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
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