Foreland Fabrictech

I take the "safe" view with respect to "S" Chips - if I can't analyze their financials, then I'll just avoid the entire sector!

same here, when in doubt, don't buy. :O

(11-09-2012, 05:19 PM)brattzz Wrote: same here, when in doubt, don't buy. :O

Yes, better miss than sorry

Wow!!! Today was a real RED letter day for Foreland with the stock touching S$0.047 on very decent volumes of 11,292 lots.

Agreed the immediate future does not look too bright but the market seems to have decided that the cash on their books is just on the books...does not exist in reality...and Mr. Tsoi's stake sale also does not inspire much confidence. Am not sure what the 3 major shareholders would be feeling considering they bought their stake at S$0.058 just a few days back. They could have just waited some more time and picked up the same stake at significantly lower prices from the market...

The stock market will never cease to amaze...

If we recall, last year Choi also did a placement of 30.8m share at 0.16 which was at 33% premium to then last traded price (refer to post #44 of this thread). It was mentioned that one of the placee (a key customer) took up 20m share.

The recent selling of 53m share at 5.8 cent a share by Choi was also done at a premium to last traded price.

Notice that in all of Choi's transactions, the buying parties all fall nicely below the 5% disclosure limit.

Interestingly, the 20m share buyer last year did not show up in the 2011 AR as top 20 shareholder. It could be that the buyer also used UOBKH to hold the share - such coincidence.

The question of why savvy investors will buy from Choi at a premium remains unanswered; or answered unconvincingly.

I think some of the forummers say it best - when in doubt, don't buy.

My doubts:

1) there are high doubts regarding Foreland's cash holdings - unless, we have the accounts of the private entities to prove otherwise, better to take the market's decision as real.

2) Mr Choi doesn't seem to be giving the signal that the company is doing very well. No doubt, there is a possibility that he maybe in need of cash badly but the track record does show he is cashing out on other means which retail or even fund investors are unable to follow

3) poor trading sentiments - even on a trading perspective, there is not enough potential to ensure that its risk-reward ratio is attractive

It seem there is likely to be only one way for Foreland's share price - down. The only possibility is a rising tide which lift all S-chips, as seen in 1Q this year. That said, it is nothing but "animal spirit".

At this price (~0.045), here is what the market is discounting..

1) the entire cash hoard is non-existent (as opposed to the approximately $60m cash recorded in the books)
2) the company is actually a loss-making business (as opposed to its financial statements which show that Foreland is profitable every year)
3) the company has a huge amount of undisclosed debt (as opposed to the currently zero debt recorded in the books)

Thus, even with all the fears of fraud, I find Foreland to still be a good buy simply because of the price.

To further illustrate, let's say you discount all the cash to be conservative.

Total assets 737,898
Cash 307,704
Total Liabilities 60,808

Adjusted book value per share = (total assets - cash - total liabilities)/No. of shares = ~0.14

Compare this with the market price of 0.047. Even if you take this extremely conservative stand, the company is still undervalued. If the company is wound up right now at this very instant, payout to shareholders is likely to be substantially more than 0.047.

Comments welcome.

Disclosure: I hold Foreland stock

Errr, if u think there is fraud involved, how does one know
assets = 737,898 and not 100,000
liabilities = 60,808 and not 800,000 ?

(24-09-2012, 11:30 PM)Serendipity123 Wrote: At this price (~0.045), here is what the market is discounting..

1) the entire cash hoard is non-existent (as opposed to the approximately $60m cash recorded in the books)
2) the company is actually a loss-making business (as opposed to its financial statements which show that Foreland is profitable every year)
3) the company has a huge amount of undisclosed debt (as opposed to the currently zero debt recorded in the books)

Thus, even with all the fears of fraud, I find Foreland to still be a good buy simply because of the price.

To further illustrate, let's say you discount all the cash to be conservative.

Total assets 737,898
Cash 307,704
Total Liabilities 60,808

Adjusted book value per share = (total assets - cash - total liabilities)/No. of shares = ~0.14

Compare this with the market price of 0.047. Even if you take this extremely conservative stand, the company is still undervalued. If the company is wound up right now at this very instant, payout to shareholders is likely to be substantially more than 0.047.

Comments welcome.

Disclosure: I hold Foreland stock

The assumption that you made here is that the following exists. However, are the assets real? If it is real, are they worth that much? In the case of liquidation, shareholders would be the last to get the payout. Creditors and bondholders would get it first. As such, it would not be right to say that the "payout to shareholders is likely to be substantially more than 0.047".

Total assets 737,898
Cash 307,704
Total Liabilities 60,808

Does Foreland has any debt? If not, the case of creditors/bondholders may not be so strong.

That said, there is no catalyst for foreland to re-value despite the huge discount, even if we assume your assumptions are correct.

It may take a few months or it may take even years.