Search Results for: powerland

Missed opportunities: Osram, Praktiker, Powerland

Osram:

Good idea, bad execution is my summary for this one. The main mistake was clearly some kind of “anchoring”, because I wanted to see a price below 23 in order to buy. ANother question would be if you should, as a true value investor, do such “trades” at all.

Clearly, I am not yet convinced of Osram’s long term potential, but to me it was clear that this looked very similar to Lanxess’ first day on the stock market. A friend told me that “if you miss the limit by a few cents, then the margin of safety was too small anyway”. That is a good point. On the other hand, I think one can also add “alpha” if one does those kind of trades consequently (like the KPN trade), if the odds are in one’s favour.

I mean this is the whole idea of “special situation” investing. It might not be a pure “Margin of safety trade” each time, but if the chances are 55:45 on average instead of 50/50, over time this strategy will also produce good results.

For the time being, I will however remain on the sidelines with Osram.

Praktiker

Almost exactly a year ago after I sold the Praktiker Bond, the Insolvency now seems to be unavoidable.

Looking back, the sale at ~44% in July looked like really bad timing in the beginning:

Clearly, this was a missed opportunity as well, as the price even doubled after I sold July 2012. But after the “restructuring”, the Praktiker bond in my opinion was a pure speculation, the odds were at most 50/50 or worse. Clearly, I did not forecast the bad weather, but overall this whole affair looked just too bad. So I do not regret this missed opportunity as the fundamental decision was clearly correct.

Just as a remark: I assume that the recovery for the bond will be very low, maybe even single digit percentage points. Everything valuable has been pledged away and I don’t think they will get any fresh money into the capital structure “below” the bond.

Powerland

2 years ago, I looked at Powerland, a “German-Chinese” IPO. Already a superficial look at the company showed a lot of inconsistencies. Now it looks like that the game is over.

I am not sure why I didn’t short the company. This was clearly a case with a very big chance of being a fraud. There would have been even a second good chance when the CFO in November 2012 surprisingly left the company. So clearly a missed opportunity as I didn’t follow up on that one.

Powerland AG – Wieviele Taschenhersteller mit diesem Namen gibt es in China eigentlich ?

Nur mal aus Spass gegoogelt.

Bei “unserer” Powerland AG steht folgendes im Impressum:

Company history

Powerland has a successful corporate history. Founded in 2003 as Powerland Fujian, the company initially manufactured textile goods before it started manufacturing synthetic leather goods in 2005 with the incorporation of Powerland Guangzhou.

Based on his many years of experience in the sale of bags, the company’s owner, Mr. Shunyuan Guo, turned his attention to luxurious genuine leather goods in 2007. In the same year, Powerland kicked off the collaboration with the Italian design company, Studio Francesco Turchi, led by Mr. Francesco Turchi, a former director of production of Gucci. Francesco Turchi is a star designer who has worked with a number of outstanding international luxury fashion brands.

In 2008 the company started the distribution of its high value leather goods under the brand name “Powerland”, accompanied by an elaborate marketing campaign. By 2010 almost half of Powerland’s sales were generated by the Luxury Segment.

Mit einer Google recherche findet man das hier:

Brief Introduction

Powerland Group established in 1989 in Fujian China. Being a leading designer, manufacturer and exporter of quality fashion accessories, we have filiales or offices spread around the world, including in Italy, South Africa, Brazil, Dubai, Australia, China, and so on. And our customers are from different countries and areas, such as Europe, America, South East Asian Nations, Middle East and Asia.

As one filiale of Powerland Group, Guangzhou Powerland Bags & Leathers Co., Ltd has an excellent design group, and focuses on design and production of fashion bags, lady bags, party bags, semi-stereotyped lady bags and so on, which manufactured with the materials of PU, semi-PU, PVC and fabric. At the same time, it owns several factories with over 10 advanced handbag production lines, hundreds of workers, and has the ability to accomplish entire arts and crafts alone. There are over 1,000, 000 pcs of perfect bags of annual production capacity.

Ist das jetzt die gleiche Firma, oder ist das eine alte Webseite oder eine andere Firma die älter ist und zufällig so heisst ? Ist die Powerland AG ein Ableger, der nur die “Luxusvariante” produziert ?

Wie so alles in China dürfte da die Aufklärung schwierig sein.

Immer wieder China – Sino Forest, Powerland, Harbin Electric& gefälschte Hühner

Weil es neben Griechenland auch weitere spannende Themen gibt, ein kurzer “Round up” zu den allseits beliebten “Red Chips”:

Sino Forest
Auf den Zeitungsartikel hatten wir ja schon verwiesen. Jetzt verlassen die “Ratten” das sinkende Schiff: Broker Dundee Securities stellt die Coverage ein, nachdem man noch vor 2 Wochen behauptet hatte:

“We are going to provide you with some information on why Muddy Waters research is a pile of crap”

Die Kanadische Zeitung hat gleich nochmal nachgelegt.

The curious transactions totalling $6-million and inked on March 7 between a Sino-Forest subsidiary with an empty office and a seller with no address highlight the bigger questions surrounding Sino-Forest’s dealings in southern China.

UPDATE:John Paulson, der größte Aktionär von Sino Forest hat alle Aktien verkauft. Der letzte macht wohl dann das Licht aus.

Powerland
Powerland ist je einer der “Deutsch Chinesen” und im April 2011 an die Börse gegangen. Nun hat eine Firma namens “Claimpicker Research” ein Analyse im “Muddy Waters” Stil veröffentlicht.

Im Research wird auf die Differenzen zwischen Chinesischer Bilanz und Deutscher Bilanz eingeganen, das scheint in der Tat aber bei jeder Chinesischen Firma ein heisses Eisen zu sein. Interessant ist der Teil bzgl. der Einbringung als Sacheinlage in die Deutsche AG, das zeigt zumindest einen gewissen Bilanz Sachverstand bei den Erstellern der Studie.

Etwas “dubios” ist die Claimpicker Seite selber, in einem FAZ Artikel steht dazu Folgendes:

Bis zum Oktober 2010 hieß die Claimpicker AG noch ooout.com Portal AG. Unter diesem Namen hatte das Unternehmen unter anderem zum größten sozialen Netzwerk für College-Studenten aufsteigen und die wichtigste Anlaufstelle bei der Jobsuche für Graduierte werden wollen. Zudem wollte man zur größten E-Commerce-Seite für chinesische Studenten im Bereich Elektronikartikel werden.

Nach einem Wechsel des Großaktionärs, in dessen Rahmen das Unternehmen „erhebliche gesellschaftsrechtliche Mängel“ einräumte und versprach, die Informationslage zu verbessern, erfolgte die Umbenennung zu Claimpicker und der Wechsel des Geschäftsmodells. Auf seinen Internet-Seiten rät das im Schweizer Kanton Zug ansässige Unternehmen Aktionären der Powerland AG, das Bestehen etwaiger Ansprüche aus dem Prospekthaftungsrecht von einem spezialisierten Rechtsanwalt prüfen zu lassen und empfiehlt dabei die bekannte Münchener Kanzlei CLLB.

Powerland selber hat natürlich alle Vorwürfe zurückgewiesen.

Harbin Electric

Citron Research hatte einen Updated der Vorwürfe veröffentlicht, den Harbin postwendend mit einer erneuten Ankündigung eines Management Buyouts zu 24 USD gekontert hat. Das hattem an allerdings auch schon mal im Oktober 2010 getan. Immerhin konnte man jetzt den Kurs nochmal um 60% nach oben bringen.

Bleibt die Frage, warum ein CEO die eigene Firma zum mehr als dem Dreifachen des letzten Preises übernehmen will. Das hätte er durch gezielte Käufe auch billiger haben können. Vielleicht hat es damit zu tun, dass er vielleicht doch lieber eigentlich verkaufen will aber das ist nur eine persönliche Meinung.

Zum Abschluss noch die gefälschten Hühner:

Introducing Yuhe International:

…a supplier of day-old chickens raised for meat production, or broilers in China. Our day-old broilers are sold, through third party distributors or directly, to broiler farms and integrated chicken companies, which engage in the breeding, hatching, farming, and food processing of broilers, for the purpose of raising them to market-weight broilers.

Lt.. einer neuen Short Boutique sind angeblich die Farmen gefaked:

Our most important findings:
* We have reason to believe that YUII has misrepresented the details surrounding its acquisition of 13 breeder farms. More specifically, we believe we have compelling evidence that YUII never reached or executed an agreement with the owner of the Dajiang farms, as stated in December 2009,.

Mann mann mann, wo soll das noch hinführen, wenn die selbst die Hühner fälschen 😉

Special situation quickie: Osram take-over at EUR 35 /share

This will be a very short one:

Bain Capital and Carlyle want to take over Osram at 35 EUR per share. The offer is friendly as Managment and Supervisory board have agreed to the takeover.

The offer runs until beginning of September and minimum acceptance level is 70%.

There is no detailed offer document out now yet.

Nevertheless I established a 2,5% position at ~33.1 EUR, providing a 5,7% potential return.

Major risk is in my opinion politics (loss of jobs), chances to the upside could come form activists pushing for a higher price. In the meantime there could be clearly hick-ups (not reaching the 70% because of activist involvement) but Bain and Carlyle are pros.

The buyers are top tier PEs who execute this kind of offers well and have the money.

For those investors who remember: I looked at the Osram spin-off 6 years ago, but then failed to buy the stock because my limit was a few cents too low. So I know the company relatively well. This doesn’t of course guarantee any success ……

Emerging markets: China & Hong Kong stocks

On my trip into the Emerging Markets space, I tend to favour the most “countercyclical” countries and markets. When I was looking for my next “target”, I was thinking: Ok, which country and which sector have the worst reputation right now (of cours after Russia/Ukraine and Turkey) ? The answer was pretty easy: Chinese companies. Consensus seems to be now that China is crashing rather sooner than later, so that might be a natural place to start (slowly) looking for opportunities.

China & Chinese companies

In general, I have been sceptical or “bearish” about China since around 2008/2009. So far, Chine has kept up better and longer than I have expected, at least based on the official growth figures etc.

A quick look a the chart shows that the Hang Seng Index is only at 50% of the peak valuation compared to 2007, so the “official” growth rates did not translate into rising share prices at all:

Mainland Chinese companies are even more “depressed” based on the chart as the mainland based, Shanghai composite index clearly shows:

Valuation wise, the markets look cheap but not dirt cheap:

Hang Seng:
P/E 10,4
P/B 1.4
Dividend Yield 3,47%

Shanghai Comp
P/E 10,2
P/B 1,3
Dividend Yield 2,95%

I have written in the blog a couple of times about Chinese companies listed in Germany which in my opinion are to a very large extent promoted frauds, for instance Powerland (2011) and the Asian Bamboo series. I have also written why I would never invest in Chinese companies , so did anything change ?

Just to be clear: I would still not invest into a German-Chinese company or a US listed Chinese company. Also I would have reservations about China ;Mainland companies, as I don’t think that mainland standards are comparable to anything I have experienced yet.

Why not just ignore China ?

Some people might argue that “staying in the circle of competence” would be the better and safer option. However, if you look at the German Mittelstand for instance, most of the growth comes from business in China and/or Southeast Asia. Ignoring China is in my opinion a big risk for any investor as the impact on almost any company is growing day by day.

Looking directly at Chinese or Asian companies in my opinion will add an important perspective for any investor in order to be able to analyse Asian operations of non-Asian companies as well.

Where to look then in China ?

From my current status of knowledge, I would make one exception to my “Anti China” bias: I do think that “traditional” Hong kong listed companies could qualify as an investment.

As some might remember, Hong kong belonged to the UK until 1997, when the control then was ceded to China. What is interesting in my opinion is the fact, that the legal system in Hong Kong is still British or very close to British. This is a quote form Wikipedia:

The Hong Kong judiciary has had a long reputation for its fairness and was recently rated as the best judicial system in Asia by a North Carolina think tank.[2]

Although Hong Kong had its waves of fraudulent “Mainland” Chinese companies , I do think that “traditional” Hong listed AND Hong Kong registered companies are “investable”. A funny quote from the linked article above shows the issues with Chinese mainland companies:

There is no extradition treaty between Hong Kong and the mainland making it hard to take criminal action for fraud.

So even the Hong Kong regulators cannot get their hand on mainland fraudster, so good luck to German investors in Kinghero, Ming Le sports etc. ……

A good history of Hong Kong company registration and listings can be found here: including the short histories of many of Hong Kong’s most famous companies. So a lot of Hong Kong companies have a long history against one can check how they treated their shareholders etc. which is lacking for many mainland companies.

Despite the British heritage, Hong Kong is clearly an Asian market with a lot of pitfalls, specialties etc. Many companies are run by “Tycoons” or “Tai Pans”, strong patriarchical characters with many links and connections between large Groups, listed and non-listed comapneis etc. To get a “flavour” of some of the more common issues in Asia, one can read for instance this document from 2009 called “Guide on Fighting Abusive Related Party transactions in Asia”. A little Gem out of this report: There are no insider trading charges in Indonesia…..

What I do like about major Hong Kong companies is the relatively high standard of reporting. I looked at some annual reports and many of them were very well written and informative.

Hong Kong specialities

Traditionally, the big Hong Kong conglomerates are mostly active in some kind of transportation, real estate or both and have branched out into many other areas.

The Hang Seng index company is actually calculating a special index for “Non China” Hang Seng companies called the Hang Seng HK35 index. The constituents are the following stocks which I think are a good start to analyze further:

>

Code Constituent Name
1 Cheung Kong
2 CLP Hldgs
3 HK & China Gas
4 Wharf (Hldgs)
5 HSBC Hldgs
6 Power Assets
11 Hang Seng Bank
12 Henderson Land
13 Hutchison
14 Hysan Dev
16 SHK Prop
17 New World Dev
19 Swire Pacific ‘A’
20 Wheelock
23 Bank of E Asia
27 Galaxy Ent
66 MTR Corporation
83 Sino Land
101 Hang Lung Prop
142 First Pacific
93 Cathay Pac Air
303 VTech Hldgs
330 Esprit Hldgs
388 HKEx
494 Li & Fung
522 ASM Pacific
551 Yue Yuen Ind
880 SJM Hldgs
1038 CKI Hldgs
1128 Wynn Macau
1299 AIA
1928 Sands China
1972 Swire Properties
2282 MGM China
2388 BOC Hong Kong

As many companies invest to a certain extent in real estate, one should now that most HK companies revalue their proporties through the P&L. So low P/Es are often a result of large property valuation gains which might not be sustainable. This is the first thing to check with any HK company.

What to look for in general

For further excursions into Hong kong, I will try to concentrate on companies which will (among others) have the following characteristics:

– transparent reporting & good track record with regard to shareholder orientation (e.g. dividends, share buy backs etc.)
– conglomerates with the majority of listed subsidiaries (sum of parts)
– no pure real estate companies
– significantly cheaper valuation than comparable US/European companies or clear discount to sum of part
– it would not hurt if some well known value investors would be among the shareholders

Two reading tips:

At the end of this first Hong Kong post, 2 reading recommendations. The first is from Mark Moebius and called “Passport for profits”:

This is basically the extended version of the “Little book of Emerging markets” which I reviewed a few weeks ago. Mobius started his career in Hong Kong and has some interesting Hong Kong stories in the book.

A second, more unconventional tip is the novel “Noble House” from James Clavell:

This massive 1.200 pages book written in the 1960ies covers the story of a CEO or “Tai Pan” of a big Hong Kong Trading house and his fight against another big trading house. The author lived in Hong Kong for a couple of years and the story seems to be based on two “real life” Asian companies, Jardine Matheson (now headquartered in Singapore) and Swire. Along a spy story, various murders etc., the book contains detailed descriptions of bank runs, bear raids, insider stock trading, non existent trading rules etc. Although the names were changed, many of the events in the book actually happened, for instance a bank run in 1965.

A good long read for a summer (beach) vacation.

To be continued…..

A quick look at the Stockopedia Screening tool + Quantitative value investing & Data quality

It seems that I begin to harvest my successes as an investment blogger. After getting a free book, I now received already for the second time (temporary) free access to a stock screening tool. I wonder what comes next……maybe someone offering me 100 mn EUR to manage ?? 😉

A year and a half ago, I checked Tim Du Toit’s Eurosharelab screener which looked like a fair deal and a good tool

Now I checked the Stockopedia tool. I did only check the screening tool, they offer a lot of other stuff but I am not really interested in that.

From the beginning, I found their tool very easy to use. I don’t know the current status of Eurosharelab, but for me the biggest plus of the stockopedia screener is the fact that one can set up custom screens based on a large number of different variables. I was able to create my custom screens without reading any manuals etc. The navigation is very good, I liked especially the “Bloomberg” like selecting of fields for the queries.

The results are presented very well, it is very easy and convenient to drill down into the stocks or to check the fundamental data. This is even better than in Bloomberg and a big advantage of the fully web based technology. The speed of the queries was OK, could be a little bit faster.

I also liked the existing “Guru” screens, especially the “Screen of Screens” which kind of aggregates all existing screens. (Note: EGIS is the second best stock there after Dart. It looks like that my Boss model is not totally useless…..)-

The list of “in and outs” is interesting, too, where one can see which stocks newly qualified for the top positions and which stocks dropped out. The single stock monitor also looks very comprehensive, with a good data history. Up until now they offer only Europe but including many exotic countries like Bulgaria etc.

All in all it is a very good tool which is a lot of fun to work with. They told me that they would charge normally 499 GBP p.a. but if someone is interested, they would offer a “special rate” of 399 GBP. If I recollect correctly, Eurosharelab had also 3 month access which could be interesting for people who don’t need such a tool permanently.

For small investors, they should consider if the really need this. If you for example have a 50 K GBP portfolio, the 500 GBP full rate would eat up already a full 100 bps of annual returns or depending on what you expect at least 1/10th of your total return if you make on average 10% p.a.

Quantitative investing & Data issues. Example “Magic Sixes”

As I have written many times, I like using screeners as a basis, but I do not think that quantitative value investing, especially in the small cap sector, makes a lot of sense. The major issue is data quality.

In order to test the data quality of the Stockopedia screener, I did the following:

I set up a custom “Magic Sixes” screen (P/E lower than 6, P/B lower than 0.6, Div Yield higher than 6%, Europe) both, in Stockopedia and Bloomberg and compared the results. The results were quite surprising for me. Stockopedia returned 28 stocks, Bloomberg 19 stocks, but only 2 stocks showed up in both lists.

Here you find the results:

Stockopedia Magic Sixes   Bloomberg Magic Sixes  
 
    C21 21ST CENTURY TEC
AIRC Air China    
AURG Aurskog Sparebank    
    BTT BABCOCK-BSH AG
BQRE Banque de la Reunion SA    
BTG4 Bertelsmann SE Co KGaA    
ELMU Budapesti Elektromos Muvek Nyr… ELMU ELMU NYRT
CAT31 Caisse Regionale de Credit Agr…    
CCN Caisse Regionale de Credit Agr…    
6C4 Chimimport AD Sofia    
CICG Cinkarna Celje dd    
CSFG CSF    
CTC Cyprus Trading    
DOM Domstein ASA    
    DIOD DIOD
    MLDYN DYNAFOND SA
    MLEDS EDITIONS SIGNE
ERME Ermes Department Stores    
EMASZ Eszak Magyarorszagi Aramszolga…    
    MLEVE EVERSET
RAM F Ramada Investimentos SGPS SA    
    BSG GERMANIA-EPE AG
HJH H.J. Heinz Co    
HF HF SA    
HGM Highland Gold Mining HGM HIGHLAND GOLD MI
HSPG Holand og Setskog Sparebank    
    INOX INOX
MELG Melhus Sparebank  
    KYTH K KYTHREOTIS HOL
    KDHR KMECKA DRUZBA
    OAB OAB OSNABRUECKER
    PVA PESCANOVA
PVL Plastiques du Val de Loire SA  
    1PL POWERLAND AG
5BU Real Estate Fund Bulgaria ADSI…    
    ALRIC RICHEL SERRES DE
SALB Salling Bank A/S    
    SHFT SHAFT SINKERS HO
SPOG Sparebanken Ost    
PLUG Sparebanken Pluss    
SVEG Sparebanken Vest    
SHL Stademos Hotels    
    SZI1 STOLBERGER TEL
TOTA Totalbanken A/S    
    59X UNIPHARM AD-SOFI

Only Highland Gold Mining and Budapesti Elektromos showed up in both tools. When I digged into the detailed data, I was even more surprised. In total, I had 43 “diverging” entries. From those, 7 stocks were stocks where there were large bid/ask spreads and depending on the price the stock would either have 0.59 as P/B or 0.61 for instance, so this is a pure technical issue.

On the other hand, 20 diverging stocks were clearly mistakes in the data of Stockopedia (either wrong, outdated or missing data) and still 16 stocks were clear data mistakes by Bloomberg.

I emailed a little bit back and forth and it seems that they get their data from Reuters and are working hard on improving data quality. But nevertheless it is for me highly revealing that based on two different data sources, you get 2 almost completely different set of stocks with a few relatively basic filters.

Clearly, the Magic Sixes filter at the moment only throws out micro cap deep value stocks, where data is always an issue, but still, I wouldn’t have expected such a result. Also rankings might help to a certain extent. Nevertheless that mae me highly suspicious of any “automated” Value trading strategies no matter how good they look in backtests.

Summary:

I really liked the Stockopedia tool. If I would not have access to Bloomberg, I would seriously consider their tool . Although I would always use it as a screener only, not as a basis for a trading strategy,

Maybe it is not representative, but my Magic Sixes example clearly shows that data sources alone can have a huge impact how portfolios look like even if you use the exactly same criteria.

If one really digs deep into data like I had to for my boss model, one would detect even more disturbing data issues, but that is a topic for another post.

DISCLOSURE: I got free access to the tool but I do NOT get any referal fees etc.