Why I would sell Man Wah 1)For a simple fact that the US housing market has a lagged effect on Man Wah\'s sales -- I believe while consumers may switch from something high end to mass market, I believe this effect is limited in the case of Man Wah. Eventually, the huge slowdown in the US market will catch up with Man Wah. This should be more evident in their sales revenue for the coming 2-3 quarters. 2)Raw materials have stablished but labour costs continued to escalate in China. With the minimum labour wage laws put in place, Man Wah will experienced higher labour costs and this will eventually eat into their margins. 3)PRC sales are slowing down. Believe the PRC government data if you want but I just came back from a trip to several major Chinese cities. And I can tell you that the slowdown in demand is so obvious. Many Chinese friends told me that they now refrain from going to shopping malls, massage, sauna, movies.. lest to say buy furniture. 4)HLT, Cacola and even Royal in Hong Kong are experiencing slower sales. Why would Man Wah be the exception in this case? 5)Man Wah gearing though not high is not exactly debt free. The credit tighting will affect their capex plans. Their Free Cash Flow is also not exactly the strongest I have seen. If they continue to invest in new production capacity, then they definately have to cut dividends to save cash. These are my 2-cent worth about this Company. Not a recommendation, simply a feel of this Company. :woohoo: :woohoo:
Some comments relating to Morpheus\' reasons for selling: 1. The US housing problem has been there for a few quarters but Man Wah has shown result in taking this crisis as opportunity by increasing market share with its cost advantage. So I don\'t get the point when you said the switch from high end to mass market is limited in the case of Man Wah. 2. The increase in wage can be planned for and I believe their cost advantage gives them a stronger pricing power over competitors. If Man Wah can\'t increase price to maintain margin, its competitors can\'t either and will go out of business first. 4. Focusing on sofa business gives Man Wah a cost advantage over Cacola and Royal HK. HTL\'s cost of production is higher as its production process is not as efficient as Man Wah\'s. 5. Man Wah\'s utilization rate with the new plant is about 60%. There is no expansion plan in the coming 1-2 years and management guided for moderate capex for maintenance in the immediate future. During the SGM, Francis Lee said there is no problem whatsoever with their current bank credit lines. The share price has run up nicely since end March. There is still strong support at 18 cents yesterday and today. If we look at the \"time and sales\" record, the 20 cents was done only for 1 lot each on Monday and Tuesday, so effectively the high reached was 19 cents. There may be profit taking but I still see accumulation taking place.
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