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Recently, I have been looking at China Minzhong, a company which the Government of Singapore Investment Corporation (GIC) has a 17% stake in. Prudential reduced its stake to less than 5% while Templeton increased its stake to above 5%.
There is an abundance of research which has been done on China Minzhong and it is mostly good. Here are links to some analyses:
1. CIMB (14 Feb 2012)
2. Kim Eng (14 Feb 2012)
China Minzhong has made some large capital expenditure last year and it would take some time to show positive results. The longer term picture looks promising and buying on weakness could be rewarding for anyone who takes a longer term perspective here.
See slides presentation dated 13 Feb 2012: here.
1. Net income margin is consistently above 25%.
2. NAV per share: RMB 5.70 (approximately S$ 1.14)
3. Net gearing ratio: 0.11x
4. Current ratio: 2.7x
5. Half year EPS: RMB 0.48 (approximately S$0.096)
Expectations are for second half of its financial year to show higher EPS.
Technically, China Minzhong's share price emerged from a terribly persistent downtrend at the start of the new year. It then took a while to overcome resistance provided by the 100dMA before hitting a road block set by the 200dMA. It is now supported by the 50dMA and if that goes, we could see a retreat to the 100dMA which is currently at 93c.
Notice that volume has been higher on white candle days and lower on black candle days in recent sessions. Volume seems to be reducing as price pulled back. Consolidation could continue for a while more as weaker holders are shaken out.
I have initiated a long position today at 98.5c. If its share price were to weaken to 93c, I would probably add to my position. 93c is, in my opinion, a very important support if it should be tested. If it should break, we could see price retreating to test the lows of 2011 with 84c as an immediate target.
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40 comments:
Is CMZ a S-chip?
Hi Ray,
Very much so and I can only hope that it is in the same class as the former E-pure and not Ferrochina. ;p
Hi Ak,
u're not concerned about their notorious poor governance?
Cook the book?
Hi Ray,
Yes, that is always a concern and I have had both good and bad experience with S-Chips.
So, my initial long position in China Minzhong is only 15% the size of my initial long position in Yongnam, for example. Being a bit more cautious. ;)
hi AK,
I cant find China MinZhong under SGX Corporate Action page.
Is it listed there as other name than "China MinZhong"?
Do you know its annualized DPU (if any)?
Hi Ray,
ChinaMinzhong (K2N). You might want to look again.
No dividend from this company, unfortunately.
Hi AK,
Actually I'm puzzled why would anyone want to buy a stock that doesn't give out dividends. What's the rewards to own the share then?
You may say its for capital gain but if there's no incentive to own the share, why would there be a greater fool that want to buy it at a higher price from you?
Hi Ray,
Buffet's Berkshire Hathaway does not pay a single cent of dividend. I suppose people buy its shares, believing that its value would continue to grow.
With China Minzhong, I believe that it has the potential to grow and I believe that it is undervalued. Technically, it looks like its share price has found a floor. Hence, a small long position for me. ;)
Hi AK71, I really like your blog - informative, updated frequently and I think our trading/investment style seems alike.
I have vested interested in minzhong too! One of the lowest PE stock around for a 500m market cap.
Hi BC,
Thank you and I am glad you like my blog. Please visit my sponsors at the same time. Small reward for my blogging efforts. ;)
Apart from the low PE, China Minzhong looks good in terms of price to book ratio too. Although huge CAPEX depleted its cash position, it looks like it could recover rapidly.
All said, the current price weakness could be a nice window of opportunity for anyone who would like to long this stock. Good luck to the both of us. :)
From the chart as of today, it seems CMZ is on a downward trend.
The wave up is quickly turning downwards again.
Hi Ray,
Have a plan and stick to it. I am taking my own advice. ;)
good luck to us :)
Hi Ray,
Indeed, good luck to us all.
Actually, whichever way price moves, it is good for me. If it weakens to the support I identified, I will buy more. If it rises, I will wait to sell. :)
haha, u have deep pockets...
Hi Ray,
Yes, having a war chest ready helps. :)
GIC backed (GIC owns 17% of the company) China Minzhong which listed in Apr ’10 is currently trading at $1, is 20 cents below its Apr ’10 IPO price of $1.20. It had reached a record high of $1.85 in Feb ’11 and hit a record low of 67 cents in Dec ’11. And valuations remain undemanding at 4x
PE against its historical average of 6x and IPO time of 9x despite having delivered on management’s promise of 30-40% growth rate.
Source: Lim & Tan, 26 March.
Price broken down of consolidation band; a healthy correction or is it something more?
Templeton fund is still accumulating though...
Hi AK,
WOW CMZ plunged to 91 cents this morning.
I was searching all over for news and found nothing.
do u hear any news?
Hi Ray,
Nope, I have not heard anything and, in fact, I would not have known about the fall in price if not for you. :)
I would accumulate on further weakness, everything remaining equal.
haha, i have become your human stock alert ;)
yeah I sold my holdings off few weeks ago and today I picked up a few. Got cut by the falling knives but luckily I buy in tranches :) learnt from mistakes earlier.
Just kind of concerned with the sudden fall in price.
The only corporate announcement I can find is that two BB increased their stakes. Surely thats good news so really scratching head to what's brewing in china.
Hi Ray,
Hahaha.. Indeed. :)
It is hard to account for Mr. Market's mood swings. If nothing has changed, lower prices are good for investors. ;)
Hi AK,
My limited knowledge of Fibonacci tells me the next support is at 88.5c
Is your estimation about the same?
Hi Ray,
There is really no hard and fast rules, imo. It depends on the time frame we are looking at. Personally, I see a stronger Fibo support at 84c. With the high volume sell down yesterday, could we see more heavy selling?
I am somewhat wary of adding to my long position at the moment because I am unable to spot any positive divergence with the momentum oscillators.
On the other hand, Wilmar's daily chart shows a rising MACD even as its share price fell.
hi AK,
Any thoughts CMZ chart?
Hi Ray,
Technically, it looks rather weak. The last time I looked, I didn't see momentum rising and the lack of such a positive divergence means I would not be adding to my long position.
Fundamentally, I think this is good pick, especially the low PE. Don't know why recently drop, will 0.80 again a point to buy?
Hi John,
I really don't have any issues with China Minzhong's fundamentals. In fact, I think it would recover quite quickly from its huge capex. There is value here and the lower the price, the greater the value. ;)
I see stronger support at 84c if that price should be tested and I could add to my long position if the momentum oscillators should slow their rate of decline.
hi AK,
When you spot divergence, pls post here :)
last checked, CMZ fell to 0.835.
seems like 0.84 not strong enough to hold. Selling pressure still very great.
Hi Ray,
I have been somewhat lax in charting and blogging recently. However, if I do spot a positive divergence here, I would definitely blog about it. ;)
Hi Ray,
Looks like it. It remains, however, to be seen if it is a whipsaw and if price could close at or above 84c.
I am glad I am disciplined enough (this time) not to add to my long position last week and decided to wait for the dust to settle.
yep, all thanks to your timely reminder, I also didn't add any to my position :)
Cheers.
Hi Ray,
Thanks for visiting my sponsors... ;p
i have been. :)
Hi Ray,
I assume that to be the case which is why I thank you with confidence. ;p
Hi AK,
This morning, CMZ rose from its 84c closing on Monday.
Seems like u're spot on :)
did you add to your long position?
Hi Ray,
Nope, I didn't. I still do not see momentum improving. So, I would wait to see if a retest of 84c would take place. If it should take place and if it should hold up, I would be more confident of adding. If I should miss it, I am not too bothered since I already have a long position in the stock albeit at a higher price. ;)
CMZ, now 0.82!
Hi Ah John,
The technicals still look weak although it looks like volume has been declining.
Fibo lines suggest supports are at
80c, 77c, 74c in case of further weakness.
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