The investors always said that the market is a voting machine in the short term but a weighing machine in the long run. Sentiments toward the S-chips have been battered down due to the recent bad news about FerroChina, China Printing & Dye... So dealers and brokers told the opportunity to geneate trades by calling their clients to sell. This will always be a cycle. Just shut out the noise and buy those good quality companies to keep. You will be rewarded. :laugh:
In contrary...a lot S-Chips have been on the buy list for a long time... 1. Techcomp 2. China Sky and all their bretherens (Li Heng, Fibrechem, SinoTech) except C&G 3. Zaino, China Sports, Eratat and Hongxing 4. Celestial, China Milk, China XLX, China Farm ....so many others Results...all still beaten down to the pulp. Noise??? Bro it sounds like a disco pub....sell,sell,sell...hmmmm...sell, sell, sell...maybe can even win American idol!!
I am not so sure that the list that you have, are all good companies. Some look good on the outside but cannot be eaten at all. Li Heng, Fibrechem, SinoTech have, in my opinion absolutely zero competitive advantages. All you need to do, is to look at the textile companies in HK to know what is a more realistic profit margin for such companies. China Zaino makes 20% net profit in selling bags and luggages? Better go and look at what type of margin is CROWN making? A more realistic profit margin is around low teens, or high single digit. SP Chemical is a good company with solid earnings. A real company with real profit margins. Too bad, it decides that since the Singapore investors give me low PE, I might as well delist myself and list elsewhere again. :laugh: :laugh:
The list I gave is just a general list of companies consistently been given a \'buy\' rating by the analyst. So if the profit margins are high indeed. Is there something fishy going on here with the audited books then? I cannot buy the fact that the fibre companies have all zero competitive advantage. They do not grow to that level unless there is some competitive advantage. Price and logistical advantage can be competitive advantage with china being the main factory for clothes and related products (shoes, bags, etc) worldwide. They are surely beating the hell out of similar products imported from outside (of china). Even with the proliferation of the chemfibre companies in china, they are still small in comparison to the other giants from Japan and also Europe. So I\'ll be careful with the statement of zero competitive edge. I have seen it happen all too often with Chinese companies that they are able to learn and learn fast to close the technological gap and they have all the cost advantage which easily translate into lower prices which in turn is a huge edge in a price sensitive market. Well the battle among themselves is more difficult for me to judge as who has the edge over the other and maybe they are all serving different segments thus may not directly compete apart from LiHeng and China Sky. Again this is my own view from the outside and apparently you do have painted all of them with the same brush. As for Zaino, they are trying to break out of being a pure OEM play and brand their own bags which they are pursuing aggressively. It started by making bags for the big guys and that they have accumulated manufacturing expertise in that field and are now moving to sell direct to the chinese consumer which gives them higher margins. Not a lot but much better than being squeeze by the majors. Yes they will have a uphill task but as long as they understand that they can position themself as the low cost alternative to Crown or Samsonite with acceptable/good quality they will have a segment for themselves. Call them the \'bata\' or \'Fila\' of sports shoes fighting against the likes of Nikes and Adidas. Not one company can dominate unless you\'re a monopoly. Again Zaino has the local advantage of being able to read the likes and dislikes of chinese consumer and may desgin better for that market. It does not have to look outside it borders as the pie china in china is sufficiently large enough. It can be a \'local champion\' as if it meets its goal it may be end up being the largest bag maker in the world? I would have to agree that all china plays are inherently riskier but that is the price you pay for outsize returns or total loss!!! As a matter of fact Celestial may be the next time bomb to go off with the CB issue. If it does then I would have to write it off as a permanent loss of capital. Chances of it going belly up like Ferro? I would say low 25% but you never know...since I\'m not an insider. The only saving grace is that so far have not seen any filing of insider selling but at the same time if it is so cheap why aren\'t the insiders buying????
I agreed. Not all S-chips are bad. Let\'s evaluate the textile companies after their results are out. China Fibretech, Fibrechem, Sinotech Fibre, Li Heng, China Taisan etc.... We can do a comparison and see how they perform... Then, we can see if the industry is really that bad.
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