In the February issue of Pulses, there is a very insightful article on SGX-listed IPOs. Based on the first-year performance of IPOs over the last decade, the article concludes that oversubscribed shares (i.e., those share prices which usually increase significantly on first trading day) tend to perform more badly at the end of the first year, as compared to an undersubscribed share (i.e., share price dropped on first trading day).
Two points are useful for the investor:
1) The result is so significant that there is an almost 30% price difference between oversubscribed (read: popular) stocks and undersubscribed stocks after 1 year.
2) The undersubscribed stocks tend achieve price gains during the third to ninth month after the IPO.
This is a clear case of market inefficiency, and the shrewd investor will maximise this to his/her fullest advantage.
Good night, and good luck!
Wednesday, January 30, 2008
Sunday, January 20, 2008
SP Chemicals Ltd
Note: SP Chemicals (SP) is a China-based chemicals producer and distributor. Listed on SGX in 2003, it currently has market capitalisation of $315m at a price of $0.86 per share.
The financial performance of SP since listing has been phenomenoal from day one. ROE for their 1st year was 17%, rising to 37.5% for FY2006. Based on latest 3Q results, the performance for FY2007 is set to surpass that of last year's. Other exciting facts about SP Chemicals include the following:
1) Price/NAV = 1.45: an attractive and relatively low-risk stock.
2) P/E = 5.9: an underpriced stock. Considering that FY2007 is set to be better, this is significant.
3) 52-Week Low = .825: the current pricing of SP at 0.86 is not shored up during 2007's bull run. Hence, SP is likely to be an unpopular stock and underpricing is likely.
SP Chemicals appears to be severly undervalued, even in light of the current bearish market sentiments. Indeed, because SP Chemicals' clientel base is increasingly global, while the cost base is in low-cost Jiangsu region in China, it is in a good position to ride out any economic downturn. Also, as a preferred lowest-cost chemical producer, it will be less affected in a downturn.
My target 6-month price for SP Chemicals is between $1.05-$1.25, which will translate to a potential 20% - 50% gain.
Goodnight, and good luck!
The financial performance of SP since listing has been phenomenoal from day one. ROE for their 1st year was 17%, rising to 37.5% for FY2006. Based on latest 3Q results, the performance for FY2007 is set to surpass that of last year's. Other exciting facts about SP Chemicals include the following:
1) Price/NAV = 1.45: an attractive and relatively low-risk stock.
2) P/E = 5.9: an underpriced stock. Considering that FY2007 is set to be better, this is significant.
3) 52-Week Low = .825: the current pricing of SP at 0.86 is not shored up during 2007's bull run. Hence, SP is likely to be an unpopular stock and underpricing is likely.
SP Chemicals appears to be severly undervalued, even in light of the current bearish market sentiments. Indeed, because SP Chemicals' clientel base is increasingly global, while the cost base is in low-cost Jiangsu region in China, it is in a good position to ride out any economic downturn. Also, as a preferred lowest-cost chemical producer, it will be less affected in a downturn.
My target 6-month price for SP Chemicals is between $1.05-$1.25, which will translate to a potential 20% - 50% gain.
Goodnight, and good luck!
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