The depressed HK markets triggered another buy, this time PC Partner Group. PCP is an OEM of computer parts, especially graphics cards. They’ve actually manufactured the graphics card (Zotac card) on the very PC I’m writing this.
PCP is trading at 0.42 NCAV. I see three reasons the company has such a depressed valuation.
- Personal computers are in decline
- They are tied up in litigation
- Asset/liabilities ratio is not very good.
Interestingly PCP has had a good run over the last years due to a graphics card boom, due to bitcoin mining. However, now the bitcoin miners have turned to other solutions – such as custom integrated circuits.
How about a manufacturer of CD and DVD discs? Apparently demand for discs has not decreased as much as one (I) would expect, Swing seems to be doing pretty well.
I am a bit concerned about the historical share increases and swelling working capital, but I find it offset by stable margin and pretty good balance sheet.
Entered at P/NCAV 0.35.
I have put some of the proceeds from sale of Hengxin in Oriental Watch Holdings. Oriental is in the business of luxurious watches. They have a flag ship store in Hong Kong and some other stores across Asia. The business has slowed quite a bit during the last year but the balance sheet is strong. They also seem to have some control of cost, which is important as fixed costs and inventory write-downs have killed many net-net retailers before.
On the plus-side Oriental seems to be a shareholder friendly company with a good history of dividends.
Entered at @ P/NCAV of 0.43.
After a sweet run over the last 3 three months I decided to exit my position in Hengxin today. The stock has a positive momentum and is now trading at around NCAV.
The return on the position ended up at +122 % (in HK$). I think that the relisting to Hong Kong have had a positive impact on the price.
It just came to my attention that QC Holdings paid a 2.5¢ dividend a few days ago (May 15th). This is the first dividend in the portfolio, hopefully more are to come.
Eidai Kako – the second Japanese manufacturing company this month. Priced at P/NCAV 0.61. Eidai Kako is in the industry of plastic resins, car mats etc. As usual a strong balance sheet and dividends.
The Japanese net-nets are now a substantial part of the portfolio, I am thinking if I should do anything about the currency exposure. I lean towards the opinion that the currency exposure is a nice diversification. I’ll probably not try any (imperfect) hedging – which as far as I know I could only do with mini-futures.
Another Japanese net-net. Nippon Antenna – a manufacturing company with solid balance sheet, profitable plus a (somewhat) regular dividend. Took position at 655 ¥ which equals an P/NCAV ratio of about 0.55.