Still Who Wants Huann?

Received a comment on the posting Who wants Sino Hua-An? ( see also Regarding Sino Hua-An )

• Ivan's investing diary said...
  
  Moola,
  
  No doubt , you are figure expert. But I think you do not have a good understanding on how to run a business.
  
  1st
  Revenue increase, margin drop as its raw material are increasing faster than its products sold. On the other hand,If commodities price drop , its cost of raw material will drop as well. That translate to lower raw material and better margin.
  
  2nd
  The profit of the company in 2007, 127,522,000.
  
  Culmulative profit for 2 Quater 2008
  72,484,000
  
  Projected 4 Quater (same as 2007)
  128,000,000 ( Total)
  
  Market Value of the company
  1,122,307,817 * 0.33 = 370,361,579
  
  thus we get
  
  pe= 3
  
  Its cash reserve on 2008 = 75,739,000
  
  The company is debt free
  
  Analysis
  ---------
  Even earning is flat for 3 years i will get the stock for free on the 4th year. More than 33% a year plus its cash reserve.
  
  
  3rd
  Yes, you can buy cyclical stock (timber, plantation, steel etc)when the commodities is in bull. But how much you have to pay for, rocket high price ?? Or when the newspaper say .. oh ya xxx worth to buy now? revise target price of xxxx upside to XXXX? Js like what happen few month ago when all the steel counter traded at record high price? (If one are thinking of fast money, i guess cyclical stocks is definetely not a good choice.)
  
  Or Rather to buy something when someone are willing to sell you at a ridiculous cheap price keep it and wait for good timing to sell?
  
  Commodities bull in china havent die. Travel to China and have a look. It will make you 10 times better than to do reading online. Thinks as a contrarian, it will make you rich beyond your imagination.

Dear Ivan,

• No doubt , you are figure expert. But I think you do not have a good understanding on how to run a business.

Thanks for opinions. I am flattered. Some actually believes that my analysis is flawed. Which is rather puzzling for I had only given my view point on a stock. Perhaps it's rather useful that I highlight this posting again, Disclaimer & Closure & Some Random Musings

Let me indulge again.

• First thing first. I would like to repeat this comments made by me earlier.
  
  It's a disclaimer that I should posted on this blog from day one. See, I never thought this issue of disclaimer was important, for I thought it was redundant since I do not make any stock recommendation or advice on this blog. Second opinions, yes.
  
  A couple many times I have made open second opinions on stock. However, I have always leave my commentary open to the readers' own interpretation.Anyway do remember this:
  
  Now I do believe that you realise that I am a mere blogger and I am not an investment advisor or any sort.Meaning to say, I offer no one any guarantee card here. There is no 'pink borang to isi' if and when anyone decides to buys or sells any shares based on what I had blogged on.So this is to say, I do not owe anyone anything and neither does the reader owe me anything.

Well perhaps I am lousy at running a business too.

Nevertheless, I would share with you, some of my humble opinion on your comments.

• On the other hand,If commodities price drop , its cost of raw material will drop as well. That translate to lower raw material and better margin.

Yes, the raw material has now dropped however, correct me if I am flawed but I do understand that metallurgical coke prices have dropped too. And so has the demand for it too. So if it was me, I would not dare to make that assumption.

Secondly, I would like to reproduce the following passage from my other posting, More On Sino Hua-Ann:

• 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
  See http://www.custeel.com/
  
  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?

Now from a business perspective, I would reckon that point no 1 is a huge worry! For example, how come China Coal Group saw so much more profit in its coal business? Why didn't one see this happen with Huann? Why did their performance differ so much?

Well I am running or if I wanted to own a business, surely this is such a massive issue for consideration yes?

I do not know. Maybe I am lousy in business but this is how in my humble opinion I would have asked myself.

• Yes, you can buy cyclical stock (timber, plantation, steel etc)when the commodities is in bull. But how much you have to pay for, rocket high price ?? Or when the newspaper say .. oh ya xxx worth to buy now? revise target price of xxxx upside to XXXX? Js like what happen few month ago when all the steel counter traded at record high price? (If one are thinking of fast money, i guess cyclical stocks is definetely not a good choice.)
  
  Or Rather to buy something when someone are willing to sell you at a ridiculous cheap price keep it and wait for good timing to sell?

Ivan, we all have our own way. Maybe I am lousy but if you think that your method of investing/buying a stock is justifiable, go ahead man. I wish you all the best.

Well for the record, back in May, I made the following comments at Sahamas. http://sahamas.net/forum5/5799-1.html (see posting #2 ). I wasn't convinced then.

And neither was I convinced when Huann was trading around 55 sen.

And neither was I convinced when I replied to your posting when you suggested that Huann was a value stock at 44 sen.

Right now, at this moment of time, I see Huann trading around 31.5 sen.

Sorry I do not mean to gloat or as a friend said goat here but I do hope you understand my point for I do not see the point in me making anymore stance on Huann. The stock is now trading way below since I gave my second opinion on this stock.

And when you think about it, there is always a better tomorrow. One day, all these mess will pass. And one day most stocks will rise again and so will Huann. And I do wish you well.