In January this year, I received my share certificate from Hongwei Technologies Ltd. This is not something to rejoice, for it means that the shares are now officially delisted from the Singapore Exchange and worth nothing. The main cause of the company failing was accounting irregularities at one of its subsidiaries. What are the lessons that I learnt from this episode?
I first invested in this stock in Apr 2009 during the Global Financial Crisis (GFC) at a price of $0.125. Then, I liked it as it was an undervalued stock. It had earnings per share (EPS) of 28.9 Renminbi (RMB) cents in Financial Year (FY) 2008, making its Price/ Earning (P/E) Ratio a mere 2.2 times. Its net asset value was 145 RMB cents, making its Price/ Book (P/B) ratio only 0.43 times.
With the passage of the GFC, it recovered to a price of (Read more...)
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This is a case of trash stock being mistook for “value stock”. Many novice investors in Singapore tend to make this mistake and thought that a cheap stock is a good stock when it is just a trap waiting for you to fall in. I made this mistake too and hope no other young investors went through the same experiences. Just remember, when something is too good to be true, then it is. Don’t ever ever catch a falling knife. Check out my blog, SG Wealth Builder (www.sgwealthbuilder.com).
Regards