Thursday, August 13, 2009

Qian Feng Fabric Tech 30 minute analysis

Anxious to get invested since my analysis paralysis, I lookup the top ROA and EPS ranking stock in my filter and decides to list all the negative signs why I should not buy it.

QIAN FENG FABRIC TECH LIMITED

http://www.qianfeng.com.sg/
Qian Feng Fabric Tech Limited is engaged in the production, dyeing and post-processing treatment of synthetic knitted fabrics. The Company produce fabrics with functionalities, such as water-resistance, fire-resistance, chlorine resistance, Ultra-violet (UV) protection, moisture wicking, anti-static, anti-mildew and anti-bacterial properties. Fabrics that it produces are used in a variety of products, such as casual wear, sportswear, shoes and bags.

Why not?

  1. Mention of possible dividend policy in Prospectus, 20% of profit for FY2008 and FY2009 but not given in FY2008 due to unstable economy
  2. 1Q2009 shows tiny increase in revenue compared to 4Q2008
  3. Mention of expecting negative growth in sports and leisure apparels, shoes
  4. Previous years success largely attributed to the Olympics that is over
  5. Expects ASP to come down due to declining material price and fierce competition
  6. Uncertain consumer demand
  7. Focus on R&D to raise ASP
  8. Small market cap
  9. Downward trend for ROE and ROA
  10. Increasing capex
  11. Tax benefit expiring
  12. Appointment and resignation of assistant company secretaries


Investment tips:


The fabrics sector does seems promising with 6 companies making up the top 10 in ROA and EPS. However, it can possibly be attributed to the Olympics. The trend seems to be focused on R&D to differentiate and improve margins. However, it is a sign of a indefensible moat.

Also, I notice Fibrechem while filtering stocks with increasing dividend payout. Then, I remembered it was involved in a fraud. Another sign why increasing dividend might not be a good way to judge a company although you do get back part of the investment though. However, NextInsight last visit shows that business is as usual.

References:

  1. Qian Feng Fabric - Homepage
  2. Next Insight - FIBRECHEM'S factory humming with business - NextInsight finding

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