Tuesday, September 7, 2010

The Small Caps Stock Adventure

No investment has been done since the beginning of 2010 till today 7 September 2010. Stocks, especially blue chips ones, have been running up like crazy. We missed an opportunity last week to load some more Singpost due to trying to gain a 0.01 cent advantage...damn it! See how far it rose from $1.13 to $1.23 within 1 week!!!Arrgh. I spotted the aggressive quantity of share buybacks of Singpost, whenever it touches $1.12 or $1.13 and therefore entered with CONVICTION but missed just cos i queued at $1.12."%%$#*@&@^!%@#$@%@". But its alright..hehe..another one will come as always and i have vested in it last year, so nothing to complain. Just for your information on the performance of Singpost, up up and away!

Having about 90% of my portfolio vested in blue chip stocks during the crisis,the valuation of such stocks are not very attractive, having reached near their 52 week highs and price exceeding their net asset valuation by quite a bit. Europe and US seems to be sputtering along and the asian region seems to be doing better. In very general terms, the economy is on a better footing than before though risks still remain but the probability of going back to the crisis again is low. (We are still keeping some opportunity cash just in case). Investing in companies that are focused on the asian region seems like a logical choice now. Given this backdrop, we have started to look at small cap to medium cap stocks whose revenue is predominantly derived from asia.Honestly, we find it a challenge to research and source out for the perfect small-medium(SM) cap stock. Unlike the blue chips ones,for SM ones, there will always be an aspect to it that is an eyesore like everything will be good about it, but they are giving out too much rights or everything about it will be good but directors have bought it cheaply at low price before, so buying it at a higher price feels damn sian to me. Nevertheless, i bought into Tai Sin today having considered the pros and cons.

We like it that they are giving out dividends consistently every year. This shows that they are shareholder oriented. This is bloody important. This stock can be a capital growth stock, and dividends along the way just makes the wait for the capital growth more bearable. At current price, dividend yield is approximately 7.5%. According to their latest financial statements, there is one upcoming dividend ($0.01)as it has been recommended by the board, but yet to be reflected on SGX website as of now.

We like that their current price is below their Net Asset Value per share.

We like that their directors are buying at $0.225.Go to Tai Sin insider trades. If you look further back through the months, some of their directors have paid prices ranging from $0.34 to $0.15. See for yourself. The interesting part is that some of the shares were given as a gift for a daughter's wedding from the parents and uncles. This further point to the likelihood of focus on shareholder value. Come on, will you give your close kin shares which wont add value. Possible, but unlikely.

We like it that they are pretty near their 52 week low. See for yourself....you unbelieving soul!

Just for your information, here is a look at the historical prices since 2005. Tai Sin has hit a high of $0.595 before in 2007.

On a final note, go look at theprojects they have done in the past, from circle line mrt, marina barrage, bedok water reclaimation plant, sentosa development project, changi airport....Remember the national day rally about the $60 billion upgrading rail lines government project announced by PM.....hmm maybe,maybe, only time will tell. As an endnote,this stock is still not perfect.........Do your research yourself!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team


  1. Hi TSRFIAPF! I would place a stop at 0.195c and perhaps add on positions to let it ride once it breaks 0.225c. Are these prudent levels to look at?

  2. The high price of 0.575 in 2006-2007 is due to high copper price. Copper price has fallen quite a bit now and this is affecting their cable and wire segment. Just compare their revenue for 2008 and 2009, a drop of approx 24%.

    IMHO, I doubt price will go back to 0.5 level as I don't forsee copper price to increase in the near future. Based on my DCF, price should be between 0.256 - 0.30 depending on the discount factor.

  3. Hi Axt,

    Just wondering, why is the increase in copper prices beneficial to Tai Sin?

    I have read analysts reports about Tai Sin and they have also said that the high revenue last time was due to high copper prices.

    IMHO, i feel that Tai Sin uses copper as an input to make cables, so shouldn't a high copper price translate to high input of raw materials for tai sin which is no good?

    Only if Taisin produces copper or owns a copper quarry ( like BHP billiton or Rio Tinto) will it be good for them if the copper prices increases sky high.

    Honestly, i'm still quite puzzled why many people say what you are saying.

    Pls feel free to correct me if i am not seeing anything properly.


  4. I will try my best.

    For companies involving metal (copper, aluminium etc), you have to look at LME metal price and the company inventories. The metal price is the suppliers price for refined copper in bulk before fabrication into tube or whatever. Inventories include finished goods, work in progress and raw material.

    The LME price moves up or down depending on whether the economy is good or bad, hence there is demand for copper or not, When there is no demand I don’t think it make sense for Tai Sin to stock up their inventories. It is only when Tai Sin managed to secure more projects and/or when they anticipate an increase in demand of their product will they starts to stock up their inventories. In 2009 annual report, you will note they have writes down their inventories substantially because of the sharp market plunge. Even if they have hedge against the metal price, I think Taisin including many other companies did not expect the massive fall in worldwide demand due to the financial crisis, hence the massive reduction is copper price.

    As regards to copper producers, my guess is they just stop/reduces their mining capacity. As in the case of TaiSin, they are stuck with the high inventories cost and therefore they have to writes down their inventories. If you look at other stocks such as AEI, Lee Metal, NSL you will see similar trends.

    I hope the above make sense? Also would appreciate any experts to correct me if I’m wrong.

  5. Tai Sin shot up to $0.28 and receded. What should be a fair value?

  6. IMHO, for a small cap stock, a fair value should be its NAV per share.

    Unless you have undisclosed insider information.



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