It has been raining whole morning. The mood is similar to the recent share market sentiments. It would be a miracle if STI could hit 4,000 mark with only few trading days to go. It was like Liverpool's fate this morning when it was a goal down to Chelsea and Peter Crouch lost his head. There was no coming back since then.
Despite all the doom and gloom, values do emerge every now and then. Instead of being too pessimistic, one should take this opportunity to reassess his/her share portfolio and be better prepared when the bull returns. Think about it, why should we be so bothered by the 30-component stocks Dow performance? Why should we let the Ang Mohs control our fate and dictate our well being?
Unfortunately China and Asian have not risen fast enough to decouple from the Ang Mohs influence. China may have half of the ten largest companies by market cap but the quality of their earnings and valuations are still a long way off. What to do? Just accept the stupid fact and move on. For serious investors, this should be a good time to accumulate some quality stocks that the Ang Mohs dump to the market. To be fair, they are the ones who buy up these counters and rightfully they have the power to sell them down if they wish to.
Sinotechfibre - Undervalued Synthetic Leather Player
Not long ago it was China Fishery Group where its price dropped more than 50% in a short few days after reporting a slightly disappointing set of Q3 results. Profit margin eroded due to higher operating costs in Peru and softer fishmeal prices. These 2 elements are the perfect ingredients to send the share price plummeting. The situation was probably made worse by the alleged selling by Angmoh funds. These Angmoh funds may have no choice but to sell out some good investments to bail out their good friends at their backyard exposed to the subprime losses.
It was a good bargain and probably still is at current prices. Even our kiasu value investment friend Muzicwhiz scooped up few lots at an average price of S$1.54. I first bought some CFG at S$1.75 and later average down to about S$1.60. The short term negative news aside, the Company has delivered on profitability with increasing capacity. Dividend yield was also very decent at more than 3%.
Sinotechfibre is deja vu of CFG where share price suddenly dropped for bo tai zi. The delay in PMP equipment was widely published in the past and technically should be factored into the share price. The doubling of microfibre production lines should bode well for the Company. The growth in PMP production lines should also further boost its already impressive revenue and profit growth. Sinotechfibre has the first mover advantage in the PMP sector which commands better margins.
Sinotechfibre has been generating high profit margin of above 40% and high ROE of more than 30%. Valuations are at a significant discount to China Sky and Fibrechem eventhough their market values are somewhat very close. At current price of <$1.00, Sinotechfibre trades at a very undemanding FY08 PE of < 8x.
The robust customer demand for synthetic leather which accounted for two-third of its revenue will continue to propel growth in the coming years. The secured orders from People's Liberation Army is a good endorsement of its products and provides stable income stream.
In my opinion, I believe the current share prices present good entry point for investors who wish to participate in the growth story of Chinese companies. When the Ang Moh return from their rescue mission, they will furiously snap up these S-shares with good earnings.
Good luck my friends and have a blessed holiday break!
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