Singapore Stock Market News

I was passing by one of the sportswear shops and saw these two socks selling at a discounted price. I was suitably impressed by the brands of it. My handphone camera quality isn't exactly fantastic, so I'm sorry if the second picture isn't at all clear.



There seems to be a certain fetish for brands having a certain 'tick' symbol. Perhaps by emulating certain branded logo, other brands can stand on the shoulders of giant and ride on the wave of mad consumerism. The socks under these 2 brands isn't exactly quality socks. I wouldn't rely on them to last a few rounds of hard machine washes. Perhaps that's why they are selling rather cheaply - 3 for $9.90. Other more branded socks are selling around 3 for $20-30 dollars, so you can do the maths here.

To show you what I mean by the fetish of the 'tick' symbol, let's take a look at the brand logo of a few sports companies.




Convinced now?

Care to guess which two companies these belong to? Hint - one is listed in singapore and the second picture shows the competitor of the first one, but listed in HK.

I'll write the answers in black ink, so that those who don't like the puzzle can safely look at the answers without depriving the fun from others :)










1st picture - China Hongxing
2nd picture - Anta

I was suitably impressed by the great showing of my companies that released their full year results today - china milk and pac andes.

I admit that I did not buy pac andes on fundamental grounds. In fact, I entered it solely due to dbs brokerage report back in 2006. Back then, I did no technical nor fundamental analysis. As such, my knowledge of this company is severely lacking. I'm trying my best to correct this, so haha, bear with me :)

Pac andes

------------------------2008----------2007
Gross margins---------21.6%---------17.8%
Net PATMI margins---6.9%-----------7.3%
ROE-------------------12.9%----------24.5%
Currents ratio----------1.5x-----------1.9x
Debt/equity------------1.4x-----------1.5x

*note: ROE is PATMI divided by equity attributable to shareholders
*Debt/equity is Total liabilites divided by total equities

Dividends declared is 0.0207 SGD per ordinary share, which works out to be $20.70 per lot. I wish they have scrip dividend options too, seriously. You can read all the rave in their press statement and their full year annual results.


China milk

------------------------2008----------2007
Operating margins-----90.6%---------91.3%
Net margins------------87.9%---------85.5%
ROE-------------------26.4%----------28.0%
Currents ratio----------14.9x-----------9.8x
Debt/equity------------0.59x----------0.85x
EPS (RMB)-------------0.65-----------0.51

Should be expecting more revenue and earnings coming from their raw milk production. Their plant is ready for production. An interesting fact is that they keeping on saying their plant is ready to commence production for a 'major customer' soon. I wonder who that major customer is. I hope and hope it's Mengniu :) Win-win situation for all :)

I promised someone i'll do tat hong. In fact, I did it very briefly and posted it in the cbox, but I think that person didn't see it. Either way, May asked me to help out on reading tat hong's financial report, so here I am.

First of all, I confess my accounting knowledge is lacking. As such, there are certain things that I might not know or understand. I try my best. This is what I'll look for:

1. Income statement

a. Calculate gross margin, net margin
b. Check to see if there's any big changes in margins
c. Check to see if there's any big changes in the expenses
d. Check out the earnings per share

2. Balance sheet

a. With reference to income statement too, I'll calculate the ROE and note changes between years/quarters
b. Calculate debt/equity, current ratio, quick ratio
c. Check if there's an increase in current and long term liabilities
d. Check to see if there's a big changes in inventories, trade acct receivables and cash equivalents

3. Cash flow statement

a. Check cash generated from operations
b. check cash flows from financing activities, does it make up the main bulk of cash and cash equivalents at end of the year
c. check cash flows from investing activities, specifically any big changes in individual components

4. Read footnotes, esp the parts about management's remarks on revenues, profits, margins etc.

5. Check dividends if any. Calculate payout ratio.

6. If i'm really into the company, i'll check to see their business results by geography, segments etc

Okay, with that, let's jump into tat hong's results, I'll not do any analysis. I'll just be stating the obvious:

1. Income statement

Gross margins = gross profit/revenue
Net margins = profit for the year/revenue
Earnings per share = Net earnings / outstanding share

* cookieguy mentioned that net margins should use profit attributable to equity holders of the company divided by revenue. I'll stick to what I put earlier.

-----------------2008-------------2007
Gross margin----39.0%-----------30.9%
Net margin------15.9%------------17.4%

Notes:
- 2007 have this 44 million under operating income. I'll check it out to see what it is, as it inflated the net profit for the year 2007, that's why we see a drop in net margins for 2008 compared to 2007.
- big jump in operating expense in 2008 caught my eye
- if i use net margins as the net profit attributable to shareholders divided by revenue, i'll get a 2008 figure of 14.0% and a 2007 figure of 16.4%.

------------------------------------------------------------------------------
I got a little interested at this point to find out more about tat hong's results:

-----------------2008-------------2007--------2006---------2005
Gross margin----39.0%-----------30.9%--------28.9%-------26.8%
EPS (cents)------17.73-------------17.10---------9.66---------4.57

Looks interesting indeed.
------------------------------------------------------------------------------

2. Balance sheet

ROE = net profit for the year/total equity
Debt to equity = Total liabilities/ total equity
Current ratio = current assets/current liabilities
Quick ratio = (current assets - inventories) / current liabilities

*cookieguy mentioned that ROE should be profit attributable to equity holders/equity attributable to equity holders. But again, I'll just stick to my formula.

-----------------2008-------------2007
ROE------------22.6%------------27.7%
Debt/equity-----0.88--------------1.08
Current ratio----1.39---------------1.27

In my opinion, quick ratio isn't relevant here.

Notes:
- ROE dropped from 07 to 08. Could be the other income in 2007 playing a part
- Debt to equity dropped from 07 to 08 - a good sign
- Current ratio also increased from the same period - good sign.
- Using the formula cookieguy mentioned, i'll end up with 2008's ROE of 24.1% and 2007's ROE of 31.0%.

Other ratios can be calculated, but I leave it to you to find out. In fact, you might want to come out with some yourself, made specifically to find out for a particular industry/sector.

I think that's about as far as I would like to go. Hope it helps :)

It's an inspiring book, "Anyway - The paradoxical Commandments" by Kent M. Keith. This book is about finding meaning not in other people's applause, but finding it in the very act of doing things that you think is right. Here's the 10 paradoxical commandments:

1. People are illogical, unreasonable, and self-centered. Love them anyway.

2. If you do good, people will accuse you of selfish ulterior motives. Do good anyway.

3. If you are successful, you will win false friends and true enemies. Succeed anyway.

4. The good you do today will be forgotten tomorrow. Do good anyway.

5. Honesty and frankness make you vulnerable. Be honest and frank anyway.

6. The biggest men and women with the biggest ideas can be shot down by the smallest men and women with the smallest minds. Think big anyway.

7. People favor underdogs but follow only top dogs. Fight for a few underdogs anyway.

8. What you spend years building may be destroyed overnight. Build anyway.

9. People really need help but may attack you if you do help them. Help people anyway.

10. Give the world the best you have and you'll get kicked in the teeth. Give the world the best you have anyway.

Today I trimmed off CSC from my portfolio, cutting out all my stake in it. It was a love-hate relationship.

I bought it entirely on technicals, held it with speculative hope, thought I'm holding it for investment but sold it on a rational and businesslike manner. I believe CSC will have a splendid FY08, but I couldn't care less anymore. This is simply a business that holds no place in my revamped portfolio.



I went in 5 lots at 0.305 on 16th April, 2007. Went in another 20 lots at 0.385 on 22nd May, 2007 after csc announced that it won a contract worth 200 million (something like that, can't remember the exact details). I made 2 mistakes:

1. Bad entry point on 16th April. I don't know what I'm thinking about.

2. Even worser entry on 22nd May. I bought on news that they won a contract, whereas I should have sold. This gap up is soon covered and the stock price went up after that. But by buying 20 lots at a high of 0.385, I basically sealed my returns for csc, no matter how great it looks. This lesson is already well learnt by me. It's my first exposure to being a contrarian instead of following the herd instinct.

At a price of 0.305, I bought it at a PE of 35 times (FY07 earnings). At a price of 0.385, I bought it as a price of 44 times. Considering the low margins (though it's better than most construction firms, I must admit), erratic earnings subjected to economic cycles and low ROE, is it a good buy? Furthermore, at a PE of 35 times, do I really expect the earnings of CSC to grow at 35% or 44% pa?

Subsequent mistakes come from not knowing when to sell off a cyclical stock. At the peak of the bull run, csc was trading at 0.495, PE of 57 times. I didn't sell it. My rationale then was that since the price kept creeping up, it will continue to creep up too. Even when the price first broke past ema20d, then ema50d, then ema100d I was still holding it. I thought it is just a correction and things will improve.

So what's my total losses?

Total capital input: $9,282.92
Total losses without dividends: $2,290.02
Total losses including dividends: $2,232.21

% losses inclusive of dividends : 24.0%