INNOTEK

Let me share my views on Innotek which could be identical case as Venture when Venture was trading at about $5.00 and then giving $0.50 CD. You know what happen, the stock went up as high as $6.80 before . Now Venture is trading around $8.70 If you look at $6.80, the return is a cool 7.3% CD even though the stock rises from $5.00 to $6.80 ie some 36%. I suspect with the coming good friday holidays and some positive market sentiment, Innotek could rise to about 68 cents. At 68 cents, you still get about 7.3% based on the 5 cents CD. I think that if Innotek wants to support the price and buy back more shares, it should be a good think as everyone who had invested in it will just ride on to the higher share prices + CD later on. If Innotek is in need of money, they can simply announce rights issue, etc.

Dont look at full-year cashflow. InnoTek generated S$15 million of positive operating cash flow in Q4’09. As at 31 December 2009, the Group had cash of S$109.3 million and total borrowings of S$42.8 million, amounting to a net cash position of S$66.5 million or 28.6 cents per share. . “While the Group continues to improve operational efficiencies and cost-controls, in the absence of any deterioration of business conditions we expect InnoTek’s performance in Q1’10 and for FY10 to improve year-on-year,” said Group Managing Director Mr Yong Kok Hoon.

Once upon a time there was a stock that traded at 17 cents. In June 2009, the company bought back 10 million shares from the market. Just 3 months later, in September 2009, when the stock price had recovered strongly, the company did a placement of 50 million new shares at $0.62 each. This is a real story. The stock is SINOMEM TECHNOLOGY. Just check out its FY09 results, page 10, para 1d(ii).

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Now, InnoTek may be / could be planning something like that. Nothing new under the sun. Buy lots of cheap stock now, wait for 1Q or 2Q results to inspire the market to re-rate the stock upwards (to 70 cents?), then do a placement ..... Buy cheap, sell high. Simple. U agree?

I do remember Sinomem, one of the \"incredibles\". Sinomem has thin margins, low returns on investments and suspicious expansion plans that claims to have cost pass through which do not reflect itself on the financials with the rising expenses. I think some one needs to do me a big favor and start a post to educate me on water firms .. I cant seem to find that its a logical venture which generates free cash .Hyflux, Epure...all the relentless capital raising? Am I right or did i miss something as big as the elephant? Cashflows ultimately accrue to the firm. Timing has only one effect, which is present value factor. Harlequin may be right in that mgmt are doing cheap buybacks in anticipation of newsflow. But somehow the price now do not justify entry though.

Is it stil good to buy at 0.53?

Looking at the chart, it is clearly a uptrend stock now as it is above the 20MA. If you want to play safe, you may q at 0.475 ie at 20MA -which I think it will not happen given the 5 cents CD. The 20MA will move higher if the stock prices move higher. If you want to invest in this stock, it is better to take a longer term ie at least 6 months. ie get the CD and then hold till at least Christmas time for another round of market rally before you want to take profit. There will be other opinions by others which you can also consider.