Hi Harlequin Just to share my thoughts with you : Although some investors have stopped looking at s-chips since the blew ups of some china companies, I believe not all of them are bad and if you do proper homework, the potential reward is still quite good. Here are my selection criteria for s-chips :
1. I prefer to look for recently listed company since new company is less prone to run into problems within 12 to 24 months of listing, sino grand was listed in nov 2009 so that is good for me
2. profit base not too big : I prefer company whereby profit base not too big so they can deliver more sustainable growth for 1 to 2 years at least. Sino grand profit was RMB66m in FY09. If we add back ipo expenses of 16m, that will be about RMB82m. I think that is a nice base to growth at least 20% per year for next 2 years.
3. PE low . market forecast (DMG and Phillip) sino grand profit for 2010 is about RMB90m so the eps is about 7.5c sing. When it was 20c, the PE is only 2.67 times! To me that is like investing in pre-ipo deal where pe is usually less between 2to3x, definitely cheap enough for me.
4. earnings growth potential : sino grand new beverage business only started in 2H2009. So when they report 1H2010 results in august, we should expect pretty good performance because 1H2009 has no beverage business so the base is lower.
5. Investor friendly management : I also prefer company that is more open or willing to communicate with investors regularly. As I shared with you that sino grand has an internal investor relations officer plus they have been actively meeting investors to profile the company, that is also a plus point. In fact the recent roadshow is one of the most active roadshows that I have seen for a company, presenting to 6-7 brokers all within 8 days shows that the company is generating good interests.
6. sector : I personally like F&B sector, especially the potential of china market. Sino grand only recently started to launch in-house brands of canned food and drinks for the china market. Since the base is low for this new business, it means upside potential should be quite good.
7. chart : this is the last and most important point for me. When I highlighted the stock, the short term signal started turning up and the mid term indicators also turned bullish for me when it closed above 24c, so Mr Chart also agrees it is attractive then
of course investing comes with risks but if we are prepared to take some risks (always remember to set cut loss point) and do some homework, there are still some good picks out there once in awhile that's all I have to say, hope you enjoy reading my 2c comments
happy trading