To be precise, Huaan is not steel company but a company that supply coke that needed for steel processing materials.

I don't have any research on this company. Is it true that the company is debt free by looking at company balance sheet? Curious to know also.

Err... not the same analogy, yes, Huaan's product is needed for steel industry, but it doesn't mean if Steel company is earning good money, Huaan must or should be able to do also.

It is about pricing power, cost and competition among themselves within the industry. Yes, it indirectly affected by steel industry because steel industry is its customer, but higher revenue doesnt' mean higher profit. As if coal price is surging faster, then it might mean higher cost for them in the future as well.

Don't get me wrong, I don't say Huaan is not good, in fact, it low price with good earning starts to attract my attention as well.

Just we can't say if steel industry is doing good, then those supply to the steel industry must be doing as well.
It is similar to oil industry, crude oil price is surging to historical high so does gasoline price, but refiners are facing profit margin being sqeuezed even though gasoline rose to historical high because the pace of gasoline price increment is less than crude oil.

Just my 2 cents.

Btw, got any link for getting the financial report of it (particularly on balance sheet and cashflow), so that can study a bit on it. Can't find it at the KLSE website.

NVM, just found it already.

This post has been edited by cherroy: Aug 28 2008, 02:49 PM

May be the share price dropping because of concern on its profit margin. Nevertheless, its profit in term of EPS and cashflow look healthy.

Taken from the financial report,

It can be view as half full or half empty in term of special tax incentives and others cost factor as mentioned (buying at discount price).

1. If those being taken away, then it might not as profitable as it was/is. So for half empty view, the company is not as profitable or competitive as it looks because those cost price is not according to the normal market price as well as tax incentives wise.
As those discount price purchase or tax incentive wise although might be long term, but we knew it is not forever, that's where market concern of.

2. Half full view, those lower cost will able the company to register more healthy profit to the company.

Generally, as market is forwards looking mechanism, market generally tend to take the view on (1) more than (2). Because market generally more concern about the true competitiveness of the company.

It is similar to TNB, although TNB registered billions of profit, market generally doesn't react quite positively because market knows TNB is buying natural gas from Petronas at huge discount price compared to market price. So its share market price generally being traded at a discount compared to its peer.

Don't mean to comment on Huaan whether it is good or bad. Just some experience that how market view on a stock generally.

Judge you own.

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Added on August 28, 2008, 3:15 pmBtw, you or anyone can explain why they want to list in KLSE in the first place by reverse takeover of Antah? I am still struggling to find a reason for it.

As listing elsewhere particular in China market or HK, they can easily chalk up more premium on their share price compared to KLSE. As we knew KLSE performance wise is not so good compared to others regional market.

This post has been edited by cherroy: Aug 28 2008, 03:15 PM

This is 10 years ago story prior before 1997. Since then KLSE no longer a major attraction for foreign investors (for equities market). This part still really puzzling me of its listing in KLSE, may be got some relationship with Antah shareholder previously. That's my guess only.

Again, explain 12352 times already, (joking only) how large, how many employee, how tall the company building, how sizeable the company is not the most important matter, what matter most for the stock market and its share price is its earning ability, competitiveness and able to generate profit in term of dividend to the shareholders.

Sizeable of company, number of employee never a good benchmark comparison as different industry has different nature of business which is not comparable. Mining company surely is more labour intensive and work on sizeable area, while for tobacco company like BAT, it might be having less than 100 employee and with a small factory but still able deliver the same revenue and profit compared to 10,000 workforce company. So can't really use those figure to compare, the key issue is always efficiency, competitiveness of the company within the industry and ability to generate profit and create wealth to the shareholder.

Financial report basically reveal almost the details of the company (like how much worth of those sizeable building/ work area already), so it is much better look at its financial reportf or justification rather than looking at the size of the company. No offence and don't get me wrong, not saying it is not good or good (as above statement is a more general statement, not specifically towards Huaan issue), just to highlight what to focus when evaluating a company or stock.

Just my 2 cents.

This post has been edited by cherroy: Aug 29 2008, 10:36 AM

Er..... I don't think you are getting my point on previous post.

To look for investment target, equities investors won't strolling around a country then see a huge factory then starting to interested in it. They won't care your factory is 10 acre big or your mine field is 100 hektar.

Equities investors will look for those company that can deliver them good return rate on their investment over the long term, in term of creating wealth as well as through dividend. It is always the main point and main criteria to start with.

We only care how much it can deliver profit and dividend to the shareholders, we don't need to look how sizeable, how large the company factory, how many employee it have etc. This is not the main consideration in equities investment.

Sizeable can be advatange and also a liability which is another issue.

This post has been edited by cherroy: Aug 29 2008, 03:18 PM

Secondary listing means list the company in another exchange only. Just like Huaan already list in KLSE, they can opt to list at HK exchange, which both exchange is trading on the same share.

It has some effect, depended which one is the dominant trade on it normally market will take the cue from the higher volume market. The less dominant generally will track the dominant exchange traded price. But it can have discrepancy price of price in between depended on demand and supply. But it can't have too great discrepancy as if the difference is too big, it will mean profitable for someone to do the cross-trade or arbitrage aka buy at a cheaper side, the take it to sell at higher price side.

Number of shares is still the same (if they don't opt for bonus issue or right issue which is different story).

Numbers of shares you can simply increase one, it will affect shareholders benefits.

Bad news -
Profit margin declining due to higher cost
Market view it as half empty (due to tax incentive, etc as discussed in previous post which is not sustainable in long run)
Steel price is declining so might affect coke price steel company willing to pay.

Good -
Price is relative low, might be a bargain, might not be as well.

In this kind of environment, the high volatility of materials price which affect a company cost, it is very difficult to judge a company share price through PER, as no one will have the accurate way to measure it nor foresight to view the exactly future situation will be.

For eg. like Airasia. It is a less than 10 PER stocks by using last Q result, but it becomes a more than 30X PER stocks after recent Q result. So previous drop in share price of Airasia seems investors were getting roughly right on their future forseeable financial result.

So whether current share price reflect future trend of company result, your guess is as good as anyone. Whether it is super cheap or not at current price, only future financial result can give justification on it.

On the other hand, (Huaan is not a steel company, don't get me wrong, just a simple example) steel company tends to trade at lower PER side, because market view those steel price or specifically the tremendous increase in profit margin on steel is not sustainable over the long run, as cost will be catching up like electricity price up significantly as well as others cost like transportation etc.

One thing for sure, there are many foreign investors are fleeing this market and KLSE might be getting downgraded by most investment bank.

Just my 2 cents

A reminder,

You can't rely on PER to make justification at the moment especially those involved in commodities related one, as those past year PER data can be misleading. As we know future earning will be in different picture.
Airasia is the good example lately.

One question always remain on my head when seeing this counter, why they want to list in KLSE in the first place? Most people already know they won't get good premium on listing in KLSE compared to SG or HK or even China market itself. As Huaan core business is in China, not in Malaysia as far as I concern. For Malaysia company, yes, they have no choice but only in KLSE, but for Huaan, it is not the case, they can opt elsewhere that is more liquid and bigger market.

It is relative new company, so what the company policy on dividend not yet known, hard to judge.

The name of blue chip normally given to those reputable, has long history of good earning, big cap and stable company.

Huaan is a relative new in the market, although there is no specific rule to say which is blue chips or not, for Huaan, most analysts won't classifiy it is blue chip.

There is no specific way to classify or rule on it, just a market jargon to those as I mentioned.

The reason why people taught this way because normally index will include those big cap and well perform company so that index looks good and represent well of the country bourse. You want your index becomes higher and higher, right?

You definitely don't want Transmile as one of the component, right? it drags down the index while make the index looks not so good. That's why they always discard those not well perform one, and including newly good one from time to time.

If non-index linked can't be said blue chip then we have to discard Resorts as blue chip already, while the like of Transmile was a blue chip.

No offence.

The next 2-3 Q result will hold the key and reveal the real effect of the slowdown. Share price will react accordingly.

For big scale manufacturing company.
Demand goes slower generally will hurt manufacutring underlying profit quite significantly because there are certain fixed cost that are difficult to cut down which might not be able 100% offset by lower cost of material, ie capacity utilisation is an important factor for manufacturing company as there are certain fixed cost like depreciation, production overhead etc which cannot be easily being cut down to match the pace of demand slowdown.

This doesn't sound a right or good reason to list either.
They should already knew, in Malaysia, for the last few 5-7 years, IPO generally won't chalk up a good premium already.

I think you had never been in before in manufacturing sector. A 30% or more sales decline already can have significant impact on the a manufacturing company already.

Yes, goodside is the company has no debt, so don't need to bare any interest rate charges. As long as cashflow is healthy, company still in good shape.

Share price is about profitability of the company. Company share price will match the pace of increase or decrease of the company profitability. Company can still earn hundred of millions, but stock market won't like if the company profit is declining, that's why you see equities around the world are declining due to high potential slowdown in the world economy.
That's why steel stocks are having low PE around 3-5 across only, because market view previous good profit won't be repeating.

A RM60K in the stock market is a relative small sum actually. Just a norm market transaction.
No offence.

Nobody can assure they will make money or not including big players.

Big or small never mind one. Big players are not guaranteed to make money as well, so does small retailers, even their investment amount is small doesn't mean their decision is not as good as that big players.

Yes, we knew Huaan is listed through backdoor listing of acquiring Antah.

The question is that why they choose KLSE or Antah for listing purposes. There are others way or other bourses they can list it as well which they can easily chalk up more premium compared to KLSE which we knew in the first place won't be good. Consider that its business operation is not in Malaysia either.

The first statement, I don't think it has major influence on steel demand, yes, re-construction need steel but have to consider those are highly remote area whereby re-construction would be slow and minimal in term of macro-economy.
Steel demand is mainly from economy activities growth from construction to industrial which is the major force.

Picture would be clearer after they releasing the 3Q and 4Q result. By then it is much easier and have a clear picture where company financial situation is heading, whether it is a profit reduction of 30%, 50% or no profit at all. But market share price suggests the later.

Yup, if 10 cents, I would gamble a little on it, not much harm done. Something like getting 100 lots only cost 1K, still cheaper than buying a high end HP or a PC.

Wow! you pants worth 1K lor!