Singapore Stock Market News

I chanced upon the wallstraits website today while searching for celestial for my blog post. Happened to see this little pop quiz in their main website, with the teaser that you'll get a free book if you answered the not-so-simple quiz.

Haha, they are not kidding, the quiz is so hard! (I suspect that some answers that are supposed to be correct are in fact wrong!) Nevertheless, I tried both of the quiz and managed to get 2 free books as they promised.

Step 1:

Step 2:


Step 3:


Hee hee, let's see if they really gives out the book in a weeks time :) If they really sent it, I would have won a cool $45.80 worth of books :P I quite like the Professor Sage's series of books as it catered to local context, so I do hope I'll get both of them for free :P

Go try it, no harm right?

Was browsing through sgx announcement during lunch time when I saw that Celestial annual report is out, so curiously I took a look at it. Celestial is a leading manufacturer of soy protein-based food and beverage products in Heilongjiang.

I wasn't going to look through the whole thing, just looking at the main figures which I thought was interesting.

1. COGS as a % of revenue for 2006 is 55.7%. That for 2007 is 61.0%. That's not a good sign. Possibly Celestial is being held hostage by the rising soy bean prices. They mentioned that soybean prices rose by 24.6%, but it seems some of their measures to control cost is good, otherwise, I believe the COG as a % to revenue will be even higher. The good thing is that their products are not essential food staples, hence are not affected by the policies imposed by PRC govt to curb inflation. They plan to increase their selling prices and that will really be a good test to see if they have pricing control - a sign of economic moat.

Gross profit went from 44.3% in 06 to 39.0% in 07. Net profit margin goes from 31.9% in 06 to 23.3% in 07.

2.
------------------Financial leverage-----asset turnover-----net margins-----ROE
FY2006--------------2.17------------------038---------------31.9%--------26.3%
FY2007--------------1.99------------------0.52---------------23.3%-------24.1%

Financial leverage seems a bit too high. They stated on their annual reports that their gearing dropped from 87.5% in 06 to 75.1% in 07. That's scary and probably that's the factor that drove up their ROE to over 20%, which is quite good. I didn't check their past reports, but I would start to get interested if the business generates 15% to 20% ROE and above consistently over at least 5 years.

Their total borrowings in FY06 is a 1.22 billion RMB (total equity is 1.40 billion RMB, operating cash flow 0.28 billion RMB). Total borrowings for FY07 is 1.32 billion RMB (total equity is 1.75 billion RMB, operating cash flow 0.45 billion RMB). Are they over stretching themselves with too much debts? Funny thing is that they hold nearly 1.65 billion RMB in cash and equivalents, earning an effective interest rate pa of around 1.67%, while the effective interest rate of total bank borrowings is 7.99%.

It's almost like borrowing money from loan sharks then putting them in savings banks to earn interest. Well, they better have good use of the money, because that will be huge cost to them.

3. I think celestial is worth at least $1.50. At current price of $0.655 and EPS of $0.13 it is trading at a pretty undemanding 5 times FY07 earnings. With net asset value of $0.55, I'll feel even more comfortable buying at that level. There's a support around that level too.

Oh, almost forgot to mention, at current price, there's also a dividend yield of 3%. Could be one off, since they didn't state their dividend policy clearly. So if I were to buy, I wouldn't be attracted by their dividend only. This seems like a BATA stock - Buy And Throw Away (after the inflation storm and food scare eases off and the price escalates).

Haha, I'm such a cheapskate :)

Didn't know that my post on 'Statistics lie!' generated quite a healthy discussion on what is fair and what is not.

My aim of the post is to highlight the fact that statistics are used to show and highlight what the person intends to say - or to add weight to what had already been said. As such, there really is no fair way to represent statistic without the risk of misleading someone. Though I say that, there are plenty of ways to confuse and obfuscate the casual reader and it is these that we must really be careful.

A case example to note: There are people who say buy and hold is good. Warren Buffet buys and hold, and he is a good example of person who buys and holds stocks. To add weight to this statement, the person might quote him saying that he said his timeline for holding stocks is forever. But the fact is that Warren Buffet didn't buy and hold ALL his stocks forever. And those who recommend the buy and hold strategy sometimes forgot to mention buying GOOD COMPANIES at FAIR price with a MARGIN OF SAFETY. Also missing is that one must check and update if the reasons for buying it in the first place is still there.

So be very careful of what others say AND didn't say. I'll actually pay more attention to the latter than the former. People can similarly use statistics or graphs to show what they want. It's quite easily done actually.

Back to statistics... I calculated a ratio to see how the trends of fuel oil prices and electricity tariffs are like. The ratio is calculated like this:

Ratio = Electricity tariffs (cts/kWh) / Fuel oil price ($)

By using this ratio and watching how it varies with time, I hope to see a clearer picture. Using the ratio, one can see how electricity tariff changes as fuel oil price changes. Here's what I get when I plot it out:

Interesting huh? Seems like electricity tariffs per fuel oil price drops over the years. Does it mean that we get a better deal now then before? Haha, well, it's up to you to analyse it :) My point now should be clearer - is all that you see a lie? Be skeptical, not cynical :)

I've always told my students - statistics lie.

I'm amazed at how subtle little massages to the data or even to the way the data is presented can create an illusion that conveys to the reader what is intended. While reading the newspaper today, I came across this little notice on the straits times that the electricity tariffs are going to go up again. Usual suspect for the rise in tariffs - high fuel price. It then proceed to put a table, after which a chart is drawn.

Guess which one of the 3 below is shown in the straits times?




I copied the data and put it on an excel spreadsheet. While the data values remain the same, the scale of the graph is different for all 3. Hence, for anyone who didn't take a closer look at the scale of the graph, they would have made some major error in their quick perusal of the charts.

1. In the first chart, it seems that the electricity tariffs are shooting up faster than the fuel oil price.

2. In the second chart, it seems that the electricity tariffs are climbing as fast as the fuel oil price, but resting slightly below it.

3. In the third and last chart, it seems that electricity tariffs are pretty constant while the fuel oil price fluctuates wildly.

No prizes for guessing which of the chart above is used for the straits times :)