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]



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