Review: China Farm

Following the fall of 7% from my purchase price of $0.995, I've cut loss at my 7-8% rule that I've always encouraged. Sold my holdings of China Farm at $0.915.

So whats wrong with China Farm? China Farm is still fundamentally strong. The cut loss rule is there to save my (and your) ass.

"Said it before, compounded returns magnifies your losses as well. a 30% loss would require a 42.8% gain before you break even. And 7% gives the share enough room for short term weakness."

Cut loss is even more important for a person like me that uses margin trading.

China Farm is fundamentally strong, but with the impending bear (or already in a bear) market, maybe the time isn't right. Will be monitoring China Farm and the market, and high posibility of reinvesting into China Farm in the near future.

Sold China Farm at $0.915, 13 Feb 2007 1140h

Review: China Farm

What a debut! IPO at $0.345, opened at $1 on day 1!

Sincerely congradulate those who successfuly subscribed to it. But "BOO!" to those who sold it on day 1. This counter is meant to be held on to. For the long term.

So where do we go from here? Having only being vested at $0.995, I can tell you I'm bullish about this counter.

With such a surge from its IPO, there is bound to be a short term weakness. Expect to see some fall thru past CNY, in-view of the possible market correction around CNY. After the company announces its FY06 results, expect the price to start its upward trend.

So why don't I buy later? Well, first of all, I don't like to time the market. Secondly, who says there will be a correction? I expect China Farm to live up to its FY06 profit & eps growth, and maybe the market sees eye to eye with me. With the Chinese "farms" modernising, i espect China Farm to continue its growth.

Even with a high P/E ratio (relative to 8x P/E at $0.73), there is no saying that China Farm wouldn't be trading at 20x P/E in the near future.

Addition on 10 Feb 07:
With regards to the company's competitive edge, they have recently filed a patent for their latest plough machine. This shows the company's edge over other companies in the industry. In addition, with several awards for branding and satisfaction to China Farm's name (can be found on the website), it is clear that the company's managers know what they are doing when it comes to expanding China Farm.

With regards to the possibility of the company not being able to keep cost down, i'm consoled by the fact that they have won several awards for "financial performance" and "quality trustworthy enterprise". And on a more important note, the company has successfully maintained a good growth, and able to raise their sales and keeping cost in control in 9M06.

That assures me that FY06 will not produce any negative surprise, but a positive surprise is more likely.

In a short time to come, $1.00 would seem too cheap, and you will be wondering why oh why didn't you invest in China Farm then. (well, i hope so, nothing is certain in shares.)

Target of $2.00 for China Farm, in 1 year.

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.

Buy: IPO China Farm

As the name suggests, China Farm is a farm equipment supplier to farms, in China. They produce harvesters and plough machines (bye bye bulls hello stock bull), and they produce diesel engines for various uses, including in their own product.

In terms of prospects, there is lots. Looking back that the industrial age in USA, farms are rapidly mechanised to increase efficiency for the population, with a reduced amount of arable land for urban use. Bring it back to present world, we could see the same rapid mechanisation in China. China Farm is well placed to tap into that.

Prospects aside, hows the fundamentals? Since its an IPO, there really isn't much I can look into its quarterly performance. However, the yearly performance has been nothing short of impressive. Revenue, Profits and EPS has more thandoubled for the last 3 years, each year. >50% growth.

"Thats the kind of company that calls for not only a headliner day 1, but a headliner for 2007. "

Risks? What are the chances of the government withdrawing grants for machines to farmers? I think its unthinkable. The government, though Communist, has proved to be an extremely efficient government in economics, and is unlikely to make a decision like this. The farm industry is set to grow.

I will within the next few days sell my shares of Tech Oil & Gas and apply for China Farm's IPO (pick me!). I am 70% certain that shares for China Farm will gain >70% over $0.345, and may reach $1.0 by the end of the year. I based this on nothing.

Joking.

I've been monitoring IPOs for the last few years using my model, and companies that fit my model generally do very well on day 1 and the next year.

I just hope i don't make such an impact on the IPO that i don't get a single lot in China Farm in the ballot. I'll still buy China Farm on day 1, in view of its potential upside of a $1 stock.

Apply! With an interim target of $1.00, pending day 1 open price.
Will inform on blog when I sell Tech Oil & Gas. With graphical prove.