Dream Int'l (1126)

2009 results were in-line with my expectation.  The company's CFO said before that he will consider paying out one-third of the company's profits as dividends.  The EPS being HK$0.11/share, he's paying out HK$0.03/share (instead HK$0.04/share), which is why the market was disappointed and stock dropped 16% yesterday (and technically, some profit taking as well).  In my view, the stock is fairly priced at this HK$0.60-0.80/share level.  HK$0.60 represents a dividend yield of 5%, which is fair.  Judging from things that have been unfolding in the world, and well as the big order from Brazil, the company should be able to sustain its profitability at the current level for 2010.  So the question becomes - if you own the stock right now, what should you do?  Well, I think there's limited room for stock price appreciation as this point (and not a lot of downside risk either).  If you are ok sitting on a stock with 5% dividend yield and 5.5-6.0x P/E, then hold.  But if you have opportunities to earn a higher return, then you should consider selling down your position gradually.

I am current studying a 庄家股, which is something that I don't normally do.  But this one is interesting in that the company had a change of management in recent months.  There's a business unit that's generating good recurring income, and the company is sitting on a lot of cash and with little debt.  P/B ratio is 0.1x right now - there's so much value to be unlocked in the company, but obviously, the risk is if the company's new management continues to pillage the company, then the stock you buy will become worthless.  But if things go in the right way, then the stock could easily go up 4-5x.  Anyway, I'll share the idea upon more research.