even when the market is under pressure.

However, there are two counters which I must flag out as likely to be susceptible to oil hikes - FAPX SP and CFLX SP. Apparently, FAPX SP had discussed about the impact of oil prices on their bottomline during their last results reporting. CLFX SP which makes plastic sheets may be similarly affected too.

Crises are opportunities; especially to load up on counters which are likely to have not exactly affected by oil prices. For this, I would want to build my position on LFBZ SP and WFG SP.

LFBZ SP is what I would call a classic Lynch pick. Its sales of Xando, Extrim and Suscostop are clearly good. Just walk into any neighbourhood OTC pharm and it is plainly obvious. I can easily name 5 outlets around my home that sells it. Newly introduced Intenz pills and facial masks is likely to contribute to the bottomline. But for future growth, I understand that it has identified penetration into Taiwan and Indonesia as key. I believe it is already in HK. Its estimated free float is approximaely 40%, while their management hold about 14% each. That's a sizable stake in the company. Its gearing is zero; net cash position. [LFBZ SP, $0.190, CD]

The other pitch I would like to make would be for WFG SP. A lead manager of several IPOs; small SMEs, even from China. Has cash on its books. I doubt oil spikes will affect its operations. [WFG SP $0.415]

I wish to initiate coverage on GNC. It operates a regional network of 100 GNC outlet as the sole franchisee of the chain in China, Singapore, Malaysia, Brunei, Guam and Saipan and US bases in Japan, Korea and Guam. It has made inroads in Australia too. Osim has a 24% stake in the nutritional product retailer. Also has an option to buy a 31% stake at 28 cents. (exercisible only in Feb 6 2005). [$0.265]


Hedged Positions

Quick thought: SIA SP may have hedged its oil needs at about $32 per barrel. So, it may be able to ride out the crisis with reduced impact. They typically hedge one-third of their oil needs. Whilst they are susceptible to competition from LCCs, it remains a premier name in air travel. May be a buy if it gets overly beaten down. [About $10.50]


Monday, October 25, 2004

My Virtual Portfolio - RED STAR

My virtual portfolio:
  • SECURITY [Bloomberg Code] - POSITION SIZE - COST
  • CFLX SP - 2000 - 0.795
  • CH SP - 2000 - 0.58
  • FAPX SP - 4000 - 0.485
  • LFBZ SP - 2000 - 0.185
  • MEGH SP - 2000 - 0.285
  • UFH SP - 2000 - 0.380
  • WFG SP - 2000 - 0.40

[Note that the Position size is not indicative if one does actual trading due to minimum commission imposed by brokers.]


Discipline through blogging

When Peter Lynch was running Magellan, he kept thick journals describing his investment ideas. Today, I hope to mirror the discipline by keeping a weblog of my investment ideas.

I started a virtual portfolio in Bloomberg a few months back. I will port those ideas in a while and substantiate them.