Showing posts with label Stemlife. Show all posts
Showing posts with label Stemlife. Show all posts

Friday 29 January 2010

Why I usually avoid IPOs

I browsed the local paper for those stocks priced closest to the year low. There were 35 stocks listed: 29 derivatives (warrant) and 6 non-derivatives (mother share). Stemlife was in this list.




This company was listed with much hype in 2006.  Its revenue grew quickly in this virgin medical sector.  Those uninformed customers and investors saw "unlimited" potentials from this new medical technology.  The business model was not one with durable competitiveness.  With new competitors in the market, I can foresee this company's business will be challenging.

Listing in 2006 was the right timing as the stock was chased up to a high level during the bull market then.  At the peak market price of more than MR 6 in 2007,  its market cap was almost MR 900 million.   It was not surprising that a significant large investor (insider) sold when the price was close to its peak; making a huge profit from the shares, locking in many years of future profits that the company can hope to generate through its business.  

At 45 sen per share, its present market cap is MR 74.3 million. What is its intrinsic value?  Interestingly, more major investors sold and exited the company recently.

This is a good company to study as it provides a lot of education on how to select the stocks you wish to invest into.  In general, it is better to avoid IPOs.  IPOs are never priced cheap.  You can always let them build their business for a few years.  Given the track record you can then assess the business fundamentals with more certainties, before you invest.

Some simple rules I follow:

A good company can be a good investment at fair price or bargain price.
A good company may be a bad investment if you overpay.
Avoid a  lousy company at any price.






Insiders selling in huge volumes this January, desperate to unload
.
STEMLIFE BERHAD (ACE Market)
====19/01/2010 Notice of Person Ceasing (29C) - The Goldman Sachs International
====19/01/2010 Notice of Person Ceasing (29C) - The Goldman Sachs Group, Inc.
====19/01/2010 Changes in Sub. S-hldr's Int. (29B) - The Goldman Sachs International
Disposed 12/01/2010 5,706,000
====19/01/2010 Changes in Sub. S-hldr's Int. (29B) - The Goldman Sachs Group, Inc.
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - BERJAYA GROUP BERHAD
Disposed 14/01/2010 4,050,000
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - BERJAYA CORPORATION BERHAD
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - JUARA SEJATI SDN BHD
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - TAN SRI DATO' SERI VINCENT TAN CHEE YIOUN
====18/01/2010 Changes in Sub. S-hldr's Int. (29B) - HOTEL RESORT ENTERPRISE SDN BHD
====13/01/2010 Notice of Person Ceasing (29C) - HSC HEALTHCARE SDN BHD
====13/01/2010 Changes in Sub. S-hldr's Int. (29B) - HSC HEALTHCARE SDN BHD
Disposed 11/01/2010 10,000,000


Fundamentals


INCOME STATEMENT                           12/31/2006    2/31/2007  12/31/2008
                       
Net Turnover/Net Sales14,57820,45618,509
EBITDA4,6346,021195
EBIT3,7195,112327
Net Profit3,7725,5151,317
Ordinary Dividend-1,650-1,650-1,650







Recent Financial Results


Announcement
Date
Financial
Yr. End
QtrPeriod EndRevenue
RM '000
Profit/Lost
RM'000
EPSAmended
04-Mar-1031-Dec-09431-Dec-094,971-2,610-1.55-
24-Feb-1031-Dec-09431-Dec-094,971-2,241-1.33-
26-Nov-0931-Dec-09330-Sep-094,3314100.27-
20-Aug-0931-Dec-09230-Jun-093,691650.09-