Xinao Gas (2688.HK)

Sorry that I haven't written for months.  I will try to be a bit more diligent and at least post an idea or two every month.

HERE'S THE LATEST IDEA:  Recommend "Buy" on Xinao Gas (2688.HK)

+ China's energy consumption will continue to grow in the foreseeable future

+ Natural gas is increasingly used instead of coal and this trend will continue in the foreseeable future

+ PRC gov't is incentivized to see the sector develop due to its strategic importance

+ Sector has high barrier to entry, being a) relationship with upstream gas providers such as PetroChina, b) capex, c) ability to obtain license from gov't on gas projects, among others

+ Xinao Gas is a leading player that has demonstrated ability to grow revenue and achieve decent margins in the past 10 years

+ Earnings is projected to grow by 20-25% CAGR from 2010 to 2012

+ Valuation is attractive at 17x P/E (based on 2010 analyst consensus earnings estimate), representing 20-30% discount to peers

+ Recent price weakness was due to alleged fraud but there has been no proof nor further development to the story, and price has started to recover

+ Morgan Stanley had reported recently that Xinao Gas may announce 6-7 new gas projects in the next few weeks

+ A peer company, China Gas, will report its earnings this week and the results should be very favorable, which reflect that sector fundamentals is good

Target price is $24/share (vs. $18.3 now), representing 30% upside potential.  But do your own homework before buying.  Here are some analyst reports that you can download.

MS Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyMjg5OGNjZmQtYjU3MS00MjQ0LTk1NTQtZjcyNTgzMDlkOGRk&hl=en


Citi Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyM2Y2YWRiN2QtNDgzNC00MTIxLTkwNDItOTg1YTljNmY4ZTc1&hl=en


CPY Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyZDg1YTdlZDgtZjM5Zi00NDY5LTg0ZGItMTMxY2IyODFhYjI1&hl=en


ML Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyMzYxMjk0MzYtZWIyNy00OTIwLWI0ODItMjI1ZGFhMzBjY2I3&hl=en


GS Report:
https://docs.google.com/fileview?id=0B7h43MoiTlxyY2ZmMmU3MDktNTVlZi00NjA0LWI5OWQtYzhlODU3ZjZmMjQw&hl=en

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.

中國網(8006)

如果下星期一(三月二十二日)中國網(8006)宣布派高股息, 股價將爆升.

一周兩件：資策博資產大升值(錢雋)自蘋果日報

資本策略（ 497）有靚爆鏡中期業績墊底，仲有大孖沙基金坐鎮，買資策，博資產大升值。資策剛公佈 2010年度（ 3月年結）中期業績，純利升咗 2.9倍到 3.97億銀。就當全年度都係呢個數額入賬，資策 PE都係得 4倍多少少。
又資策最新 NAV 0.4元，現價折讓 42%，已經有唔錯折讓墊底。仲要咁睇，在資策投資組合當中，持作出售物業總值高達 45億銀，真係係咁易加多 20%上去，資策已經可以額外增值 9億銀，每股增值 0.11元，幾乎係現價一半。
再講，資策股東當中，包括無寶不落嘅 Value Partners。 12月頭，有報道話著名基金鄧普頓講過，唔排除喺合理價位增持資策。一於跟基金上車，齋計資策反映上邊每股 NAV增值，股價就要翻近半番到 0.34元。

http://hk.apple.nextmedia.com/template/apple/art_main.php?iss_id=20100103&sec_id=15307&subsec_id=15326&art_id=13587536&cat_id=5886778&coln_id=6795051

資本策略(497.hk)

公司將會在12月28日(星期一)公佈業績.

CAPITAL STRATEGIC (資本策略, 497.HK) - RECOMMEND BUY

I have studied this Company for three weeks and my takeaways are:

Capital Strategic (497.HK) is a very good company with a unique business model.  Chairman Mico Chung, Value Partners and Templeton all bought at $0.19-0.24 level.  The stock has also been recommended by "Master Win" in NOW Business News.

The Company will announce its first-half results in December 28.  The results will be very good due to a) one-off gains from CB redemption (~HK$200 million), b) disposal of properties (~HK$60-80 million), c) gains from investments held for trading purpose (~HK$50-100 million) and d) rental income (~HK$50-70 million).  Even though the Company has already announced a positive profit warning, I don't believe that the market price has fully reflected this yet.

The Company has many exciting projects that will come to market in the next 3 years, so the value of the Company will be gradually unlocked.  It is also venturing into the property market in Mainland China, especially Shanghai, which is a promising proposition, I think, given the need to refurbish/reposition some of the properties in Shanghai and the lack of players with similar skill sets as Capital Strategic.

Given the run-up in property prices in Hong Kong and China for the past 12 months, Capital Strategic's property and land portfolio is very valuable.  Capital Strategic's NAV is around HK$3.5 billion.  The Company's market cap of HK$1.8 billion represents ~50% discount.

THIS STOCK IS A SHORT-TO-MEDIUM TERM BUY.  TARGET PRICE IS >$0.35 WITHIN ONE YEAR (VERSUS $0.23 CURRENTLY).

3V Capital's research report on Emperor Int'l (163.HK)

3V Capital published a research report on Emperor Int'l (163.HK) today.  Their recommendation is BUY and target price is HK$2.60.

See report here:

https://docs.google.com/fileview?id=0B7h43MoiTlxyYzM0YTk3NGEtZWE0Ni00ZTZlLWJiMTQtMGFmNzI4ZjBhNzQz&hl=en