Tuesday, April 05, 2011

Koon Yew Yin's Investment In Xingquan.

Got an off topic comment from the posting "Why Perisai Is Rated So High By The Local Analysts?"

  • gwynwelsh said... Sorry out of topic. But I could not help to point out to all and sundry that Coastal went so high from the low of RM2.25. It was strongly suggested by Koon Yew Yin, the same person who holds 32 million Xingquan shares. If he is right on Coastal, I believe he will to on Xingquan.

Xingquan had been blogged many times before too. Take your pick of posting for your reading pleasure. :)


Hmmm... I actually undertstand very well your thinking. It's normal and it's common.

Many do like to look for their stock market hero and they reckon it's a safe bet to follow their stock selections.

And I have seen some who are rewarded with such a strategy.

And I have seen some who crashed and burned badly.

Yes, we are all aware of Koon Yew Yin INVESTMENT in Xingquan.

And for the record, in Nov 2010's posting More Balanced View On Xingquan.

Do read the number of comments stating the fact that Koon Yew Yin had invested in Xingquan. Xingquan then was around 1.60+.

Personally? I gave the following remarks back in Nov 2010.


  • ps: how many quarterly earnings has Xingquan reported since listing?

  • ps/ps: how has Xingquan reallly fared?

  • ps/ps/ps: has Xingquan's performance so far being up to par? Has it beat 'expectations'? or has it grossly perform below expectations.

Fast forward to Xingquan's latest review posting Review Of Xingquan's Earnings on Feb 2011.

The questions raised then:


  1. Yeah, there's visible growth in sales revenue....

  2. but where's the profit???

  3. Cash... yeah... capex.... but... it shrank so much????

  4. And then.... the ..... increase in receivables .... is simply .... crazy!!!

Of course some did not agree. See postings subsequently.


And so here we are. Yet another comment stating Koon Yew Yin's investment in Xingquan.

Now.. I am not here to judge Koon Yew Yin investment. Please get this issue correct first.

And if any reader wants to adopt the follow their stock market hero strategy, please do so by all means. Yes, please remember I am not your friendly investment advisor. :)

However, what these series of postings merely offers a second opinion on the justification if one were to invest in Xingquan based on one's own logical reasoning.

Yes, let's put our brain cells to work and think the justification behind an investment in Xingquan itself. Yes, let's take the Koon Yew Yin equation out of the picture and ask ourself a simple question: Is there really a justification to invest in Xingquan?

1. The stock is trading at a cheap PE multiple.

A. Correct or wrong, all Chinese stocks listed abroad are all traded at a low pe multiple. Take the example of Taisan which is listed on the SGX ( see Regarding Xingquan And Taisan ) and as one can seen in the example of Xingquan and Taisan, low PE stocks can still sink quite a bit!

B. Now, if and when Xingquan's TDR is listed, Xingquan's share will increase from 307,330,000 to 353,429,500 once the TDR is issued. Xingquan's EPS WILL be diluted from the TDR.

2. Is there growth in earnings?

Yes, when can buy value and if there is value, perhaps growth in earnings is not important. Very true.

But because there is possible future dilution in earnings per share once Xingquan completes its TDR, this growth in earnings becomes important!

Think about it for a moment.

Say the eps is 10 sen and there is no growth. Flat earnings.

Now if the numbers of shares increase by 15%, the eps will shrink by about 15%.

And if the EPS shrinks by that much, the stock would be valued lower, sometimes much lower since the company would be deemed unattractive due to lack of earnings.

So does Xingquan have earnings growth so far? Is there any indication? My answer based on Feb 2011 posting, Review Of Xingquan's Earnings, is no. 3. Is there balance sheet weakness?

Again, my answer based on Feb 2011 posting, Review Of Xingquan's Earnings, is no.

4. Are there issues with the company?

Company had tons of money but as pointed by snowball, the company is earnings very low interest for their money. Why? This is an important issue to address.

Company had lots of money but most of the money had been used in their store expansion and more incredibly they did a whole brand makeover. And they want to raise more money using TDR.

And if one is a minority shareholder, won't one be left wondering what is happening?

And what about the dividends?

How?

Does Xingquan looks like a top notch investment idea?

Think about it....

Ah.. Some would argue that perhaps all these reasonings are not important. A waste of time. Most important is that one follows the stock market hero.

Well... all I can say is.... good luck.

at

12 comments:

  1. messi11:09 AM

    This reminds me of Buffett's investment in Berkshire Hathaway, a textile company in a commodity business.

    One bad investment wont make him poor but one great investment can make him rich :)

    ReplyDelete
  2. Moolah11:20 AM

    Messi, ok let's use this perspective. :=)

    Let's assume Koon Yew Yin is wrong.

    One bad investment shouldn't really hurt Koon Yew Yin one single bit.

    However, what about the follower? How much can take if this investmetn go bad?

    ReplyDelete
  3. xinzhang12:15 PM

    We are second guessing if Koon had indeed invested wrongly or rightly into Xingquan. I certainly believe he has covered all these angles before investing. I once read in your blog where a commentator commented that Koon holds 32 million Xingquan shares and if hed purchased them at RM1.60, he had indeed invested more than RM50 million into it. I have no idea how deep is his pocket but I believe Koon has a reputation to live up to and that's is more important than money. I was at Syuen several months ago listening to his lecture on stock investing and he was extremely bullish on Xingquan. Those who were present would be able to tell you so. The questions raised by all of us were thrown at him during the lecture. To cut the story short, Koon was sure that Xingquan is going to be a winning horse. How or what make him so convinced is something that is not worth rattling about. We should think and make our own decision.

    But again, I believe there is / are something that Koon is so fascinated about on Xingquan that probably we haven't been able to figure out. Otherwise, we would have been millionaires.

    ReplyDelete
  4. Moolah12:39 PM

    You said: "We should think and make our own decision."

    So how are you going to make YOUR decision?

    You are going to make it based on HIS decision?

    Or are you going to do your own reasoning?

    And if you are going to use your own reasoning, I would certainly be more than interested to read about it too. I am sure many would too!

    :)

    --------------------

    ps: So there's absolutely ZERO chance that KYY could wrong?

    ps/ps: Even Warren Buffett is known to have made mistakes before. Even Buffett acknowledges this fact.

    ReplyDelete
  5. Moolah12:45 PM

    Apparently most important issue is that Koon Yew Yin own shares in Xingquan.

    Apparently whether Xingquan is investment grade matters not.

    :)

    ReplyDelete
  6. ch12:54 PM

    Dear All,

    Yes, I would agree with you that Koon may have mistaken a dead horse for a winning horse as after all, he is human and to err is human. However, the fact that he placed so much money into Xingquan and go around telling everyone about his recent purchase is something that we should not discount. The question right on our face is why he is so bullish on Xingquan and not other Chinese stocks which are trading at low PE and all? Why Xingquan and not some S-Chips if we are to say that SGX is more rigid on public listing. I was told that the auditor, auditing Xingquan since its listing, Foo, Tan, Kon and Thornton is a company familiar to Koon. Kon is a cousin to Koon. He is 76 and Koon is 78. They were sharing the same pair of jeans when they were younger?

    Many investors who followed Koon might be shock to see the price sliding away to currently RM1.21. But Koon is not perturbed. But then again, he is not investing to lose money.

    ReplyDelete
  7. Moolah1:22 PM

    LOL!

    Another new blogger.

    Welcome. :)

    Again... apparently what matters most is Koon Yew Yin is an investor.


    LOL!

    And apparently no other reasoning is required!


    If that's the case, just buy, buy, buy, buyyyyyy

    :)

    ReplyDelete
  8. K C3:14 PM

    Aiyah,
    If I am Koon Yew Yin and have invested 60m in Xingguan, I would tell everyone I know that Xingguan will fly fly fly also. I do not think there is something wrong about it. I am a big fan of KYY, not in his investment prowess but his character and generosity. Using the logic that he was right for Coastal and make an induction that he is always right in other investment is no doubt a big flaw in reasoning. There can be important things hidden from him when he analyze Xingguan too. Nobody can be right all the time in investment; not Warren Buffet, Peter Lynch, Bill Miller, etc etc.

    ReplyDelete
  9. Moolah3:30 PM

    KC: As I had clearly said, I think it's not wrong that one chooses a stock market strategy based on 'following a stock market hero'.

    Such a strategy exists and I have seen it.

    Now could someone instead of using KYY as a reason, could they give their own reasoning why Xingquan is worth an investment?

    :D

    ReplyDelete
  10. Remnant 88810:44 PM

    We're all different breed of investors, employing reasonable logic or gut feelings to arrive at decisions.

    We typically invest based on certain known figures, criteria/rational analysis and that gives us a guide whether to take a position.
    When we overide this principle with gut feelings, I guess it's pure speculating with unknown reward/ risk.

    To be fair:
    Discounting KKY or any superdude's position in XQuan, what's the price action/ trend telling us..? No need to use a lot of thinking,,LOL,..
    Why is George Soros so rich..?

    ReplyDelete
  11. snowball11:29 PM

    @ch,

    Since the topic of auditor is mentioned by CH, I would like to chip in. I guess the firm that is mentioned by CH is actually Foo Kon Tan Grant Thornton(FKT GT). No matter whether Koon Yew Yin share jeans or not with this Kon, the fact remains FKT GT has his fair share of audit frauds. Look up China Milk, Beauty China and China Printing and Dyeing all is FKT client. Even if Koon Yew Yin share underwear with this Kon, this fact will not change. FKT has some S Chips blow ups. I heard from ppl working there and ppl used to work there, the quality of FKT work is not that great anyway..that's from what I heard.

    Initially, I am very bullish about all this S Chips, small Chinese co. and stuff. But, then, over a longer run, I realize that, if they want to screw you, they can really screw you. There is a lot of ways that they can screw you and an auditor seriously, can't do much. Practically useless I would say. They would only tell you when the situation has become really bad. I nearly got into a fraud situation, luckily some kind soul talked me out of it.

    All this Chinese stocks may be cheap, but, sometimes, things are really cheap for a reason. There are 100s of S Chips plus the red chips in Msia. What make you think that you can pick the 1/100 that is genuine?

    Imagine a situation where I can steal without being prosecuted? Will you steal? Some may not, but, with the lack of prosecution, some will. Just like whether you will jump a red light, at certain place that there are no police or camera, some may jump a red light.

    ReplyDelete
  12. ronnie10:52 AM

    I will get straight to the point. All the footwear and sportswear companies listed in M'sia, S'pore & HK are badly hit. Labour & raw materials have sky rocketed. China is no longer a cheap manufacturing base. Li Ning, XStep, etc profits have fallen & their share prices declined. Had Xingquan reported fantastic performance, I would be worried. It did not. But this poor market condition will not last forever, there will be attrition. The weak players will go bust or be bought over by rivals. There are 1.3bill customers in China. When the upturn comes & surely it will, it is highly likely Xingquan & other fundamentally strong players will be there to reap the rewards. It might get worse before it gets better, I do not know.

    ReplyDelete