More Balanced View On Xingquan

From the posting: Regarding Xingquan's Cash And Dividends

• ch said...
  Dear All,Yes, the issues brought up by Moolah, Mosea and Snowball are primary concern(s) if one is invested into Xingquan. The dynamics of Chinese stocks and business community are always tinged with mysterious circumstances. Be that as it may, the Chinese are rapidly becoming the world economic superpower. One thing I know about Xingquan is that a shrewd investor by the name of Koon Yew Yin is a minor majority shareholder. Please refer to Bursa Malaysia under change in shareholdings column. This is the same man who has years of experience in stock investing and the same person who pledged to donate RM30 million to UTAR (but was turned down by MCA for reason(s) best known to them. He is a smart share investor and invested a sizeable amount in Xingquan. Guess he should know something about Xingquan that we don't.
  
  You have hit the right note i.e. we should not follow the herd mentality but then again, this news which was fished out from the Bursa website goes to show that a multi-millionaire has invested into Xingquan. He is rich for his smartness in stock-investing or other reason(s) but one thing placed right in front of us is that he has sizeable amount of money in Xingquan. As I have said earlier, is it that he knows something about Xingquan which we don't? I am not saying that your observations and of those of Mosea and Snowball's on Xingquan were wrong nor neither I am trying to convince others to buy Xingquan but the emergence of Mr. Koon as a major minority shareholder is something we should try to understand. Surely, he is not considering to donate the RM30 million turned down by MCA to Xingquan. Or is he? And I believe philanthropist like him has some reputation to live up to. It is like Francis Yeoh is now into the Wimax biz which might be foreign to him 10 years ago but surely he is not investing in the biz just to keep him busy. It is all for making money. Similarly, I believe this is true to Koon Yew Yin too on his foray into Xingquan.

• xinzhang said...
  
  I guess we should look into Xingquan in a more perspective manner. Snowball was right that the interest rate regime in China is low and it is something which no one could argue or debate. So, in other words, the Chinese is encouraging people to take money out and invest and spur the economy.
  
  The apparent higher receivables reported by Xingquan is definitely a cause of concern but not to an extent where we should just ignore the prospect of investing into this company. Question like is the receivables are within its credit term? I have no idea as to its ageing list but surely they are not selling on cash basis. Do they have any bad debts? If no, then the high receivables are not a concern as you will have higher receivables as business grow. The important thing is to check if they are within credit limit and term.
  
  Xingquan is lacking on dividend as correctly pointed out by Mosea. Yes, for any investor, dividend is something that they are looking up to apart from price appreciation. But Xingquan has caveat this by presenting to all and sundery that they are paying from 10% to 20% of its PAT.
  
  Xingquan should be paying up for the expansion completed recently. And the issue is how much business have they managed to get for this new plant.
  
  And my last advise is will there be more funds interested in this counter apart from Mr. Koon Yew Yin. Having Koon Yew Yin on board is a good thing boosting investors' confidence.
  
  

more...

• panaceaasia said...
  Dear Moola,Thank you for your excellent blog. I too note that Mr Koon has a substantial stake in Xingquan. Mr Koon is Malaysia's Warren Buffett. He invested in Supermax about 2 years ago at rock bottom prices before analysts went mad on the rubber gloves sector. It appears Mr Koon has made millions investing in shares. My money is with Mr Koon. You can spend your time arguing about the low returns on cash, which I applaud as higher than market returns would indictae a higher level of risk. Xingquan offers an undervalued exposure into the second largest economy in the world. I followed Mr Koon by buying Supermax and am now buying Xingquan. I bought a new BMW 523 with half of my Supermax profit. It's lovely, indeed the Ultimate Driving Machine.

*** these are comments received and they are highlighted for the BALANCED view only since I had already made some comments in earlier postings***

*** I know nothing what will happen the stock or the markets. ***

21/11/10

Past postings:

• 19 Nov 2010: Regarding Xingquan's Cash And Dividends
• 18 Nov 2010: Quick Review On Xingquan's Earnings
• 19 Oct 2010: Xingquan's TDR
• 16 Aug 2010: Quick Review Of Xingquan's Earnings
• 10 Aug 2010: Regarding Xingquan

22/11/10

And from the other side...

• snowball said... .
  Dear all,
  
  Yes. Mr. Koon may be a savvy investor, but, Mr. Buffett can make mistake, too. Some say TTB is also the "Warren Buffett of Malaysia", but to those who follow him into Meico, you will probably be still losing your money. Unless you are a good friend of Mr. Koon and he can tell you what is inside his portfolio, you could not replicate his above average return.
  
  The cash is not just earning a low rate, which I would not bother as it is the Chinese company way of doing things, regardless whether we like it or not. It is earning a suspiciously low rate, that's the concern.
  
  Mr.Koon would have probably been there or at least sent someone there to check out the place and found the place is in proper order. But, the shoe business in China, is still extremely competitive. If I were an investor, I would probably study the competitve dynamics of the Chinese shoe market and how their addnice brand stack up against others.
  Shoe is a very labour intensive business. Xinquan as well as other shoe makers are churning out very decent margins. But, investor always need to consider the labour cost. I think it forms at least 20% of Xinquan cost structure. Whether a Chinese wage increase will hurt their margins, I think investors should find out. There are a lot of pressure on lifting the minimum wage in China. Based on analyst report, the wage that Xinquan workers is earning, I feel is not out of line with the general numbers in China, which means, a revision is likely. But, with such a competitive sector, can they pass on the increase? Some may argue that the increase would likely to bring about increase in demand, but, I would add that you need to build a new plant to support such demand increase,so, more money there.
  
  Xinquan is pursuing some massive distribution channel expansion, whenever there is something new going on, investor should be wary about their expansion plans and see how it goes. Even starbucks got it wrong with their expansion. There are very little information out there on how the rate of expansion is going and etc, whether the incremental investment actually brings about good returns. If this company is based in Malaysia, we would probably be able to figure out whether the expansion works or not, but, it is too far away, so, there is much more problem when it comes to lack of information.
  
  There are a lot of good story out there about the integrity of this company owners, but, story is story. A good manager can bring you so far, you still need to study the industry dynamics. You need to know how addnice stack up against more established names like Li Ning, anta and hongxing etc Plus, all the things that we hear about this company is all hearsay, we do not know the person.

So much interest.

Well... for the record...

ps: how many quarterly earnings has Xingquan reported since listing?
ps/ps: how has Xingquan reallly fared?
ps/ps/ps: has Xingquan's perfomance so far being up to par? Has it beat 'expectations'? or has it grossly perform below expectations.