US housing futures

Wow! now we can trade 5 year housing futures for the US. See article by Matthew Hougan here . A 15%-25% fall in real estate prices - unadjusted for inflation, is expected.

Moody's Coproration MCO

Moody's (MCO) is an interesting company. To the unsophisticated like me it seems like they give you three letters like "AAA" and get a load of cash in return. Even Warren Buffett holds a stake. It seems like the perfect business to own - has a moat and has low requirements for capital.

What could go wrong? Recently the price has fallen on fears of lawsuits related to its role in the subprime lending mess. I am not qualified to comment but I feel that "Cogitarius" has done a good job summing up the issues on a Motley Fool board here.

So should I buy? Naah! If you know me you know that I have a way of avoiding value traps. I will not buy unless there is some confirmation from insider buying. You can see the insider trades for Moody's here. So if I see more insiders buying in the open market I will jump in.

Top picks - Reasonable valuations and insider buying.

• Bright world precision machinery . Price 0.61 SGD, pe 9 , yield 3%, roe 20-30%, zero Long term debt, p/b 2.5, p/s 2.3. See Insider buying and reports.
  
• Super Cofeemix. Price 0.78, ( last post at 0.71), pe 13, ps 1.83, roe 15, yield 2.8%, negligible LT debt. See insider buying.

So we have two companies at reasonable valuations and with strong insider buying. These are my top picks for the next year. I already hold Bright World and will place an order for Super Cofeemix when I can arrange some cash next week, if it does not rise above 0.8 SGD.

Insider buying in Singapore may not be what it seems. In her book "Show me the Money" Volume 1, Teh Hooi Ling reports ( page 117 ) that - based on a NUS honors thesis by Jaikishin " Insiders tend to conceal information laden buy trades through the use of family members or friends... Insiders also .. buy their own shares in order to support the share price. Or some of the trades were carried out to confuse the market or mask their real intentions."

I am not sure if disclosure norms have changed since that study was carried out(1990) so the results may no longer be valid. She does suggest though that significant buying by multiple insiders may be a good long term indicator.

Anyway do your own research, your investments are your responsibility alone.

Super Coffeemix Manufacturing

Super Coffeemix Manufacturing . Price .71 SGD, NAV 0.42, PE 14, P/S1.9, ROE 13.7, P/CF 11, LD/E 0.01, Yield 3%. Makes instant beverages (tea/ coffee ready mix) and convenience foods . Has been on my to research list for a long time, somehow I assumed the company had gone private and I forgot about them. Looks like it is still trading. See messageboard. Nice Annual Report , see quarterly report, and here. Sinagpore Exchange sponsored research reports are here .

From the reports we have

- 39,300,000 new ordinary shares were issued to CIM II Pte Ltd at S$0.60 per share, and
- 10,000,000 new ordinary shares were issued to Quek Chee Hoon at S$0.60 per share.
Post issue total shares are 542,542,980 and also we have 900,000 options issued to management.

My guess would be that if management think that S$0.60 is a good price to inject fresh cash then we can consider that to be a good price to buy.

Company has grown sales and gross income June end quarter by nearly 25%. Net profit skewed by other income from property sales. According to Shares investment No 301 Company has been profitable and paid dividends while growing sales and profits since records start from year end 2003. Possible negative is diversification into property development in Jiangsu China.

So it looks like a stable dividend paying and growing company in a defensive business, Reuters give long term D/E of 0.01. It does not pass my high ROE or low p/book screen but I can make an exception if the price is right as signaled by insider buying. Insiders seem happy to buy in the open market at S$ 0.83, price has fallen since then. Am thinking of placing an order.

I have tried their products. My office used to provide their instant tea packets in the cafeteria, the stuff is not great, but it is convenient, instant food will be with us for along time. Am off to make some instant coffee. Noted that its products are stacked in supermarkets and 7/11 stores right next to Nestle equivalents, so it seems to be holding up against the multinationals.

Jardine Strategic - A Margin of Safety?

If you have read James Clavells books like TaiPan then you will love the Jardine group.

For the background see
http://findarticles.com/p/articles/mi_qn4158/is_20010620/ai_n14393712/pg_1
and
http://en.wikipedia.org/wiki/Jardine_Matheson_Holdings

I own Jardine strategic holdings, bought for its discount to Net Asset Value (NAV as reported in the balance sheet). It had turned up in a ROE/PTB screen I mentioned in an earlier post.

Some recent news.
Jardine Matheson the other jardine company said
"shareholders in Jardine Strategic are being invited to tender Jardine Strategic shares in the range of US$14.00 to US$14.50 per share representing a premium of up to 9.5 per cent. over the average closing price of the shares"

Source http://202.66.146.82/listco/sg/jm/press/p070815.pdf

and

"Net asset value per share up 27% to US$24.69"

Source http://202.66.146.82/listco/sg/jsh/interim/2007/int.pdf

So put simply the offer is at USD 14.5 - a big discount to the USD 24
NAV of Jardine strategic. An unacceptable offer, I am not handing in my shares. But maybe this is simply an ploy by the owners to prop up the price of Jardine strategic to prevent a raider from getting a big stake. The price has certainly risen to the offer price though I doubt anyone investing from the business perspective will sell at the offer price as it is below NAV.

So what you have is company growing in Asia available at a discount to NAV and it will not fall much more because of the buyback offer at 14-14.5USD - a margin of saftey. Right now it is trading around 13.5USD - 1$ less than the top of the offer range.

Stock Screen Analysis

I will be analysing stocks from my previously posted screens here.

Incidentally I also I increased my ownership of Soundwill holdings and added China Print Power to my personal portfolio. I also recommended TCS (No ADR) and Wipro (WIT ) on the Indian Stock exchanges to my friends and family. I do not like the WIT ADR because it trades at a premium to the Wipro stock on the Indian NSE.

• Chinese Estates Holdings Ltd 0127.HK (Hong Kong), price 12 HK$, p/Tangible book 0.72. Latest results say NAV is 16.74 HK$. In June the company said that it MAY be considering takeover offers. That explains the recent price surge, a takeover would be expected to be atleast at NAV. Has recently fallen since peak of 16HK$. Company has paid dividends consistently for 5 years, Has been buying back stock. Did make losses and not pay dividends like other real estate stocks in 2002 , If market values of properties fall, the company must reflect this as a loss, that is the biggest risk. Financial summary. NAV has grown consistently. I like their website, unlike some HK companies the site was easy to navigate and has a lot of information. See review of HK property maket. At 4.7% yields office property is not in a bubble. Worth a closer look.
• Melco International Development Ltd 0200.HK (Hong Kong) .HK$12.3, P/Tangible Book 2.0. High growth possible on huge investments in Macau. See announcements . Gambling and Macau! . Joint venture with PBL Melco PBL has ADR.Caps profile for ADR. ADR . Usual search at webb-site.com, turns up nothing interesting. Get your daily Macau news fix here . Article on the Ho family , recent problems.Tough call.
• Ellipsiz Ltd ELPZ.SI (Singapore). S$0.57, PE 4.5, yeild 2.5, p/sales 0.7, ROE 30, p/b 1.2, low debt. Semiconductor related business. See messageboard. Fall in prices due to failure of possible takeover. SGX announcements. Report. Slowdown in business expected. Cyclical business, made losses in 2003 but has tripled book value since then. Not cheap enough, prefer growing companies with higher yield or lower p/book. May buy if price falls below book.
  
• Yaan Security Technology Ltd YAAN.SI (Singapore), S$0.22, pe 5, p/s 0.7, ROE 29, Yield 2.8,no debt. Messageboard. SGX announcements .Report. Report. Very competitive business making video security monitoring systems. Sector expected to grow. Like low price. May buy if price falls more.
  

High ROE and low P/B screens

The results of my high ROE screen are here.
The results of my Low P/B screen are here.
The results of my 20% annualized return backtested screen are here.
I would have posted these in this article but the table formatting got messed up.