Qingmei has tumbled from a high of 36.5 cts on 9 Feb 2011 to an intraday low of 27 cts on 15 Feb 2011 before recovering. It is interesting to note that the behaviour of Qingmei is somewhat similar to CG Technologies (now known as C & G EP) of 2005/6 era. CG Tech IPO in April 2005 at a time when S-chips were generally out-of-favour with most investors following the CAO’s scandal of 2004. Historic PE – 6x at 31 cts. Share price hit a high of 35 cts before sliding First Pullback: price hit a low of 15 cts in Nov 2005 Next High Point: price rose to a high of 43 cts in April 2006 Second Pullback: price hit a low of 24 cts in June 2006
Share price consolidated between 30 to 37.5 cts when 1H 06 results were released showing EPS – 4.7 cts(S). (annualized EPS – 9.4 cts); Forward PE – 3.5x at 33 cts. Breakout To New High: price made rapid ascent after breaking above 43 cts to hit a record high of 94 cts on 26 April 2007 & then followed by the company making a 1:2 bonus issue. QINGMEI IPO in March 2010 also at a time when S-chips were very much out-of-favour with most investors following the spate of scandals or poor corporate governance among SGX-listed China companies in 2008/9. Historic PE – 5.3x at 31 cts. Share price hit a high of 30 cts before sliding. First Pullback: price hit a low of 15.5 cts in May 2010. Next High Point: price rose to a high of 36.5 cts on 8 Feb 2011 Second Pullback: price hit an intraday low of 27 cts on 15 Feb 2011.
1H 2011 EPS – 4.3 cts(S) (annualized EPS – 8.6 cts); Forward PE – 3.5x at 30 cts. Breakout To New High: - (yet to be seen)? QUESTION: Could Qingmei emulate the feat of CG Tech?
Hi Observer 2,
Thank you for sharing your insights on Qingmei. I agree with you that Qingmei is very undervalued, and am holding it for the long term. I have also done the same with Eratat which I feel is also highly undervalued, and which is also a stock which you've also spoken positively about before. What is your opinion on Eratat right now?
Hi, Ethan999,
With the market now undergoing a significant correction, we have to expect many stocks ( including Qingmei & Eratat) to experience a pullback with some falling more than others. The share price of Eratat has fallen close to its pre-placement issue level. While the fundamentals of Eratat may not have changed much, the recent aborted placement issue does not seem to reflect well of a good management.
Below are some unanswered questions:
Why did the management proceed with a placement issue at a large discount when the stock price was already so depressed and undervalued?
Has the management given due consideration to safeguard the interest of minority shareholders who would lose out in earnings dilution after the placement issue?
Why did the company not resort to bank loans if it needed funds since it has no outstanding borrowings in the first instance?
In declaring its last dividend, why was there such a long delay in announcing the payment and book closing date after the dividend payment was approved at the AGM?
Since Eratat’s share price is at rather depressed & undervalued level and the company has good earnings visibility for Jan – Jun 2011, it is reasonable to expect good upside in its share price when market recovers and sentiments for penny stocks improve. However, investors should watch out for Eratat's order book for this year’s Autumn/Winter Season.
Hi Observer2, I share all the concern that you have listed down for Eratat. I do not see the urgent need for that capital at the expenses of minority shareholders. Also i have not seen any insider buyback over the past one year. If the shares is so undervalued, why isn't insider buying back and instead they opt to raise capital from the market at great discount to the already depressed price.
With that in-mind, i am worried that there might be problem that outsiders may not know. I donot see the necessity for a healthy and strong company doing that since liquidity is abundance in the market and Fund Manager are also looking for places to deploy their fund under current low interest environment.
For Qingmei, we have an Australian fund buying straight from the market at average 34 cents. I am sure that you see the value that you have listed down here.... that's why they rather buy quickly than waiting for regulatory approval for placement shares. Also note that the insider have also buy shares in the market that signal the company is undervalued. I will be excited to see how the new capacity (up 43%) will do wonder to its next quarter result.
I re-call reading somewhere that Eratat is undergoing transformation to target upper middle income market which itself is not proven yet. That's why i rather SELL all my holding in Erata and deploy them into Qingmei. I might be wrong but i think this is a safer and better bet in term of risk/reward basis.
