Stocks Discussion With A Knowledgeable Reader

2010/9/19

Hi there.

I have been actively reading your blog and share some of your views. I am particularly confident in some of your stocks such as GMG Global (which I have invested in) and Etika. However, recently I am looking to invest in another penny stock and Elite KSB has been of particular interest to me.

Can you give me some advice and if you have any research reports on them? Cos they seem very low profile and very thinly traded. Do you see any short term potential for them? Any target price you have in mind? I also believe the food industry wil boom in the coming year.

GMG global is another holding of mine... I believe in their fundamentals and have increased my stakes in them. Can you shed any views on them?



Also if you have any penny stocks that u dun mind recommending, do let me knw. Thank you so much for the help.... such selfless help will come back to reward you in some form next time!

Cheers,

XXX

Date: Sun, 19 Sep 2010 22:47:30 +0800
Subject: Re: Shares


Hey there XXX,

Thanks for reading my blog. Sorry if I took a while to reply.

For Elite KSB, I do not see any short term potential due to their very thin volumes as you have stated. Based on my own observation, the stock moves only every half yearly, during the period when it announces its financial results. Medium term catalysts includes the weakening of the A$ and the income stream from its dormitory. Long term catalyst will be overseas acquisition, although I have my doubts where they can find their management expertise to do so. They are a very local outfit and family run. Elite KSB has gone past its historical high. If there are more synergies to be realised from its Jordon acquisition, I would think $0.30 would be a comfortable level till the end of this year.

As for GMG Global, do note that there has been a slow down in China's auto industry which will in turn affect the demand for natural rubber. However, if you have scoured the SGX website, you will realised that they have incorporated a Thailand subsidy. GMG's foot print is expanding alot since Sinochem recently put its own person at the top levels. My gut feel is that share price appreciation will be in line with the European recovery as it is still a key geographical market.

Sadly, I have not much small cap stocks to share. At first, I was keeping an eye on Del Monte and Auric Pacific. Both are strong brands and are illiquid. However, they have been badly lagging the market recovery and for Del Monte, there is still some issue with their lawsuit.

I am however considering increasing stake in Asiatic Group (Holdings), but I need to do a bit more research. The share price has come down from $0.165 to current $0.11 with not much apparent reason. I am trying to scour its annual report to find out more what it really does, cause at the moment, they seem to be everywhere in SEA, with lots of equity stake in power projects.

Thanks for your support and your sharing. If you want to, you can also share with me what you think are good investment ideas, at least within the SGX.

Sincerely,

SGXSP

2010/9/20

Hi there,

Thank you for your prompt reply. Your advise is much appreciated.

Like u said, Elite KSB is too thinly traded, that is one of my concerns and hence my reluctance to invest in their shares. Asiatic is another company I have monitored for some time.. they are pretty old school and traditional but their fundamentals have been very strong and and at $0.110 they are really tempting. But I have sourced around and don't seem to find any particular reason for their share price to fall. Do u have any inputs on that? $0.100 would be a good entry price though Asiatic moves very slowly, so u are looking at a minimum hold of 6months for major returns (>30%). Pls advise accordingly if u knw more.

I have always stayed out of S-Chips. But 2 S-chips are favorable to me and they are Sinomem and Fuxing. Sinomem is particularly attractive cos they are trading below their NAV and they have very low levels of debt. With the recovery of china stocks and Sinomem's fair share in the water membrane industry, there are lot of prospects for them. You are looking at a target price of $0.70 by Dec if BBs recognize their value. Do u have any views on this stock? The only downside is big players like Hyflux and Semb Corp are entering the Chinese market, so that could affect Sinomem.

Fuxing (make zippers) is also pretty favorable and even more attractive due to their low share price of $0.175 (now).. they have climbed from $0.125 to $0.175 in 2months. This due to their low levels of debt and they pay out dividends even though their market cap is small. I tend to prefer china companies that pay dividends cos u never knw what will happen with them!!

I am also invested in Swiber as I believe this sector will boom in the next yr and swiber are probably the most under-valued among the big offshore players and with their track records and recent gossip, they are likely to secure some big contracts soon. I also hold Lian Beng, who are in the construction industry. Their NAV is about $0.26 and they are trading close to $0.30. With expected boom in the construction industry, they have potential for growth. Their track record is impressive too.

All these are just my views and could be biased since they are my shares too! So pls do give me any opinions of yours. Also do recommend any stocks u have been monitoring. I guess this can be a 2 way thing that could hopefully make both of us make some money!!

Thank you!

XXX

Date: Tue, 21 Sep 2010 21:28:39 +0800


hey XXX,

i am sorry if i do not have the time to get back to you. currently i am at a new job, so time is a bit tighter for me.

Short Comments

Asiatic: $0.10-0.105 looks like a good price but i have seen it rise to $0.16 and retrace down. I am considering increasing stakes too but I want to find out if the company's power plant along with its financing is going according to plan.

Sinomem: I have not studied the company so no comments

Fuxing: I attended their briefing before and I think they industry they are in is like those textiles - very very competitive with thin margins. Just to let you know, their current CFO was formerly from China Sunsine. I think for these S-Chips, their CFO are not the same as those Singapore companies. Think of China Milk.

Swiber: Highly geared company. Nonetheless I agree with you on the prospects of the industry. I think the strength of the O&M will only return in 2012 there about. Short-term there are still too many demand uncertainties coupled with the BP spill in America.

Lian Beng: No comments.

Anyway, thanks for your input.I will let you know when I turn bearish. I think this bull still has got legs, as long as people keep thinking about all there is to worry. Also, i changed job, makes it harder for me to study stocks.

SGXSP
2010/9/23
Hey,

Don't worry about the late replies. I can fully understand your work committments... I am forever busy with work too!

As for Asiatic, the price looks really attractive now, but their volume is too thin. That is the only concern... it is tad too similar to Elite KSB in terms of thin trading. I will probably monitor it for the next 2 months.

Thanks for your input on Fuxing... it made me re-analyze their reports and sectors. It is indeed highly competitive, but their p/e is low and favorable though and I have put this stock on the backburner!

On a more positive note... GMG has done wonderful this week! Congrats mate. Also I am thinking about buying into China Animal Healthcare.. Do you have any advise on that?

As for Biosensors... they still have yet to receive approval for their stent in Japan and China... so would u recommend buying in now for a TP of $1.20?

Are there also any S-chips that u favour? Cos after Chinamilk even I got pretty wary of them. Thank you for all the advise.. I am learning all the time!

Best of luck with your new job!

XXX

Date: Sat, 25 Sep 2010 09:23:58 +0800

Hey XXX,

Was thinking of picking up some Asiatic at $0.10 but the order did not fill.

China Animal Healthcare: The stock got a big boost because those that had planned dual listings - Midas and Sound Global - have finally followed through recently.

Biosensors: Good brokerage report and good news flow, which the latter included BIG being a possible M&A target, a similar company listing somewhere in the world amking BIG due for re-rating.

Between CAH and BIG, I think while BIG is a better business and has better long term prospects, CAH has got better upside. I see BIG over the 2 weeks correcting to slightly below the dollar. Its price has run up too fast and profit by the punters should be coming soon.

For CAH, I think getting in as early as possible (aka buy on dips) is a good idea. From the info that I can find, its intraday low for the few weeks leading to Midas and Sound Global's announcement has moved from $0.295 to $0.315-0.335 the past 2-3 days. My theory is, we do not know when they will really announce listing. It could be early next year for all we know. Also, they won't want to IPO in HK when Midas and Sound Global are doing so. So all those people who bought CAH while it was hot may not hold so long and I am GUESSING that the so-called support/floor price will be $0.315-0.335. Likewise, if you bought at say $0.345, the support/floor I just mentioned will be the possible short term downside.

If you need a reference in terms of technicals, you can have a look at China XLX or Z-Obee Holdings. Both showed very strong run up leading to their listings, but have some down significantly despite a broader market recovery. Nonetheless, they are still 20% higher than before their HK IPO due simply to higher demand for their shares.

Previously, I was actively monitoring SGX news, not so now, as my new job requires me to monitor another industry. But I would say off hand C&O Pharm. If you can find the old news, try to compare it with Sihuan Pharm. My "wish" is that this company privatize at say close to $1.0. It is possible cause it is still trading 12 times trailing PE.

All disclaimers apply.

SGXSP

2010/9/27

Hi there!

It's a shame your Asiatic order at $0.10 didn't fill, cos that would be a great price considering their price to book is close to 1 (correct me if I am wrong). And I believe there is good upside with Asiatic and the only concern would be the low trading volume. Although I am not quite sure how their energy activites in cambodia and vietnam are going.

Thank you for your advise on CAH, I do strongly believe they will dual-list and there is indeed much potential in them. I actually work in the pharmaceutical sector and I believe their vaccines approach will work favorably in the market though it may take some time as they are still a S-chip. With recent investments in them and their robust approach to scale up their vaccine manufacturing schedule I believe there is a genuine reason to be optimistic. Vaccines, when successful, are the cornerstone of success for many new comapnies in the biotech and pharma industry.

Biosensors has recently shot up but there are mant stents out there that work with equal or greater success. Though this may be a quick rise, I do not see Biosensors breaching $1.20 unless their approval in China and Japan materializes. Even then, I do not think their business model is diverse enough to compete with bigger companies. Companies like Johnson and Johnson and Boston Scientific are among the current leaders in stent development and I don't expect Biosensors to have such a great impact. However, this may just be the start of a new era for them if they continue to expand on this success. Pls advise accordingly if you feel otherwise.

As for C&O pharma, I have not researched much on them. Could you give me some inputs on them? I have added them to my watchlist and will be reading up on them. Also I have a keen interest in the offshore oil and gas industry. Do you have any recommendations on potentially undervalued companies? Also I was looking at your portfolio again. Could you explain to me why you picked Stratech and Action Asia? Especially Stratech cos I also feel they have potential though they have often been overlooked.

Thank you for sharing your ideas!

XXX


Date: Tue, 28 Sep 2010 20:17:16 +0800

Just bought 5 lots C&O in the morning, but the stock fell in line with the broader market. If I am not wrong, it manufacture some drugs (check AR) under its own brand and under OEM for the US market. It has been giving good dividends.

Action Asia: I think it is very undervalued compared to its earnings growth. I could be wrong.
Biosensors: I agree with your observation. However, you have to consider that there is a premium to this stock because it is one of the very rare bio-tech stocks on the SGX. the rest are mostly Chinese pharmaceutical rather than engaged in meaningful R&D.
Stratech: Impulse buy. I still regret buying it. I will keep it till the next quarterly reporting. I agree that Stratech has great potential but I hope it materialize. Should be noted that it has managed to turnaround.

I hope to find some time to carefully study the companies that i have soon. i intend to consolidate some of the smaller holdings . like i mention in some of the posts, $5000 is a meaningful position.

Oil and gas: no meaningful companies to be invested in with the delisting of SPC. In my opinion, the fundamentals for O&M and hence stcoks like Ezra and Swiber are not that good. There is really still and oversupply of vessels. COSCO and YZJ share price are rising because of the money going back into the market.


Thu, Sep 30, 2010 at 8:49 PM
Hi,

Good luck with your C&O investment. I just looked through their report and they seem pretty impressive. They have been making consistent profits and their cash and cash equivalents is also impressive and seems to have increased from 2009. Also I like how they have very little short term and long term debts.... this is positive for the company especially for a pharma company where one moment your drug can be a blockbuster and the next things can head the other direction based on a single trial/investigation. However, they are also paying out dividends which is usually a good sign! So you are holding them hoping they will be bought over/merge with another big company and thus delist? If not do you have a tp in mind?

I am also looking to streamline my investments. ChinaAnimal is one of my confident bets though recently they have been falling owing to the overal market sentiment. I do hope they pick up soon to boost my portfolio! I am looking at picking up few more lots of GMG if they drop any futher. I haven't read any news about them recently. Are u confident their new acquisitions will take place or are the BBs just pushing the price up on rumours?

It is pretty hard to pick penny stocks now, the market seems very volatile and even fundamental companies need lots of time before they pick up.

I haven't heard u mention Reits/Truts before. Do you think they are too heavily geared and hence too risky? Their dividend payout has decreased from previous years but some still pay up to 9% dividends if I am not mistaken. I dun hold any Reits now but am thinking of picking up a propert stock in the near future. Do you have any advise? Wing Tai was on my radar as they were trading below their NAV but have not heard any positive news from them recently so still unsure now!

Have a good one!

XXX