Saturday, May 27, 2006

Market News and Updates

An Artist Impression of what the IR may look like

So at last the long-awaited rebound has occurred. From the starting bell all the way to the close of trading, the STI managed to stay above water, closing at 2,445.02, up 40.57 points. Stocks were mostly up but somehow, sentiment was still dented and trading interest remained cautious. Most of the plays focused on Keppel Land and Capitaland because of the impending IR bid announcement later in the afternoon. The former gained 32 cents (7.4%) to close at S$4.62 while Capitaland gained 10 cents (2.3%) to close at S$4.42. Incredibly, BOTH did NOT get the IR contract. Instead, Sands won the contract because their bid was considered the best for Singapore's development as a MICE (Meetings, Incentive Travel, Conferences and Exhibitions) hub. Imagine the ire of the people who thought either Keppel or Capitaland would win the IR bid ! Genting and Star Cruises never had much chance in the first place and so they wisely announced that they would concentrate their efforts on the Sentosa IR bid. Duh, is anyone surprised ?

Wow....nice relaxing spot for a tryst for two !

Banyan Tree also released their IPO to the public, hoping to raise S$407 million through the issuance of shares priced between 87 cents and $1.07. Banyan tree offers premium spas, resorts and hotels and their two most famous brands are Angsana resorts and Banyan Tree resorts. What a nice relaxing time one can have at such resorts, assuming one has the income level to support the "premium" pricing. The IPO will list on July 14 and this will be one of the more "relaxed" IPOs to hit the market. As long as you think trading in this counter is too frenetic, just visit their spas to chill out. As a shareholder I assume you will get discounts and special privileges for their spas and resorts ! Hey, after all, Prime REIT gave out Wisma cards to its shareholders offering them discounts and incentives. Hmm...wonder why SUNTEC REIT can't do that huh ? *Hint Hint*

BioSensors Analysis of Results and Market Reaction

Apparently, someone got wind of BioSensor's huge losses early yesterday and starting to sell down the counter. It dropped a whopping 21.5 cents from $1.03 to close at 81.5 cents, after touching a low of 71.5 cents. BioSensors is a company which makes drug-eluting stents and so a lot of money is pumped into research and development. From their Profit and Loss statement for FY 2006, their licensing revenues had dropped a massive 81% from US$50 million to a mere US$9.3 million. This drop in revenues was further compounded by the almost doubling of R&D costs to US$19 million from US$9.6 million. Their net loss of US$22 million was wider than analysts' most pessimistic expectations (they had expected it to be around US$11 million).

What we can learn from this is to always be wary of companies which spend large amounts on R&D and which have limited abilities to generate revenues. It's not that I don't believe in these companies and their prospects, but sometimes investors need to take a long hard look at a company and what is has been achieving all this time. It was inconceivable that a company which was making such a huge loss could actually trade at $1.03. The market realized this and adjusted its price accordingly to $0.815, and the downside risk is still there because of its under-performance. This also mirrors the example of Samudera Shipping, which saw its share price plunge about 10 cents due to a profit warning.

Moral of the story: You have to be wary and be knowledgeable about the companies you invest in. I am a believer of value investing and FA and I feel that a company with good growth and earnings visibility would not be sold down in the long term.


Anonymous said...

Strong company fundementals like Global Voice? kkkkkkkk

musicwhiz said...

I think if you look at the case of Global Voice, what they have is a strong network of fibre cables which are under-utilized. That alone should form the asset base for the company and allow it to use it to generate recurring revenues.

It's strange that no one made the same mention for Mediaring when it was still unprofitable. Now it is one of the first VoIP players to show a profit.

We buy shares for its future potential and its future earnings, that is also the idea of value investing.