Tuesday, November 12, 2013
No nasty surprises for Yangzijiang and Golden Agri Q3 results
There were no nasty surprises for Yangzijiang and golden agri Q3 results, although golden agri profits deteriorated rather badly. Golden agri's China division turn in a loss again, within my expectations and again pointing to the fact of how unreliable is China's operations to golden agri bottom line.
I bought into these 2 cyclical knowing results might be bad, if things turn well earlier, it will be a bonus for me, if not, I will just wait out the bear cycle. There might be a few triggers for sell, and luckily, I did not need to do it.
For both companies
1) Loss making quarters (Their operations and scale should allow them to weather the storm)
2) Significant gearing for diversification beyond their core business (I like companies who focused on their core competencies unless they have a track records for other businesses)
1) Big jump in default rates or bad loans
2) Drastic fall in margins
3) Delay in deliveries
In conclusion, story intact, continue to hold. In terms of price, I would think that Yangzijiang is fairly priced now, with expectation of turnarounds priced in somewhat, golden agri is still weak.
I was hoping for more information from YZJ in terms of their LPG/ LNG carriers orders, and also their application for a banking license, there was none. Yangzijiang has diversify rather successfully, and the property development of the old xinfu yard will start to show results, that will be keenly watched. Given how Chinese are obsessed with properties and I not really worried about the residential and commercial properties selling.
Given Yangzijiang is a s-chip, there is always concerns of it being a fraud. I am quite happy that my recent research into taxes paid by YZJ to Jiangsu tax bureau show up no red flags. YZJ is the top 20 tax payers in Jiangsu for the past 2 years, unfortunately, I can't find the actual figures, but the risk of it being a shell company is rather low.
Assume YZJ Q4 results do not fall drastically, they should be able to reach EPS of 17 cents, and should be able to pay out 5 cents dividends (30% payout), when I bought into Yangzijiang, I am prepare for 4 cents DPS, as I am not sure how much longer the doldrums of shipping will impact Yangzijiang, so there is already a consolation for me.
Posted by Sillyinvestor at 9:07 PM