Buy: China Farm
I've been off the blogging mood for the last 2 years due to my anticipation for this stock.
"Please give me some lots for my subscription... Please!"
Coupled with the fear for me affecting the subscription (due to the sudden increase in visitors to my blog, and with more people influenced, less chance for me to get this stock!).
The growth potential for China Farm is immense. With the Chinese (communist) government targeting a mechanization rate from currently 7% to 45% by 2015, there is room. Lots of room for growth for China Farm.
"With such increase in mechnization rate, there is lots of room for China Farm. Will it be able to grab a share in that growth?"
China Farm is well positioned to tap this growth. Why do I day that? I've gotten a hold of China Farm's 10M06 vs 10M05 statement from Kelive Research. 
Looking at the statement, we are looking at a 48% EPS growth for 10M06 vs 05. Already for 10 months in 06, China Farm has made 10.9 Million RMB more than the whole of FY05 (+32.1%!)
With that, I'm more assure the management of China Farm knows exactly what they are doing, and their ability to bite a big chunk of that 45% mechanization rate by 2015.
"There is no use for an industry to grow. The company has to show that its able to tap a large (larger if possible) chunk of that annual growth over its competition"
My plan. I'll be realising my profits for Tech Oil & Gas and Hiap Seng tomorrow (negative profits if it makes you happy). Don't mind me, but Tech Oil & Gas and Hiap Seng are good companies, but it is my believe that I'm putting my money in a better company, with relatively less competition, and a company thats a leader in China in its industry (vs the 2 above companies fighting in a tight market).
"Selling my losers for winners (or possible winners) is in line with my trading principle"
I'll put my money into China Farm and look forward to the long term, pending an easily achievable good 1Q07 results, as I already expect a good FY06 result.
Buy China Farm, with a short term target of $1.00, and a 1-2 years target of $2.00.
Sold Tech Oil & Gas for $0.870
Sold Hiap Seng for $0.78
Vested in China Farm at $0.995 on 9 Feb 06, 0901hrs.
6 comments:
Hello,
May I check with you on the ROE for China Farm for 10M Fy 2005 and 10M Fy 2006 ?
Also, what was their gross and net margins for the above specified periods ?
Another point is....although I agree there is potential for China Farm because of an increase in mechanization, how will China Farm differentiate itself from other China Farm Equipment companies which are not listed ? Do they have specialized equipment, know-how or a patent of some sort ?
Thanks !
Hi f16eater,
As usual, congrats on a well-argued piece.
Just wondering what's your take on the gray price of CFE? Or the opening price on Friday morning?
Let's make $ from this baby TOGETHER!
Warm regards,
John Jay Jinglebells
My take for grey price is $0.70. Hopefully opens below that. My application for its shares wasn't successful.
Hi Pehon,
Several companies have already reported lower earnings than expected, as a result of declining margins and intense competition. I am worried as to whether China Farm might be one of them as well.
I would advise caution as IPOs are usually priced at the highest point of a business, and the company may not have much of a track record to boast of.
Anyhow, best of luck to you !
wow, your $1 target already reached on the very first day.
Euphoria over new issues is not big news anymore. Expect more people to subscribe for IPOs in the coming months, and expectations will be at least 2.5x to 3x its IPO price.
What does this tell about the company ? Problems will arise when it tries to live up to expectations and earnings cannot match share price. I would advise selectivity in choosing which companies and businesses to buy into.
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