China Gaoxian - Crazy Play today

must attedn their AGM in Apr n question the CEO, how can they made such stupid mistake.......

I blur. What stupid mistake are you referring to?
They raised good money from the koreans for expansion into PET chip production that will expand their profit margins ....
They sold to Koreans at 40.5 cents.....instead of , say, 19 cents.

So what 'stupid mistake' did they make?
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[BT Ali 29-01-2011]:

must attedn their AGM in Apr n question the CEO, how can they made such stupid mistake.......

Agreed on the selling before dual listing. I sold all my holding above 40 cents but get catch when trying to catch the bottom. Finally exited with little damage at 34cent. overall still make good money from my long on Gaoxian. Currently it is trading at historical PE of 8-9X assuming that final quarter result is similar to last year result.
It is no longer cheap as before but also not expensive for investors taking a long term of view of the company. It can be consider a market leader in its field where Volume counts as one of the competitive advantage.... like i say in my other posting, management did an excellent job for the long term investors as they are able to raise fund at high PE level of almost 10x historical earning when other so called undervalued S-chip like Eratat have to raised money selling to fund managers at a PE level of 4-5x. In this aspect, i give Gaoxian management 5 stars rating while China Eratat 2 stars for short-change of their shareholders.
It all depend whether you are speculator or investor of the company. Long term investors should be happy because the korean pay more for the shares which goes into capital expenditure that will grow the revenue and income of the company while Singapore investors can now enter into the market at a discount from the 40.5 cents IPO price. 

Gaoxian has the proven record and it is going into vertical integration that will increase its profit margin. Big boys who understand the business model are in for the long term investment are paying 40.5 cents too in Korea.
While Eratat is changing its business model and strategy from selling sport shoe to apparal as well as moving from medium income target market into luxury product market which has yet to be proven. We have see some positive result from their transformation into the apparal market but we have yet to see whether they can enter the luxury market. Take ourselves as the consumer, will you buy the product of this brand when it suddenly go up market? I do not say "No" but it is going to be a challenge and it will take time....
For myself, i will instead focus on Taisan which have not been appreciated by the market yet. Forward PE for Taisan is about 4-5x PE. Smaller than Gaoxian but also have good client base as well as order for this year look good based on feedback from client. Final quarter result is also expected to be "great" since they are forced to spend over rmb 200mil to buy new machinery to meet order from client.
Another good counter to consider will be Qingmei, Fund Manager buy more from the open market at 34 cents level. Capacity has been running at over 90 percent in the past few quarters and the new plant add >45% capacity.... and this could show immediate increase in sales in the current quarter. 

I learn a different lesson. I exited at 34cents and made decent profits. But instead of feeling good I feel lousy. I don't quite totally agree with selling before the actual day. There are too many cases of stocks rocketing on their first trading days. Although these counters does come back to earth e.g. Include Hu an china new town and etc . Therefore the lesson I learnt is, sometimes I really need to enlist my broker. On counters that have gain so much , I should given instructions to my broker to sell at a certain price if the counter does not raise, and if the stock fall too fast, just sell an whatever next possible price. The counter open at 40 cents if I didn't remember wrongly, if inmanage to sell off at 39 or even 38cents my opportunty cost will not be that big. Although Gaoxian is still my second best performing counter, the lousy feeling of misjudgment stays with me. Yes, I agree with observer2 and erelation about Qingmei. Definitely on my radar screen. Still like s chip in the short term as long as PRC don't go bonkers with their interest hikes. Trying ti catch chinafibreT on it's low and make a quick buck and looking at accumulating anchun. Like it's strong profit margin of above 30% and the sector it is in. Agriculture demand should be strong in years to come and anchun services should be in demand. Also like the fact that anchun is going for economic of scale by building the third largest reductive Catalyst. I also have Hu an and Fuxing. Anyone has any other favorite s-chip?

Okay Gaoxian managed to raise cash at a higher price - this may be good for the older shareholders but not necessarily for the new shareholders who bought at a high price because they were led by the management to believe for instance, that they will list it in Korea at a premium to the price in SG. What if it was all one just big bubble and the idea that Korean investors value Chinese companies more highly a complete myth and the bubble continues bursting and it goes back down to 20 cents? Will you then still say that the Gaoxian management has done better than Eratat in managing to raise cash at a high price? The first question to ask is is this sustainable in the long term or is all the dual listing hype just one big unsustainable bubble?
Also, even if we presuppose that dual listing is a good thing, your statements wrongly assume that Eratat has no intention of dual listing ever - even though the management has mentioned an interest in listing in the secondary board in China, where the average P/E is 45 compared to Eratat's forward P/E of 4 - unlike the tenuous and statistically insignificant claims by Gaoxian supporters that Chinese companies are more highly valued in Korea (little concrete evidence of that) what better evidence could we have on a market that values Chinese companies much more highly than the Chinese secondary market valuing thousands of their own companies at a P/E of 45? There is a lot of talk about Eratat doing a dual listing in China, so even if we assume dual listing is a good thing, this is no basis to claim that Eratat's management has not done well. 
Another point is that is it fair to assume that a placement offered to an established fund with experience in the industry is necessarily a bad thing and a short-changing of shareholders? People seem to think that placements are necessarily inferior to rights issues but I don't think that this is the case - no doubt for rights issues you have the option to not dilute your shareholdings but only if you raise more funds from out of your own pockets to buy the issued shares - this way your shareholdings are not diluted but your own wealth is decreased - this is not very different from coming out of your own pocket to purchase more shares to compensate for the dilutive effect of a placement.
Furthermore, if you ask me, I think that placement done to bring in an established fund and big investors (what we know as Big Boys) who are willing to pour in over ten million dollars to become major shareholders in Eratat is far more important endorsement to the value and potential of the company than the endorsement that a rights issue - mainly done through raising funds from the pockets of the 'little men', the retail investors who basically have no choice but to raise funds or accept their holdings being diluted. Yet companies which do placements are often seen more negatively than companies which do rights issues. 
Also, if you consider the amount of Eratat shares that CMIA and Mr Khoo Boo Kok wanted to purchase, in order to in effect become major shareholders and directors, 63 million shares, it would have been impossible for them to do it in the open market without driving the market crazy considering Eratat's average daily volume is amounts to about a few million shares. Yes out of goodwill the shares were offered to CMIA and Mr Khoo at a slight discount to market price but compare this to Hu An Cable where a major fund also recently bought into it at a premium to market price but Hu An Cable has remained consistently about 15% below the price they bought and even dropped a little further since the time they bought. On the contrary, Eratat's price has actually risen since the placement, apparently because the market views the fact that CMIA was willing to invest such a large amount to become a major shareholder as an endorsement of Eratat's prospects - not forgetting also that its quarterly results are about to be released in a few days time. 
Also, it would be inaccurate, misleading and irresponsibly lazy to say that Eratat is switching from mid-market to high-end market. This information is clearly inaccurate as all Eratat has said is that it is considering adding a new product line meant for the high-end market in first tier cities - this is great news as it is considering expanding its customer base to market with even higher margins but this by no means implies that they are removing their present product lines which are proving very successful with the middle-market from tier 2 and 3 cities and have so far been showing increasing profit margins - in fact last quarter alone net profit doubled to 9 million - Eratat, a company valued at merely about 100 million is producing net profits of 9 million dollars a quarter! Severely undervalued with immense room for growth. Compare this to Gaoxian which is currently valued at well over 700 million dollars already and is in the midst of a bubble burst in which everyone is trying to get out.
Yes what Gaoxian's management has done so far has proven good for short term traders but genuine investors like me are concerned with the long term sustainable growth of currently undervalued companies like Eratat and I have faith from Eratat's valuations, China's consumption growth and Eratat's sensible and effective management that we will see it blossom and grow many times but in a sustainable manner over the medium to long run. I can sleep at night unlike Gaoxian shareholders who wonder if the price will drop to 25-27 cents tomorrow. 
 
 

Gaoxian did free fall from 42 to 22.... now it's back up to 24. Not much when seen in the longer term perspective of post-listing trading. But today  it gives long-suffering shareholder some relief and some amusement. I say amusement because the market is truly an unpredictable animal - sometimes soothing, sometimes a pain. Who knows what Gaoxian will trade at in 6 months time when the expanded capacity is supposed to be in utilisation and the PET chip factory is about to be completed?