Saturday, May 31, 2014

YZJ update 3: Trying to figure out the accusations

Below is what I posted at valuebuddies. The first part was a reply to a fellow forummer.

[quote='yeokiwi' pid='84646' dateline='1401546694']
The three agreements that were signed between 成清波 and 任元林.

As a listed company, can these kind of agreements be signed without informing the rest of the shareholders?

The main accusation is based on the following paragraph:
甲方: 成清波
乙方: 任元林

极配合;对于天津国恒 2013 年度财务决算和财务会计报告书编制必须有乙方人
员参加并会签,同时甲方必须确保天津国恒 2013 年度盈利和在经乙方同意的情
权利。另外,如果标的股票股价连续 3 个交易日下跌,或跌至 1.5 元/股以下,乙

Hi YeoKiwi and CF,

I read through the original agreement: (the 046 report),

the terms of conditions include (pg 6)

There is condition of secrecy. Hmm... Isn't 成清波 shooting himself?

If that is the case, the third accusation (三)涉嫌侵犯上市公司独立运作
Doesn't hold, isn't it?
They are making a loss
Company suspended on 5 May

Also, since the shares are transferred to TaiXingLiyuan, TXLY is effectively the biggest shareholder with management rights, but because 成清波 has the rights to repurchase the shares, TXLY thereby gave management rights to 成清波 and co, subjected to various conditions, apparently, the profitability and no suspension conditions are not meet.

The crux of the argument is insider trading, the buying of shares after the agreement is sealed. I read the document a few times, I couldn't find a clause that stated YZJ cannot buy more of Tianjin GuoHeng Railway.

Also, the harsh conditions of profitability, no lower than $1.5 etc, are merely conditions, does it constitute as insider info? There is no guarantee of profits.


Accusation 4 (Above)is even more bewildering.
将标的股票以大宗交易方式过户至泰兴市力元投资有限公司。 (pg8)

I assume 大宗交易 means married deal, that was agreed during the supplement contract, when TXLY come into the picture.

I am not a lawyer, but if I can find so many question marks, it does not seem like Ren will just lose the legal battle when it starts.

Friday, May 30, 2014

YZJ update 2: steal or falling knife

What I post at valuebuddies. For anyone still vested and concerned:

Table4 show the penalty of recent cases, only about 26% of the studied53 cases lead to criminal prosecution.

A good read on the study of insider trading in China. There is another case of everbright security on bloomberg, can't paste the link here.

I did a very quick scan on the long document.

The definition of insider and insider information can be vague and too broad.

YZJ has 3 charges, not all as announced by the news. ( lump with tai Li .. Yuan investment co)

1) insider trading
2) illegal profiting due to the harsh terms of contract ( is a ah long contract$)
3) hindering independent governance and operation of company.

Of the three, 1) is the one that is most difficult...

Personally, which shadow banking product is not on a long terms? (2)

For three, shouldn't tai Li ... Yuan the major shareholder bear the most blame for installing the management, in this case Ren?

For 1) the accusation is on insider information, and hence making the shares purchases illegal, given transparency is always an issue in china, how strong is this accusation?

The outright breach should come from tai Li .. Yuan when he sell its shares for a profits during the holding period.

So, I guess we have 3 scenarios

1) case dismissed after legal challenge or investigation

2) Ren gets away with the alleged illegal profits confiscation and a fine. No criminal prosecution.

3) Ren gets criminal persecution and company is banned from
Involving in HTM trades.

So whether YZJ is a steal or falling knife depends on which is the likely scenario. If it is 1), u get a smart rebound.

2) impact is hard to justify

3) will mean a very severe write down in the company's HtM assets.

Will trading be halt pending the 3 outcomes is anyone guess.

If u ask me, when in doubts, run when dealing with china companies.

If your knowledge ( local or legal) makes u think 1) or perhaps even 2) is likely case, then u make your move to accumulate.

I won't until we get a clearer picture

YZJ update

I found the announcement made by the railway company (that announcement)

I tried reading the announcement a few times, this is what I gather:

1) the company involved is not Ren private investment, it is a investment (share but back aka loan) arrangement through YZJ. It should be one of those HTm loans.

2) most of the accusations are levied at another investment company Taiyuan for seizing the bulk of shares and collaborating with Ren with various terms of contract and passing management rights to Ren, which both benefits from unfair terms of contract.

My thoughts:

I think there is room for judiciary battle. The crux of the matter is unfair terms and Insider trading and flouting of certain clauses of contracts. Am not a lawyer, but the bulk of accusations is leveled at taiyuan investment co.

Bad news is, it is not Ren's private business, it is through the investment vechicle of YzJ.

Those hoping that is a rumors like me, will have no more chance.

Thursday, May 29, 2014

Random thoughts: 7 years of marriage

How time flies, my wife and I are married for 7 years.

Is this post about the 7 year itch? Hahahaha, what are you thinking, nope, quite surprised it didn't affect me.

Looking back at my 7 years, there are plenty of bitterness as well as sweetness.

I was driving in the rain, and looking back at my life, thinking about my wife.

It suddenly dawned on me i have not felt loneliness for a very long time. I used to be quite a loner, so much so that I already gotten used to it. When we are first married, we couldn't really get used to each other, as I still appreciated "me time" a lot, and she wanted a lot of attention.

We aren't the perfect match, we have different values, growing up experiences,  and family background. We quarrel a lot, we still do, but much lesser now. I still laments secretly the loss of freedom, especially after we have our kid. I also felt there are times when PMS strucks and I bored the brunt of it. But I have to admits, I am a better person because of her, not quite sure if she could say the same.

I am not an affectionate person, in fact, I am really cold and still like water. Recently, I got a transfer and will be leaving my workplace for another soon. Many came up to me to congratulate me and wish me well. My colleagues, even throw a surprise party with a surprising expensive gift for me. Many asked if I felt like crying, I smile, and said "No", to the disappointment to many of my colleagues.

Another close colleague ask me when is my last day, I told him I will be packing soon, he asked me if I will cry as I packed, hmm... why? I replied I will most probably laughed as I packed. Why is leaving a bad thing, I am very happy that I have a place in their heart, that's good enough already, it is a happy thing, isn't it??

Hence, many a times, either knowingly or unknowingly, I know my straight talking and to the point response to my wife's grumbling is not what she look for when she complains. She takes it in her stride now, but hey, what to do, like the frozen song, "I am not asking you to change him, cause' people don't really change.

There are many things I don't appreciate about her, her immaturity at times, but knowing that she have stick with me for 7 years, I think I should not be complaining.

She used to be very insecure about our relationship, to  the extend she hire a PI to check on me. I forgave her, I am more sure about not having a affairs than her. I told her blankly, not that I am a saint, or that I have no fantasies, my job doesn't expose me to temptations, so that is one down. I am not a social person, so again, probability of meeting someone is again low. If I do meet someone that make me heart beats faster, I am just too shy or/ and lazy to chat her up, and get her to another level. What my friends do without blinking an eye, I find it such a chore and uphill task, I rather stay at home and research on companies and do stock prospecting.

Happy anniversary, she will not see this post, although she knows I owned a blog. She is not interested. But well, our RoM anniversary is just over and our chinese wedding anniversary is just a few days away. I always know and remembered, just don't understand why we have to celebrate it. Since she already used to it... Shh....


Wednesday, May 28, 2014

Sold Yangzijiang

Just to update readers here. I just sold all my shares of YZJ.

I am not sure if anyone follow me to buy YZJ, but nonetheless, my reason, your call.

This news is the trigger:

Rail company calls for investigation into shipbuilding tycoon Ren Yuanlin

I believe Yuan to be a capable businessman with good connections with local government. Nonetheless, I like to hold on to more cash to await opportunity. Apparently, the news is already 2 days old, but market do not care. I care though. Ren is the key factor in the YZJ equation.

Just to keep readers heads-up, not a buy or sell call.

Sunday, May 25, 2014

Random thoughts: Old age

I am young, might be offensive to post such sensitive topic, but hey, what the heck...

I was walking towards the coffee shop for my breakfast, the old lady that stayed at my MIL condo shout a good morning to me, and ask me if I am back from work. I smiled and said I am going for breakfast. She think for a while and asked:" What day is today?" I said "Sunday!", she replied "oh" and said "mang mang kia (walk slowly)" I wondered how is it like when you don't know if a day is Monday, or Tuesday, because everyday seem like the same? At least when I am working, I will know when is the weekend.


I was driving back from dinner with my wife and son. My wife pointed to me an old uncle who is pushing his carpark up the carpark ramp. "He always go out at this time alone, so sad" In order not to go all depressed on a Sunday, I start to be Drama, and make up a storyline about how when he was young, he left a girl and is so lonely now, but in my mind, it again left an dent.


My parents, in particular, my dad, has slogged for his life. He is diagnosed with heart attack in his mid forties, but only went for operation in his sixties. Simple, we were all dependents then, although he never mentioned it, I know he knew if he was incapable of working after his operations, our family will fall apart.


My MIL has no entertainment, she only find solace in her two daughters, talking and gossiping about people, raising her voice to talk about unfairness of life, how people were, she don't even watch the stocks anymore after teletext is gone. I have taught her how to use the bloomberg app in her phone, but it never catches on.


Old age seem really gloomy to me. Even if one is financially well. There is another neigbour, either in his late seventies or early eighties. He is in the pink of health. He has 2 dog pets, both are strays and much stronger than him. One of his dog is called Moscow, who is as old as him (in terms of dog's lifespan), he is really docile and my boy like to hug it. The younger stray can drag the maid alone when it wants to, but both are like cats when this old ah pek bring the dog out. Power! But his wife is getting senile. Many times I saw her sitting outside the penhouse, staring blankly into space. I didn't see the both of them as often now, only the maid and the dogs.


The prime of my life... Why am I am complaining about work?

When it comes, it comes, enjoy it when it comes. 


Friday, May 23, 2014

A deeper look at Venture.

My analysis is mainly doing some fact finding from the various Maybank reports, which I think are of high quality

Of the 5 area of customers:



Printing and imaging is the only one that is doing very badly. This is despite Venture being the sole builder of a type of portable printer for HP in 2013. There is a lot of buzz from the 3D printing sector filling this gap, even if the 3D printing does not contribute strongly in the coming quarters, how bad can it be? Its major customer is Stratasys 3D based in Shanghai. Stratasys as with other 3D companies are growing very strongly, however, how much market share can Venture take from Stratasys is questionable, especially it it is still in the prototype stage. But if there is a growth segment that Venture cannot be without in, it is 3D. VIPcolors is actually the retail arm of Venture, it sells printers made by Venture, It has launched a new product recently, late 2013. There is no inking of the demand for this product, as VIPcolors is not listed. HP printing business is still resilient, but I doubt Venture has a big market share of HP.

As for the rest of the 4 areas of customers, the reading of the annual reports of its major customers show some interesting facts. When I first looked at Venture, It is a decent company with decent FCF generation capability. However, as margins are falling, it make me wonder if the customers are deserting Venture, or has such big bargaining powers over Venture that it can squeeze them dry. I think the former is less of a worry now.

When I look at Micros, they have been outsourcing its manufacturing of its traditional workstations POS to Venture for years, and in the recent 2013 AR, added Mtablets, which is deployed in summer 2013. So it is truth, when Venture AR mentioned that they are entrusted with more responsibilities and higher value-work from major customers. Any example I found is Oclaro, another customer, from the networking and communication area, is in its second year of outsourcing/transferring its operations from China to Venture's Penang factory. It is mentioned that the products and testing done by Venture at Penang must be verified by Oclaro's customers before supplies will be ramp up. I think that explain why 2013 did not see improvement of results in this area. I believe 2014 will have significant revenue generated from Penang, as Oclaro signed an 5-year agreement with Venture, and the outsourcing is part of their restructuring plan for better profitability.

In short, I agree that the poor results of Venture for the past few years were a result of M&A activities and poor macro-economic conditions. I do not want to go into the customers one by one, but Verifone, NCR, Ailigent, Waters etc did show a good Q1 report and is forecasting growth for the rest of the year.

Next, Venture has the issue of Pioneer status of tax incentive expiring in July and another subsidary in September. Venture is confident in renewing it, and their past records has shown that they could. Given that they have been acquiring new capabilities, I think it should not be too difficult to keep the status. Of the subsidiaries that have their tax incentives expired, GES Manufacturing Services (M) Sdn Bhd has it status recently renewed for another 5 years, and Technocom Systems Sdn Bhd is approved, pending commencment date. So the tax rate should get lower.

What really attract me to Venture is the names of its customers, they are all big global players. I know, Venture might not have bargaining powers over them, but I guess the relationship is stronger than the margins suggest. I also looked at a few cash rich technology companies that gave good dividends, like PCI, and Karin. Karin margin is too low for comfort, around 2% for recent years, and its FCF generation is rather irregular for the past few years. PCI has decent margins and good FCF for most years too, however, it is highly illiquid as CH holdings already owned 75% of the shares (CH holding is another story), also, the recent plummet of earnings is worrying, and there is no information about its customers for me to do checks.

Now if Company is sound, or I least I project  it to be sound for the next 2 years, is valuation attractive. In terms of yield of above 6.5% for a net cash company, I think price is very decent. In terms of earning powers?

I took a look at his historical PE


Forget about the lofty valuations of above 20.

With the exception of the 2008 and 2009 GFC years (Venture has exposure to CDO, and hence is badly affected), the maket seem to value Venture around 12 - 18. I expect Venture 2014 earnings to improve about 10% from 2013. If we take EPS to be 5.2 cents, at 72 cents, Venture is valued at about 14X PE. Valuation is not stretched either, although a PE value of around 12 will provide better MOS. For PE to be 12, either earnings has to jump to EPS of 60 cents, or if we keep our 52 cents earnings, prices has to drop to $6.25 cents. At $6.25 through DCF lens, it will then be a 10% discount at 2% FCF growth. Highly conservative.

Great, we have a no brainer entry place of around $6.25, that yield 8% dividend. The problem is, I don't think It will go there.

So I have to read my previous blog and remind myself to keep my itchy finger away. Waiting is a tougher game to play then I thought. Darned the trader/gambler mentality in me...

Random thoughts: Curbing my traders instinct

My mind is in a state of flux.

I have researched Venture deeper, I will share my research soon. I really like to get it. But I keep persuading myself not to. I know we cannot timed the market. We should just buy a good company that is fairly valued with some margins of safety, regardless of the state of the market. A good company could buck the general market if the earnings are good. But I felt a meaningful correction is really overdue. US market is breaking historical records. Can stocks defied gravity? Also, I am starting to smell greed in the market. My own. Look at the forums and blogger sphere, I saw many new members, many pleased with their recent winning purchases. Nothing wrong with that, but many are either keeping away from analysis deliberately, or just shouting how great a company is. And again, people are lamenting about missing the boats, "can still buy?" etc. 

I am aware market can stay irrational longer than you stay solvent, I think the reverse is true, the market can defied gravity longer than you can endure and fall into the trap too.

How to keep my itchy fingers away? I think the few remainders work better in drowning out the chorus of "buy, buy, buy" in my head.

1) Cash is King. I am not actually holding a lot of cash. In fact, I am 80% vested. My emergency fund is not that big. A new mouth to feed, if any, would most probably eat into that.

2) I have not come out with a longer money plan that is ready for bull-bear-bull, or bear-bull-bear. I am not taking the dollar-average approach. Mathematically, if Market clash by half, your 1 dollar can buy 2 dollars of shares for 2 years, but you could be paying $1 for $1 for 2-3 years or even $1 for $1.5 for a few years too. Mathematically, if the subsequent bull do not return with a vengeance and hit a higher high (The last decade high is not breach yet) , your profits might be meagre in the longer run.

3) Market is due for a correction soon. Out of the several world cups in recent years, only 1 did not come with a period of consolidation, are we are at a market high going into July. The problem is, while I can convince myself that market will correct soon, Venture might not show price weakness.

4) There are other options, hold cash and build it up to 2017-2018, 10th year of bull run.

I am timing the market, yes. I no longer consider myself a value-investor. I think I am more a FA trader. 


Tuesday, May 13, 2014

Portfolio as of 13 May


With the exception of Golden Agri, and newly acquired Singapore Shipping Corp, most of the counters have already reported their most recent quarter result. 

I sold Nam Lee, and Sabana Reit this quarter, and HPHT in the earlier quarter. I just added Singapore Shipping recently.

I think there is no need to talk too much about the gain or loss, as the table is self-explanatory, also, gains or dynamics, depending on market movement, I shall review more about the outlook.

Lee metals: Unstable

Lee latest quarter report show lower margin of Manufacturing and fabrication business, although business volume increased, the revenue decreased due to competition. As Lee metals usually have supply contracts of 12-18 months, I suspect we might expect more of such rough ride. Nonetheless, I believe the business is sound, with 1.3 cents EPS in a quarter, they can still safely payout 2 cents annually. I didn't include austville earnings that will be recognized this year, as this will be one-off.

Inventories has been increasing, it could be till to the fact that they have bigger business volume and also the expanded capacity is slowly coming into play, but we should keep a lookout for the inventories numbers.

APTT: Stable, growth prospect lowered.

APTT is stable, expect tax issue to be resolved, got approval to expand into Taichung. But with further research, I believe the expansion into Taichung will not be easy. Below is what I posted in valuebuddies:

AM fraser has a report on APTT.

Key point: 
1) There is TALK (only) of refinancing its 2020 debts so that they can payout dividends quarterly. Unless the "new" debts allow significant interest savings with the same runway to maturity (e.g.2020), I do not like the smell of it.

Quarterly, semi-annually, what is the big deal? interest costs savings should be the primarily reason, when management gave such lame reasons, I also gave me the creeps that there is something more than meets the eye. Or maybe the analyst just jumping the gun.

i find the forecast growth of AM fraser too optimistic.

If you look at slide 3 of JP morgan research,

400K households at greater Taichung include all three franchise area Dali, Shalu and FengYuan. All three at its own, 133k to 188k household, as compared to its hometurf of 400k households. And APTT/TBC is already enjoying the highest 70% penetration rate at hometurf and is saturated (Growth is flat for a few quarters already.)

APTT is going in to "snatch" business, not link up households, it will not be easy. Assuming APTT entry can increase penetration rate of the 3 counters of greater Taichung to be 70%, it will be 18k, 13k, 16k(very rough estimate), about 47k more households, and there is rather a optimistic projection.

I also do not think APTT is striking 3 counties at the same time. 
If we take ARPU of APTT as a guide, 538 NT$ for cable TV,47K household will just yield 1.05 million S$ revenue.

It seems there is too much hype over its Taichung expansion... The growth should come from its "upgrade" to digital premium channels, or its broadband selling. 

But both are moving terribly slowly even in its home turf. 

Anything wrong with my line of thoughts? appreciate comments

Then again, spending capex of close to 60 million to greater Taichung for 1 million recurring revenue, managment cannot be so stupid right??? They are capable of gaining market shares at expense of competitors???


Hence, I would not accumulate further unless prices fall by a lot.

Lippomall: Stable but overvalued

DPU is 0.68 cents,while nothing to shout about, I am quite happy.

Since, rental guarantee of about 2 million from Pluit Village has expired, but gross income and NPI has not fallen by the same amount as compared to Q4. In fact, occupancy of this biggest mall of Lippo has improved further.

Weak IDR is still a problem, but I am more concerned about operating weaknesses, which is not too bad.

However, at sub 7% yield, there are easy alternatives.

YZJ: Neutral, growth story intact.

Really nothing much to write about. Again the biggest spanner is its HTM, but they have reduced in the last quarter. They will have tax rebate writeback most probably in the next quarter, and relocation fees from their own yards. They are going into to property in a big way, and I believe they will be a meaningful contributor in the future, but the verdict in this segment of the business is still out.

SPH: Unstable

Their last quarter report of their core media business is horrible, but you can look forward to Seletar mall opening. The price is surprising strong too. 

SSC: Stable, visible growth

Readers should read the thread at valuebuddies. Basically, I just checked the fact and find them to be sound and correct. They have 2 long term charters, and a third PCTC are coming next year. They bought logistic Cougar business at a steal. Although yield is at a low 4%, it is sustainable and has high potential for increase by next fiscal year. One should not expect anything more than 1 cents dividend this year. The PCTC fleet growth is the most moderate compared to bulkers, tankers or containers,and yet automobile are in their upcycle. I believe the case for a oversupply situation in the case of BDI is low, Anyway, the third PCTC they are receiving is also on long term charter.

(Read Nick and Learner88 Post)

OK...see ya

Saturday, May 3, 2014

Random thoughts: Reflections

Recently, I have a lot of questions on my mind. I do not have answers to many of these.

I read recently on CW and SMOL thoughts about financial investments. SMOL think of himself as a swing trader with a horizon of 6-18 months when equities is concerned. Hmm.. My record of buying and selling is not too far off from that, in fact, I think I have a strong trading mentality. Not that there is anything wrong with that, but it kinda of clashes with what I have in mind.

I recently sold Sabana and Hpht. Both have a holding period of only 6-9 months. For both, some assumptions made are totally wrong, so I guess it's totally fine to switch out. Not much of a loss.

Then the next question, how often can we always get our assumptions right? When market turns, most assumptions will change. Valuation might change too. No such thing as intrinsic value that is static. Unless u are investing in a solid blue chip where u are comfortable about it business viability, do u dare to average down?

How much cash to hold for ammo? CW has a 3 M approach, of which he think mindset is most important, follow by money then method. I think all 3 are interlinked.

Most bloggers blog about methods, I have an inkling if we are in a bear correction mode, eg a 20% fall, most of us will have some losing counters in our portfolio, in a severe 40% bear, our portfolio would have plummeted. Does that make our method lesser? I do not think so, but I guess many beginner readers will think. Hmm.. He not that Zhun afterall. If we plan for bear, and super bull arrive, do we benefits? Are our investment plan really bull - bear inelastic? Meaning we might make paper losses but generally have a strong returns over a long term that beats inflation and leave some more? (5-7% annually) no need to be a straight line, but can we withstand the test of time, and test of discipline?

Lastly, I have my fair shot of stock picking, results is mixed at best. Although I might have spend a lot of time and effort researching, things still turn out wrong. Might get better with experience. But I realized the convention wisdom of always trust yourself and be misconstrued as dun trust others.

I always read postings at valuebuddies. I know of a few who are more analytical than me. If I know roughly their entry price, shouldn't I just follow if after checking, their analysis is sound? That would be more productive isn't it? I have not followed anyone in that manner yet. Preferring to find my own pot of gold. Maybe I will try a different method. Some researched by my own, some tagging along, having a money plan for bear and bull. (As mentioned by drizzit ) in one of its post. I find I do not wished to tag along because of ego more than because of convention wisdom. If we can buy funds and let someone manage our money, what's wrong with tagging of are sure of one capability. As long as you know nothing's bao Jia can Liao

P.S: for bloggers whose names are mentioned here, I hope I didn't infringe on your "copy" write. cW, drizzit and SMOL and valuebuddies forum links can all be found in the right side of this blog.