Friday, September 13, 2013

China Stationery Limited

Watching an article from TheStar Business News column drive to to write something what I feel is not so true from investor perception.

Since the first China base company XingQuan listed in Malaysia stock exchange in Bursa, their performance is well known by those who follow the stock market trend closely.

It is already a norm which most of the investor may agree that China base company listed in Malaysia is trading at the lowest PE range among other listed company in Bursa, by using the normal valuation method, a newbie in stock market will always tend to found that they are extremely undervalue, yet their stock price is fail to perform from what your valuation had done, not even near to it.

Normally what analysis blame to their bad performance in share price is due to some bad perception on the history of some China base company that listed oversea at US, Canada or Singapore, the accounting fraud is the main concern. And foreign investor is not easy to do a site visit to the Company as it base in China.

Another reason to be blame may be is although with the low PE and able to generate huge profit, but the dividend policy is quite stingy which their reason is China fund raising through bank is not that easy like Malaysia and the cost is very high, so they prefer to keep the cash from the profit as their operating cash reserve.

But does it mean this Company in Malaysia is really lack of retail investor in Malaysia? I'm not think so.

May be we can see the first few China base company listed in Malaysia which mainly on shoe maker industries, is trading quite a normal low volume, I would like to use China Stationery Limited (CSL) as special case study on those blame.

Investor who follow the CSL share price trend since its first day IPO debut in Bursa, should very well noted that they actually not open below their IPO offer price, with continuous high volume trading and it actually trading at above RM1 for quite some time after the IPO debut.

And you can see their current price is merely RM0.205 (Closing price on 13th September 2013) now, but investor always can noted that their trading volume is always among the top 20 in Bursa during this period.

So do anyone think there are no retail investor participated into it with this volume? May be a lot of retailers is just speculating on it, but if one who had join share market forum (There are quite a few forum site on Malaysia share market discussion), ones may noted there are quite a lot of retailer involve in CSL, some may stuck in various price from RM1 all the way  to current RM0.205.

So personally I'm disagree that there are lack of retail interest on this CSL, what I can say is, CSL share issue amount is too big for Malaysia retail investor to do any impact on their share price movement, share price performance......the ball is still under the foot of those major shareholder, so it is very weird claim that China base company bad share price performance is due to lack of retail investor.

The full article published in TheStar today as below,

Published: Saturday September 14, 2013 MYT 12:00:00 AM
Updated: Saturday September 14, 2013 MYT 6:54:40 AM

Chinese companies still keen to list here

STIGMA, bad perception, lack of understanding of their businesses – so many negative things have been said about Chinese initial public offerings (IPOs) here.
True, the share price performances of such companies have been nothing short of dismal although fundamentally they are generally solid companies.
The ninth and latest Chinese company to list on Bursa Malaysia – China Automobile Parts Holdings Ltd – for example, which reported a healthy net profit of some RM64mil for its financial year ended Dec 31, 2012 (FY12) – is trading at less than half of its IPO price of 68 sen, based on its latest closing price of 31.5 sen,
Still, the general lack of ability of Chinese companies to attract local investors has not stopped their counterparts from wanting to list here, partly also due to the fact that there is a long waiting list back in China.
“I know of a couple of interested firms,” says one industry observer.
He says one of the issues with the Chinese listings here so far is that most tend to go for big amounts – aiming to raise huge amounts of funds does not mean quality.
“These companies should focus more on creating value for their companies in order to attract investors to take up their shares.
“For example, Chinese companies should consider building up their presence here by setting up manufacturing facilities locally so that people can have better understanding of their businesses,” he says.
“This way, they are also value-adding Malaysia by creating jobs and boosting the economy by investing and, of course, investors will feel ‘closer’ to them as their facilities will be located near to where investors can physically see them.”
He says Chinese companies serious about expanding their businesses and making it more relevant to this part of the world can also use Malaysia as a stepping stone to expand into other growing South-East Asian markets.
“Investors here will definitely welcome such a move.”
A fund manager echoes his sentiments.
“Much of the concern of prospective Chinese company investors here are focused on the companies’ investment or assets which are mainly located in China.
“Prospective investors are wary of the fact that fixed assets (plants, warehouses, machines) are located too far away from Malaysia, which translates into an issue when it comes to ‘site-visiting’,” he notes.
Reports of fraud cases and scandals surrounding Chinese companies that list overseas, for example in Singapore, do not help the situation either.
“It’s really about engaging the prospective investor in a holistic, personal and proper manner,” notes the industry observer.
In the meantime, sources say that there are at least two Chinese firms in the process of preparing their applications for the authorities for a potential listing.
One is an apparel manufacturer while the other is dealing mainly with chemicals.
According to the latter’s website, Everfine New Resin Co Ltd was established in 1998 in and is located in Quanzhou, Fujian Province Wuli Industrial Zone.
The company, which is at the initial stage of its IPO plan, is focused on the “development, production and sale of resin/curing agent of the modern enterprise.”
“The company’s products are widely used in aerospace communications, electronics, chemical paints, leather bags, decorating paints, building materials and other fields.”
If this IPO does materialise, it will contribute to creating a more diverse group of Chinese companies listed on Bursa Malaysia as most are now sports apparel companies.
That said, bamboo flooring manufacturer Kanger International Bhd is set to be the 10th China-based company to be listed on Bursa Malaysia.
The company’s business is in the manufacturing and trading of bamboo flooring and related products for residential and commercial markets under its brands Kanger andKAR Masterpiece.
It also acts as an original equipment manufacturer for customers who request this service.
“China’s robust growing economy has encouraged many of its entrepreneurs to list their companies for expansion purposes. Some may want to expand their businesses offshore and may find South-East Asia a suitable region for listing, this includes listing right here in Malaysia,” says the fund manager. 

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