Monday, June 9, 2014

Random thoughts: Company prospecting is like reading a drama script sometimes

I was looking around for counters, a recovery play in particular. I used my usual screening tool.

http://sillyinvestor.wordpress.com/2013/10/10/2-things-that-shaped-my-screening-of-companies-cdw-as-a-example/

I keyed in criterias: Companies that showed lower earnings, but gave some dividends. I will then see if I would like to read up more.

GP industries stand out

It has a yield of more than 6%. Earnings is poor due to exception write down. But what really caught my interest is the structure of the business. GP industries is 81% owned by gold peak industries, a company listed in HK. GP industries in turn own a 49% stake of GP batteries. There is constant shares buyback. Just 5%, and the minimum public flow will be less than 15%. Isn’t it very obvious that a GO is on the cards? Especially since the parent company Gold Peak Industries has GP industries as the sole company, why not save on the listing fees?

All the companies are in net debt position, but debt has been low in term of net debt to equity ratio. It was loss-making last year. But if you look cash flow, both GP batteries and GP industries and doing quite well, and that explain why they can continue to pay good dividends.

Hmmm…A privatization play with decent dividends and low debt. GP batteries, hmm, I know that brand too, business is rather easy to understand. Then the Drama starts.

I read valuebuddies for input, GP batteries go for a rights issue recently, when they have a lot of cash and just exited a loss-making venture. Hmm… why? "Hey, maybe to push down the price!" I thought. Maybe the discount of rights might put a stress on the stock price, also if not all wanted the rights they can subscribe the excess rights cheap. Given that GP industries own half of GP batteries, they need to fork out a fair amount of money too. All the rights were fully subscribed, excess rights subscribed too.

Both GP are traded at a discount to their NAV, so a GO is not impossible in terms of valuation too.

The rights issue makes me uneasy, then I read the VP committed suicide at their HK building! What the… the reason cited is work-related stress? Huh? I mean, there are dozens of loss-making companies, many have much weaker balance sheet. What the…

I stop digging further. Rule 1, when in doubts, don’t invest. 

8 comments:

  1. sillyinvestor,

    Love the ending!!!

    LOL!

    ReplyDelete
  2. Haha thanks SMOL,

    Btw, recently I notice a tinge of angst in your blog posts. Hope everything is fine with u.

    Cheers

    ReplyDelete
  3. Haha CW,

    Good one! LoL!!

    Our local production by mediacorp, not those by wawa production, are more often bad than good.

    I still watch them sometimes. Sometime just to think about how I can write a better script .

    Any good drama to recommend??

    ReplyDelete
  4. What a twist! Like reading a novel actually! lol

    ReplyDelete
  5. sillyinvestor,

    I'm recovering from a cold.

    I'm one big slime ball and coughing my lungs out.

    Not a pretty sight.

    I guess when sick, less tolerant of "empty vessels".

    You very de observant :)

    ReplyDelete
  6. Oh no, take care.

    I was a slime ball then, not fully recovered, easily triggered.

    4 months Liao!!! Hope u have better luck, I been through 6 different type of antibiotics, x-ray, blood test, etc.. But it just never recover fully. I am taking the ventoline now, 2 different types.. Never thought I will become a ashma patient.

    Watch your food!! It's gastric triggered... Eggs, chicken, coffee and sweet stuff like chocolate are deadly triggers, more deadly than fried food.

    Hope yours dun last so long

    ReplyDelete
  7. I think I can adapt from the storyline and make a script out of it. Haha

    ReplyDelete