Tuesday, April 21, 2015

New Thoughts - Power Stocks

After reading this post on Net-Net Hunter, it highlights that value investing is a waiting game. You will need to wait for "someone" or "BB" (Big Boys) to realise its potential. That is also why value investor is always looking at the long term and require some form of return (eg, dividend) while they wait. 

In addition, I have read something else in Investing Mantras as well as this under The Moltey Fool - It suggested Warren Buffet advised us to "Invest in Great companies at fair value rather than fair companies at bargain value".

After Hock Lian Seng rises to 0.40+ recently (I sold at 0.29 in June 2013), I realise I may need to enhance my approach to find "power stocks" instead of just value stocks.


Thus I decided to amend my approach a bit...

Additional to my current approach: 

(1)10 years analysis of Net Profit Margin
(2)10 years analysis of Return Of Assets 
(3)10 years analysis of Return Of Equity

If the trend is rising and above 7% - company moving in the right direction.

If there is a turnaround, it will also be easier to drill in and find out what happen.

Specifically for Net Profit Margin - If more than dividend yield and to understand if the dividend yield is sustainable

Note that with this new approach, dividend yield, PE ratio and Debt to Equity becomes more important.

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Sunday, April 12, 2015

ISDN (Part 2)

After releasing this post on Sin Ghee Huat  & ISDN on Thursday, the price shot up 1.92% and 7.32% respectively on Friday.

I cannot help but hope it is because of what I wrote (although its almost impossible). Nevertheless I do like to give you a word of caution. Please still do your own due diligence and invest in the stock only when you feel "right". Do not follow blindly!

As for my recommendation, I know some people have doubts about ISDN. After reading the annual report released on 7 April, I like to "correct" and update the following information on ISDN:

1. Sorry on the wrong information previously - ISDN did not change its business. They just add a new revenue channel as per the annual report!


2. There will be a Dividend of 0.4 cents per share (As calculated in the post previously, dividend yield of only 1.95%.)

3. They are in high tech farming as well. Interesting.


4. They MAYBE moving into Myanmar. Its not confirm yet. Do be bluffed.

5. 75% of their business is in Engineering and in China. Too concentrated?

These are the new updated information. Hope it may further allow you to make a better decision and please STILL DO YOUR ON DUE DILIGENCE before making any decision. 

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Thursday, April 9, 2015

A Review of two extreme: Sin Ghee Huat Corporation & ISDN

After reading this post from ValueEdge, it prompt me to write about this 2 stocks of mine.

One - an old school value stock. The other - an established business changing its main focus.

Sin Ghee Huat Corporation Ltd

This is the old school value stock. The company do not have any exciting business - as per SGX - "...engages in the sale and distribution of stainless steel products primarily in Singapore, ASEAN, China, Australia, New Zealand, India, South America, and the Middle East."

But its ratios show lots of potential (Current Price: 0.260)

Net Current Assets Value: 0.330 per share (26% higher than its current price!)
Price to Sale: 0.91 (<1.5)
Dividend Yield: 5.77%
Debt to Equity: ZERO!
Price to Average 10 year Earnings: 7.85 (<10)


No Rights Issue EVER! Dividend every year! Pure Play!

What's more to ask for?

People may argue that this company is a stockist and they are normally a slave to the price of its product. If its product's value (in this case, steel) falls drastically, the stock price may fall drastically as well.

But please do not forget there is still a buffer of 26% and the company has NO debts. In addition, what happens if steel prices shot through the roof? (The margin of safety will definitely be much more.)

As usual, people tend to forget this kind of stock as it gets boring in the long run.

A value gem found.

ISDN Holdings Ltd

This stock is different from any value stock. Price has fallen more than half since July 2013.


Seems that the company is changing its business to a "power supply company in Indonesia". Without a track history in this new business (other than previous being an engineering firm), investor lost all confidence in this stock. In addition, it has launch rights and warrants issue. 

Having read about "Buy when everyone is fearful" - I decided to check out more. 

I found out the company has been on an aggressive share buyback since Oct 2014. In addition, the warrants has an exercise price of 0.600 cents (compared to the current price of 0.205!).

When I first looked at this stock, I was only able to retrieve 3Q14 financials. Its Net Current Assets Value is 0.171 vs Price of 0.200.

However, I decide to launch into a purchase of this stock in view of the following: 

1. The management is very assure of the plan they have in mind with the share buybacks and a warrant exercise price of 0.600.

2. Power Supply is actually a very good piece of business. It allows the company to have a consistent stream of revenue.

3. With its rights and warrants issue, it is able to minimize the use of debt to finance its new ventures.

Finally when the 4Q14 financials are out, I am in for a huge surprise:

Its Net Current Assets Value is 0.225 per share (10% higher than its current price!)
Price to Sale: 0.315 (<1.5)
Dividend Yield: 1.95% (FAIL)
Debt to Equity: 12.18%
Price to Average 10 year Earnings: 10.62 (FAIL)

Although this stock did not managed to become a value find, but the future seems bright. If the price continue to fall further, it may really become a value gem.

By then, I will load more of them then!

Conclusion:

In short, this post reminds me that an investor must always be flexible to change when an opportunity arise. However, we should still maintain our core view when analysing.

If you want to know more about me and the blog, please click here.

If you want to know more about my approach, please click here.