Transaction of My Portfolio

Bought Qianhu @ S$0.085

Courtesy of Business Times

Published February 2, 2009
Why the Dow is holding at 8,000
By R SIVANITHY

TO MOST casual observers, the fact that the Dow Jones Industrial Average (DJIA) has bounced back every time it dipped below 8,000 points over the past few months - even when there is bad news - suggests that the 8,000 mark is where the 'support' or the magical 'market bottom' lies. This means that as soon as the index nears 8,000 on the downside, chartists and traders will start calling a 'buy' on the market.

The divisor: For every dollar an index stock falls, the DJIA falls 7.964782 points, regardless of the stock's capitalisation

Closer examination, however, reveals that the bounces around the 8,000 mark are simply a function of the way the index is constructed. Because the Dow is price-weighted, it is also inherently flawed.

In Thoughts from the Frontline weekly newsletter dated Jan 23, writer John Mauldin correctly points out that the divisor for the DJIA is 7.964782, which means that for every dollar an index stock falls, the DJIA falls 7.964782 points, regardless of the stock's capitalisation.

As a result, if the stock of Microsoft, with a price of US$17 and a market cap of US$156 billion, was to crash to zero, the DJIA would only lose 135 points (17x7.964782). But if the same was to happen to IBM, with a smaller market cap of US$124 billion but a higher share price of US$92, it would cost the index to lose a whopping 700 points.

Now consider the four financial stocks currently in the DJIA - Citigroup (US$3.90), Bank of America (US$6.78) Amex (US$16.70) and JPMorgan (US$25.43) - using last Thursday's prices.
If all four stocks were to crash to zero, the DJIA would only lose 300 plus points, not that huge a loss in the context of the market, yet imagine the repercussions on the US and global economies if these four institutions collapsed totally.

Most of the news on Wall Street these days centres on the crippled financial and auto sectors. But because the share prices of these companies are now so low, these stocks do not affect the DJIA by much (General Motors' shares, for example, are now just above US$3).

In other words, because the index stocks most affected by bad news are already battered to rock-bottom levels, the DJIA doesn't seem to fall much when bad news is released, thus giving the mistaken impression of resilience to adverse news and of strong support around 8,000 points.

By right, these financial and auto stocks should have been removed from the index, given that it has been past practice to replace stocks whose prices drop below US$10.

For some reason, the DJIA's guardians have been reluctant to do the same now, possibly because of the political fallout that might ensue - imagine the repercussions of removing pillars like Citigroup or General Motors.

This then leads to the inevitable conclusions: the DJIA is not comparable over time; the only reason the DJIA appears well-supported around 8,000 is because the collapsed financial and auto components have not been replaced as they should have been; and that movements in large-price stocks are magnified because the index is heavily skewed in favour of these counters.
If the index was to be correctly re-balanced by removing the battered financials and autos and replacing them with stocks with prices above US$10, you'd have to wonder whether the 8,000 mark would hold as well as it has.

You'd also have to dismiss arguments that it is safe to buy since the index is at its lowest level in many years because historical comparisons are invalid - unless, of course, the same re-balancings that were done in the past are performed now.

How to overcome such a large distortion? The most commonly accepted solution is to use market-cap weights, but this too has its drawbacks.

Last Thursday, the market-cap weighted Straits Times Index (STI) rose 0.64 of a point to 1,766.72, a move that a casual observer might interpret to indicate a mixed or quiet session. Far from it - if you stripped out warrants, the rest of the market only recorded 95 rises against 188 falls, a gain/loss ratio that indicated market weakness rather than a mixed session.

Peer beyond the numbers and it would have been readily evident that an 11-cent rise by big-cap SingTel to $2.76 pushed the STI up 11 points, thus creating the mistaken impression of a slightly firm or mixed market. Assuming SingTel had not risen and everything else remained the same, the STI would have recorded an 11-point fall, leading a casual observer to correctly surmise that the market had been weak that day.

Similarly, on Dec 29 last year, a sudden 87 per cent surge by CapitaMall Trust in the final minute of trading helped push the STI up 54 points, once again creating the mistaken impression of a session that was much stronger than it really was.

Still, using market-cap weights is probably a much better way to capture what's going in a stock market, at least for most of the time and over longer time periods. The alternative is to use price weights, which has been shown to lead to even more inaccurate conclusions.

On this last point, local investors - chartists and fundamentalists alike - would do well to take into account just how distorted a picture the price-weighted DJIA paints of the US economy and market, while also pondering whether 8,000 is really where its 'support' lies. If Dow at 8,000 is artificial, where does this leave the STI?

Raffles Edu Corp H1 Results

Pacific Shipping Trust FY08 Result Release

End of December 2008 Share Portfolio Review

Latest Holding of My Portfolio ~ December 2008

Cacola Furniture
Challenger
China Taisan
Courage Marine
China Zaino
Courage Marine
FSL Shipping Trust
Lizhong Wheel
Pacific Shipping Trust
Jiutian Chemical
Sihuan
Swiber
Asia Enterprise
Midas
Raffles Education

Transaction of My Portfolio

Bought

Pacific Shipping Trust @ US$0.13

Transactions of My Portfolio

I have made the following changes to my portfolio over the past week:

Sold:

China XLX
China Energy
Babcock & Brown

Bought:
First Shipping Trust
Raffles Edu (averaging down)
Swiber (averaging down)

Sihuan Pharmaceutical earns spot in Forbes Asia’s list of 200 “Best under a billion” companies

Award recognises Sihuan’s achievement of consistent sales and earnings growth

Group will continue to widen its marketing network to enhance its leadership in China’s CV drug sector

SINGAPORE, 3 November 2008

SGX mainboard-listed Sihuan Pharmaceutical Holdings Group Ltd (Sihuan, the Group, 四环医药控股集团有限公司), a leading manufacturer of cardiocerebral vascular (CV) drugsin China, has earned a place in Forbes Asia Magazine’s list of 200 “Best under a billion”companies. It is the only Singapore-listed pharmaceutical company selected in 2008. The list is independently compiled by Forbes and updated yearly, as a means of recognising Asia’s top 200 public-listed companies with sales of less than US$1 billion.

To pick the companies, Forbes looks for consistent growth in both sales and net profit after tax and minority interest (PATMI) over three years. Sihuan secured a 98% rise in PATMI to RMB179.3 million after boosting turnover by 77%rise to RMB286.3 million in the year ended 31 December 2007 (FY07). It was able to achieve such solid growth because of robust demand for the Group’s wide range of CV as well as non-CV drugs in the PRC.

For the latest nine month-reporting period ended 30 September 2008 (9M FY08), Sihuan continued to deliver an impressive performance. It increased PATMI by 42% to RMB179.7 million, exceeding the full-year profit for FY07. The Group’s 9M FY08 sales surged to RMB366.1 million, driven by the strong take-up of its top products such as Kelinao, Anjieli and Chuanqing. Sales were also boosted by increasing acceptance of its other drugs such as QuAo/Ninxinao (cerebroprotein hydrolysate injections), which are distributed by Shenzhen Sihuan, the Group’s marketing and distribution arm.

Dr Che Fengsheng (车冯升), Sihuan’s Executive Chairman and Chief Executive Officer, said: “The award recognises our concerted efforts over the past few years to build up our sales and distribution networks. We will continue to penetrate new markets and widen our well-established marketing network so that Sihuan can enhance its leadership in China’s CVdrug sector.”

Sihuan expects the increased government support on developing the healthcare sector to help boost growth in demand for its drugs. Given its competitive strengths, the Group is well-positioned to seize any attractive opportunities that might arise from the growth in the healthcare and pharmaceutical sectors.

End of Nov 2008 Share Portfolio Review

Latest Holding of My Portfolio ~ November 2008

Babcock & Brown
Cacola Furniture
Challenger
China Taisan
Courage Marine
China Energy
China Zaino
Courage Marine
Lizhong Wheel
China XLX
Jiutian Chemical
Sihuan
Swiber
Asia Enterprise
Midas
Raffles Education

Press Release - Lizhong Wheel 9M2008 revenue up 15% to RMB774.7 million on higher sales across major business segments

Courage Marine reports flattish 9M08

Strong luggage demand boosts China Zaino’s 3Q2008 revenue by 42% to RMB585.3 million

Sihuan Q3 Result Release

NEWS RELEASE - MIDAS REPORTS 4.4% INCREASE IN 9MFY08 NET PROFIT TO S$24.2 MILLION

Former Seksun Founder Dr Felix Ong To Be Appointed As Group's Chief Adviser of China Taisan

NEWS RELEASE - RAFFLESEDUCATIONCORP ACHIEVES 100% GROWTH IN NET PROFIT FOR FIRST QUARTER FY2009

Asia Enterprise Q3 Result Release

6 November 2008 ASIA ENTERPRISES’ 3Q08 NET PROFIT UP 57% TO S$8.4M

- Net profit of S$23.9 m for first 9 months of FY2008 already higher than in FY2007

“We have turned in a commendable performance for the first nine months of 2008. While the operating backdrop for regional steel distributors has become more challenging, Asia Enterprises' long held practice of maintaining sound financial fundamentals will better position us to withstand the industry slowdown as well as be ready to capitalise on opportunities that arise.”Mr Lee Choon Bok, Chairman and Managing Director of Asia Enterprises Holding Limited

3Q08 Results Review

Revenue sustained amid slower market conditions Group revenue in 3Q08 was flat at S$43.8 million. This was due mainly to softer demand for steel, which reflected increasing concerns of tighter credit conditions and an impending economic slowdown.

Sales led by shipbuilding and marine-related sectors

Sales to customers in the shipbuilding and marine relatedsectors rose marginally to S$30.2 million toaccount for 69% of Group revenue. The remaining 31% of Group revenue was contributed by stockists/traders and customers in the construction, engineering/fabrication, manufacturing and precisionmetal stamping sectors.

Steady sales to Singapore market

Sales to Singapore rose 8% to account for 39% of Group revenue on the back of the continuing steel requirements for customers’ ongoing projects. Sales to Indonesia and Malaysia accounted for 47% and 12% respectively, with the remaining 2% from other Asia Pacific markets.

Profits boosted by expansion in margins

The Group recorded an exceptional gross profit margin of 31.1% in 3Q08 compared to 20.6% in 3Q07, thanks to higher average selling prices of its steel products. Coupled with a lower effective tax rate following its entry into the Global Trader Program from 2008, the Group’s net profit margin jumped to 19.1% in 3Q08, from 11.7% a year ago.

Growth Strategies and Outlook

Worldwide demand for steel is generally expected to weaken as a result of slowing economic conditions and tight credit markets. After peaking in late July/early August, global steel prices have since declined sharply. The World Steel Association is now forecasting global steel consumption growth in 2008 to slow to 5%, from about 7.5% in 2007.

In the near term, the outlook for regional steel distributors has become more challenging and volatile. With tighter access to credit financing and changing economic circumstances for many projects, highly competitive conditions are expected to prevail in the region’s steel industry. As a result, steel prices are generally expected to stay soft during the remaining months of 2008. To better withstand an industry slowdown and be ready for opportunities that may arise, AsiaEnterprises will ensure it maintains a sound financial position, a practice that has enabled the Group to successfully weather periods of significantly unfavourable business conditions over the past 35 years.

As at 30 September 2008, the Group had total assets of S$171.2 million and shareholders’equity of S$110.7 million, of which S$12.4million comprised of cash and cash equivalents. While the Group has already exceeded its FY2007 net profit, it expects a more volatile and challenging operating environment for steel distributors over the coming months.

China Taisan Q3 Result Release

China Taisan registers sterling 70.5% growth in 9M08 net profit to RMB182 million

9M08 revenue rose 66.8% to RMB850.2 million

9M08 gross profit margin improved 2.7ppt to 32.1% due to higher average selling price, and improved product mix

Order book of RMB300.0 million as of 31 October 2008

Singapore, 4 November 2008 – SGX Mainboard-listed China Taisan Technology Group Holdings Limited (“China Taisan” or the “Group”), a leading producer of knitted performance fabrics used in sports and leisure apparel for renowned brands such as Nike, Adidas, Umbro, Septwolves (七匹狼), Li-Ning (李宁), Anta (安踏), and Metersbonwe (美特斯邦威) is pleased to announce a 70.5% improvement in net earnings for the 9 months ended 30 September 2008 to RM181.8 million.

With continued growth in demand for performance fabrics that command higher selling prices, the Group saw revenue improve 66.8% to RMB850.2 million in 9M08. The stronger revenue was also a result of higher average selling prices (“ASP”) across all product sectors, with weighted average ASP increasing 38.2%.

Gross profit improved 81.8% to RMB272.5 million while the overall gross profit margin jumped 2.7 percentage points to 32.1% on the back of: (i) continued shift in product mix to focus on higher-margin performance fabrics; (ii) ability to increase ASP to more than offset rising costs

The Group’s cash flow remains healthy, with net cash generated from operating activities of RMB198.8 million as compared to RMB58.0 million in 9M07. EPS grew 50.1% from RMB15.14cents to 22.73 RMB cents.

“Post Olympics, we are seeing more sports awareness in the country and consumers are now more brand conscious. Sports brands are eager to differentiate themselves with extensive advertising and product differentiation. Tapping on that, we are continuously maintaining our competitive edge through R&D to introduce more functionalities with enhanced effects. We believe our customers, who are mainly larger players in the industry, will gain market share with such strategies. In turn, we are set to grow along with our customers.”- Mr Lin Wen Chang (林文章) Chief Executive Officer

Future Outlook

The Group is moving ahead with expansion plans, and as at 4th November 2008, 20 multi-track electronic tubular knitting machines have been delivered and installed. The remaining knitting machines and fabric face finishing and processing equipments are on track to be installed by the end of this year. The new equipments will expand China Taisn’s knitting capacity and product range for performance fabrics that incorporate higher value-adds, such as spandex.

“Despite the global financial crisis and post Olympic effects, many of our end sportswear customers have indicated strong demand for 2009 summer season. The 4th quarter is typically our busiest time of the year as customers start to stock up for the summer season. Furthermore, with the new status of approved supplier for renowned brand ssuch as Metersbonwe, we are expecting order volumes for performance fabrics to go up.- Mr Lin Wen Chang (林文章)Chief Executive Officer

As the Group transits to the seasonally peak period in the 4th quarter, the order book as at 31October 2008 stood at RMB300.0 million. These confirmed orders are expected to be fulfilled within the next three months. Barring any unforeseen circumstances, the Board of Directors remains positive about the Group’s performance in the current financial year. Based on IPO plans, the Group intends to distribute at least 30% of net profit for FY2008 and FY2009 as dividends.

Sihuan Q3 Result Release

Sihuan on track for record 2008 from robust demand for its CV and non-CV drugs in China

9M08 net attributable profit of RMB180m has already exceeded 2007’s full-year profit

Strong cashflow from operations gives Group cash position of RMB228m and zero debt

Sihuan’s pipeline of drugs like GM-1 and Edaravone will strengthen Group’s market leadership in China’s cardiocerebral vascular sector

SINGAPORE, 3 November 2008 FOR IMMEDIATE RELEASEA leading manufacturer of cardiocerebral vascular (CV) drugs in China, Sihuan Pharmaceutical Holdings Group Ltd. (Sihuan, the Group,四环医药控股集团有限公司), is on track for a record profit for 2008. Not only has net attributable profit for the nine months to 30 September 2008 (9M08) swelled 42% year-on-year (yoy) to RMB179.7million, it has also surpassed the profit achieved for full-year 2007 of RMB179.3 million.

Group revenue surged 95% yoy to RMB366.1 million because of robust demand for Sihuan’s wide range of cardiocerebral vascular (CV) as well as non-CV drugs in the PRC. The 73% yoy growth in CV drug sales in 9M08 was driven by the strong take-up of its top products – Kelinao, Anjieli and Chuanqing – as well as the fast-rising acceptance of QuAo/Ninxinao (also known as cerebroprotein hydrolysate injections), which is distributed by Shenzhen Sihuan.

The Group’s non-CV drugs registered sales of RMB66.6 million in 9M08, a 334% rise from 9M07’s RMB15.4 million, largely because of contributions from wholly-owned Shenzhen Sihuan Pharmaceutical Co., Ltd (Shenzhen Sihuan). The maiden pre-tax profit of RMB5.6 million from 45%-owned distribution firm Beijing Purenhong Pharmaceutical Co., Ltd (Beijing Purenhong) also lifted the Group’s earnings.

Dr Che Fengsheng (车冯升), Sihuan’s Executive Chairman and Chief Executive Officer, commented: “All along, Sihuan has carefully maintained a strategy of enhancing our edge in CV drugs while diversifying into the non-CV drug segment through organic growth acquisitions that strengthen our R&D, marketing and distribution. This strategy has paid off handsomely, putting us in an excellent position to achieve outstanding results for the full year of 2008.

“We are confident that our pipeline of new drugs – such as GM-1 or Aogan, Luoanming and Edaravone – will add noticeably to our earnings when they are launched next year and will boost Sihuan’s market leadership in China’s CV drug sector. We also expect to receive further approvals from China’s State Food and Drug Administration for other new products that we have lined up in both the CV and non-CV drug segments.”

Sihuan generated strong cashflow from its operations of RMB146.1 million in 9M08, against RMB107.6 million previously, given the Group’s prudent working capital management, With this, Sihuan enjoyed a strong cash position of RMB227.7 million, with zero debt, despite making investments of RMB108.2 million to sharpen its competitive edge in the PRC pharmaceutical sector.

Given these factors, the Group is well placed toovercome the current challenges presented by the financial crisis worldwide, and to even strengthen its leading position. The Group expects the PRC pharmaceutical industry to consolidate further, so the operating environment is likely to remain competitive. However, recent moves by the Chinese government to raise subsidies to the healthcare sector and launch the medical insurance scheme, are already impacting the pharmaceutical industry positively and lend support to its continuing growth.

Added Dr Che: “We see the industry’s further consolidation as positive developments because we believe that our strong R&D capability and high product quality that meet stringent regulatory standards will clearly differentiate Sihuan from its competitors. Sihuan is therefore well-positioned to seize any opportunities presented by these macroeconomic policy changes.” Just two weeks ago, the Group boosted its portfolio by acquiring the right to distribute and sell a well-received drug, Edaravone, in China. This drug – which complements the Group’s flagship product, Kelinao – improves efficacy in the treatment of stroke patients. Sihuan will start distributing Edaravone by the end of 2008 and is optimistic about itsability to penetrate and enjoy a good share of the drug’s current market.

End of Oct 2008 Share Portfolio Review

Latest Holding of My Portfolio ~ October 2008

Cash
Babcock & Brown
Cacola Furniture
Challenger
China Energy
China Taisan
China Zaino
Courage Marine
Lizhong Wheel
China XLX
Jiutian Chemical
Sihuan
Swiber

CPF
Asia Enterprise
Midas
Raffles Education