Foreland Fabrictech

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It is a high risk high gain sector.

What's so high risk about an established fabric producer/processor, supplying/selling to established branded players (and their contract manufacturers) in a growing apparel industry and umbrella industry in PRC, which has a huge and growing domestic market and is a major exporter of apparels and umbrellas to the world?

I encourage you to do a quick review of Foreland's key customers: Anta 安踏, Edenbo 爱登堡, Li Ning 李宁, Peak 匹克, Sepwolves 七匹狼, Lilang 利郎, Fordoo 虎都 (above all branded apparel producers); and Hangzhou Paradise 天堂, Susino 梅花, Jin’ou 金欧, Yuzhongniao 雨中鸟, Angel 天使 (above all umbrella producers).

The last global financial crisis which started in Q3-08 had led to a very sharp contraction of export orders and demand for apparel/textile products from PRC which lasted till early-10. During this difficult period, there was a major supply-demand inbalance in the entire supply chain within PRC. For survival, producers which previously focussed on exports slashed selling prices in order to compete for domestic orders.

During this very tough period, Foreland had little choice but to accept reduced orders and sharply lower selling prices, in order to hold on to its customers. However, it is important to recognize that Foreland managed to avoid losses throughout the entire market/demand downturn. The company even managed to complete constructing its new factory, which should come in useful this year.

As usual, Mr Market had turned overly depressive and brought Foreland's share price to as low as $0.06. This had given rise to a great value investing opportunity.

Given enough time, the supply-demand inbalance has corrected itself, and since Q2-FY10, Foreland has been seeing increasing orders again, and selling prices have also recovered nicely. This very positive evolution is now supporting a re-rating of Foreland's share price upwards towards its justified fair value.