Saturday, November 13, 2010

Sinotel Technologies : A Dying Or Dead Stock?

In my earlier post, I talked about how Sinotel Technologies' time has  come to past. There was definitely money to be made if you had bought into the S-Chip at prices below the current price of $0.345. More upside had you bought it during March 2009 bottom of around 10 to 12 cents. But I dare say that more investors bought into the stock when it was 50 - 70 cents during the euphoria over its ADRs and have been sitting on hefty paper loss.

Despite the recent slate of announcements and a revived PR campaign, from a long term investors perspective, I think the hey days for this company are over, consigned to the rubbish bin of history. Of course some people would point out that the stock is currently trading at about 4 times price-to-earnings. But I reiterate the point that the company has a very strong balance sheet even before the rights issue and the cash call was totally unnecessary from my point of view. Furthermore, I would really like to see the company payout some dividends. It has not done so in its listed history.

Defenders of Sinotel would say that the company has a recurring cash flow and that it is poised to benefit from China's growing wireless infrastructure. If that really is the case, why are there no dividends? Sinotel's management by declaring even a 0.1 cents dividend, will help bolster investors' confidence and interest. Too many an S-Chip show a huge cash pile but many have went belly up - ChinaMilk Products is a good example.

My conclusion is that there are other better companies with better fundamentals that have received lesser media coverage exactly because they are out to improve their returns to shareholders. Stay away.

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