Those that have listened to me talk about stocks will have heard me mention this stock at least once. I know! Many fund managers are selling out, Templeton is one of them. Many believe that this company is poorly managed, especially after their last quarterly financial announcement. Believe it or not! I am calling for a strong buy. I really love this company. Loads of cash, positive operating cashflow and 2nd largest abattoir in China. Why has this stock fallen from its lofty position to this lowly price? Once a darling on the STI index, it has fallen from grace and landed on earth...guess who is there to catch it? ME of course. SVI loves stocks which the world do not.
Ok I am not saying there is no risk, but while the world is watching COSCO, China Milk, Midas as possible dual listings, I believe PFOOD is going the be the leading candidate for a dual listing because of its high profile and ridiculous valuation. Another reason for liking this stock? You still need another reason!! Ok let me give it to you....RMB$1.4 billion in cash....RMB$611 million total liabilities. Superb. Every year cash from operations have been above RMB$300 million making it $60 million a year positive cashflow. That is just a very prudent amount I am assuming. Market cap is $711 million now. So positive cash from operations is almost 1/10 of market cap. What a great business!
Love it! Thats how I would describe this gem. Risks of course are high, but so are returns...This could be my meal ticket for next year!!
When pigs fly...So will I.
Best,
SVI
Wednesday, December 30, 2009
Monday, December 28, 2009
Hwa Hong and Tourism
Today, I was sitting in front of the computer feeling as sick as I have been for the past 2 years. Cannot remember the last time I was down with the flu and this virus reminds me of how strong the market feels and look before the end of the year. Looks like people are really feeling the "love" for the market in 2010. As I said before, its time to be a little cautious and I am sticking to my guns. In my outlook piece, I specifically pointed out tourism as a top play for 2010. But it seems like the market has already gone ahead and started the party early.
SIA, Hotel related plays have done well over the past 2 weeks and I hope that you all have jumped onto the bandwagon when I made the call. A very good example of how cheap hotel plays in singapore is accentuated by the premium paid for Furama holdings. The premium paid was in access of 50% of the last close price for the stock. As I have said before, value is getting harder to find in the market. I know some of you will tell me their earnings are really abysmal and most of which are registering losses for the year. Some would even say that the supply of rooms in Singapore will only rise once the IRs are open next year. That is without a shadow of a doubt true but with the introduction of the IRs will not only bring about more tourists but also the value per room should rise as the real estate prices continue to rise. In valuing a hotel, it is important for us to also focus on the revenue per average room and also the value per room. Revpar will only rise as economic recovery gains traction and the value per room will increase along with this rise. My belief is that the value per room in Singapore is going to go up as real estate prices continue to rise. So look out for hotel stocks that are trading at a significant discount to their NAV. Orchard Parade, Singland are a couple that comes to mind.
Now for Hwa Hong...I really like that fact that the company is looking to reinvent itself. For too long it has been regarded as the grand father stock of the decade. One of the earliest listed companies on the Singapore Exchange. You ask any one on the street or maybe even veterans in the market on this stock, they will give you a puzzled look. Well it has been making some headlines this year, giving a good dividend of $0.12 earlier and now...now they have sold one of their core businesses for a cool $95 million bucks! That is about 1/3 of its total market capitalisation. The best thing was that insurance arm (the one they are selling) only brings in $2 mil per year. So what does that mean? They sold it for a PE of more than 40 times! So was it a good price? Hell yes! What is the money going to be used for? Dividends? I doubt it. I think that it will be used for more investment acquisitions, most probably land as this would reinforce their property business arm. I always like companies that work on what they are good at, and this is something Hwa Hong is doing well. When a company concentrates on its strengths, that is always something a value investor should look out for. If you followed my earlier posts, I called for a buy since $0.505. Now its $0.585. A good return...you think? Ha! Well this makes me want to sing out the old Carpenters song..."Its only just begun"
Best
SVI
SIA, Hotel related plays have done well over the past 2 weeks and I hope that you all have jumped onto the bandwagon when I made the call. A very good example of how cheap hotel plays in singapore is accentuated by the premium paid for Furama holdings. The premium paid was in access of 50% of the last close price for the stock. As I have said before, value is getting harder to find in the market. I know some of you will tell me their earnings are really abysmal and most of which are registering losses for the year. Some would even say that the supply of rooms in Singapore will only rise once the IRs are open next year. That is without a shadow of a doubt true but with the introduction of the IRs will not only bring about more tourists but also the value per room should rise as the real estate prices continue to rise. In valuing a hotel, it is important for us to also focus on the revenue per average room and also the value per room. Revpar will only rise as economic recovery gains traction and the value per room will increase along with this rise. My belief is that the value per room in Singapore is going to go up as real estate prices continue to rise. So look out for hotel stocks that are trading at a significant discount to their NAV. Orchard Parade, Singland are a couple that comes to mind.
Now for Hwa Hong...I really like that fact that the company is looking to reinvent itself. For too long it has been regarded as the grand father stock of the decade. One of the earliest listed companies on the Singapore Exchange. You ask any one on the street or maybe even veterans in the market on this stock, they will give you a puzzled look. Well it has been making some headlines this year, giving a good dividend of $0.12 earlier and now...now they have sold one of their core businesses for a cool $95 million bucks! That is about 1/3 of its total market capitalisation. The best thing was that insurance arm (the one they are selling) only brings in $2 mil per year. So what does that mean? They sold it for a PE of more than 40 times! So was it a good price? Hell yes! What is the money going to be used for? Dividends? I doubt it. I think that it will be used for more investment acquisitions, most probably land as this would reinforce their property business arm. I always like companies that work on what they are good at, and this is something Hwa Hong is doing well. When a company concentrates on its strengths, that is always something a value investor should look out for. If you followed my earlier posts, I called for a buy since $0.505. Now its $0.585. A good return...you think? Ha! Well this makes me want to sing out the old Carpenters song..."Its only just begun"
Best
SVI
Thursday, December 24, 2009
Santa Claus Rally?
Merry Christmas to all! Here I am sitting here after shot after shot of whisky writing about the market. I have to say, it is times like this when the mind works uninhibited and inspiration flows straight from the brain (sedated and a little high).
In my 8 years in the market, I have paid attention to the smallest details and the biggest moves. There has never been a boring moment and I have to say to all my dealer or remisier friends, be glad that you are in the most interesting job the world can offer.
Ok enough of sentiments, now back the important stuff. The week has been rather boring with the mood of Christmas in the offing. The markets have managed to break the 2800 points convincing and we are at 15 month highs. Personally, I feel that Singapore's bourse being strongest in the face of Shanghai and Hong Kong dropping has been due to the optimism of a strong recovery driven by mainly the 2 IRs to be opened in 2010. The other market that has looked very strong and I have a gut feeling it is going to be the outperformer for at least 1H2010 will be the Nikkei. Historically, the worst performing market for the year before will be an outperformer in the next year. The yen is expected to fall the coming year and the only worry is that the Japanese sovereign debt gets the downgrade. But that is highly unlikely as the Japanese Debt is mainly held by their own citizens unlike the US. So it is very unlikely that the Japanese citizens will come and ask for their money back. So I will be looking for niche Japanese stocks which fits my value criteria. Which is very stringent. I have said many times to others, price is what you pay, value is what you get.
So go forth and seek out the value plays for the next year.
A word of caution, the technical charts for Shanghai and Hang Seng do not look good. They not managed to hit higher highs and if they breakdown and hit lower lows, it is a tell tale sign.
I have a few ideas up my sleeve but I will let you guys know as time passes as more work needs to be done.
I have been wrong about the US dollar hitting the markets. I may be wrong now, but I am sure if the US dollar keeps rising, we are going to be in for an interesting ride.
Best Christmas Wishes,
SVT
In my 8 years in the market, I have paid attention to the smallest details and the biggest moves. There has never been a boring moment and I have to say to all my dealer or remisier friends, be glad that you are in the most interesting job the world can offer.
Ok enough of sentiments, now back the important stuff. The week has been rather boring with the mood of Christmas in the offing. The markets have managed to break the 2800 points convincing and we are at 15 month highs. Personally, I feel that Singapore's bourse being strongest in the face of Shanghai and Hong Kong dropping has been due to the optimism of a strong recovery driven by mainly the 2 IRs to be opened in 2010. The other market that has looked very strong and I have a gut feeling it is going to be the outperformer for at least 1H2010 will be the Nikkei. Historically, the worst performing market for the year before will be an outperformer in the next year. The yen is expected to fall the coming year and the only worry is that the Japanese sovereign debt gets the downgrade. But that is highly unlikely as the Japanese Debt is mainly held by their own citizens unlike the US. So it is very unlikely that the Japanese citizens will come and ask for their money back. So I will be looking for niche Japanese stocks which fits my value criteria. Which is very stringent. I have said many times to others, price is what you pay, value is what you get.
So go forth and seek out the value plays for the next year.
A word of caution, the technical charts for Shanghai and Hang Seng do not look good. They not managed to hit higher highs and if they breakdown and hit lower lows, it is a tell tale sign.
I have a few ideas up my sleeve but I will let you guys know as time passes as more work needs to be done.
I have been wrong about the US dollar hitting the markets. I may be wrong now, but I am sure if the US dollar keeps rising, we are going to be in for an interesting ride.
Best Christmas Wishes,
SVT
Saturday, December 19, 2009
Review of picks
Can it be true? I am writing for the third time this week on my blog. I guess it really is the holiday season, how else would I have so much time to write here? Haha. Ok lets start off with some review on my picks so far.
NOL...I remember picking shipping as one of my favorites going into the next year. I stick to this because I do believe that the better results will be reflected in 1Q10. Goldman has just issued a buy call for this last week, setting the 12 month target at $2.20 so it shows that they are thinking the same thing as I did. I do believe that Asian shippers look like they are going to be strong and NOL is well positioned to benefit from this. Also bearing in mind that they have done their equity raising, so funding fears have abated and now its time to focus on improving business performance.
Trump Dragon...The sleeping dragon seems to have awaken after a month and a half of hybernation. I still like the story of Baijiu, especially after my trip to China earlier this month. However one worry I have about this particular counter is that they have to deliver on their promises. The past 2 quarters have been poor in terms of operating results and they blamed it all on the change in product mix. So they will have to deliver over the next few quarters of 2010. The deal to buy Ruyang Dukang has been delayed for 2 weeks till Jan 15 2010, this is something that I am conerned about too. For people who have studied this deal will know that Kwei Zhou Moutai tried to buy this distillery but the deal fell through, so it keeps us sober to the fact that this is no done deal by any means. Gut feel tells me it will be moving strongly till the end of the year. But I do think that I will be taking some profits off the table for this one soon.
Ziwo...This is a company that is still a work in progress. It seems to have fizzled off after my call. I am only concerned about the loss of interest from investors, however the company is still on the right track for some good results going forward. Patience is going to be the key word for this one.
Lion Asia Pac...I really liked this company but I did say that the key risk is overpaying for Polaris metals. It does seem that it will be going that way. So KIV this stock and see how things pan out. However the value is still here and it takes time for value to shine through.
Reyoung...It has been stuck here for some time. Results were good and still showing good organic growth. Setting up the JV in the US recently is a good step forward for the company and I maintain my stance that this is a company to look out for. The support at $0.30 looks like a very patient accumulator for the company.
New stocks to look out for:
Tat Hong...Major laggard, ready for a jump very soon.
Hwa Hong...I know...alot of Hongs, but this company has shown a lot of positive initiatives. A sleeping giant awakening. Selling their insurance business is a good step forward and transforming into a full fledged investment company. One to look out for in 2010. Special dividend could be in the offing here. NAV of $0.55 but I think it could trade at a premium.
Hong Leong Asia...Good news, good news and more good news. The past 2 months have been great for this company. I think this will continue into 2010. Flushed with cash and another special dividend candidate in the making. Promising and strongly backed by the Kweks. What else can you ask for?
Have many more picks but typing is very tiring...having a stiff shoulder right now.
I never run out of ideas, but I just feel that if I had to write it all at once, I will need a symphony pillow and the newest Osim chair. So for those of you who have made money from the picks and decided to buy me these items, please feel free to let me know. Thanks in advance.
SVI
NOL...I remember picking shipping as one of my favorites going into the next year. I stick to this because I do believe that the better results will be reflected in 1Q10. Goldman has just issued a buy call for this last week, setting the 12 month target at $2.20 so it shows that they are thinking the same thing as I did. I do believe that Asian shippers look like they are going to be strong and NOL is well positioned to benefit from this. Also bearing in mind that they have done their equity raising, so funding fears have abated and now its time to focus on improving business performance.
Trump Dragon...The sleeping dragon seems to have awaken after a month and a half of hybernation. I still like the story of Baijiu, especially after my trip to China earlier this month. However one worry I have about this particular counter is that they have to deliver on their promises. The past 2 quarters have been poor in terms of operating results and they blamed it all on the change in product mix. So they will have to deliver over the next few quarters of 2010. The deal to buy Ruyang Dukang has been delayed for 2 weeks till Jan 15 2010, this is something that I am conerned about too. For people who have studied this deal will know that Kwei Zhou Moutai tried to buy this distillery but the deal fell through, so it keeps us sober to the fact that this is no done deal by any means. Gut feel tells me it will be moving strongly till the end of the year. But I do think that I will be taking some profits off the table for this one soon.
Ziwo...This is a company that is still a work in progress. It seems to have fizzled off after my call. I am only concerned about the loss of interest from investors, however the company is still on the right track for some good results going forward. Patience is going to be the key word for this one.
Lion Asia Pac...I really liked this company but I did say that the key risk is overpaying for Polaris metals. It does seem that it will be going that way. So KIV this stock and see how things pan out. However the value is still here and it takes time for value to shine through.
Reyoung...It has been stuck here for some time. Results were good and still showing good organic growth. Setting up the JV in the US recently is a good step forward for the company and I maintain my stance that this is a company to look out for. The support at $0.30 looks like a very patient accumulator for the company.
New stocks to look out for:
Tat Hong...Major laggard, ready for a jump very soon.
Hwa Hong...I know...alot of Hongs, but this company has shown a lot of positive initiatives. A sleeping giant awakening. Selling their insurance business is a good step forward and transforming into a full fledged investment company. One to look out for in 2010. Special dividend could be in the offing here. NAV of $0.55 but I think it could trade at a premium.
Hong Leong Asia...Good news, good news and more good news. The past 2 months have been great for this company. I think this will continue into 2010. Flushed with cash and another special dividend candidate in the making. Promising and strongly backed by the Kweks. What else can you ask for?
Have many more picks but typing is very tiring...having a stiff shoulder right now.
I never run out of ideas, but I just feel that if I had to write it all at once, I will need a symphony pillow and the newest Osim chair. So for those of you who have made money from the picks and decided to buy me these items, please feel free to let me know. Thanks in advance.
SVI
Thursday, December 17, 2009
Christmas, a time to be jolly and cautious...
Those people who know me, will know that Christmas is my favourite time of the year. Not because I am a religious person, just that I grew up loving the thought of the existence of Santa Claus and lots of presents. Many people are now asking me whether Christmas will bring about a rally in the markets to deliver the greatest gift of all...money. Just like how I grew up to realise that Santa Claus is nothing more than a fairy tale, I am afraid that the market is going to disappoint everyone this December. Why? Simple...The USD is rebounding, this will lead to some unwinding of the carry trade and will cause markets to weaken. The downgrading of sovereigns in Europe is causing weakness in the Euro and this gives Dollar bulls some hope. Just as long as the dollar remains strong, we will see the market remaining weak or tepid. Lets hope this rebound in the dollar is just a technical bounce and not a bottom.
The market is reaching a point where it looks a little lethargic and peakish. Of course, we cannot ask for too much as the market has performed admirably this year. I believe that we are at a point of cross roads. Saying this makes me fear the coming year even more.
The time has come for us to become more defensive. To position our portfolios into more defensive stocks that have strong fundamentals, low downside or have an impending deal that is going to go through. My picks for defense would be Hwa Hong, Novena (yes I am sticking my neck out for this), Hong Leong Asia, Tianjin Zhongxin etc. I am really mentally too tired to explain my picks but I think that you will have to trust me on this.
I had a really bad day so I am just going to leave it here.
SVI
The market is reaching a point where it looks a little lethargic and peakish. Of course, we cannot ask for too much as the market has performed admirably this year. I believe that we are at a point of cross roads. Saying this makes me fear the coming year even more.
The time has come for us to become more defensive. To position our portfolios into more defensive stocks that have strong fundamentals, low downside or have an impending deal that is going to go through. My picks for defense would be Hwa Hong, Novena (yes I am sticking my neck out for this), Hong Leong Asia, Tianjin Zhongxin etc. I am really mentally too tired to explain my picks but I think that you will have to trust me on this.
I had a really bad day so I am just going to leave it here.
SVI
Saturday, December 12, 2009
I am BACK! MyView for 2010
Before I start, I need to apologize for not writing for so long. Things just kept coming up and have been traveling too much over the past 3 weeks. Until I got an msn msg from a friend asking why I have not updated my blog with new ideas, only then did I realise that time has flown by over the past weeks. I would just like to say that I am here to stay with this blog and I hope you all will get more of your friends to follow it. Trust me, readers will definitely get more insights and truths here than most other websites or investment gurus as you will be getting unbiased views with no vested interests.
Suddenly, we are at the end of the year and let us take a look at how things have panned out over the year. Overall, global markets hit a low in March this year and rebounded very strongly for the rest of the year. We have continued to rally with strength till now and the markets are all near their year highs at this time. It is easy for us to get carried away with this year's rally. But it is always good for us to stop and re-evaluate things before going into next year.
Have things changed?
Things seem to have gotten better, with all the economic data showing us that the economic situation is improving in most countries and the worst looks like its behind us. While writing this, I would like to point out that "less bad" does not mean "good". Lets take for example, exports globally are still weak, employment has been weak (except in Australia, those aussies are really solid, I guess kangaroos have strong legs), deflation is still cited as a worry, asset bubbles forming in emerging markets etc, protectionism is rising and MOST IMPORTANTLY....sovereign ratings are dropping, just look at Greece, Spain, Portugal..this is definitely not the end. Over the next year, debt levels in the US and UK are only going to rise, with tax revenues falling as unemployment continues to plague global economies and stimulus spending continues to be used to substitute for private consumption, more developed economies may start to face credit downgrades.
Yesterday, the great Mohammad El Erian (possibly the most brilliant mind in my view) commented that too much hope is placed on China to lead the world out of this global crisis, this may be too hopeful on investors and economist's part. How can we expect a country with an average per capita income of US$6,000 to lead the global recovery? Developed countries like the US and UK are averaging US$40,000 or more per year, how is China going to replace the consumption lost by these nations? What he said woke me up to reality. Things are not that great....
Don't get me wrong, I am not entirely bearish, but before we turn on the music and put the champagne on ice, I really think we have to be realistic and keep our feet on the ground. If you are expecting markets in 2010 to deliver returns like this year, I would say that it is wishful thinking. But I do believe with prudence and good research, we will be able to bring back decent returns.
2010 Strategy
Country bias: Japan...I am a contrarian, it is the worst performing market this year and did almost nothing, so I am actually very bullish on Japan next year. This is a country that has done nothing wrong during this financial crisis and their companies have been languishing for the past 2 decades. They have been prudent and hold very strong balance sheets so they are going to be relatively safe investments. Expect Jap companies to consolidate more because many of them are flushed with cash.
Sector bias: Shipping, Hospitality and Agriculture
Trade should start to pick up next year and shipping stocks are still trading at very reasonable levels. However do pick those that have low gearing and not expecting too many ship deliveries. Tourism will pick up too, this will spell better times for hotels, casinos, airlines etc.
Why Agriculture? I believe that Agri is going to be the sector to watch for the next decade. Arable land is falling in supply, farm workers are starting to urbanize with fewer people willing to work on farms, technology although improving is not going to make up for the drop in labor supply. Demographic changes are going to be the main drivers for this sector; larger population, growing affluence, excess liquidity..all are compelling arguments for this sector.
This is how I am going to position my portfolio and stay tuned for more. It the middle of the night already and I am falling asleep, so will not say much more. Christmas is approaching and expect markets to remain strong till 2010, but let us cross our fingers that its going to be more than just the usual capricorn effect.
Truly,
SVI
Suddenly, we are at the end of the year and let us take a look at how things have panned out over the year. Overall, global markets hit a low in March this year and rebounded very strongly for the rest of the year. We have continued to rally with strength till now and the markets are all near their year highs at this time. It is easy for us to get carried away with this year's rally. But it is always good for us to stop and re-evaluate things before going into next year.
Have things changed?
Things seem to have gotten better, with all the economic data showing us that the economic situation is improving in most countries and the worst looks like its behind us. While writing this, I would like to point out that "less bad" does not mean "good". Lets take for example, exports globally are still weak, employment has been weak (except in Australia, those aussies are really solid, I guess kangaroos have strong legs), deflation is still cited as a worry, asset bubbles forming in emerging markets etc, protectionism is rising and MOST IMPORTANTLY....sovereign ratings are dropping, just look at Greece, Spain, Portugal..this is definitely not the end. Over the next year, debt levels in the US and UK are only going to rise, with tax revenues falling as unemployment continues to plague global economies and stimulus spending continues to be used to substitute for private consumption, more developed economies may start to face credit downgrades.
Yesterday, the great Mohammad El Erian (possibly the most brilliant mind in my view) commented that too much hope is placed on China to lead the world out of this global crisis, this may be too hopeful on investors and economist's part. How can we expect a country with an average per capita income of US$6,000 to lead the global recovery? Developed countries like the US and UK are averaging US$40,000 or more per year, how is China going to replace the consumption lost by these nations? What he said woke me up to reality. Things are not that great....
Don't get me wrong, I am not entirely bearish, but before we turn on the music and put the champagne on ice, I really think we have to be realistic and keep our feet on the ground. If you are expecting markets in 2010 to deliver returns like this year, I would say that it is wishful thinking. But I do believe with prudence and good research, we will be able to bring back decent returns.
2010 Strategy
Country bias: Japan...I am a contrarian, it is the worst performing market this year and did almost nothing, so I am actually very bullish on Japan next year. This is a country that has done nothing wrong during this financial crisis and their companies have been languishing for the past 2 decades. They have been prudent and hold very strong balance sheets so they are going to be relatively safe investments. Expect Jap companies to consolidate more because many of them are flushed with cash.
Sector bias: Shipping, Hospitality and Agriculture
Trade should start to pick up next year and shipping stocks are still trading at very reasonable levels. However do pick those that have low gearing and not expecting too many ship deliveries. Tourism will pick up too, this will spell better times for hotels, casinos, airlines etc.
Why Agriculture? I believe that Agri is going to be the sector to watch for the next decade. Arable land is falling in supply, farm workers are starting to urbanize with fewer people willing to work on farms, technology although improving is not going to make up for the drop in labor supply. Demographic changes are going to be the main drivers for this sector; larger population, growing affluence, excess liquidity..all are compelling arguments for this sector.
This is how I am going to position my portfolio and stay tuned for more. It the middle of the night already and I am falling asleep, so will not say much more. Christmas is approaching and expect markets to remain strong till 2010, but let us cross our fingers that its going to be more than just the usual capricorn effect.
Truly,
SVI
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