Thursday, March 31, 2011

Scorecard - reviewing the results for portfolio companies

Quite a few of the Hong Kong companies which are included in the private portfolio have December financial year end dates and have been reporting their results. Needless to say, reading every results announcement and much of the related commentary has occupied quite a bit of my time for the last few weeks. The following is a summary scorecard of my thoughts on the results.

(Companies listed in no particular order)

Hutchison Whampoa* (HK:13): better than expected result as 3G produced positive EBIT. The one off gains were expected. Increased dividend. Stronger balance sheet following the spin off of Hutchison Ports

Yangzhou Coal* (HK:1171): excellent result. Increased dividend. Further growth expected

AUPU (HK:477): disappointing result below both my expectations and the markets. Current dividend is not sustainable absent an improved performance. Continued holding requires a belief that performance will improve. See separate post

Varitronix (HK:710): outstanding result. Increased dividend. Still looks good value inspite of recent share price increase

K Wah*(HK:173): significant fall in profit and cut in dividend was clearly disappointed the market as the share price dropped significantly. Given that revenue recognition is linked to the timing of the sale and completion of property developments, and the company has been very clear in communicating in this regard, the market reaction was surprising. In any event, a much better result can be expected for 2011

Xtep (HK:1368): excellent result. I particularly liked the margin expansion and what appears to be the emergence of brand name recognition for the company's products

Sinopec* (HK:386): I had mixed views on this result. The refining division is clearly facing difficluties created by high input costs (oil prices) and price controls on its output (refined products). The failure to at least replace its reserves is also of concern. That said, these issues are well known and presumably reflected in the share price - which continues to look superficially attractive

CNOOC* (HK:883): an excellent result. I was particularly happy to see the increase in reserves and the increased dividend

China Construction Bank* (HK:939): although the bottom line was slightly below consensus forecasts, it was still an excellent result. The improvement in NIM and growth of fee income were positives for me

China Blue Chemical (HK:3983): a solid result. Given the policy initiatives in the agricultural sector, I have to wonder whether more should be expected from this company. I also have to wonder about the company's ability to extract full market prices for its products going forward should price controls be imposed in an effort to control inflation

Jiangsu Express (HK:177): solid result and a nice dividend yield. The company remains debt free

Shenzhen Express (HK:548): in contrast to Jiangsu Express, this toll road operator has a high level of debt and a lower dividend. That said, the potential for growth is better and, given the nature of the business, I am not overly concerned about the debt levels

CMOC (HK:3993): a good result. I remain puzzled by the decision to declare a dividend which is much higher than the annual profit. The stock looks a little expensive in terms of PE. I need to do more work on this one

CKI (HK:1038): a good result and a good dividend. A clean balance sheet

Vodone (HK:82): a good result, but one that was expected. The growth story appears to remain intact. Given the speed with which internet based businesses are evolving in the PRC, this company that will need to be watched more carefully than most of the others which I hold

Companies which have a "*" next to them are large positions.

All in all it was a good set of results. AUPU was the only meaningful disappointment.

No comments: