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Moolah
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Posting #71: Thu Nov 15th, 2007 00:10 |
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random wrote: Moolah wrote: Random,
The problem here, as in LKT and as in APM, we are not too sure what exactly is causing the dip!
For a so-called fundamental stock ... perhaps one should ask the question I raised earlier..
"Think about it.. if GPacket is indeed good, then who and why is selling GPacket down so aggressively? Which logical fund is willing to dump GPacket so aggressively that it has seen GPacket losing almost half its value from its peak."
how?
True.. that is why I said people take it for granted. There MUST be some sort of fail-safe mechanism in your investment strategy to safeguard your precious capital.
Ass-u-me.
Ain't that a much better word for taking things for granted?
And the greatest irony in highlighting this issue of taking things for granted (assume) was the comments posted on CBS. Yeah, i laughed my ass off. Was that even a stock tip from me? LOL! I guess my english must be utterly lousy. 
Anyway stocks do not simply fall for no reason.
What might look like value could turn into a value trap.
Ah.... the nice word... VALUE.
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Moolah
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Posting #72: Thu Nov 15th, 2007 00:28 |
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ultraman_taro wrote:
I've questions myself. Has the market priced the stock based on this negative result, or there's further downside?
Ultraman,
Hope you do not mind me being blunt.
Let's analyse your situation here.
You had invested in GPacket thinking there was value in the stock, given the fact the stock had declined greatly from its high.
Hence, it was more a 'price motivated' stock purchase.
Now the market has proven that the stock decline was justifiable and more importantly, it's suggesting that your investment reasoning earlier is flawed.
So what's the next step?
You are now left thinking if there is anymore downside. Or would I bluntly said, are you hoping that the stock would not decline anymore? And perhaps, are you hoping that the business would turn around?
Am I making sense on this issue? If no, please do let me know.
But if what i am saying makes sense, then do you see that word, 'hoping'?
Your investment has now turned from what you know and morphed into a hoping case. And this simply ain't too nice to be in. Yes?
Yes, I would indeed imagine that GPacket business might recover. Yes, this is a possibility. No doubt at all. It's a possibility. And the result DID NOT conclusively say this is the end for GPacket. But... as presented in the thread When setbacks occurs in a Business , the biggest issue is TIME. When will the company recover its growth? And the problem in waiting in such cases, you know very well that the market reaction to lousy results can be unforgiving. (see this remark in that thread)
The difficulty for the average value investor is distinguishing between a temporary setback and a real detoriation.
For example, most stocks after reporting good growth in the past few years may then start to reporting slowing growth or flat growth. Some may go on to regain the growth path while others without warning sunddenly have a big profit drop.
If a value investor decides just to sell after one or two "bad" quarters, he is frankly be considered to be engaged in "short term" type behaviour against which he has been taught not to do. For most companies, they do not have a fundamental detoriation but just merely just a temporary setback but the market prices in reaction to lousy results can be very unforgiving.
rgds
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random
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Posting #73: Thu Nov 15th, 2007 01:26 |
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Dear ultraman,
I have to ask you.. What is your exit plan on this one?
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ultraman_taro
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Posting #74: Thu Nov 15th, 2007 02:04 |
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Wow, u guys really wanna know...well no exit plan yet 
I need time to look through carefully their latest results...and look at the market reaction...Sad to say, mistake was already done. I don't like to be in "hoping" situation either; but I'm never the type to jump the gun on one extremely weak or strong quarter
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Moolah
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Posting #75: Thu Nov 15th, 2007 02:18 |
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Ultraman,
I believe in simplicity.
When a mistake is made, it simply has to be rectified asap.
rgds
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ultraman_taro
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Posting #76: Thu Nov 15th, 2007 02:36 |
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Mistake in timing yes, mistake in valuating the oversold position; yet to be verified.
Why let the market dictate whether one made a mistake in valuation? Rectifying by selling is an easy way out now, but if the price went up next week, does it mean that you made a "mistake" in selling at a cheap price?
I believe this is a classical Technical vs Fundamental approach.
If you're really interested, I'll keep you updated on what I do next.
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random
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Posting #77: Thu Nov 15th, 2007 02:44 |
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I believe a exit strategy is necessary. The cut loss point could be by price or if you are not comfortable, by time.
E.g dump the stock if it has not appreciated in price in a time frame of say 1 year. Assuming fundamentas remain intact
Just an idea.
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Moolah
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Posting #78: Thu Nov 15th, 2007 03:07 |
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Ultraman,
I've said more than I had wanted to say already on this stock.
And since I will respect your reasoning, hence i wish you all the best.
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random
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Posting #79: Thu Nov 15th, 2007 03:18 |
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Methinks you might be getting a wee bit tipsy with all them drinks!
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ultraman_taro
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Posting #80: Thu Nov 15th, 2007 11:05 |
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I did a little research on the segmental earnings. Ignored broadband and engineering division. Software and Nextel are the 2 main source of revenue and profits currently.
2006 Revenue Pre-Tax profits
Software RM64.478M RM39.07M
Nextel RM31.685M RM5.692M
Q1 2007
Software RM16.374M RM7.498M
Nextel RM14.499M RM1.841M
Q2 2007
Software RM20.73M RM12.4688M
Nextel RM14.311M 25k
Q3 2007
Software RM15.193M RM7.059M
Nextel RM13.593M -RM1.852M
I think the figures that scream out for attention is Nextel contributing to a loss. It was said that Nextel has a "profit guarantee" of 6M this year. What does this mean? Is someone going to pay up??  So far, the only rationale for keeping Nextel in business is the large market that it will provide for GP's broadband rollout.
On the software side, Green Packet has attempted to explain why the figures are off the mark, which you can read in my earlier post, so I will leave it for now.
The conclusion from my research; Green Packet is screwed; for now at least. Nextel will drag down their overall profit margin for the time being; so GP better show how they plan to tap into Nextel's customers to upsell their broadband solutions. Software side is a bit vague. It's obvious now that growth is slowing down; though i trust that GP still has room to move in China, but when? We can't wait until 3G licenses are awarded there...Which puts pressure on their expansion in the middle east.
Overall...yes, I agree now, a lower valuation must be given to GP. However, the long term growth of software sales in China/Middle East is still good. Broadband/Wimax is still in startup mode, we will see more of it in 2008. I would say....a minimum 10x P/e is more than warranted. RM1.40 based on 14 cents EPS. + RM0.93 in net current assets = RM3.03. Well...some of you wanted to know what I'll do next. I'll most likely hold.
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