Foreland Fabrictech

[Serendipity123]

Can anyone list down Foreland's competitors?

Taisan, ChinaFibretech and what else?

ChinaFibretech has a huge cash hoard and is currently trading at substantially less than net cash. Currently trading at 0.039 compared with net cash of approximately 0.16. BUT there may be no way to unlock the value. The company doesn't seem as well run as Foreland. Revenue and profit reached a peak in 2009 and has been declining ever since. The company also hardly paid any dividends, with the most recent dividends in 2009.

Taisan is currently trading at 0.048, compared with net cash of 0.11. I haven't taken a close look, but it seems to be an interesting play as well. Management has a history of paying dividends. Dividend payout is 30% and 20% in 2009 and 2010 respectively. Margins also seem comparable with Foreland. Only thing is that 1Q2012 results are really lousy. Would like your thoughts on this stock as well. Can this a better alternative to Foreland?

[CityFarmer]

In the few stocks highlighted, it seem it is norm to have net cash > market price.

If it is a norm in that industrial, then should we still rating it as an incentive to own them?

[d.o.g.]

In the few stocks highlighted, it seem it is norm to have net cash > market price.

If it is a norm in that industrial, then should we still rating it as an incentive to own them?

This type of situation is highly abnormal. One simple explanation is that it appears under extreme stock market sentiment, when investors everywhere believe the world is coming to an end, equity prices are widely depressed, and some stocks are so cheap that their cash on hand exceeds their market capitalization.

Look around - do you see extreme depression in the Asian stock markets today? No. The regional stock markets are not awful - Singapore for one is doing well. Even Hong Kong has gained about 7% for the year. The Shanghai Composite is down a modest 1.4% this year. So I would say that such pricing extremes should not be present, at least in the 3 markets where the stocks in question could conceivably be correlated to.

Another simple explanation is that it is widely believed that the companies in question are fraudulent, that the cash being reported is simply not there. Therefore the "cash per share exceeds stock price" situation is not actually true.

One should think carefully about whether there is any conceivable way of proving/disproving the fraud hypothesis. An aggressive investor might feel that as long as there is no proof that a company is a fraud, it is OK. A conservative investor might feel that if there is no proof that a company is real, it is not OK. Take your pick.

[pianist]

what is your pick on such situation may i ask?

[CityFarmer]

In the few stocks highlighted, it seem it is norm to have net cash > market price.

If it is a norm in that industrial, then should we still rating it as an incentive to own them?

This type of situation is highly abnormal. One simple explanation is that it appears under extreme stock market sentiment, when investors everywhere believe the world is coming to an end, equity prices are widely depressed, and some stocks are so cheap that their cash on hand exceeds their market capitalization.

Look around - do you see extreme depression in the Asian stock markets today? No. The regional stock markets are not awful - Singapore for one is doing well. Even Hong Kong has gained about 7% for the year. The Shanghai Composite is down a modest 1.4% this year. So I would say that such pricing extremes should not be present, at least in the 3 markets where the stocks in question could conceivably be correlated to.

Another simple explanation is that it is widely believed that the companies in question are fraudulent, that the cash being reported is simply not there. Therefore the "cash per share exceeds stock price" situation is not actually true.

One should think carefully about whether there is any conceivable way of proving/disproving the fraud hypothesis. An aggressive investor might feel that as long as there is no proof that a company is a fraud, it is OK. A conservative investor might feel that if there is no proof that a company is real, it is not OK. Take your pick.

I agreed with d.o.g. view. The market is not always efficient, BUT it is frequently efficient. I tend not to believe this situation exist as norm, instead of exception

On top of the two (2) explanations, another likely one may due to accounting tricks used across industrial. It may not illegal but will provide the illusion of "cash rich".

[Greenrookie]

From SGX:

The increase in the total issued share capital of the Company arises from the allotment and issue of 11,688,970 new ordinary shares in the capital of the Company pursuant to the application of the Foreland Fabrictech Holdings Limited Scrip Dividend Scheme to the final dividend for the financial year ended 31 December 2011 (the “Final Dividend”). The increase in Mr Tsoi Kin Chit's shareholding arises from the allotment and issue of 9,768,242 new ordinary shares to Mr Tsoi Kin Chit pursuant to his choice of receiving his entitlements to the Final Dividends in scrip.

it seems besides the chairman, most opted for cash. Again, this could be a case of glass half filled, for the risk aversed/ conservative; its a sign that most investors are not confident with the prospect of the companies, for the optimistic,at least half the dividends is being made in hard cash, and the investors receive it.

When i invest in this company, and continue to accumulate, I also ask myself this question, what if this company has a fraud issue, my answer, i lose all my investment. Then, am I still be able to sleep? Maybe a few heartache nights but will not affect my long term investment goal, as the cash involved is small, and my other investments are on different sectors and companies/products.

What if there is no fraud, is there a competitive edge that will see this company improve when the industry improve? I like its innovative products and how it out perform its singapore peers, I couldn't find a china counterpart for comparison yet, maybe someone can enlighten me. To me, I like that companies for its constant innovation and its ability to come up with new products almost every year. Of course, not all will be marketable, but it just need to find another to can be as successful as its umbrella, the gains could be immense. This is the reason, i stay invested rather than the PE ratio and cash ratio, of course, the fact that both these ratios are low, make me more comfortable in holding them

The fact that the price of such companies fell more than general markets can be due to the sector, the s-chip sector and in particularly textile sector has been bashed quite badly, foreland is just one of the many.

[CityFarmer]

From SGX:

The increase in the total issued share capital of the Company arises from the allotment and issue of 11,688,970 new ordinary shares in the capital of the Company pursuant to the application of the Foreland Fabrictech Holdings Limited Scrip Dividend Scheme to the final dividend for the financial year ended 31 December 2011 (the “Final Dividend”). The increase in Mr Tsoi Kin Chit's shareholding arises from the allotment and issue of 9,768,242 new ordinary shares to Mr Tsoi Kin Chit pursuant to his choice of receiving his entitlements to the Final Dividends in scrip.

it seems besides the chairman, most opted for cash. Again, this could be a case of glass half filled, for the risk aversed/ conservative; its a sign that most investors are not confident with the prospect of the companies, for the optimistic,at least half the dividends is being made in hard cash, and the investors receive it.

When i invest in this company, and continue to accumulate, I also ask myself this question, what if this company has a fraud issue, my answer, i lose all my investment. Then, am I still be able to sleep? Maybe a few heartache nights but will not affect my long term investment goal, as the cash involved is small, and my other investments are on different sectors and companies/products.

What if there is no fraud, is there a competitive edge that will see this company improve when the industry improve? I like its innovative products and how it out perform its singapore peers, I couldn't find a china counterpart for comparison yet, maybe someone can enlighten me. To me, I like that companies for its constant innovation and its ability to come up with new products almost every year. Of course, not all will be marketable, but it just need to find another to can be as successful as its umbrella, the gains could be immense. This is the reason, i stay invested rather than the PE ratio and cash ratio, of course, the fact that both these ratios are low, make me more comfortable in holding them

The fact that the price of such companies fell more than general markets can be due to the sector, the s-chip sector and in particularly textile sector has been bashed quite badly, foreland is just one of the many.

No-one is sure on the outcome, including me and probably d.o.g. as well. It is an assessment of risk vs gain. You projected a high-risk high-gain approach, which is totally different from our low-risk high-gain approach. So it is reasonable to have different conclusion from both sides.

I am sincerely wish you lot of good luck on your Foreland Fabrictech story. I do believe you need a lot of them.

[dzwm87]

One of my mistakes when I started (not that I have started very long ago! haha!) was to correlate low P/E and value together. It doesn't necessarily mean that low P/E = value stock.

I think the safest way is to always evaluate why the stock is so cheap in the first place. Thereafter, you use evaluate on your anchoring factors. If Mr Tsoi's push for a scrip dividend is your inference that he is believing in the long term view of the company, then perhaps, you may want to do a historical check on his trading activity. I am not sure if I rmb correctly but his track record isn't that fantastic. He once bought on the peak just before the stock price plunge.

Because the risk is so high for S-chips, you must know when's the next catalyst and what's the strategy to it (Do you exit and cut loss if the catalyst is not met?). Some S-chips can remain 'cheap' for a very long time.

[shn]

I have learned not to buy a counter when there is doubt, as I will not be able to sleep well and dare not to average down when the price drops. For a counter which I am sure of its long-term prospect, I feel happy when the price drops as much as as it rises!

From what I see, there are big sellers out there for Foreland and they are not done with the selling yet -- it does not matter whether they are short-sellers or existing shareholders who want to divest. The sellors are too strong for the buyers to stop their advances. There are no catalysts in sight for the price to move up in the short-term.

[pianist]

the strong wind today at cross street blew and damaged my umbrella, do u know where i can buy foreland's umbrella here?