- ch said...
Dear All,Yes, the issues brought up by Moolah, Mosea and Snowball are primary concern(s) if one is invested into Xingquan. The dynamics of Chinese stocks and business community are always tinged with mysterious circumstances. Be that as it may, the Chinese are rapidly becoming the world economic superpower. One thing I know about Xingquan is that a shrewd investor by the name of Koon Yew Yin is a minor majority shareholder. Please refer to Bursa Malaysia under change in shareholdings column. This is the same man who has years of experience in stock investing and the same person who pledged to donate RM30 million to UTAR (but was turned down by MCA for reason(s) best known to them. He is a smart share investor and invested a sizeable amount in Xingquan. Guess he should know something about Xingquan that we don't.
You have hit the right note i.e. we should not follow the herd mentality but then again, this news which was fished out from the Bursa website goes to show that a multi-millionaire has invested into Xingquan. He is rich for his smartness in stock-investing or other reason(s) but one thing placed right in front of us is that he has sizeable amount of money in Xingquan. As I have said earlier, is it that he knows something about Xingquan which we don't? I am not saying that your observations and of those of Mosea and Snowball's on Xingquan were wrong nor neither I am trying to convince others to buy Xingquan but the emergence of Mr. Koon as a major minority shareholder is something we should try to understand. Surely, he is not considering to donate the RM30 million turned down by MCA to Xingquan. Or is he? And I believe philanthropist like him has some reputation to live up to. It is like Francis Yeoh is now into the Wimax biz which might be foreign to him 10 years ago but surely he is not investing in the biz just to keep him busy. It is all for making money. Similarly, I believe this is true to Koon Yew Yin too on his foray into Xingquan.
- xinzhang said...
I guess we should look into Xingquan in a more perspective manner. Snowball was right that the interest rate regime in China is low and it is something which no one could argue or debate. So, in other words, the Chinese is encouraging people to take money out and invest and spur the economy.
The apparent higher receivables reported by Xingquan is definitely a cause of concern but not to an extent where we should just ignore the prospect of investing into this company. Question like is the receivables are within its credit term? I have no idea as to its ageing list but surely they are not selling on cash basis. Do they have any bad debts? If no, then the high receivables are not a concern as you will have higher receivables as business grow. The important thing is to check if they are within credit limit and term.
Xingquan is lacking on dividend as correctly pointed out by Mosea. Yes, for any investor, dividend is something that they are looking up to apart from price appreciation. But Xingquan has caveat this by presenting to all and sundery that they are paying from 10% to 20% of its PAT.
Xingquan should be paying up for the expansion completed recently. And the issue is how much business have they managed to get for this new plant.
And my last advise is will there be more funds interested in this counter apart from Mr. Koon Yew Yin. Having Koon Yew Yin on board is a good thing boosting investors' confidence.
more...
- panaceaasia said...
Dear Moola,Thank you for your excellent blog. I too note that Mr Koon has a substantial stake in Xingquan. Mr Koon is Malaysia's Warren Buffett. He invested in Supermax about 2 years ago at rock bottom prices before analysts went mad on the rubber gloves sector. It appears Mr Koon has made millions investing in shares. My money is with Mr Koon. You can spend your time arguing about the low returns on cash, which I applaud as higher than market returns would indictae a higher level of risk. Xingquan offers an undervalued exposure into the second largest economy in the world. I followed Mr Koon by buying Supermax and am now buying Xingquan. I bought a new BMW 523 with half of my Supermax profit. It's lovely, indeed the Ultimate Driving Machine.
*** these are comments received and they are highlighted for the BALANCED view only since I had already made some comments in earlier postings***
*** I know nothing what will happen the stock or the markets. ***
21/11/10
Past postings:
- 19 Nov 2010: Regarding Xingquan's Cash And Dividends
- 18 Nov 2010: Quick Review On Xingquan's Earnings
- 19 Oct 2010: Xingquan's TDR
- 16 Aug 2010: Quick Review Of Xingquan's Earnings
- 10 Aug 2010: Regarding Xingquan
22/11/10
And from the other side...
- snowball said... .
Dear all,
Yes. Mr. Koon may be a savvy investor, but, Mr. Buffett can make mistake, too. Some say TTB is also the "Warren Buffett of Malaysia", but to those who follow him into Meico, you will probably be still losing your money. Unless you are a good friend of Mr. Koon and he can tell you what is inside his portfolio, you could not replicate his above average return.
The cash is not just earning a low rate, which I would not bother as it is the Chinese company way of doing things, regardless whether we like it or not. It is earning a suspiciously low rate, that's the concern.
Mr.Koon would have probably been there or at least sent someone there to check out the place and found the place is in proper order. But, the shoe business in China, is still extremely competitive. If I were an investor, I would probably study the competitve dynamics of the Chinese shoe market and how their addnice brand stack up against others.
Shoe is a very labour intensive business. Xinquan as well as other shoe makers are churning out very decent margins. But, investor always need to consider the labour cost. I think it forms at least 20% of Xinquan cost structure. Whether a Chinese wage increase will hurt their margins, I think investors should find out. There are a lot of pressure on lifting the minimum wage in China. Based on analyst report, the wage that Xinquan workers is earning, I feel is not out of line with the general numbers in China, which means, a revision is likely. But, with such a competitive sector, can they pass on the increase? Some may argue that the increase would likely to bring about increase in demand, but, I would add that you need to build a new plant to support such demand increase,so, more money there.
Xinquan is pursuing some massive distribution channel expansion, whenever there is something new going on, investor should be wary about their expansion plans and see how it goes. Even starbucks got it wrong with their expansion. There are very little information out there on how the rate of expansion is going and etc, whether the incremental investment actually brings about good returns. If this company is based in Malaysia, we would probably be able to figure out whether the expansion works or not, but, it is too far away, so, there is much more problem when it comes to lack of information.
There are a lot of good story out there about the integrity of this company owners, but, story is story. A good manager can bring you so far, you still need to study the industry dynamics. You need to know how addnice stack up against more established names like Li Ning, anta and hongxing etc Plus, all the things that we hear about this company is all hearsay, we do not know the person.
So much interest.
Well... for the record...
ps: how many quarterly earnings has Xingquan reported since listing?
ps/ps: how has Xingquan reallly fared?
ps/ps/ps: has Xingquan's perfomance so far being up to par? Has it beat 'expectations'? or has it grossly perform below expectations.
Dear Moola,
ReplyDeleteThank you for your excellent blog. I too note that Mr Koon has a substantial stake in Xingquan. Mr Koon is Malaysia's Warren Buffett. He invested in Supermax about 2 years ago at rock bottom prices before analysts went mad on the rubber gloves sector. It appears Mr Koon has made millions investing in shares. My money is with Mr Koon. You can spend your time arguing about the low returns on cash, which I applaud as higher than market returns would indictae a higher level of risk. Xingquan offers an undervalued exposure into the second largest economy in the world. I followed Mr Koon by buying Supermax and am now buying Xingquan. I bought a new BMW 523 with half of my Supermax profit. It's lovely, indeed the Ultimate Driving Machine.
I have found this discussion interesting. On one hand many are second guessing the financial announcement of Xingquan and on the other Bursa announced that Mr. Koon Yew Yin is a major shareholder of this company. Who to trust? The foresight of Mr. Koon or the accounts? My take is that Xingquan is in fact producing good results and growth Q on Q. This is a fact unless if you sincerely believe that the Chinese (from China and no hard feelings on the Malaysian Chinese) are a bunch of cheats by producing doctored accounts. If that is the case then we must question what is Bursa and our Security Commission are doing by inviting these type of investors into our country, approving their listing. The other thing which I wanted to point out is Mr. Koon could be holding more Xingquan shares through his relatives like what we see in Supermax. Just check out Supermax annual report and you can see that he owns some 21 million shares. Check out Kulim too. These stocks went up sky high. Yes, panaceaasia was right on his Supermax stake. ch is also probably right when he mentioned maybe Mr. Koon knows something that everyone else don't. In other words, that explains why they are so many poor people and so few rich one. Because the rich one know what the average Joe don't.
ReplyDeleteAm joining Mr. Koon and panaceaasia.
Yes, I have bought Xingquan several months ago. Mr. Koon is indeed a substantial shareholder of the company.
ReplyDeleteDear all,
ReplyDeleteYes. Mr. Koon may be a savvy investor, but, Mr. Buffett can make mistake, too. Some say TTB is also the "Warren Buffett of Malaysia", but to those who follow him into Meico, you will probably be still losing your money. Unless you are a good friend of Mr. Koon and he can tell you what is inside his portfolio, you could not replicate his above average return.
The cash is not just earning a low rate, which I would not bother as it is the Chinese company way of doing things, regardless whether we like it or not. It is earning a suspiciously low rate, that's the concern.
Mr.Koon would have probably been there or at least sent someone there to check out the place and found the place is in proper order. But, the shoe business in China, is still extremely competitive. If I were an investor, I would probably study the competitve dynamics of the Chinese shoe market and how their addnice brand stack up against others.
Shoe is a very labour intensive business. Xinquan as well as other shoe makers are churning out very decent margins. But, investor always need to consider the labour cost. I think it forms at least 20% of Xinquan cost structure. Whether a Chinese wage increase will hurt their margins, I think investors should find out. There are a lot of pressure on lifting the minimum wage in China. Based on analyst report, the wage that Xinquan workers is earning, I feel is not out of line with the general numbers in China, which means, a revision is likely. But, with such a competitive sector, can they pass on the increase? Some may argue that the increase would likely to bring about increase in demand, but, I would add that you need to build a new plant to support such demand increase,so, more money there.
Xinquan is pursuing some massive distribution channel expansion, whenever there is something new going on, investor should be wary about their expansion plans and see how it goes. Even starbucks got it wrong with their expansion. There are very little information out there on how the rate of expansion is going and etc, whether the incremental investment actually brings about good returns. If this company is based in Malaysia, we would probably be able to figure out whether the expansion works or not, but, it is too far away, so, there is much more problem when it comes to lack of information.
There are a lot of good story out there about the integrity of this company owners, but, story is story. A good manager can bring you so far, you still need to study the industry dynamics. You need to know how addnice stack up against more established names like Li Ning, anta and hongxing etc Plus, all the things that we hear about this company is all hearsay, we do not know the person.
Dear All and Inspiring Xingquan Shareholders,
ReplyDeleteI believe Xingquan will be expanding for the next several years, say 3 to 5 years going forward as this is the norm if you want to grow big in China. Li Ning went through this phase as well and there will be no excemption to anyone else. I have been told that Xingquan is expanding 300 outlets for FY2011, 400 each for FY12 and FY13. All in all, we are looking at 1,100 extra outlets in the next 36 months. Perhaps they may even target more if they have more money. Some may ask questions like are you sure with so many outlets?, can survive or not?, always expansion only nothing else meh? While these are valid questions that require valid replies it is fortunate or unfortunate to tell you that this is the way going forward in China, the next economic superpower if you think they would be. Big boys like Lining, Xtep, Anta, 361 and Peak have over 7,000 outlets each in China. There are also other players like Dongxiang Kappa,Hongxing and foreign players like Nike, Addidas, Reebok and New Balance. So having 2,000 outlets is miniscule by Chinese standard. As we all know, China is a vast market with avalanche of consumer spending. For example, departmental stores in Shanghai could achieve revenue of RMB 200 million in a day. There is people everywhere in China and they are getting more affluent by the day and increasing their spending habits too.
Xingquan is now into Outdoor Casual Wear where there are a handful of brands in the market like Jeep, Camel and Addnice. Xingquan is able to move into departmental stores setting up outlets without heavy competition. They have set up in Nanjing, a tier 1 city recently.
The above info was received by a very reliable source. Trust me.
So, my view on Xingquan is if you invest in this company it is like you invest on the future of China. If you have bought some land in China or Hong Kong six months after Tiannamen Square, you will be super, super rich today. So, do you trust Hujintao and his comrades in making China the new economic superpower. Choice is yours.
Hi all,
ReplyDeleteI am not doing any China-bashing here. More than 60% of my money is in China-related stock. So, if China goes down, my portfolio will hurt rather badly. But, it is always good to view the alternative views on China. Here's one good piece on China by Edward Chancellor : http://tinyurl.com/29nppzn
FYI, China have not yet show us how to grow without depending on exports. As long as the structural shift is not done, there is still risks in that country.
Snowball: don't seem to be able to read the article you're mentioning. Is the header of the article titled "Capt Bernanke on course for icebergs". That's the latest article by Edward Chancellor in FT.com
ReplyDeleteThanks... :)
@ Anon118
ReplyDeleteOps...sorry. I think it is for GMO registered user only. Please register to GMO at this site : http://www.gmo.com/America/. No worries, it is free. Then, look for their research section, there is this piece by Edward Chancellor called : China's Red Flags. It was written in March this year but the content is not in any way outdated.
Thanks snowball...
ReplyDeleteLabour only constitute around 8-9% of their cost. Their staff salary has already incorporate the hike since beginning this year. Average salary is around RMB2.0-2.5. So assuming they hv 3,000 worker, it only work out to RMB6-7.5 million per month only.
ReplyDeleteXingquan are one of the few lucky one that have manage to switch from Sports Wear to Outdoor Casual Wear, probably these Chinese Ah Pek went to Blue Ocean Strategy classes. Small players are starting to feel the competition from the BIG local and foreign brand starting from Lining, Anta, Xtep, 361, Peak (these 5 have more than 6,000 shops EACH) follow by Qiaodan, Hongxing Erke, Dongxiang Kappa, Deerway (these 4 brands have 3,000 to 4,000 shops) and the foreign boys like Nike, Adidas, Reebok, Asic, New Balance. Smaller brand will suffer within the next 1-2 years as this 15 brands march into smaller cities. I believe smaller sport brands will likely move into what Addnice is doing or probably do Casual wear, Leather wear & etc.
If you walk into any departmental stores in big cities in China, u will have all the 10-15 Sports brands in there and smaller local China brands will not be able to enter as it is too crowded, where as there is only a few Outdoor Causal Wear companies like Camel, Jeep and Addnice. So, that is why Addnice can expand fast in departmental stores in highly populated cities in China, and according to their IR Guy, they are given priority to enter compare to Sport brands because there is few brand in this categories.
Notice their cost is close to RMB290 million for the 3 months (July to September) and they have the balance of the new factory cost to pay (RMB150 million), expansion of sales of network & marketing (easily RMB80-100 million), buying part of their existing plant (RMB60 million) - announcement made today, rebranding exercise (due to the change from Sports to Outdoor Casual Wear) (easily another RMB50-RMB100 million), shoe sole machinery (RMB40-50 million). Guess they have a lot of expenses and that is why they need to raise funds next year to fuel their growth or they will be left behind when our smaller brands join them in Outdoor Casual Wear.
ReplyDeleteGuess they question we have to ask ourself is whether you want to take this ride which has full of expansion and expansion and the benefit is we can ride along the China Growth Story and hopefully Renmimbi will appreciate too. Guess this stock is not a dividend play stock like Nestle.
Your choice, guys - Growth or Dividend.
@KLSE Investor,
ReplyDeleteSorry for the misleading information. Yup, I have check again, it is not 20%. It is rather 14% of their cost structure (94/666) based on the latest AR. In China, you need to not just add in the basic salary, you need to add in their welfare cost as well cause it is possibly the hostel cost and all that. It is part of the pay package.
The chinese wage hike story is not just a one-off thing, it is continuous. If it is just one hike, you would not see those big companies to move elsewhere like Bangladesh or Vietnam to cheaper area. This execs are probably think it is a long term structural trend. You can't continuous churn out such a decent margin by relying on cheap labour, sooner or later, cheap labour will be gone.
The current labour cost, using my RMB 94 mil figure and your 3000 workers assumption will bring us to around RM1219. This payroll includes designers and engineers etc, those skilled labour. Such a low pay coupled with inflationary pressure in China plus the declining unskilled labour pool plus the peak of chinese labour force participation in 2015 probably demand a new hike soon. Electronics manufacturer in China has been moving towards automation since 2005, to counter the labour cost hike, I am not sure clothes and shoe manufacturing can become more automated.
Xinquan is a good story to tell. Their management is smart to move to other areas. But, other people probably can replicate that too. If their expansion works, you probably make a whole lot of money. But, Li Ning recently announce some very flattish same store sales growth, and are working towards reconfiguring their distribution channel. Expansion plan is always not that clear cut. But, again, if they got it right, yes, you will make a lot of money.
There are various ways to play China. You can even buy a Canadian mining company and you are still playing China or buying a Mongolian hotel and it is still a China story. Xinquan, in a competitive environment may not be the best way to play it.