2024 Week 15:
2024 Week 15:
Real Estate, Mermaid Maritime, Dawnrays, Akeso Bio, China Tianrui Group Cement, Taste Gourmet, Dividend Yield, TK Group, Soundwill
Real Estate
I have been a reader for Klement on Investing for at least a year now. While he blogs about academic research on finance, it is often his quirky stuff that caught my attention.
What a difference a tree makes - by Joachim Klement (substack.com)
The conclusion of this article is that it pays to have greenery near your house.
“Doing the math, that means that having an ash tree next to your house increases the value of the house by approximately 0.4%.”
- Klement on Investing
My guess is that being near a park would probably be the most accretive feature to a house valuation?
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Mermaid Maritime
"I started buying Mermaid at SGD 0.074 on 13th April 2023, did the last purchase at SGD 0.108 on 27th March during the investor conference and today it is at SGD 0.123.”
-2024 April Week 14
I talked about Mermaid Maritime last week and it closed at SGD 0.147, up another 19.5% for the week.
It seems that news of Mermaid’s “good fortune” is trickling down into the investor community and investors are finally taking notice.
At current price, Mermaid is definitely closer to being fully valued than undervalued.
A lot of the current valuation would depend on the progress of the new segment - decommissioning of rigs.
Decommissioning as a business is bound to have lower gross margin than their regular business. I would expect decommissioning gross margin to tread closer to 15% which means that the profit growth may not be as spectacular as expected by the market.
Expect some pullback in share price if the gross margin and net profit turns out to be worse than expected.
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Dawnrays, Akeso Bio
Dawnray is one of the main picks when I started the blog because I knew I had an edge.
While everyone is worried sick about central procurement practices in China, I knew that Dawnrays is winning and killing competition during the central procurement phase. Under central procurement rules, Dawnrays has the ability to displace any competitor within a province if they win the tender.
The formula is - bid and win tender - choose province to move into - displace incumbents - manufacture more - lower manufacturing price - win more tenders - repeat.
It works until the Chinese government realizes that they are creating monopoly in certain segment of the market. The centralized procurement rule changed and now more than one company can qualify for a tender.
Rule change which is not unheard of in China will continue to cause more pain to the generic drug makers like Dawnrays.
The only bright spot is that Dawnrays is their investment with Akeso Bio to work on a fully human anti-PCSK9 monoclonal antibody ebronucimab (AK102) which seems to be similar to the best-in-class drug Leqvio. Both act on inhibiting translation of the protein PCSK9.
Inclisiran, sold under the brand name Leqvio, is a medication used for the treatment of high low-density lipoprotein (LDL) cholesterol and for the treatment of people with atherosclerotic cardiovascular disease (ASCVD), ASCVD risk-equivalents, and heterozygous familial hypercholesterolemia (HeFH).[4][6][5][8] It is a small interfering RNA (siRNA) that acts as an inhibitor of a proprotein convertase, specifically, inhibiting translation of the protein PCSK9.[9]
-Wikipedia
But alas, Dawnrays sold the JV back to Akeso just as AK102 is going for phase 3 trials in China. While they made a good gain out of that investment, they lost the chance to distribute a potential best in class product.
Talk about a short-term gain…
They would have been better off just holding on to that JV….
Anyway, these are all old news already.
The reason why I am bringing out an old story is that I am currently reading up on Akeso Bio.
Akeso out-licensed its breakthrough bispecific antibody, ivonescimab (PD-1/VEGF, AK112) to Summit Therapeutics for development and commercialization in the U.S., Canada, Europe, and Japan and is profitable for the first time.
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China Tianrui Group Cement
China Tianrui Group Cement should be a horror story for any HKSE investors. The share price of China Tianrui slumped 99 percent in the 15 minutes before the market closed.
“The cement giant dived to HK$0.048 per share with a turnover of HK$24.4 million. On the previous trading day, Tianrui closed at HK$5.
The free fall yesterday not only turned the shares into a penny stock but also slashed the company's market capitalization to just HK$141 million from HK$14.6 billion - meaning HK$1 billion evaporated every minute.”
-The Standard
I don’t know what causes the fall. It could be a very fat finger, a potential scam or anything you can come up with. But that tells you that it is best to stick to trusted companies while you invest in the more frontier or emerging markets.
On a side note, China Tianrui founded in 1982 is the ninth largest cement manufacturer in China. They are not exactly a fly by night operator since they do have cement plants in China.
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Taste Gourmet
It seems that everyone has the same idea of trying to exit Taste Gourmet after seeing all the headlines of Hongkonger leaving for Shenzhen over the weekend.
I managed to exit a tiny number of shares last week.
While some of us are exiting the shares, there are also decent buying queue at HKD 1.40.
Trading volume for Taste Gourmet had increased substantially and there is now adequate volume for anyone who wants to buy or sell the counter.
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Dividend Yield, TK Group, Soundwill
I posted on X saying that it seems that Hong Kong stocks should have hit a bottom.
TK Group, selling at HKD 1.49 is a manufacturing company valued at HKD 1,240m with HKD 1,158m in cash on its balance sheet. They are proposing 7.5 cents in final dividend and 10 cents in special dividend. If we include the 2.8 cents in interim dividend, TK Group would be HKD 0.203, which gives it a 13% yearly dividend. If we just use the 17.5 cents, then you would be 11% dividend in 2 months’ time. I like the idea of receiving 11% in 2 months for an operating company.
If you do not like manufacturing, how about a real estate company in Hong Kong?
Soundwill, selling at HKD 7.05 is a Hong Kong real estate company selling at one tenth of its value. It is giving a final dividend of 20 cents and a special dividend of 80 cents per share. That gives it a 14% dividend yield in 2 months’ time. Though the special dividend would most likely not be repeated and the price may drop by $1 after the XD but there is hardly any permanent impairment risk.
There are opportunity costs though...
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June AGMs in Hong Kong:
I am preparing to attend a few AGMs in Hong Kong in June. If you have any contact of companies whom you think I should speak to in Hong Kong, do drop a message.