More On Sino Hua-Ann
Monday, September 1, 2008
Blogged the other day, Regarding Sino Hua-An
Here are some comments between me and Totomaster.
TOTOMASTER said...
- well... flat earnings bcoz of their plant's capacity, tats y over the quarters they are making a fair RM30million...
yes.. u r right that coke has got a bit of a run up previously but their raw materials coal also when up (gone up more than coke in % wise)... so huaan ending up having flat earnings n contraction of margins is understandable...
- Dearest Totomaster,
I do hope you have now realised it that I am only merely stating it as it is.
The flat earnings is flat is flat.
One can have one's own reasoning and views and perhaps even accepting its flat earnings performance but again do realise that i am only stating it as it is and if you look at the stock performance, i am sure you get the sense that this stock is drifting lower. Why? Could it be that there are a bunch of folks who find the stock unattractive because the stock has got no growth?
Regarding the coke issue. Crudely put, some might ask in a very simplistic way, "Bull run but cannot make money?". Now that would be a CONCERN yes?
Put it in a bigger perspective. Take the palm oil bull run. If you come across a company that is a planter but cannot make MORE money in the bull run, would you be skeptical?
Last but not least... take my perspective on your comments. Yes, your reasonings are valid. Seriously, I see no wrong in what you are saying. However, on a broader perspective, you are trying hard to explain why Huann is not doing as well as it should have.
Which means, in regardless of the reasonings, Huann as a business, has underperformed.
Would this be an acceptable perspective?
TOTOMASTER said...
- well.. if the coke price runs up faster than the coal or after their expansion plan n huaan still cannot make more money then this company is no doubt very questionable...
yes u r right with your statement "bull run (on coke) cannot make money is a CONCERN", but one must understand the process of producing coke; which involves coking coal as a raw materials (so there is a contributing factor in determining their profitability, ~25T of coal produces ~17.5T coke)...
now it clearly shows that the coal has outrun the price of coke, so with the results they produce is not too shabby...
your comparison with a plantation company is rather invalid since there is not contributing factor in between... compare with a plywood company will be more relevant here...
yes no growth is a concern for investor. so with their new expansion coming on stream next Q change your "skeptical" views?
my guess "NOT" right??
- Dear Totomaster,
"yes no growth is a concern for investor. so with their new expansion coming on stream next Q change your "skeptical" views?"
Well... a company having 'potential' is one thing.. actually performing and delivering for the shareholders is another.
As it is... what's ur frank evaluation of Huann?
TOTOMASTER said...
- imo, huaan results is good but not great...
for u i guess, if the Q-Q earnings are flat then its no good... m i right?
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Dearest Totomaster,
I guess you do not understand me well. What I think of the stock really matters not and if you really think Huann is good then it is good as long as your own reasoning is justifiable and last but not least, I really do not think you need to 'persuade' me to agree with you and vice verse.
Anyway let me share some thoughts, ok?
I had not computed the net margins because I thought it was rather so obvious. Anyway here is the table again.
And let's look at the company's net profit margins.
- 1) 07 Q4 Revenue 233.375 million. Net Profit 37.442 million. Margin = 16%.
- 2) 08 Q1 Revenue 290.798 million. Net Profit 35.567 million. Margin = 12.2%.
- 3) 08 Q2 Revenue 434.426 million. Net Profit 36.916 million. Margin = 8.5%.
How would you interpret such earnings?
Look at the revenue, its sky rocketing but the company has NOT been able to turn the extra, extra revenue into more cash and instead the net margins are deteriorating. From 16% to just 8.5%.
How? How would you evaluate such earnings? Good? Average? or Poor?
How about some comparisons? I am fortunate enough that a Sahamas forum member posted some interesting links for me. Take a look at this forum posting #61 made, http://sahamas.net/forum5/5799-7.html
- Hong Kong listed China Coal Group Corporation indicated recently that due to strong demand for coke from domestic market, the company’s profit in coke business rose up by around 236% in H1 to RMB726m (USD106m).
The company produced about 2.21m tons of coke in H1 of 2008, up by 41% in year-on-year. Coke sales volume was 2.4m tons, up by 8% in year-on-year. Domestic price and export price climbed up by 100% and 117.7% in year-on-year.
Huang Jingan, the chairman of China Coking Coal Industry Association, also noted that total profit in Chinese coke producers was RMB12.5bn (USD1.8bn) in H1, up by 200% in year-on-year, according to statistics on key coking producers.
However, market analysts believe that due to the slow down of the growth rate of steel output, the demand for coke should be weakened in H2 this year. “Although the price remains high, coke price already begin to drop back,” a coke producer said.
Two massive indicators.
1. Mr. Huang Jiangan noted that the total profit in Chinese coke producers were up 200% in year-on-year. ( Compare this to Huann. Why is Huann performance not the same?)
2. Although the price of coke remains high, the coke price has already begun to drop back.
Is this not a worry?
Finally, I do hope these set of second opinion helps and do remember my views could be flawed and all the best in your investment.
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