Shortlist For Shorting Stocks (Updated)

Well this was posted back in June 2011, which in itself was an update from December 2010. Almost 6 months now, KNM is now 97 sen which meant that it lost more than 50% (so how, Simon, where are the back stoppers ... just a shoutout to one of the commentators). Of course if taken with the original posting, the stock would be considered decimated from the RM2.89 level when i first wrote the shorting post.


Green Packet is more resilient. Its now at 59 sen, meaning it lost just 21%.


Would these two still be worth shorting at current level? Even if they were worth shorting, are they still the best stocks to short from the whole of Bursa?



The answers is Yes and Yes. Green Packet is more an Angry Bird stock, you have to keep hitting the walls, and the walls are creaking and moving ... you sometimes have to wait for the egg to explode for the thing to crumble.

Friday, June 03, 2011

I think this was posted last year 29 December. KNM closed yesterday at RM2.01. Green Packet closed at 0.75. GPacket is doing very well price wise, we'll see, we'll see... Anyways, some friends visited a recent exhibition in KL where KNM had a booth. The picture may tell a wonderful story of the company ... (click for larger image to read the inscriptions).

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29 December 2010

Unfortunately, we don't get to short stocks in Malaysia, and in many markets actually. When we think of shorting stocks, it is very easy to pick the highly speculative ones with zero fundamentals. Its a no brainer to lump stocks such as Maxbiz, Compugates or Tejari and the likes to the category of stocks to short. In fact, if you try to short these stocks, they will come back to bite you as they are highly speculative and share prices could double or triple for no reason if they "manage" the stock price well enough.


A genuine stock shorting process involves company that is running on supposedly good fundamentals, but you do not think that that is the case in reality. Some will ask, why even talk about them and make enemies. I think its pathetic to only talk about good stocks. Sometimes its good to have an opinion of stocks you do not like.

However, to save myself, I will not elaborate on why I think they are my favourite stocks to short, but let me assure you that I stand behind my views 100%. I will check back on their respective share prices every 3 months and see how they fare. I think both are excellent stocks to short on a 1-2 year time horizon.

The stocks on my list that no one wants to be in:

KNM ($2.89)

Green Packet ($0.71)

I am sure plenty will differ in their views, and thats what makes a good liquid market place, there are always buyers and sellers. If you go long, please rub it in my nose 3,6,9,12 months down the road if they continue to perform well. I will accept the dressing down gleefully.



NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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AA, Bad Or A Pleasant Relief?

SP cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits. We have to remember that Moody’s Investors Service and Fitch Ratings affirmed their AAA credit ratings on Aug. 2, the day President Obama signed a bill that ended the debt-ceiling impasse that pushed the Treasury to the edge of default. Moody’s and Fitch also said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens. 




The outlook on the new U.S. credit rating is negative, the SP said in its statement, a sign that another downgrade is possible in the next 12 to 18 months.

On Aug. 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings SP had called for as a good "down payment" on fixing America's finances.

This came after a confusing day of reports: Standard and Poor's told the U.S. government early Friday afternoon that it was preparing to downgrade the U.S.'s triple-A credit rating but U.S. officials notified S&P that it had made a $2 trillion mathematical error.

The error was in the calculation of the U.S. debt-to-GDP ratio over time and was based on a misreading of what the correct congressional baseline was, government sources indicated. They said that once informed of the error SP revised its rate-cut rationale to emphasize the political aspects of the country's debt situation.

"A judgment flawed by a $2 trillion error speaks for itself," a Treasury spokesperson said.

U.S. Treasurys, once undisputedly seen as the safest investment in the world, are now rated lower than bonds issued by countries such as the UK, Germany, France or Canada.


MY VIEWS

a) SP does not rule the world, there is still Moody's and Fitch


b) SP can make a $2 trillion calculation error, hmmm, thats why they were so excellent in analysing subprime a few years back


c) Many money market funds cannot touch non AAA papers, and they may have to sell some. Selling Treasuries into cash, but what else can you go into?


d) Have to remember that this affects funds which hold AAA bonds only, there is not a need to sell stocks to cover


e) The move removes a large weight of uncertainty and unknown on the markets. Who doesn't know they should be AA already?




f) Bear in mind that stocks have been down 10 out of 11 trading days, so its not like the last 2 days was a sudden sell down. Plenty of smart players have been selling for 9 straight days. The 9 straight days are to discount something like this eventuating.


g) I expect all equity markets to rise a couple of percents on Monday.


p/s photo: Aum Patcharapa Chaichua

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Bumi Armada, Badass Or Goodfella

Valuation and prospects wise, the new owners of Bumi Armada have done well to instill both in the company. Those with better memories know that minorities got the raw end of the deal when it was privatised. We can sit and complain or reassess the Bumi Armada that is in front of us.

FinanceAsia: Bumi Armada, a Malaysian oil and gas services company, has started bookbuilding for what looks set to become the country’s biggest initial public offering since Petronas Chemicals raised $4.15 billion in November last year. It will also be the second-biggest listing in Southeast Asia this year after the Singapore IPO of Hutchison Port Holdings Trust, which raised $5.45 billion.

The company and its existing shareholders are seeking to raise between M$2.46 billion and M$2.77 billion ($802 million to $903 million) from the sale of a 30% stake, ignoring a challenging market environment that. The shaky markets have forced the withdrawal of 19 IPOs in Hong Kong, Europe and the US during the past month.

But sources say there is significant domestic interest for the transaction, which is backed by Malaysian billionaire Ananda Krishnan, and this might convince international investors to take part as well.

“Domestic funds pretty much have to buy this,” one banker said, citing the size of the deal and the fact that the company is the country’s largest provider of ships and floating platforms used by the energy industry.

The list of cornerstone investors shows demand from non-Malaysian funds as well. As per the term sheet, Singapore’s Great Eastern and UK-based Prudential, both life insurance companies with a large presence in the region, have joined Malaysia’s Hong Leong Group, HwangDBS and state-owned investment company Permodalan Nasional in buying a combined 300 million shares. Based on the mid-point of the price range, their investment amounts to about $291 million, or about 34% of the total deal size. The cornerstones will be locked up for six months.

Also supporting the deal is the fact that equity investors generally like Malaysia and Southeast Asia. Together with Indonesia and the Philippines, Malaysia’s stock market is one of the best performers in Asia year-to-date and Dealogic data show equity issuance from Southeast Asia up 21% to a three-year high of $11.2 billion in the first half. Malaysia accounts for 17.2% of the total issuance. Notably, six of the 10 companies that have debuted on Malaysia’s main board this year have also gained from their IPO price. By comparison, 12 of Hong Kong’s 18 IPOs above $100 million are still under water.

Investors who bought into the $269 million IPO of Malaysian sugar refiner MSM Malaysia Holdings, which closed two weeks ago, will most certainly have no regrets after the stock surged 39.7% on its first day of trading Tuesday. It gained another 3% intraday yesterday before easing back to finish 3.8% lower.

Bumi Armada is a classic Ananda Krishnan deal in that the company has already been listed once. It was privatised by Krishnan in 2003, one year after he bought control of the company together with a partner — a business model favoured by the Malaysian tycoon as he seeks to grow his companies without having to answer to minority shareholders. The idea is that once a company has reached a decent size, or after it has been restructured, it will be relisted.

The initial intention was to relist Bumi Armada in 2008, but the IPO was delayed due to the financial crisis.

The company has set aside 9.1% of the offering for retail investors, while the remaining 90.9% will be offered to institutional investors. Approximately 42.2% of the institutional tranche will go to ethnic Malay investors, also called Bumiputera investors, leaving 57.8% for other buyers. That latter portion also includes two-thirds of the cornerstone tranche, however, which means only 261.9 million shares, or about $254 million (at the mid-point of the price range) of the deal, will be available for other institutional investors, including international accounts.

Some 73.3% of the deal is made up of new shares, while the rest are secondary shares sold by existing shareholders. The company will use the proceeds to repay bank borrowings, for capital expenditure and for working capital requirements.

The order books will remain open until July 8 and the final price is due to be fixed on that same day. The trading debut is scheduled for July 21.

CIMB, Credit Suisse and Maybank are joint global coordinators as well as joint bookrunners together with CLSA, RHB and UBS.

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Upcoming IPO Ratings

Too many IPOs in such a short time. I can only gauge their business model, prospects, follow through investors after IPO. 10 is the best upside potential.

Bumi Armada: 8/10

Inari: 6/10 (solid business, not terribly large float, management looks OK)

OldTown: 4/10 (very low barriers to entry, everyone can rattle off at least 3 names doing similar stuff, first mover advantage yes but the other similar players are basically cannabalising the market for all, dubious business plan sustainability)

Peter Labs - 6/10 (in the right industry, the group makes and trades animal health and nutrition products which include animal feed additives, environment maintenance products, biological and veterinary pharmaceuticals)

Hibiscus Petroleum: 3/10 (let the rating speaks for itself, or do more research on it yourself)

Catcha: 3/10 (I rather not say all bad things in one posting, the rating will suffice for now)



NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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