Thursday, February 23, 2017

Not a surprise that AEM declaring a 1-for-2 bonus issue

AEM just announced its full year 2016 performance and for its stellar FY2016 performance, it declared a one-for-two bonus issue to reward its shareholders.

1.    Profits before tax, excluding impairments, allowances and reversals, surged 50.5%.
2.    Strong customer demand of its technology ensures continual growth and profitability for many years to come.
3.    Generous final dividend of 1.3 cts per share, making total dividends per share of 1.8 cts for FY2016, up 80% from that of previous FY.
4.    Management is so confident that they have declared that they can make $6.5 million operating profit before tax for 1H2017 with their strong order book as at 16 Feb 2017. What does that translate to? It means more than 100% EPS growth in FY2017. Simply Superb!

The price will go through the roof upon the opening bell of 24 Feb 2017 market trading. Is this a surprise? No, if you have done your due diligence and followed up closely.

Refer to my earlier blog to read more about my analysis and prediction:

This multi-bagger is a gem that is worth keeping for the long haul.

Superphang

Saturday, February 11, 2017

AEM --- A 2017 Multi-bagger

AEM closed on 10 Feb 2017 at $1.02. It will be a multi-bagger going forward. In fact it was already a 3-bagger in 2016. I only discovered this gem at the beginning of 2017 and my wife and I bought this stock in the range between $0.925 and $0.965.  I wish I could have discovered this gem much much earlier.

Stellar Financial Performance
The second quarter ended 30 June 2016 saw strong growth as revenue was up 51.1% to S$17 million while its profit surged 186% to S$1.34 million.

It reported even more stellar third quarter financial performance on 8 Nov 2016 as the adoption of its new flagship high-density semiconductor test handlers had taken off.
-328.6% rise in year-on-year 3Q2016 net profit after tax
-69.9% rise in year-on-year 3Q2016 revenue
-Sales order book of S$45.5 million as of 8 November 2016
-EPS rises to 5.15 cents and NAV per share rises to 59.8 cents
The uptrend suggests a further growth in FY2017.

At the close of 3Q2016, the Group's balance sheet showed total assets of SS$42.9 million. Cash and cash equivalents totalled S$8.4 million. AEM has funded its business primarily with internal resources, supplemented by modest borrowings from financial institutions and its debt gearing is less than 0.4%.

Commenting on the Group's performance, Mr Loke Wai San, Chairman of AEM said: "We are proud to be generating solid returns on the significant R&D investments we have made over the past 5 years as we bring our high-density test handlers to market. Our engineering team has done a wonderful job in commercializing one of the most advanced test handlers on the market today. We expect the demand for our test-handlers to grow substantially next year, and our leading products and capabilities should hopefully position AEM well in the years to come.”

Sharing Fruits with Shareholders
AEM paid a final dividend of 1 cent and interim dividend of 0.5 cent per ordinary share to its shareholders for FY2015 and FY2016 respectively.
Sharing his thoughts, Mr Charles Cher, CEO of AEM said: "Despite headwinds from a slow global economy, AEM continues to achieve significant growth by delivering compelling capability and value to our customers. The considerable effort the team had expended over the last few years in realigning the business and investing in our future have begun to pay off and we look forward to sustaining growth momentum in the business next year.”

Superb PE and PEG
Its trailing p/e is only at 5.3x, computed based on the closing price on 10 Feb 2017 at $1.02.
Its PEG is at 0.0163. Simply superb!

Confidence Shown Through Rampant Company Buybacks
AEM market capital excluding its treasury shares is only about $43.6 m based on the price of $1.09 apiece. AEM bought about 2.3 million shares (which is about 5.4% of the company) from the open market in 2016, highest price being concluded at $0.85. The rampant company buybacks has shown the confidence of the management in the future growth of the company.

AEM will release its FY2017 report soon and the price will surge with the expected stellar performance yet again. I predict the stock will double its price and hit $2.04 by August 2017.


Superb 800 Super

I first talked about 800 Super in my blog of 29 May 2016 when its price was at 67 cents, but I started accumulating it when the price was at 48 cents. The stock closed on 10 Feb 2017, Friday, at $1.09.


I will not sell it so soon even though my profit is more than 100% now.

The negative point of this gem is its liquidity or the lack of it --- trading volume is low or I would have bought more at its trough. But the negative point can also be its strength when the gem is uncovered as the price can go through the roof. 

800 Super just announced its HY2017 result. The company declared a special half-year dividend of 1 cent this time and this shows that the management is willing to share its spoils with shareholders and is sharing more this time.

With the current price at $1.09, the forward p/e has shot up to about 11.95x. But its solid 65.2% earnings growth gives a superb PEG at only 0.1833. From past records, my assumption that the growth is sustainable with its strong management team has not wavered a bit.

I will keep this defensive stock until at least half a year after their S$31 m biomass waste-to-energy plant at Tuas South starts its operation at end of Q2 as I envisage another round of big percentage of growth is on the cards.

Keep this gem for the long haul. It is very hard to find an equivalent in Singapore.

Superphang


Wednesday, February 8, 2017

Fierce Surges in HKEX and HK Brokerages Setting the Pace in HK Stock Market

Hong Kong Exchanges & Clearing Ltd, HKEX(388), today surged 4.71% and the volume was 10x that of yesterday's. Hang Seng Index (HSI) edged up 0.66%, but the magnitude paled in comparison with HKEX.
From history, HKEX is the leading indicator of HSI if it can surge after a long consolidation. This time round, HKEX has consolidated well for more than a month before this big surge and it should signal the arrival of a strong uptrend going forward.
Emperor Capital (717), a brokerage with lots of insiders' recent purchases, that I introduced surged 5.8% today with 10x volume compared to yesterday's, signaling the start of a bull run ahead.
All HK listed brokerages will enjoy this belated bull run starting now. Have you parked your money in HK market yet?

Superphang
http://superphang.blogspot.sg

Thursday, February 2, 2017

KrisEnergy Warrants --- You cannot miss this one

The first day of trading for KrisEnergy warrants and its zero-interest-rate notes showed huge profit taking for the warrants. In the heat of profit taking, the premium for the warrant to convert to the underlying mother share was reduced to zero based on the closing prices of the warrant and the mother share.
It means people are taking profit in a jiffy on the very first day of the warrants and the notes becoming tradable. It also means some smart money is accumulating the warrants or converting their mother shares to warrants due to the low or zero premium.
The low warrant premium at 0% is a far cry from at least 15% typically for warrants with such a long tradable period before the expiry date and a sound gearing ratio (price of a mother share/price of each warrant)
Also, at the closing price of 41.2 cts for the note, its yield-to-maturity is 13.5% --- very attractive compared to the best fixed deposit rates you can get from any banks in Singapore.
Those who subscribed to the preferential offer, which shareholders of KrisEnergy are entitled to buy 93 zero-interest-rate notes at $1 apiece with sweetener of 837 free detachable warrants for every 1000 shares that they own, would make a return of 15% from their subscription based on the closing prices of their debut. Some of my friends and I applied for the excess notes too and due to the under-subscription, we were given all the excess notes that we had applied for. With the profit taking and with the premium of its warrants reduced to zero percent, It is still a resounding victory for those who subscribed to the offer considering a two-week time frame for this huge percentage of return.
To me, a warrant with a long life span of 7 years and a reasonable gearing of 2.34x (=19.2/8.2) but with a zero premium for conversion to the underlying share is simply abnormal.
If the oil prices can remain stable or creep up from here due to OPEC production cut, KrisEnergy should follow suit. And when the selling pressure of KrisEnergy warrant is gone, it should be more rationally priced at at least a 15% premium or you will see more warrant holders start to convert their warrants to the mother shares if KrisEnergy declares dividends to be paid to shareholders.
Superphang
http://superphang.blogspot.sg

Sunday, January 1, 2017

H-Shares Have Started Their Uptrend Trajectory

Both HK and China stocks should do well in first half of 2017 and HK stocks, especially H-shares, should perform better than stocks listed in Shanghai Stock Exchange. I can think of three reasons for my prediction.

1. Ants moving houses from Shanghai Stock Ex to HKEx
HK$ is pegged to US$ and it has strengthened rapidly alongside US$ in the past few months since the anticipation of Fed interest rates hike started. Conversely, Chinese yuan or RMB has weakened in the same period due to its massive outflow when China tycoons and businesses parked or invested their money in other countries, guessing that the China government would support the devaluation. However, the fact that the Chinese government has spent more than US$550 billion in 2016 to stave off attacks on RMB is showing its resolve not to let RMB depreciate too much or the confidence in the Chinese economy will be shattered.
As it is, RMB has depreciated against HK$ by 12 percent since July 2015. And all pundits are now predicting that RMB will keep weakening and the China government will have no choice but to try all means to stop the money from flowing out of the country as it is not helping their own economy now.
As it is, all China citizens are restricted by the existing rule to exchange a maximum of foreign currency equivalent to US$50k per year and this quota will be easily reached given that China is among the top few countries that have the highest savings. There have been rumours that China government will tighten the dollar-exchange limit. But with the new year just kicking in and China citizens being able to swop their RMB savings into US$50k again, you can expect China citizens will flock to their commercial banks to do this first thing in the morning. But what about the rest of the RMB cash hoard in excess of equivalent US$50k? What can the China speculators do to circumvent this?
One alternative is to buy H-shares through Shenzhen-HK Stock Connect or Shanghai-HK Stock Connect. When an investor does it this way, his action is not deemed as exchanging his RMB into US$. As H-shares are quoted in HK$ on HKEx, even if the share price of the stock he is buying does not rise subsequently, the investor may rest assured his money will not depreciate as HK$ is pegged to the strong US$.
On the last trading day of 2016, the money flowed from Shanghai Exchange to HKEx is a record RMB6.453 billion. You do not need a crystal ball to tell you that HK market will have a good start for 2017.

2. Smart Money will move to stock markets that have strengthening currencies  
In July 2014, I predicted that stocks listed on Shanghai Stock Exchange will start a bull run after the Shanghai Composite Index (SHCOMP) dropped from the peak of 6124 in October 2007 and hovered around 2000 in 2014 for a long time. 
At that time, only China citizens can invest in the cheaper A-shares and foreigners like me can try the equivalent H-shares listed on HKEx which is about 30+ percent more expensive. Then, in 2014, for the good dividend and very attractive p/e, I invested in China Construction Bank H-share (CCB, ticker: 939) , the second biggest China's bank in market cap, knowing very well that it is more expensive than its equivalent A-share listed on Shanghai Stock Exchange.
HK CCB H-share was more expensive than its A-share by 35% in 2014. And as the RMB was perceived as the strengthening currency and the China Chinese are more speculative after the launch of Shanghai-HK Stock Connect, CCB A-share became 14% more expensive than CCB H-share a year later in July 2015. That is, a 49% (35+14) gap in a year.
As the RMB has been perceived to be weakening since two months ago, the CCB H-share is only 2% cheaper now. Who knows CCB H-share will soon be, like the situation in July 2014, 35% more expensive than its A-share counterpart again?
As it is, A-shares generally still command a premium over their equivalent H-shares. The collective premium of A-shares over H-shares on the last trading day of 2016 is 22.35%.
My experience can tell you that currency risk assessment is important when you invest in any stock market. The time has come for us to wake up from our slumber to put money in H-shares if experience from history is anything to go by.

3. Fed will not raise interest rates in middle of March
In end of 2015 when Federal Reserve raised interest rates by 25 basic points for the first time after 7 years, Fed Chair Yellen informed that the interest rates would be raised four times in 2016. Lo and behold, it turned out that Fed only raised it once in 2016.
Given that the US$ has appreciated too fast and too furious against other major currencies within so short a time frame, it is in all probability that Fed will not raise rate more than twice in 2017 and the first one can only be in June, not March.  If that is so, the first quarter will be the best time for market players to invest in the HK bourse, especially in H-shares.

What stocks to invest?
Still the same stocks that I have recommended before in my blog. Good stocks will withstand the test of times. Prices quoted here are the closing prices on the last trading day in 2016:
1.     Emperor Capital (英皇證券, 717)A brokerage with insider purchases, p=0.7, p/e=7.778x, yield=3.571%, p/b=1.11x
2.     Get Nice Hldg (结好控股, 0064)A brokerage with insider purchases, p=0.265, p/e=3.786x, yield=7.547%, p/b=0.46x
3.     HS H ETF (恒生H股, 2828) - H-shares ETF, p=94.4, yield=3.284%, A/H=1.22x. Advantage of diversification and you may save some money on clearing fees too when you invest in ETFs in HKEx.
4.     HuanDian Power (华电国际电力, 1071) – Utility, p=3.51, p/e=3.722x, yield=10.057%, p/b=0.69x, A/H=1.5732x.
5.     HuanNeng Power (华能国际电力, 902) – Utility, p=5.14, p/e=4.647x, yield=10.759%, p/b=0.81x, A/H=1.5301x.
6.     Datang Power (大唐发电, 991) –Utility, p=2.03, p/e=8.219x, yield=9.852%, p/b=0.59x, A/H=2.0993x.

Two potential growth stocks with low p/e:
7.     Donfeng Motor (东风集团, 489) - Car manufacturer, p=7.57, p/e=4.8x, yield=3.104%, p/b=0.6x.
8.     China Saite (中国赛特, 153) - Steel Structure Constructor with a theme of One-Road-One-Belt. p=0.53, p/e=2.573x, yield=3.585%, p/b=0.49x.

英皇领头先开张
结好加油也跟上
囊中好股天天涨
喜笑颜开精神爽

I have parked my money in HK bourse, what about you?

Superphang

Sunday, October 9, 2016

Little Changes Added Up to Imminent Bull Markets


The Singapore second- and third-liners all moved up strongly this week mainly due to rebound in crude oil prices. However, the STI still largely remains in the doldrums. This begs the million-dollar question: Will the STI move up soon?

The HK market has moved up quite a fair bit in the past 3 months or so. My strong sense, based on both my fundamental and technical analyses, is that the uptrend of HK market is still intact and the China market and Singapore market will start to move from here onwards. The following reasons will lend support to my prognostication.

1.      Inclusion of RMB in SDR

As of 1st October 2016, the Chinese renminbi (RMB) has been included by IMF in the Special Drawing Rights (SDR) together with four other major currencies -- the U.S. dollar, euro, the Japanese yen, and pound sterling. The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. This will help RMB to be more internationalised and increase the foreign funds’ interest in trading stocks in Shanghai and Shenzhen stock exchanges, partially through HK stock exchange.

2.      The countdown to Shenzhen –HK Stock Connect

The Shenzhen-Hong Kong Stock Connect will be rolled out by end of 2016 and so far most pundits believe it will take place in November. This is a strong booster to stocks listed in HK Exchange, especially H-shares.

3.      China expansionary PMI

The China Caixin Manufacturing PMI announced on 30 Sep is 50.1, and the official government Manufacturing PMI is 50.4. It has been a few months for this economy leading indicator to hover above the expansionary level of 50. This should give impetus to smart monies to enter the China and Hong Kong markets.

The China August railway freight volume increased by 1% compared to the same period last year. This number may seem insignificant but it is the first growth registered in a single-month freight volume in the past 32 months. The electricity power consumption in August grew 7.8% compared to the same period last year. The RMB loans were up 11.6% in August as compared to August 2015. These three important figures that economists monitored closely for the health of China ‘s economy have all shown obvious improvement and this should translate into an imminent strong rebound in China’s economy and thus the stock market performance.  

4.      Entry of A-shares into Morgan Stanley Composite Index (MSCI)

On 29th September, MSCI Inc. noted that Shenzhen-HK Stock Connect will allow foreign investors to put their money in the US$6 trillion China stock market, and this should help international investors solve their problems of bringing their investment money out of China.

It is expected that MSCI will announce the assessment of all its indexes in June 2017 and there is a likelihood that China’s domestic equities (A-shares) can be included into MSCI emerging-market  index, which is tracked by investors with US$1.5 trillion in assets, even before June 2017’s announcement and if this happens, it will prop up A-shares prices more. The entry into MSCI Inc.’s benchmark indexes will turn renminbi into a truly international currency.

5.      Market Reforms taken seriously in China

China stock market has been a closed market that used mechanisms like freezing the market and making it illegal to short, using government funds to buy shares -- interventions that are not welcome among global investors.

However, there have been a number of market reforms in progress. In February, China regulators allowed qualified traders to shift money in and out of the country on a daily basis, a key change for open-ended mutual funds and ETFs. In May, domestic stock exchanges published rules restricting trading halts. In June, China gave a 250 billion renminbi (US$38 billion) investment quota to the US, allowing American institutions to invest overseas renminbi in mainland markets. The progress made has shown China’s determination to make itself link to the world and this should augur well for the China stock market as well as for the world economy.

6.      Equity Risk Premium are telling us the markets are undervalued

The historical average p/e for matured stock markets are generally around 15x. But when the interest rates are low, the more practical way is to use equity risk premium to determine if the markets are undervalued or overvalued.

Equity risk premium is the excess return that investing in the stock market provides over a risk-free rate. A survey of academic economists gives an average range of equity risk premium of 3 to 3.5% for a 1-year horizon.

From the Business Times Weekend Oct 8-9, 2016, we can obtain latest p/e of various markets. The estimated p/e of HSI is 13.1x, STI is 13.8x and SHCOMP is at 14.1x. The p/e of US S&P 500 is currently 18.3x. If we benchmark against fixed deposit rates, with about 1.5 % per annum, as the risk-free investment, the equity risk premiums are 6.13%, 5.75% and 5.59% for HSI, STI and SHCOMP respectively, which are all better than the range of 3 to 3.5% as recommended by economists.

From mathematical calculation, p/e needs to be around 20x for equity risk premium to be at 3.5% with respect to a one-year-risk-free rate of 1.5%.

This shows that the stocks in Singapore, HK and China are all very cheap compared to putting money in the banks or with government bonds.

The current US two-year treasury bond yield is only at 0.838% partly because all investors are treating US dollars as the safe haven. So, even the USA market which is perceived to be lofty, with p/e of S&P at 18.3x, is still considered as undervalued.

7.      The charts are telling us an uptrend has started

The charts of STI and SHCOMP have shown that both markets are starting to move up and the momentum should be increasing soon. Hang Seng Index (HSI) for HK market has already experienced a bull run and the uptrend is intact.

I hope I have given all a clear picture of why the Singapore and China markets will start its bull run soon. Singapore market will not be lacklustre anymore. I have moved some of my money back to Singapore market after about 20% gains made from investing in HK market for the past 6 months or so.

Download the mobile free apps: InvestingNote and you can find remarks of my recommendations like Rowsley and Ezion W200424. For the latter, I got in at an average price of 5.088 cts on 8 Sep 16, and now it is 8 cts --- a whopping surge of 57.23% in exactly a month. Luck? Not really. It is still about old-fashioned hard work, research, research and research.

For my estimation done in InvestingNote, I will set a target price for a stock I recommended to buy or sell. Once the target price is reached, I will likely post another estimation to ride the trend. But in actual investment, once I get hold of a growth stock and when its price keeps ascending, I will not sell it until Mr Market signals to me that the reversal is imminent. You could see that I have kept raising my target prices for Ezion W200424 in InvestingNote as I am still holding on to this rare and beaten-down gem.

The shrewd investors and smart money have to move their funds to a more lucrative asset class. Period.

Superphang