Tuesday, 24 July 2012

My thoughts on China Fishery Group

China Fishery Group has turned into a smelly salted fish. The chart broke the critical support level of 85 and is now at a new 52 week low. I hate making sweeping statements but once again, it has proven to me that we should be very very wary of Chinese companies. Just to name a few, China GaoXian, Sino Forest, China Hongxing, Hongwei Technologies are just one too many. Not to mention my previous article on China Taishan too (the share price is now 0.044 cents versus 0.10 when i last blog it)!  

Be careful of companies that have excellent 'financial results' but are always in need of cash for business expansion. They will forever be raising cash via placement issues or worse still, via high yield bonds and most importantly, they never pay dividends. 

Let me just share a few lessons which I have learnt the hard way in the past. If you can master the 3 things below, it will bode you well in your pursuit for financial freedom.

1.  Never trade on tips or insider news. 
2. Always know when and where to cut your losses (before you even enter a position).
3. Know yourself and do your homework.

 Blogging on the 3 lessons above will probably take me another few hours, unfortunately, i have many meetings tomorrow. Just spend some time to ponder on what i said and when i am free, i will elaborate on them in more details. 

Good night.


Anonymous said...

China Fishery has been consistently paying dividends over the years and its owners are Malaysian and they have been growing their revenue share over the last few years. Just because prices are near 52 week lows doesn't mean it's another Gaoxian. Most chinese stocks now are near 52 week low - it's correlated with the Shanghai Composite which is at a 3 year low.

2Y Capital said...

Try to see who the shareholders are, Seems more Taiwanese than Malaysian?

I don't like them to keep issuing debts to pay dividends... It is unsustainable. Might as well don't pay dividends but keep the cash for growth. Just my 2c.

They paid dividends because the board recommends 30% of net profit to be paid out each year. But who are the main shareholders? isn't it back to themselves again?

Anonymous said...

They are an ambitious growth company which has been consistently growing the revenue and market share since listing in 2006. If they issue debt and there's no return on the cash generated then I would say there's something wrong but this is not the case.

The dividends they paid is far less than the debt they issued, so withholding dividends wouldn't be enough for the kind of growth aspirations they have.

Yes they own majority of the shares, which is a good thing because they wouldn't kill the goose the lays the golden egg. At least they do share some of the profits with minority shareholders rather than pay themselves higher bonuses and salaries but no dividends.

I think if you want to pick on a Chinese company, there are far worse ones out there that are worth questioning. For example, China Taisan or Qingmei which have very questionable records.

2Y Capital said...

Well, it is good to hear a differing view. Good luck to your investments and hope the share price recover. I just hope they are not issuing debt to pay the dividends. Perhaps I will take a look at this company again next time.

I don't pick on Chinese companies for the sake of picking on them... so don't get me wrong. It is just unfortunate that the better Chinese companies prefer to list either in HK or China....or became privatised here to list back there...

Anonymous said...

Well my average price for China Fishery is below 80 cents - the last time it reached these levels was during the slump in end 2008 and early March 2009 so I think there is quite a large margin of safety plus a dividend yield of close to 6%. Furthermore it's NAV is much higher now than it was in 2008-2009.

Actually, China Fishery is intending to do a dual listing in Hong Kong - and its parent company PAIH is already listed there. Just that it won't consider issuing equity at current market prices, and thankfully so. I do think that this is one of the better Chinese companies listed here, a sort of 'blue chips' among the 's-chips', together with the likes of Yangzijiang, Yanlord and China Minzhong.

Good luck to you in your investments too!

2Y Capital said...

Do visit often. Thanks for engaging this in a professional manner. I agree that YZJ , Yanlord, not so sure about China Minzhong after the recent events, are good companies.

It is sad that SGX experienced so many S chips fiasco such that the good ones are unfairly penalised until they make their $ by privatising them and relisting them elsewhere.

At the end of the day, investors here are the one suffering.

I definitely hope I am wrong about China Fishery but only time will tell. :-)

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