Found another interesting HK stock - Sundart Holdings /1568.HK/. They are one of the leading fitting-out companies in China, Hong Kong and Macau and work with large office, hotel and residential complex clients. Market cap is HKD 650m, net cash/investments is HKD 1.4bn (yes, 200%+ of MC, it was 300%+ as of YE21, but they settled some trade payables) and avg. profits since 2015 are ~HKD 400m/year. At 10x PE + net cash this should be 700% higher and up until 2020 it was trading 1200% higher. They have suffered this year due to the construction meltdown, but are still very profitable. My main concerns here are the increasing amount of overdue receivables and the relatively low cumulative payout of 34% since 2017 (hence the huge cash pile-up). Still, at such a huge discount and a 23% trailing div. yield (at 40% payout), I couldn't resist. Unless the numbers are completely cooked I don't see how one would not make a very decent return here in any scenario. Do you have any method of searching for financial shenanigans/red flags on Chinese companies? I checked webb-site.com from your HK article earlier this year, but didn't find it particularly useful. Curious to hear your thoughts.
I guess the biggest risk according to him is some sort of a loss transfer from the majority parent company. But then that risk would apply to most cheap Chinese companies nowadays, incl. some from your HK posts (I also bought 3818.HK and 1277.HK, both of which have 50%+ insider ownership). Is this why you skipped it over?
Looked closer into this and it actually looks fairly interesting. I get the impression it was overvalued for some reason, and a lot of shareholders didn't hold it for fundamental reasons. And now with Chinese real estate panic it overshot downwards.
Actually less exposure to China than my first impression too. And it should do well when China reopens and Macau recovers. Since Macau was a significant portion of their profit over the past couple of years.
Cheers IJW - some great posts. Need you back on Twitter, I was searching for China opening ideas that weekend and literally have no one to bounce ideas off.
I feel like I need someone who trades similar to me, perhaps incl UK and special sits, for like a Sunday debrief, playing devils advocate on ideas for the week and sharing resources and stuff but I may be some time finding that.
Kinetic Development - from financial point of view looked great, but when looking into their website, seen that they operate a single coal mine 6km2 size, and with the valuation of around 700M USD, I don't know anything about coal, but it looks like... expensive.
By looking their their investor relations pages, I have noticed a few yellow flags for me:
- most of their equity in "Intagible assets" probably estimates of remaining coal
- lending money to private companies
Green flag is that 5 year dividend return is really good and it has some insider buying.
Is 6km2 too little? It is ~2.45 by 2.45km. I don't know enough about coal mining to know if that is too small tbh.
They did recently purchase a large exploration asset. A bit of a yellow flag as well. Controlling shareholder owns over 60%, so it is probably not a complete waste.
They seem to think they have some sort of operational advantage:
"In addition, the Group will continue to promote strategic mergers and acquisitions to achieve diversified business development. The Group will strive to complete the final procedures as required under the Listing Rules for acquisition of Ningxia Sunshine on or before 15 September 2022, and replicate the existing operational advantages to the operation of Yongan Coal Mine and Weiyi Coal Mine in Ningxia, optimize product mix with multiple coal types, expand business presence and further increase profit growth points, thereby creating greater value for the society and shareholders"
Found another interesting HK stock - Sundart Holdings /1568.HK/. They are one of the leading fitting-out companies in China, Hong Kong and Macau and work with large office, hotel and residential complex clients. Market cap is HKD 650m, net cash/investments is HKD 1.4bn (yes, 200%+ of MC, it was 300%+ as of YE21, but they settled some trade payables) and avg. profits since 2015 are ~HKD 400m/year. At 10x PE + net cash this should be 700% higher and up until 2020 it was trading 1200% higher. They have suffered this year due to the construction meltdown, but are still very profitable. My main concerns here are the increasing amount of overdue receivables and the relatively low cumulative payout of 34% since 2017 (hence the huge cash pile-up). Still, at such a huge discount and a 23% trailing div. yield (at 40% payout), I couldn't resist. Unless the numbers are completely cooked I don't see how one would not make a very decent return here in any scenario. Do you have any method of searching for financial shenanigans/red flags on Chinese companies? I checked webb-site.com from your HK article earlier this year, but didn't find it particularly useful. Curious to hear your thoughts.
This thread has more info:
https://nitter.net/mrierathelen/status/1528130215804903427#m
I guess the biggest risk according to him is some sort of a loss transfer from the majority parent company. But then that risk would apply to most cheap Chinese companies nowadays, incl. some from your HK posts (I also bought 3818.HK and 1277.HK, both of which have 50%+ insider ownership). Is this why you skipped it over?
Looked closer into this and it actually looks fairly interesting. I get the impression it was overvalued for some reason, and a lot of shareholders didn't hold it for fundamental reasons. And now with Chinese real estate panic it overshot downwards.
Actually less exposure to China than my first impression too. And it should do well when China reopens and Macau recovers. Since Macau was a significant portion of their profit over the past couple of years.
Cheers IJW - some great posts. Need you back on Twitter, I was searching for China opening ideas that weekend and literally have no one to bounce ideas off.
Maybe I could set up some sort of subscriber chat. I got 1100 subs now, so there should be enough people probably.
I'd be up for that and would try to contribute.
I feel like I need someone who trades similar to me, perhaps incl UK and special sits, for like a Sunday debrief, playing devils advocate on ideas for the week and sharing resources and stuff but I may be some time finding that.
Kinetic Development - from financial point of view looked great, but when looking into their website, seen that they operate a single coal mine 6km2 size, and with the valuation of around 700M USD, I don't know anything about coal, but it looks like... expensive.
By looking their their investor relations pages, I have noticed a few yellow flags for me:
- most of their equity in "Intagible assets" probably estimates of remaining coal
- lending money to private companies
Green flag is that 5 year dividend return is really good and it has some insider buying.
Is 6km2 too little? It is ~2.45 by 2.45km. I don't know enough about coal mining to know if that is too small tbh.
They did recently purchase a large exploration asset. A bit of a yellow flag as well. Controlling shareholder owns over 60%, so it is probably not a complete waste.
They seem to think they have some sort of operational advantage:
"In addition, the Group will continue to promote strategic mergers and acquisitions to achieve diversified business development. The Group will strive to complete the final procedures as required under the Listing Rules for acquisition of Ningxia Sunshine on or before 15 September 2022, and replicate the existing operational advantages to the operation of Yongan Coal Mine and Weiyi Coal Mine in Ningxia, optimize product mix with multiple coal types, expand business presence and further increase profit growth points, thereby creating greater value for the society and shareholders"
As I remember they had bought large value investments from the controlling shareholder andthe I decided to sell.
Love this blog.wish I had read your hong kong stocks post (the one in May) earlier.
Long kaspi ,lvji technology, snack empire and finvolution.