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Kind of long article, so here is the snippet of what I wrote. Look at some of the reasonings made by Dynaquest to justify their buy recommendation...
Low PE multiple 8.1x.
DIY of 2.33% nett
Current price of 1.29 at 3-year low
Growth stock: (5-Yr: 5.31% & 10-Yr: 11.25%).
* Some reasons not to buy?
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.
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.
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.
3. DIY of 2.33%... err.... not terribly exciting isn't it?
4. Trading at a 3 year low? Waahh... does that justifies an investment?
5. Growth stock? The following table highlights Yung Kong track record. Where is the growth? All I see is a very inconsistent company.
And the below chart posted in my blog, showed Yung Kong tumbling down..
I believe that this is such a good case study. let me-paste again and I will add in new comments in blue.
Look at some of the reasonings made by Dynaquest to justify their buy recommendation...
Low PE multiple 8.1x.
DIY of 2.33% nett
Current price of 1.29 at 3-year low
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?
And last but not least.... same with Wallstraits calling buy on stocks... when folks like Dynaquest or iCapital say buy... should you? Look at Yung Kong. Look at Mieco.
1. Remember the thingy about business suffering a setback?
Should one hold or should one sell first?
Now if one had held on, this is how the stock has performed... the bug on the picture, indicates 2005...
not a good sight eh?
Just imagine if one had taken the option to sell first...
Anyway... the turnaround has been happening for 3 quarters already...
Remember how it was argued that one MIGHT miss out on the opportunity?
Well... Yung Kong now has reported 3 quarters of earnings turnaround (do note - very important.. i DID NOT look at the quality of the earnings, ok?), so is too late if one decides to buy this stock say tomorrow? ( not a buy call hor!)
just for the record... Yung Kong closed today at 0.98.
this is in regars of WFC (waiting for confirmation) of earnings turnaround and the share price. As you can see, earnings has turned around since July 2007.
I could have used those traded share price of Yung Kong then... but I will not. Instead, I am using this third quarterly earnings turnaround share price of 98 sen as my guide. ok?
Yes, Random, as STATED in the old postings... this company has rather razor thing margins mah (as stated CLEARLY almost a year ago on Oct 27th 2006)
ps.. i still have not seen its earnings notes yet.
ps/ps... obviously some love to twist!
ps/ps/ps... do see the concerns posted about the stock
ps/ps/ps/ps... this posting is all about stating the fact that there is a turnaround in YungKong's earnings.
ps/ps/ps/ps/ps... since I had criticised YungKong's earnings b4.. and since on the issue of YKong's earnings turnaround is there... can i deny that it's not happening?
ps/ps/ps/ps/ps... Surely i have to state the fact? Right?
ps/ps/ps/ps/ps/ps... Quality of earnings needs to be examined. Maybe my brains too. (hey, now past 7 pm woh! )
ps/ps/ps/ps/ps/ps/ps.. Do i need to disclose that i do not own this stock?
ps/ps/ps/ps/ps/ps/ps/ps.. wtf, do you realise i got my cousin bull's ps thingee... so what the heck is ps? (please sing? - surely you miss my singing, yes? )
ps/ps/ps/ps/ps/ps/ps/ps/ps.. so how many ps already?
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