SunVic made a extremely impressive debut. Looks like the market is bullish about SunVic's potential. Its is however my opinion that this stock is over hyped, and over priced in a long run. With a poor showing in 1H 06, one must not forget a possible poor showing in FY06. That might cause shareholders to run.
In view of SunVic's good performance on day 1, I think it is possible in everyway for China Farm to perform as well as SunVic on day 1.
I've been asked repeatedly how I learn my stock picking techniques. Over the years since I became interested, I've been reading into the mechanics of the economy, micro and macro. Its only with that understanding that I've been able to understand the stock market, quickly.
I've been largely influenced by this book, "How to Make Money in Stocks -A winning system in good times or bad". Although i've got to admit, the cover looks kind of dodgy, but take note, its the 3rd edition already, and i've read it, and it has influenced the way I choose my shares in a large and important way.
One thing to note here is that this book doesn't use P/E ratio. In fact, like me, it heavily dismisses P/E ratio in this book. It uses what i practice as well, EPS analysis. Using some of the techniques learnt from this book, I've been able to locate the winners and the losers.
"This book doesn't use P/E ratio to analyse stocks. Its uses EPS growth"
The only thing I don't really agree with is the fact that the author advocate market timing. As we all know, its impossible to do so, and by doing so it can diminish your returns. But this book was where i learnt the importance of "cut loss point", which has saved me a few times.
Though most books at the store aren't really relevant to SGX, the techniques taught in this book can be applied in our context, just like I did.
"Lessons learnt in this book can be easily applied to SGX"
If you are serious about learning how to pick good stocks, instead of listening to your friends at the cafe, buy this book.
It was in an article I read recently, that when asked what was the most powerful math formula known to him, Einstein said it was "Compounded Interest". Indeed.
The basic idea is simple. For every return in terms of capital gain and dividends, you reinvest them, to see exponential growth.
Lets say you have $10,000 to begin with. And assuming a return of 25% PA on your best investment (25% is achievable easily in Unit Trusts, so its conservative). You do not spend the returns on food or car. Calculated on a monthly basis, here is what the $10,000 would look like.
Time to buy the SLK you always wanted. But on the other hand, if you find yourself there with this kind of success, you'll not spend that money as just another 5 years. This is what you get if you didn't buy the SLK.
So, still want to buy your SLK?
Maybe spending your $1,000 profit in Sino-Env wasn't such a good idea? Though its tempting, I recommend buying shares on the notion that the returns are not "spendable".
So does that mean that after buying Share A and seeing a 100% return, I've got to sell it to see the compounded interest grow itself?
That was what I thought. But recently, I've got this revelation in my sleep.
Lets say you bought Sino-Env when it was $0.50. A few months later, you see it at $1.00. Thats a 100% return. A few months later, at $1.50, thats a 100% return from $1, but a 200% from your capital. From $1.5, to $3, thats a 100% return from $1.5, but a 600% return from your $0.50.
A $0.1 gain from $3 is about 3%. But from your purchase price of $0.5, its 20%. Need i say more?
Thats the beauty of compounded interest. Hold off that champagne to 20 years from now, where the champagne is 0.00001% of your gains, rather than 10% of your gains.
In the recent "Edge", SunVic was hailed as an IPO that would open at $0.60 on day 1 of trading. Thats 100% gain from its IPO of $0.30. But here is why i think China Farm is a better choice over SunVic.
From their prospectus, you can see that from FY03 to FY05, the company's profits has increased at a good rate, backed by increase in revenue. If you based your IPO choice based on that, it might seem as a good choice to put your money at. However, look closer.
For HY05 to HY06, there has been a decrease from $118.7M to $63.3M. From that, my bet is that the FY06 profits will not show a growth over FY05. Infact, there would be a shrink in profit.
"No growth? Move on."
Based on my experience on IPOs, prior growth is extremely important for its share's open price, and of course future price appreciation. For Eg, Sino Env opened at $0.40 (ipo at $0.33), and quickily went to $3.00 in half a year due to its prior growth records and sustained growth after IPO.
vs
Sunshine Holding that had inconsistant growth before IPO, and IPO at $0.3, opened at $0.4, now $0.345.
Thai beverage public co as well.
Its my belief that SunVic Chemical is a good stock to apply for in IPO, but my money goes to China Farm, with the intention to keep the share for 1 year. SunVic Chemical would be a day 1 play for me, if I have even applied for SunVic Chemical's IPO.
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.
Before I start, here is the prove ("God!").
And so, a little background, Hiap Seng is a company involved in local oil & gas fabrication. With the impending completion of reclaimation projects in Jurong Island, coupled with the $3b investment from Shell on a plant, and seeing the number of plants on Jurong Island double over the next few years, there is room for growth for Hiap Seng, and of course, Hiap Seng's shares. In fact, Technics Oil & Gas is a direct competitor to Hiap Seng.
Analyst reports indicate that Hiap Seng's order books are fully booked for the next 3 years, but they have recently completed a capacity expansion project.
HY2006 Results show an increase in profits attributable to equity holders of 237.9%. The EPS growth is pretty close as well.
Likewise for their FY statements and forcasts, 2007 F looks at a 169% growth in EPS, and supported by increase in sales and profits.
"EPS EPS EPS. It shows the profit growth vs shares in the market. Follows the ancient supply and demand rule"
With the recent sudden surge in interest, it might be a good time to jump into the wagon. And on top of that, with such an upside to Hiap Seng's shares, we are looking at a possible $1 stock right now.
"Sustained interest is important"
The only downside to Hiap Seng's shares? Its listed in the Sesdaq, and my other share that is listed in Sesdaq (Techics Oil & Gas) isn't doing too good.On top fo that, both shares are in the smae industry. I'm also unable to find % shares held by institutional investors.
"Institutional investors are important for the good of the share. They control the number of floating shares as institutional investors don't engage in daily trade"
If Hiap Seng doesn't do well, I'm out of Sesdaq for life.
Buy, with target of $1.00.
Vested $0.785 at 1 Feb 07, 0910hrs
For all the critics, here is my portfolio. Note Raffles Education is held in my cash account. This is my margin account. Why don't I show my cash account? I don't see the point in going thru more trouble. I've got nothing to proof to you. I'm the one with 100% gain in 1 mth (used margin for leverage).
For those who are lost on whats going on, visit this link.
http://forum.channelnewsasia.com/viewtopic.php?p=726896
And i thank you all for your interest in my blog. Thanks to my supporters, and of course, the kids.
