Yung Kong

Blogged on this before ( here )

Recently I made some notes on this stock (on July 26th) and the coloured commentaries were inserted as my notes on what's happening.

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Look at some of the reasonings made by Dynaquest to justify their buy recommendation...

1. Low PE multiple 8.1x.
   
2. DIY of 2.33% nett
   
3. Current price of 1.29 at 3-year low
   
4. Growth stock: (5-Yr: 5.31% & 10-Yr: 11.25%).

* Some reasons not to buy? => look at the above. What the writer from Dynaquest did was he based the buy reasoning on yardsticks. And the reasonings were simply flimsy.

1. Ze debt issue. See how Dynaquest analyst IGNORED the issue about the massive build-up in debts... debts went from 44.89million to rm194 million? Ah.. remember how some argued that borrowings is needed to finance growth? And that in order to stay on top of the game, further capital expansion and continued spending on research is needed. => some have argued that debt is needed for capex. True. But at end results, like Yung Kong and also my favourite, Mieco, has simply proved that to ass-u-me that such a capex is good is simply hazardous to the investor. Remember what might be good for the company might not be good for the investor!

On the other hand, the argument is simply on how prudent the management is. No one has said that capital expansion is bad or said that borrowing is bad... but... there should a limit on how much a company should spend. By being too aggressive capital expansion could be deemed reckless. One cannot use capital expansion as an excuse. There is a saying that one should only buy a hat that fits their head. => how true is the statement in red!

Ahh... such classical arguments... anyway... Dynaquest argued that the proposed rights issue by Yung Kong would help lessen this debt issue in the near future.

2. Low PE. I have always argued that the PE only reflects how the stock is trading in the market when gauged against its earnings. It states NOT about the quality of the stock. Simply put.. not all low PE stocks would equate to a great investment. => Remember a low PE stock does NOT make the stock good.

3. DIY of 2.33%... err.... not terribly exciting isn't it? =>True? Look at the price of Yung Kong versus its DIY. Remember when Dynaquest wrote that article, Yung Kong was trading around 1.29.

4. Trading at a 3 year low? Waahh... does that justifies an investment? => Same issue with low PE right? And to use 'trading at a 3 year low' as an excuse to buy the stock for investment is never a sure win thingy!!!

5. Growth stock? The following table highlights Yung Kong track record. Where is the growth? All I see is a very inconsistent company. => This one.. Dynaquest writer should simply be shot!!!! Where was the growth?

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Yung Kong announced its earnings today.


It's not too bad, although it's margins are rather so razor thin..

but..

is this the turnaround the investor is waiting for? Now if one was still optimistic of this company's future, wouldn't this have been a better time to consider the stock compared to what Dynaquest had written from day one? (remember Dynaquest started their buy recommendation on this fella since April 2005. Price then was 1.27! Price of YungKong now? 0.805!!!)