Wednesday, July 25, 2007
Level13 investor creed
Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything merely on the authority of people who are above you. Do not believe in anything simply because it is found written in books. But after observation & analysis, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it.
Wednesday, July 18, 2007
Just for laughs
Classic Definitions & Cool Meanings:
1. Conference : The confusion of one man multiplied by the number present.
2. Compromise : The art of dividing a cake in such a way that everybody believes he got the biggest piece.
3. Conference Room : A place where everybody talks, nobody listens & everybody disagrees later on.
4. Classic : A book which people praise, but do not read.
5. Office : A place where you can relax after your strenuous home life.
6. Etc. : A sign to make others believe that you know more than you actually do.
7. Committee: Individuals who can do nothing individually and sit to decide that nothing can be done together.
8. Experience : The name men give to their mistakes.
9. Philosopher : A fool who torments himself during life, to be spoken of when dead.
10. Diplomat : A person who tells you to go to hell in such a way that you actually look forward to the trip.
11. Miser : A person who lives poor so that he can die rich.
12. Father : A banker provided by nature.
13. Criminal : A guy no different from the rest... except that he got caught.
14. Boss : Someone who is early when you are late and late when you are early.
15. Politician : One who shakes your hand before elections and your Confidence after.
1. Conference : The confusion of one man multiplied by the number present.
2. Compromise : The art of dividing a cake in such a way that everybody believes he got the biggest piece.
3. Conference Room : A place where everybody talks, nobody listens & everybody disagrees later on.
4. Classic : A book which people praise, but do not read.
5. Office : A place where you can relax after your strenuous home life.
6. Etc. : A sign to make others believe that you know more than you actually do.
7. Committee: Individuals who can do nothing individually and sit to decide that nothing can be done together.
8. Experience : The name men give to their mistakes.
9. Philosopher : A fool who torments himself during life, to be spoken of when dead.
10. Diplomat : A person who tells you to go to hell in such a way that you actually look forward to the trip.
11. Miser : A person who lives poor so that he can die rich.
12. Father : A banker provided by nature.
13. Criminal : A guy no different from the rest... except that he got caught.
14. Boss : Someone who is early when you are late and late when you are early.
15. Politician : One who shakes your hand before elections and your Confidence after.
Monday, July 16, 2007
Raising capital at Contel
Contel Corporation Limited, a company listed in singapore. It is a ODM/OEM maker of digital media products, is driving its margin-focused business strategy on four fronts – revenue stream, product range, clientele, and geographical market reach.
Recently there are people who recommend me the stock due to its low P/E and high growth story.
However, I would urge caution at putting money into the company contel.
Below is the reason using the FY2006 annual report as reference.
It seems like contel is in urgent need of capital As shown in the annual report, it has US$6 million at the end of last year. To solve their problem, contel has issued convertible notes to Advance Opportunities Fund and collected S$26.5 million in the process. At first glance, it seems gd as contel does not need to pay interest on the notes. But it is clear that in the past months, Advance Opportunities Fund have converted all the notes into shares. So in short, they are actually raising funds through the issue of more new shares. Basically, the cost of capital is the highest for equities as compared to bank loans or bonds. An investor will expect 8-10% return in the long run for the shares.
My question is, why cant contel borrow S$26.5 million from the banks and pay the normal interest rate? With the conversion, there are now 417 million shares outstanding and the minority shareholders’ stakes are diluted.
However, the worst part is this:
Suppose Advance Opportunities Fund did not sell any of the shares after the conversion, it should be holding 167 million shares. With this amount of shares, it should be a substantial shareholder. However, I have yet to see any announcement of this nature!! This has led me to conclude that Advance Opportunities Fund has been selling away the shares that it converted in the open market so that it will always hold less than 5% stake at any one time. Seems that Advance Opportunities Fund is not too eager to hold on to the shares.
The historical P/E for the company at the current price of $0.24 is about 4. This value is quite low and i believe that is the part attractive to investors.
But one have to understand that for this low P/E story to hold, contel have to grow its bottomline by 20% or more. Below is a simple example why this is so.
In the FY2006 annual report, its revenues are US$178.9 million.
Assuming there is a revenue growth of 30% to US$232.57 million in FY2007 and the net profit margin remain unchanged, the estimated net profit will be US$13 million. With the current outstanding shares of 417 million, the estimated EPS is US$0.031 (S$0.0465) and the forward P/E is 5.16 at the current px of S$0.24. So I will say that the current price is a bargin ONLY IF it can achieve a net profit growth of 20% or more.
Besides, there is no free cash flow to speak about for the past 2 years and the profit margin is low.
Recently there are people who recommend me the stock due to its low P/E and high growth story.
However, I would urge caution at putting money into the company contel.
Below is the reason using the FY2006 annual report as reference.
It seems like contel is in urgent need of capital As shown in the annual report, it has US$6 million at the end of last year. To solve their problem, contel has issued convertible notes to Advance Opportunities Fund and collected S$26.5 million in the process. At first glance, it seems gd as contel does not need to pay interest on the notes. But it is clear that in the past months, Advance Opportunities Fund have converted all the notes into shares. So in short, they are actually raising funds through the issue of more new shares. Basically, the cost of capital is the highest for equities as compared to bank loans or bonds. An investor will expect 8-10% return in the long run for the shares.
My question is, why cant contel borrow S$26.5 million from the banks and pay the normal interest rate? With the conversion, there are now 417 million shares outstanding and the minority shareholders’ stakes are diluted.
However, the worst part is this:
Suppose Advance Opportunities Fund did not sell any of the shares after the conversion, it should be holding 167 million shares. With this amount of shares, it should be a substantial shareholder. However, I have yet to see any announcement of this nature!! This has led me to conclude that Advance Opportunities Fund has been selling away the shares that it converted in the open market so that it will always hold less than 5% stake at any one time. Seems that Advance Opportunities Fund is not too eager to hold on to the shares.
The historical P/E for the company at the current price of $0.24 is about 4. This value is quite low and i believe that is the part attractive to investors.
But one have to understand that for this low P/E story to hold, contel have to grow its bottomline by 20% or more. Below is a simple example why this is so.
In the FY2006 annual report, its revenues are US$178.9 million.
Assuming there is a revenue growth of 30% to US$232.57 million in FY2007 and the net profit margin remain unchanged, the estimated net profit will be US$13 million. With the current outstanding shares of 417 million, the estimated EPS is US$0.031 (S$0.0465) and the forward P/E is 5.16 at the current px of S$0.24. So I will say that the current price is a bargin ONLY IF it can achieve a net profit growth of 20% or more.
Besides, there is no free cash flow to speak about for the past 2 years and the profit margin is low.
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