Author: Level13

7 timeless pitfalls of investing

Regardless of institutional or retail investors, chances are, they would have committed these sins at one point or another. 1) Placing forecasting at the very heart of the investment process. An enormous amount of evidence suggests that investors are generally hopeless at forecasting. So using forecasts as an integral part of the investment process is like tying one hand behind your back before you start. 2) Investors seem to be obsessed with information. Instead of focusing on a few important factors (such as valuations and earnings quality), many investors spend countless hours trying to become experts about almost everything....

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San Teh revisited

1.5 years ago, I made a posting on San Teh: http://level13-analysis.blogspot.com/2008/05/appraising-san-teh.html Now I feel its time to sit up and take notice of this sleepy stock again. For the last 6 months, it has been trading at $0.25 to $0.35 with low daily volume. San Teh is currently in a sweet spot to ride on China’s construction and infrastructure boom. The catalysts for its share price appreciation are slowly appearing. Catalyst 1: Demand for cement remains strong due to the re-construction after the Sichuan earthquake and China’s infrastructure stimulus spending. So far the cement prices around different regions in China have held up well. Catalyst 2: The government...

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Heads you win. Tails I lose!!!

I have to interupt the dummies posting with this latest development from one of the S-chip companies. The majority owner of China Precision has decided to take the company private by offering S$0.28 to buy back all existing shares it does not not own. I am not a stakeholder in China Precision. Nevertheless, ALL MINORITY SHAREHOLDERS SHOULD REJECT THIS OFFER! Why do I say that? Below are some reasons which i believe will support my view. 1) The company’s IPO took place in May 2006 at a price of S$0.30. The exit offer is at a discount of 6.7%....

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Dummies guide to crisis 2007-09 (Part 1 of 4)

When the financial crisis erupted full force in the second half of last year, there was panic all round. This and the next posting will focus on the banks’ contributing role in the crisis. Before going into details, one has to understand the basic principles on which the banking system operates. Students at the A-level are taught about “multiple deposit creation,” It is the most rudimentary money creation mechanism for banks, which if administered properly serves the economy and public at-large very well. In the deposit creation process a bank accepts deposits and lends them out. But almost every...

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Greed and ‘good’ GDP

Once again, greed has reared its ugly head after a hiatus of 18 months. Investors are tripping over themselves for a piece of the action in the world’s second best performing stock market. Recently, about half a million new trading accounts are opened in China and the index went up to 3296, a level not seen since June 2008. Many are optimistic that the country can attain the government-set goal of 8% gross domestic product (GDP) growth for the whole year. Due to the emphasis of the government on the GDP growth, officials are ignoring other aspects of development...

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The surge in China’s stock market & real estate prices

Investors are rightfully worried about the formation of asset bubble after the revelation that Chinese banks lent out US$670.9 billion, a full 91.6% of the country’s lending target for the year in the first quarter. Most are wondering if it was being directed into areas conducive to a long-term recovery. With such a huge sum of money flowing around, coupled with lax regulation and tracking by the banks, it is not difficult to guess which are the likely places the money will end up in. For answers, look no further than the China stock market and prices of real...

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No better way to lose – Jackpot machines

Last November, a 49-year-old man won the largest UK jackpot ever – playing an online slot machine. His take was £2,086,585. This, despite what we know to be a universal truth: slot machines (jackpot machines) are the worst bet of them all. They take much more than they give. The maths, the science and the psychology are all against you. It’s why the machines are the darlings of the casinos: they generate between 60 and 80% of all casino profit. According to figures collected by Las Vegas-based gaming expert Michael Bluejay, the return percentage makes the cost of playing...

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Pay 83% premium for hope?

The Singapore stock market has gone spectacularly over the past few months. It would be foolhardy to say otherwise. Apparently, the sense of optimism is now so strong that some speculators are willing to pay a premium of 83% for hope. Enporis Greenz Limited was formally known as Seksun Corporation Limited, which was principally involved in the manufacture of high-precision metal components and contract manufacturing for the electronics industry, with operations in Singapore, Malaysia, Indonesia, China and the USA. In October 2007, the Company announced the sale of substantially the whole of its assets and business undertakings to Supernova...

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Current outlook of S-REITs

Real Estate Investment Trusts (REITs) in Singapore are struggling for the first time since CapitaMall Trust, the first S-REIT, was listed in July 2002. Before the US sub-prime crisis took its toll on the economy and property market in Singapore. Like their Asian peers, S-REITs have taken a beating since mid 2008. S-REIT prices have fallen by an average of 61% between end 2007 and 2008. Their total market capitalisation has plunged by 42%. With a total debt of over S$4.9 billion maturing in 2009 and more than $3.2 billion in 2010, refinancing has become the most imminent challenge,...

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Thinking from the business perspective

Collin Yeo said… uptrending share price tells you nothing on the business and industry outlook”So what does? Consistent CAGR, strong cashflow, earnings and dividends? What if these doesn’t translate into uptrending share price? Would you still buy into the company? Collin, the 4 points you mentioned above form only part of the metrics that an investor should take note of. The list is not exhaustive but it includes ROE, ROIC, WACC, trade receivables level and so on. These ratios and figures can be obtained easily from the annual reports. But wait, getting your hands on them is only half...

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Beware of interested party transaction

C&G used to be a stock market darling from 2006 to 2007. But this should no longer be the case going forward with their latest announcement. Basically, C&G is signalling to its investors that there is not much light at the end of the tunnel for the textile industry. To me, textile is a commodity and there is no pricing power for companies in this industry. Of course, this does not mean that C&G will report a loss in the next few quarters but growing profits will become increasingly difficult as we move on. This is the main reason...

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Iconic major shareholder holds the upper hand

On 11 March, major shareholder, Tong Jun Kian, announced a mandatory unconditional cash offer for all issued shares of Iconic Holdings (IHL) after having acquired an additional 10.21% stake from Akzo Nobel Coatings via a married deal, increasing his total shareholding interest, together with the relevant persons, in Iconic to 57.12%. The shares are being offered at $0.10, an approximate 20% discount to $0.125, the last transacted price on 9 March. As of March, there are 111,806,820 shares in issue. Effectively, Mr Tong has valued the company at $11.18 million. For this takeover, he just need to pay $4.8...

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Beauty China turns ugly duckling

To say that it has been a roller coaster ride for the shareholders of Beauty China (BC) in the past 2 days is a gross understatement. No retail investor could have been prepared for the extreme volatility that we have witnessed on BC’s share price. On the morning of 2nd March, BC called for a trading halt pending announcement. BC closed at $0.37 on the previous Friday (27th Feb). The much-awaited announcement that was made on Tuesday noon disclosed that the founder, Mr Wong, was in discussion with some parties regarding the sale of his 38.7% stake. At first...

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Important criteria met for Bright World takeover

This posting is to follow up on the latest development of Bright World. BW just announced its financial results for FY2008 last friday. As i have expected all along, they are able to meet the profit requirement of RMB18 million for Q4 2008. Pls refer to the links below for my earlier posting: http://level13-analysis.blogspot.com/2008/10/sweeteners-for-bright-world-takeover.html http://level13-analysis.blogspot.com/2008/09/my-view-on-bright-world-takeover-part-2.html Having a profit after tax of at least 91% of what was achieved in FY2007, BW has successfully overcome a large hurdle in ensuring that the takeover by CHAC turns out to be a reality. Of course at this moment, nothing is firmed up...

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Value destruction by Contel

I pity those investors who are vested in Contel since their IPO days (although i dont think the number is high). 1.5 years ago, i had a posting, in which i advised all investors to avoid Contel due to its constant and urgent need for capital. On top of that, free cash flow was non-existent. http://level13-analysis.blogspot.com/2007/07/raising-capital-at-contel.html Let me do a recap on the amount of money that Contel raised ever since it was listed and you can make up your mind if it was indeed a value destruction job. In Dec 2005, Contel was listed at an IPO price...

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