Ezion - Bleeding Stopped!

I blogged about Ezion a few months back - Bleeding Stocks - Ezion [Part 3] after it was suspended on 8th August 2017. It has resumed trading last week on 17th April 2018, opened at $0.245 and even reached a high of $0.255!

CZM was asking me what would be my plan when Ezion resumes trading. I told her confidently that day 1 will be a bloodshed as I foresee everyone will be dumping and selling their shares. My plan was to hold it, be hopeful and see how things go. Surprisingly, it was beyond my expectation and it actually traded higher! Without any hesitation, I submitted a sell order and sold all of it at $0.225.

Investing in stocks is never easy and one does not always make money. My total capital was $6,167.70 and I am pretty glad that I manage to get back $2,222.26 after ~ 4 years. I lost in total $3,939.30 including commisions which translate to a total loss of -63.9% and an annualized loss of -37.9%! It could have been much worst - the latest closing price is $0.152 on 25th April 2018.

Looking at their 2017 Annual Report, the shares are now worth a lot lesser than it was one year ago. The equity attributed to shareholders is just US$304,826,000 as compared to US$1,315,384,000 partly due to the ridiculously large impairment losses of US$697,322,000 in their Plant and Equipment among other things. Furthermore, the decrease in cash is not proportionate to the decrease in liabilities too!

NAV has decreased by 76.8% from US$0.6343 to US$0.1470 (~SG$0.1940 using an exchange rate of US$1:SG$1.32). Regardless, the US$1.6 billion debt is an exceptionally huge one that will probably stick around its balance sheet for a long time and I am not too optimistic about it with a gross profit of US$1,804,000. Even if Ezion successfully multiplies its gross profit by 10x or even 100x, it will never be the same again.

Screenshot from https://sginvestors.io/sgx/stock/5me-ezion/target-price

Do not make the same mistake as I did when I first started investing 4 years back - buying based on analyst's report recommendation. Look at what DBS has done again with a BUY recommendation and a price target of SG$0.29 where the valuation is done at 1.4x FY2018 PB?! It is just so wrong! After all the drama, why would anyone still value/price Ezion at a premium?

One can either continue to be hopeful or cut loss, take whatever there is now. Assets can be impaired but liabilities will definitely remain. Good luck to the remaining shareholders!

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Bleeding Stocks - Ezion [Part 3]

This is the third and final series of "Bleeding Stocks" where KPO will be looking at 老鼠屎 (rat shit) dragging down the overall performance of his portfolio. Do check out the rest if you have not :)

Bleeding Stocks - QAF [Part 1]
Bleeding Stocks - Raffles Medical [Part 2]

I was wondering if I should rename this to dead stock instead of bleeding when Ezion made an announcement to suspend trading. lol.

Based on the last closed/suspended price, that is a -68% loss! I am guessing it will be even more when Ezion resumes trading. How did KPO even end up in this state? He was once a clueless investor that did not have any investing/financial knowledge and made many mistakes along the way.

This is a record of my past transactions. There was a bonus issue of 1 for 5 stocks, hence the free 200 shares on 18th Sep 2014. The above shows that I was trying to average down but ended up catching a falling knife >.< This was one of the stocks which I had bought simply based on banks' analysts' reports when I first started out.

i3investor.com used to be one of my favourite sites to hang out. It provides a list of analysts' reports, their target price, possible upside/downside and other information. If you were to head over to Ezion page, it will look like below:

The average target price is $0.44 and there is a possibility of it increasing by 123.35%! KPO, do not give up hope! Let me continue to deceive myself, I have yet to look at its last quarter earnings/report. lol.

Let me bring you back to the past, to the year of 2014 where I first bought this stock to show you what I was looking at. When people say what is on the internet stays on the internet, it is pretty true. Introducing the WayBackMachine which lets you travel back in time on the internet given an URL. You can try using it on facebook/google to see how they looked when they first started.

Welcome to 2014 where the whole world is making "BUY" call on Ezion. lol. Do note that this is before the oil price tumbles. Let's travel to 2015 now.

The price has already fallen to $0.69 and the oil price was at a 10/11 years low but the analysts are still making "BUY" call with target price > $1!

Enough time traveling, let's come back to reality where Ezion just reported its second quarter on 14th August 2017, 7am and 30 minutes later, request for trading suspension before the market opens. Well played.

The latest update on 23rd August 2017 states that it is "arranging a series of informal meetings with its lenders and holders of securities issued by the Company pursuant to its S$1,500,000,000 Multicurrency Debt Issuance Programme"

Looking at its balance sheet, Ezion has US$2,910,775,000 of total assets and US$1,609,835,000 of total liabilities. Given that there are 2,073,843,405 shares in the market, its NAV is US$0.6273 and S$0.85  (assuming an exchange rate of 1 USD = 1.36 SGD). Ignoring the fact that its EPS has been negative since 2016, it is currently trading at a PB of 0.232, isn't that a huge discount?! Anyone interested in joining me to become a shareholder? lol. I hope not. Simply looking at the PB ratio does not give a sufficient context.

A good example would be Rickmers Maritime which has wind up the business and liquidated its assets to repay the debts. It has a NAV of US$0.21 based on its 2016 annual report (the total asset of US$531,862,000 and total liabilities of US$348,389,000). However, the assets are usually not liquidated/sold at book value (usually at a significant discount). As a result, the bondholders got back a small amount (12% of capital) while the shareholders lost everything.

What is more worrying apart from its huge amount of debts is that its operating cash flow has gone negative this quarter. This means that the business is no longer making sufficient money just to be operational, not to mention paying off debts. Hence, the need to suspend the stock for further discussion.

On the bright side, Ezion has not defaulted on any of its loans unlike Erza, Swiber, etc and its CEO/founder Chew Thiam Keng has never sold any shares since 2014 but continued to buy more/average down over the years. His last purchase was 500,000 shares at $0.22 on 31st August 2016; 500,000 shares at $0.235 on 30th August 2016 and 500,000 shares at $0.255 on 22nd August 2016, $0.29, $0.602 and more. He is currently holding on to 217,583,440 shares (10.49%) and he certainly has a lot more to lose (based on last closed price, that is S$43 million) as compared to my 9,900 shares. lol.

KPO will not be showing any chart. $0.197 is already at an all time low and that is a very weak support that will definitely be broken >.<

CZM has been asking me to sell but I continued to hold on to it hoping that one day something magical will happen. After all, cutting loss is easier said than done. What would you do?

Bleeding Stocks - Raffles Medical [Part 2]

This is the second series of "Bleeding Stocks" where KPO will be looking at 老鼠屎 (rat shit) dragging down the overall performance of his portfolio. Do check out part 1 if you have not :)

Bleeding Stocks - QAF [Part 1]

QAF share price dropped because Q2 results were pretty bad. On the other hand, Raffles Medical Q2 results were much better as compared to QAF - Raffles Medical Group's Q2 profits marginally higher. Let's take a closer look at the financials.

There is almost no change but the same cannot be said for its share price. Based on its last closed price on 2017-08-11 of $1.13. It has fallen by 25.4% as compared to the price one year ago ($1.515 on 2016-08-11). What has changed to warrant such a huge drop? No idea. Your guess is as good as mine - a few analysts sell reports + not meeting its growth expectation?

Similarly, I compiled the last 5 years of financial results and you can refer to it here. Raffles Medical has been growing at a steady rate with increasing NAV and operating cash flow over the years. There was a share split (3 for 1) in May 2016 hence the numbers had to be adjusted slightly. Based on the data, it seems that Raffles Medical has been trading at a average PE of 31.7 and PB of 4.109. Assuming that EPS and NAV remains constant (2016 EPS $0.040 and NAV of $0.395), the average PE of 31.7 will translate to $1.268 and PB of 4.109 will be $1.624.

Some of you may think that PE of 31 is way too high but if you compare it against the industry - Healthcare Providers and Services, you will see that it is a premium one has to pay for defensive healthcare related stocks.

Based on both shareinvestor.com and SGX StockFacts, Raffles Medical currently trades at a PE of 28.485 is which is much lower than the industry average. Interestingly, Raffles Medical is the second largest company with a market capitalization of $2,001 billions. The largest one being IHH Healthcare Berhad with $15,438 billions trading at a PE of 75.806!

This is a summary of what to expect in the future and how Raffles Medical will continue to grow according to the latest Q2 report:
- RafflesMedical expanded its network of clinics in 2017 by opening a new clinic at Hillion Mall in Q2 2017
- Northpoint will also be re-opened in September 2017. Existing clinics at Asia Square, Clementi and Nex have been relocated or refreshed in Q2 2017
- RafflesHospital Extension’s completion and opening in Q4 2017
- Changi Airport Terminal 4, Transit 4, and two new in-house clinics in Dover and Tampines respectively, are scheduled to open in Q3 2017
- RafflesHospital’s Emergency Care Collaboration with the Ministry of Health (MOH) was extended in June 2017 for another 5 years, allowing SCDF ambulances to continue to bring patients to RafflesHospital for subsidised care
- Construction of RafflesHospital Chongqing (operational by second half 2018) and RafflesHospital Shanghai (operational by second half 2019) is progressing according to plan

At the end of the day, KPO finding Raffles Medical undervalued does not mean anything. However, when you have the founder/CEO Dr. Choon Yong Loo increasing his shares at $1.44 last year (2016-06-29) and at $1.26 this year (2017-06-30) together with a major fund buying it at $1.21 on 2017-08-07. It probably means something. lol.

Since this is the 2nd series, let me end off with 2 charts. Raffles Medical has been on a down trend since last year. The current support is at $1.10 and $1.09 while resistance is at $1.17 and $1.21. Extremely bearish as price is still trading below all the moving averages.

However, do you see a tiny hammer supported by significant volume? The RSI (Relative Strength Index) seems to indicate that the stock has been oversold or is currently in a undervalued condition too.

With the above fundamental analysis, KPO queued for 6,000 units at $1.10 yesterday (2017-08-11) and my orders were filled :) This brings my average price to $1.308 and loss to -12.92%. Patched my wound in 1 day or would it be a falling knife? Only time will tell. lol.

Thanks for reading! Hope you all enjoyed it. Stay tuned for Part 3! (May not be anytime soon since I sort of mentally write off that investment. lol.)

Bleeding Stocks - QAF [Part 1]

Our portfolio has been doing pretty well but there will always be 老鼠屎 (rat shit) dragging down the overall performance. I am not too worried because I have seen worst. lol.

1. QAF

The first thing that came to mind would be the latest quarter result - QAF reports 72% fall in 2Q17 earnings to $8.1 million. I looked at the numbers and it is indeed quite depressing. However, the numbers can be quite misleading.

The numbers highlighted in yellow is where the 72% drop comes from. One has to note that part of the huge drop can be attributed to the one time "Exceptional items" gain due to the sale of 20% stake in Gardenia Bakeries (K.L.) which is missing this quarter. On the bright side, revenue actually increased by 1% which was offset by higher costs/expenses, taxes and a series of unfortunate events:
- Pork prices in the industry have fallen by approximately 20% in the first half of 2017 due to increased competition from the general oversupply situation
- Higher advertising and promotion expense due to launch of new products and heightened competition in the Philippines
- Higher truck rental expense from the increased distribution routes
- Foreign Exchange loss due to the depreciation of the Group’s AUD denominated assets against the Singapore dollar
- and much more. lol.

KPO then spent some time to compile the financial results achieved by QAF in the last 5 years.

Note that QAF has a very low PE in 2016 due to the "Exceptional items" mentioned above which resulted in a much higher EPS. Once excluded, you will see that QAF has been trading at an average PE of 12.931 and average PB of 1.312 from 2012 to 2016.

In the worst case scenario, I will simply assume that the next 2 quarters will be as poor as this quarter (EPS of $0.014) and based on the last closed price of $1.205, the PE will be 17.985 which is pretty high hence the heavy sell down? Will it get worst than this? I dun know but I would hope that higher advertising cost will be translated to higher sales in the next quarter. Furthermore, there is a proposed listing of Rivalea on the Australian Securities Exchange which will result in QAF receiving A$52 million.

Fundamentally, QAF remains to be an excellent business consistently generating free cash flow and rewarding shareholders with suistainable dividends (DPS remains lesser than EPS even in the above worst case scenario).

At what price should one buy QAF then? I dun know. At a price you are comfortable with! Any investment at the right price is a good investment! lol. Buying it at $1.20 would mean you will be looking at a 4.2% dividend yield. Based on the very simplified average PE and PB ratio computed by me, any price between $0.866 and $1.225?

Although I believe more in the numbers, I will end off with a chart. You can see the long term trend is up and QAF is currently at its first support $1.205 and the next support is at $1.15. With 50 MA crossing below 200 MA, it has formed a death cross! Furthermore, the price is now below all the moving averages. Extremely bearish!

This is the google spreadsheet if you want to take a closer look at the numbers. Ending off with numbers still better. lol.