Regarding Fujian Zhenyun, is its stock price still depressed by its accounting discrepencies? Its eps is almost similar to its last traded price. Are investors still afraid that the account books are cooked?
The fear of accounting fraud, poor corporate governance, bankruptcies, etc has caused the majority of investors to have a phobia for S-chips regardless of their fundamentals or the reliability of their accounts – playing safe; hence, the current very depressed stock prices and ultra low valuation of many S-chips as compared to non S-chips. In the case of Fujian Zhenyun, its Special Audit also did not uncover any serious misdeeds or missing cash pile. As a matter of fact, one of the Independent Directors told shareholders at an AGM that when news of accounting problems surfaced, he flew over to Fujian to arrange a transfer of money from one bank to another in order to satisfy himself that the cash in the bank was really there. [Some Chinese companies were known to collude with bankers to show auditors “cash pile” that would just vanish as soon as the auditors left the bank].
The question now is – Is Fujian Zhenyun worth a bet? My answer is: YES – for those willing to take calculated risks and to wait for the bull market to return and for sentiments towards S-chips to improve. History has shown that the herd in the stock market is always fearful of losing money, especially in a bear market with plenty of bad news. When the market shows sign of recovery (like now), the fear is that the recovery is only temporary and that a pull back would soon bring down prices again. In the event the recovery were to continue with the market scaling new heights, the fear of losing money would slowly be transformed to fear of missing out on opportunities to make money. If the economy recovers and inflation is a factor, the market would always surpass its last record high like before. When such a bull market started to mature, fundamentals started to lose its importance as half-bankrupt stocks could also rise to incredible heights. Many undervalued and out-of-favour stocks could give returns of 2 or more times provided they have not vanished or go into demise by then. NO – for those who are risk-averse or have negative mindset.
Negative for Fujian Zhenyun is the tighter credit controls have resulted in lower business vol in 2H2011. They have already given profit guidance/warning.
Positive is .....Quote observer2 in an earlier posting >>>>
According to the company’s announcement to SGX, the chairman bought 1,600,000 shares at 17.5 cts through married deals on 4 January 2012. The purchase price is about 16% of Fujian’s NAV and 28% of its IPO price of 62 cts. It is only in a very depressed market like now, that one can get stocks of viable company at such tremendous discount.
Wild card is..... final dividend. Will it be as good as last year at about 1 cent Singapore?
Intriguing thing is, they gave an interim dividend last year. First time ever they gave interim. Which is hugely positive, unless it means they will give less in final dividend.
Dear Forummers,
I counted my lucky stars about the recent market rally. The comments that I made on 25 and 26 December still stand. 2012 may turn out to be a really good equity market year.
Having said that, I have decided to take profit on the recent rally. My portfolio which comprises of blue chips, s-chips and micro-cap stocks have hit my target returns of more than 25% returns.
Profit made during these 40 days of 2012 will allow me to pay for a small apartment in the east side of Singapore and collect some nice rental income.
Good luck and make sure you do your homework before you take on Mr Market.
