Fusion Investor Chatbox

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Disclaimer: As usual, you are solely responsible for your trading & investing decisions.

Sunday, April 29, 2007

Comment Moderation

Dear all,

If you have been following investssmart chatbox over the last few months, you may know that I was originally quite reluctant to blog. A key reason is because I didn't want to be distracted from doing what I love doing which is researching under-valued stocks and making profitable investments. Writing a post takes time ... reading, thinking and responding to comments by people with clearly other motives is simply a waste of everyone's time, besides reducing my own clarity of thought and distracting me from making the right and timely investment decisions. As a retiree, I simply have no wish to deal with nor argue with clearly stubborn people with other motives.

As a result, I have reluctantly decided to apply comment moderation. This means that before you'll see any comments posted here, it needs to be approved by me first. My criteria for posting a comment is simple. If I feel the comments are genuine, relevant and made in the interest of wanting to know more about the topic, then, it'll be posted. It might take some time, because I don't always check this blog nor my email but I will try to do so regularly. If I am slow to post a comment, my sincere apologies, but sadly, it is a fact of life that all it takes is just one rotten apple to spoil the entire basketful. Personally, I believe in quickly discarding that bad apple as soon as possible.

I hope comment moderation will not stop the genuine readers from commenting a valid view, even if their views are opposed to mine. My personal observations, inspired by Soros is that I too am also fallible, and I sincerely believe that one learns more when one listens and carefully consider opposing views .

It is possible I could be mistaken in my judgement. Hopefully, there will be few and far between. I normally give the initial comment the benefit of the doubt. However, where I see a 2nd recurrence, I will not hesitate to act.

As you can see, I clearly dislike moderating comments - it's simply extra work for me. But in view of recent experiences, I believe this is necessary, to save me time in the long run, and allow me to post many other numerous topics that I feel will be beneficial to like-minded individuals.

Hopefully this will improve our blogging experience going forward.

Thank you for your kind understanding.



Yew Khim said...

hi Seng,

I am from Singapore. 50% of my portfolio is in M'ia stock.

I have benefitted greatly from your posting on investssmart and your personal blog.

Wonder whether you are familar with EG industries bhd? it's NTA is around $1.70 and it's share price is hovering around $0.69-$0.70 for the past few mth.

it is a profitable company for the past few consecutive quarter and PE ratios is abt 3-4 times only. maybe their biz is not exciting and results will be poor that's why the mkt is valuing it at such a low PE ratio.

see http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_b9e24150-cb73c03a-940b8400-4155fc43

I also have a copy of the research report and their annual report with me (but unable to attach for u)

I have send a email to the owner of investssmart.blogspot but has not gopt a reply from him.

If you are not into this stock and/or have no time to take a look, it's ok as I know u are a busy person.

Thanks a lot

Seng said...

Hi Yew Khim,

Thanks for the idea suggestion.

I haven't followed EG, so, treat my comments as an initial impression on this topic.

EG is a micro-cap stock listed on 2nd Board. Besides generally high-tech business (computers, wireless products, consumer electronics), it also manufactures and sells solid wood parquet...

Whilst its price is trading significantly below its NTA, my concern is its cashflow and what NTA represents.

E.g. at 31/12/06, Net Assets = $90M. PPE = $72M, Inventory = $27M, Receivables = $22M, i.e. the sum of all 3 already exceed Net Assets. What it means is that your Net Assets (or Shareholder Funds) is really tied up in its PPE, Inventories and Receivables. Personally, I don't like that for several reasons.

1. Inventories in a high tech industry sometimes don't really have the value today, compared to the date it is valued at 31/12/06. It reminds me a bit of MEGAN I guess. Perhaps not a fair comparison, but I couldn't tell from its annual report what % is actually timber business and what % is actually high tech inventories. This uncertainty makes me nervous.

2. It's receivables is also high, and I note there is concentration in 1 large customer. That worries me a little bit too, as I don't know who that customer is, and to what extent the receivables can be collected / not collected. The uncertainty worries me too.

3. I note the company continues to expand its PPE, and its borrowing is fairly high. That worries me too. I just don't know to what extent it is true PPE expansion, and to what extent it is normal operating expenditure classifed by creative accountants as capital expenditure to artificially show high earnings. The uncertainty worries me too.

4. Generally, I'm not competent enough to evaluate the future of high tech businesses as I don't know what they will be like in say 5 to 10 years time.

Whilst the Earnings may appear large in relation to its price, it seems the earnings is ploughed back into PPE, Inventories and Receivables, instead of generating cash for its shareholders.

In short, from a long-term investment perspective, I'll probably pass the opportunity based on what I've seen so far, and the little that I know about this company.


Yew Khim said...

Hi Seng

Thanks for the reply. I will continue to monitor EG Industries.

What prompted me to look at this stock is because an insider (a employee of the company - big fly or small fry that i dont know) told my dad to accumulate this stock.

Seng said...

Just a short note to say be careful when trading based on tips.

Friends generally mean well, but they may be wrong unknowingly. An employee is often not in a position to know, unless they are either the M.D. or CFO. For the tip to be successful, it would depend on a lot of factors. E.g. that the M.D. has evaluated the factor and potential impact correctly, that the employee has obtained that info in a timely manner, that the employee is not misled by the M.D., that both the M.D. and the employee are putting a lot of their own monies into the stock (and you know the date, price, and amount they bought) and by the time the info gets into your hand, it is still timely to act and no new factors have emerged that invalidate the previous reason, etc.

But if you completely trust your source (and have absolutely no question about it), then, my only caution is not to invest too much. As a start, it should not be more than 5% of your stock portfolio (in case it turns out to be wrong), and it should be much less than the amount bought by the insider.

The appeal of insider info is that they don't occur often, and only comes once in a blue moon ... but with enough insider info and a million bucks, I'm sure one will be a bankrupt if follow all these rare insider tips ...

Just my 2 sen worth.