To Produce Value?

TPV Technology Limited is engaged in the design, manufacture and sale of computer monitors and flat television products. With its lost costs production facilities in PRC, TPV sells mainly to Europe, North and South America, China and other Asian countries.

Market Leader
Having acquired the monitor and flat screen tv business of Philips in a business-for-equity swap, TPV is now 15% owned by Philips, and 22% owned by China's BOE Technology, its largest shareholder. With the Philips acquisition, TPV also became the world's largest PC monitor maker, focusing on CRT monitors, thin film transistor - liquid crystal display (TFT-LCD) monitors, LCD and plasma televisions. During the year ended December 31, 2005, of the Company's display shipment, TFT-LCD monitors totaled 17.7 million units, CRT monitors totaled 11.2 million units, and LCD televisions totaled 644,000 units.

Performance and market outlook
Helped by the acquisition of Philips' monitor business, TPV posted a 14.4% rise in first-half profit on Sept 12, 2006. However, the outlook for TPV is overshadowed by intense competition, with regional rivals Au Optronics Corp and LG Philips LCD Co Ltd predicting in July a further slide in panel prices despite rising shipments, and many analysts not expecting a turnaround before the end of the year.

Prices for LCD panels, which are the key component of thin-screen PC monitors, began to stabilise in mid-2005 as more people bought monitors based on the technology and LCD TVs gained popularity.

Intense competition
More than 3 years ago, Hon Hai Group's (鴻海) expansion into the already crowded and highly-volatile flat-panel industry with the creation of Innolux Display Corp (群創光電) drew widespread skepticism among most industry insiders, despite the electronics component giant's strong cost-saving abilities.

Innolux, the David of LCD panel maker with initial paid-up capital of NT$21.1 billion/US$640 million, competed with Goliaths whom possessed large-scale capacity and having two or three times as much capital (including TPV). Nevertheless, Innolux got into the black in its second year of operation, with annual revenue reaching NT$51.4 billion in 2005. Innolux earned NT$406 million, or NT$0.21 per share last year according to the company's filing to the exchange. Innolux aims to double its revenue to NT$100 billion in 2006.

Innolux has ambitions to beat industry leader TPV by grabbing a 40 percent market share in 2009. Competing as a price-disruptive competitor, Innolux's price aggression may actually consolidate the monitor market to 3-4 dominant players and may be a long-term positive for TPV.

InnoLux(3841TT) IPO-ed on the Taiwan Stock Exchange on October 24, 2006. With the IPO price of NT$40, Innolux closed at NT$55.60 today, giving it a P/E of 265.

Light at the end of the tube/tunnel

Market segment I - LCD monitors
Market share - 23% post Philips acquisition
TPV is on track to ship 28m LCD monitors in 2006 with flat or slight lower gross dollar margins in 3Q06. For 2Q06, TPV shiped 6.5m LCD monitors, +67% YoY and +23% QoQ. Although LCD monitor panel prices declined by 20% in 2Q06, TPV maintained its gross dollar profit at US$9.4 per piece based on its experience in dealing with the dynamic pricing environment.

Market segment II - LCD TV
Market share - 6% in 2Q.
TPV is expected to ship out at least 2.5m LCD TVs in 2006. Gross dollar profit for LCD TV was a miserable US$4.7. The LCD TV business was in the red, attributed to the launch of new models which would require close to 2 years to stabilise.
Greating contribution of 37" and above LCD TVs is expected to improve gross dollar profit in 2H.

Market segment III - CRT monitor
Market share - 37% in 1Q06.
TPV further consolidated its position in the CRT monitor industry and gained 1.5% market share from 1Q06. Relatively stable segment, TPV should continue to do well in the CRT market.
Company Financials
TPV repaid US$146m in short term bank loans in 2Q06 with its excess cash. With the lower debt level, TPV's finance costs is cut by US$2m every quarter.

Insider Trades
TPV share price has hit a 52-week low ($1.04 today) on the SGX. Despite the STI hitting record highs, TPV has sunk lower. Even the purchase of 9,500,000 shares by Dr Jason Hsuan in Mar 06 at $1.85 did not prevent the erosion of the share prices. The CEO putting in US$10 million usually signifies strong beliefs in his company but the share prices have not responded accordingly. Co-incidentally, 3 other directors Chen Yanshun, Wang Yanjun and Wang Dongsheng have been constant sellers since Mar 06.

To Produce Value?
TPV looks highly attractive now. With NAV at S$1.25, it is trading at a 15% discount. At a historical PE of 5.9, and dividend yield of 4.2%, the IHs must be pulling wool over the Graham wannabes' eyes. Compared to Innolux (with astronomical PE of 265), I say I smell value.

Caveat emptor.

Investing in sentiments

Have I gone ga-ga? Investing in sentiments?

Jim Rogers did so... at the start of the commodities bull run. And according to the guru, commodity bulls last for two decades. It's still early days. Detractors exist, of course. At the moment, it's still a Gold Bulls 1-0 Gold Bears.

Listed on the NYSE since Nov 2004, and on the SGX (as a secondary listing) recently, streetTRACKS Gold Shares is a gold exchagne traded fund (ETF) by SSgA. Basically, the ETF is quite an attractive instrument to invest in gold (long or short term), without leverage - a double edged sword, and most importantly, low expenses.

I am inadequate to provide you with hardcore market research material on gold. But here's what I've just learnt:

At the end of 2005, global stock above-ground gold stood at 155,500 tonnes. 52% of which was in... *drumrolls* ... jewellery and 18% was held by central banks. 16% held by Bulls and 12% by industries. Now, it would appear that gold is highly affected by private consumption, in terms of the demand of gold for jewellery.
More importantly, from the demand flows from 2001-2005, 77% of the fresh gold mined went to private consumption, no doubt fueled by the growing/glowing demands for gold by China and India.

The bulls are singing this song:

1. Central banks would not release much more gold to the market. And even if they do, China's central bank might be able to suck up all the gold, if they do desire to.

2. Much of the gold is kept under the bed, as gold necklaces and rings. People, especially ladies, are emotionally attached to jewellery. Could be their dowry, could be their anniversary rings. So even if gold price rises, it's unlikely that under-the-pillow gold re-emerges into the market to depress prices.

Certainly feels like the Gold Bulls are banking in on sentiments.

From the TA point of view, if there is another correctiong, USD490 seems like a very strong support. It's the 50% retractment from USD250 to USD 730. Otherwise, gold seems to be back on an uptrend. Possible cut-loss at USD500.

An Exit Strategy

Well, I must qualify that I'm not a professional in the finance industry, nor finance trained. Nope, no CFA, CPA, IFA. No As.

In case you are still reading my blog, what I'll put together are tiny bits of information that I've read from books, forums, research reports or from CNBC (it's always on, as background noise). Nevertheless, I think until you put such titbits together, they stay in your grey matter taking up space. And so here I am, blogging my thoughts.

Anyway, back to my topic. An Exit Strategy. Fund managers have it. Do you? Should you? A typical Exit Strategy.

"To safeguard the interest of the Group, every investment or undertaking by the Group must be against acceptable collaterals and have a clear exit strategy. The principal risks of the above strategy include market risk, specific stock risk, interest rate risk, exchange risk, credit risk and liquidity risk."

A clear exit strategy. Hmmm..... sounds foreign to you? Did you have one for your last trade? A clear exit strategy forces you to think of why you are entering a trade and just as important, when to get out. Is the stock under-valued by the market? If so, when the gap closes, should you exit? Or do you yearn for more, thinking that you're one hell of an investor? (shhh... don't answer it. It's a rhetorical question.)

Or were you putting your money on the company to win the rights to, say, operate casinos? Were you expecting the company's new production facilities to boost growth? Was it a situational play? (Think of Section 44 tax credits plays, or de-regulation of industries...)
This works for not-very-value-investing trades aka punting aka gambling too. With the avalanche of covered warrants on the market, a clear exit strategy would do you good too when u succumb to the temptations of a quick buck. A clear exit strategy would remind you that you were in it for one and only one reason - for a quick buck. If it doesnt materialise, and goes the other way, get out. You took a gamble. You lost. No reason to be there anymore. You got an exit strategy. Do it.

With a clear exit strategy in mind, a lot of emotion is removed from your trades. That is of course, more often than not, a good thing. In the first place, you entered a trade because of an expectation of an event to occur. Once that happens, is there still a reason to be invested? Or if it doesnt pan out the way you wanted it, do you still hope and pray?

Market has been kind to all. With STI hitting new highs daily, the last painful loss has been forgetten. Don't. Have a clear exit strategy. Especially in a volatile market. It would certainly save you some time and money.

Eventually I'll get to value investing... ... ... I think. Hang in there.

The end of inertia. A new beginning

Finally overcame the inertia and started this blog. For once, I hope to maintain this blog and regularly update it. This is a blog dedicated to the Graham worshippers & Buffett wannabes. Hopefully, it will also motivate me to finish reading Graham's SA (the bible of value-investing) and complete my CFA. (Psst... I'm also looking for a copy of "Margin of Safety" by Seth A.Klarman.)

Pardon the corny title of my blog - Mind your own business. It's quite apt really.

Reason 1 -
A wise man once said that investing is actually a very lonely activity. If you want to be successful, you'll have to do a lot of homework yourself. Trust no one! The truth is out there! (oops.. ok.. no more X-files quotes) But seriously, the point is that, you got to do it yourself, you got to mind your own business.

Reason 2 -
This should be numero uno but I'll leave it here. The moment you pay good money for a share, you are in fact a shareholder of the company. You own a piece of the business. It could shares of a property developer, a medical facility, an airline or a hotel chain... You now own a brick, a syringe, a screw or a pillow... Therefore, it is of upmost importance that you protect your hard-earned money and mind your own business. Know your business, know the management, know who the operating environment, the challenge(r)s etc...

At this point of writing, the DJIA is at/near to the all time high. NASDAQ has suffered since the dotcom bust but has slowly recovered to hit 5years high as well. Lead by bullish sentiments and the IR effect, STI is also setting new highs, led primarily by banks and property stocks. In midst of all the euphoria, does value investing still exist? That's what this blog is for. To find safe and foreseeable profitable plays in a highly uncertain market.

Lastly, Happy birthday 155th Mr Dow! Charles Henry Dow, the founder of Dow theory and of course Dow Jones averages, was born on this day (6 Nov) in Connecticut in 1851.