HupSteel

[bargainhunter]

http://infopub.sgx.com/Apps?A=COW_CorpAn...380359e258 company bought back 21.5 lots at .72 today.

[bargainhunter]

https://brokingrfs.cimb.com/25QSvCCMfqsh...WfvaQ2.pdf

CIMB released a non rated piece on it today.

[brattzz]

it's a value-trap...

I'm still holding some... just to see how it will turn out!

[bargainhunter]

http://infopub.sgx.com/Apps?A=COW_CorpAn...322dc449ca company still managed to buy 106.3 lots at 0.72 today.

[karlmarx]

Nothing new in there that hasn't already been said. The fact that Hupsteel rose some 10% on a much higher than average volume of 526k shares, on the release of this analyst report, tells me how little Valuebuddies is actually being read. This is good for regular VBs; they get informed on the 'good deals' first before the mass market.

@brattzz I wouldn't say it is a value trap. Hupsteel presented great(er) value when it fell 50% during the oil and gas crisis. While demand for steel was impacted, that which most VBs find valuable in Hupsteel -- its assets which included cash, debt securities, real estate -- did not change, and in fact became more cheap to acquire. The few who bought Hupsteel when it was trading at about 50 cents, post-consolidation, would have made about 50% based on today's closing price. There is still merit in the investment thesis, as espoused by many in this thread. But for prices to reach their desired level, e.g. $1.50-$2.00, certain catalyst, as mentioned by fellow forummers, has to take place.

[bargainhunter]

Nothing new in there that hasn't already been said. The fact that Hupsteel rose some 10% on a much higher than average volume of 526k shares, on the release of this analyst report, tells me how little Valuebuddies is actually being read. This is good for regular VBs; they get informed on the 'good deals' first before the mass market.

@brattzz I wouldn't say it is a value trap. Hupsteel presented great(er) value when it fell 50% during the oil and gas crisis. While demand for steel was impacted, that which most VBs find valuable in Hupsteel -- its assets which included cash, debt securities, real estate -- did not change, and in fact became more cheap to acquire. The few who bought Hupsteel when it was trading at about 50 cents, post-consolidation, would have made about 50% based on today's closing price. There is still merit in the investment thesis, as espoused by many in this thread. But for prices to reach their desired level, e.g. $1.50-$2.00, certain catalyst, as mentioned by fellow forummers, has to take place.

agree.  hardly anyone reading other than us dying breed of longer term value investors lol.  this is especially so for stocks like hupsteel which are totally forgotten.  at 50+c, it was difficult to get a decent amount, maybe more around the last time they did share buyback at around 56c, there was more decent volume to buy.  the cimb report simply seems more credible than us even though we had been discussing the same thing.

[karlmarx]

You are right. I accumulated with great difficulty. And often at seller's price. Furthermore, it was painful on days when only 100 shares transacted. On this note, I really dislike the rule to allow trading in 100 lots.

[weijian]

Nothing new in there that hasn't already been said. The fact that Hupsteel rose some 10% on a much higher than average volume of 526k shares, on the release of this analyst report, tells me how little Valuebuddies is actually being read. This is good for regular VBs; they get informed on the 'good deals' first before the mass market.

@brattzz I wouldn't say it is a value trap. Hupsteel presented great(er) value when it fell 50% during the oil and gas crisis. While demand for steel was impacted, that which most VBs find valuable in Hupsteel -- its assets which included cash, debt securities, real estate -- did not change, and in fact became more cheap to acquire. The few who bought Hupsteel when it was trading at about 50 cents, post-consolidation, would have made about 50% based on today's closing price. There is still merit in the investment thesis, as espoused by many in this thread. But for prices to reach their desired level, e.g. $1.50-$2.00, certain catalyst, as mentioned by fellow forummers, has to take place.

Based on the trend of Hupsteel for the last 10years, there wasn't much opportunities (from time frame standpoint) to get HupSteel at 50cents.

https://www.google.com.sg/search?q=hupst...hare+price

Nonetheless, a value buy is a trap (ie. a value trap) when the assets (that provides a large MOS compared to its share price) either wouldn't be unlocked, or it is inflated and will most probably be squandered/written down in future.

IMHO, I would argue that it is the structure and the actions (example, any catalyst to trigger corporate actions to liquidate/distribute its assets to shareholders) that determine whether it is a value trap or not, rather than whether the share price does rise or not. Eventually, is Hupsteel's recent increase in share price more due to a change in business fundamentals? Or is there really a potential chance/concrete action of changes in the structure, that will trigger future corporate actions to unlock the value (via liquidation/sell down of assets etc)?

[karlmarx]

From my understanding of most people's use of the term 'value trap,' it is used to refer to a stock which looks cheap but will continue to stay cheap. Whether this is correct or not, I do not know. But this is the context of my use of the term.

Based on your definition, I will agree that Hupsteel is and continues to be a value trap. My point is that this should not stop investors from buying Hupsteel, especially when they have become cheaper. After all, if it is known that value will be unlocked, then there wouldn't be any bargains to be had as everyone will be buying. Buying a value trap and waiting for value to be unlocked is part of a value investor's strategy. I think most people call this 'asset plays.' The learning point here for long-time Hupsteel holders and watchers could be that a larger margin of safety is required when buying 'asset plays.' If the assets are valued at $1 but there is no foreseeable event to unlock it, maybe you'll want a discount that is even more than 50%.

Continuing the discussion on the concept of value trap, I agree with your definition but if we take it to its conceptual extreme by referring to companies which do not maximise their efforts to increase shareholder value as value traps, then almost all companies will have some level of value trapped in them. Vicom has plenty of cash and no debt. It can pay out almost all of it and keep a small amount to finance operations. Is Vicom a value trap by not distributing most of its cash? Probably somewhat so. And value can be trapped not just in unutilised physical assets; lazy management that spends more time at night clubs and not utilizing 100% of their energy in growing revenue (i.e. human resource value trap).

I will say that for most value investments, there will be some amount of value trapped in some ways. After all, there must be some reason for it to be selling at bargain prices right? It is only in rare (market crash) occasions where companies are cheap not due to value being trapped, but due to the market's incorrect perception (bias, fear) of its value or liquidity issues (bad economy).

[weijian]

hi karlmarx,
Thanks for your reply.

- We have very similar definitions of "value traps". I just talk about the underlying ("no incentive/action to unlock") and you talked about the symptoms ("continue to stay cheap"). My personal observation is that if the market is quite efficient, all "asset plays" are value traps to an extent, at that point of time. It takes a catalyst to take away the term from it. The key differentiation is thus the catalyst - the probability of one happening and whether one has the ability to create some disturbance to break the structure (activist investing is all about this). Without catalysts (or the potential for one), a value trap stays a value trap.

- Generally, value traps have low P/B, P/E and ROEs, either due to the price-valuation gap or depressed earnings. VICOM doesn't really satisfy those conventional metrics. VICOM does have certain amount of value "in the form of cash" trapped on its balance sheet, but it does depend on the intent of Mgt of how they decide to want to used those retained earnings. Even Warren Buffett believes BH is having too much cash when it exceeds a certain amount! (But BH wouldn't be classified as value trap if we take WB's word for it because he has promised to return it if it exceeds a certain amount)