NRA Capital: Kevin Scully Blog

Company visit to AVI Tech.....encouraging performance and better outlook but visibility remains poor Monday, 31 August, 2009 3:23 PM Posted by Kevin Scully I accompanied our analyst on a company visit to AVI Tech last week after the release of their Q4 2009 results. Calendar Q1-2009 was the worse and the business has improved in calendar Q2-2009 was double calendar Q1-2009. Full year 2009 earnings came in within expectations. Read the report by our analyst Chee Keong - he has raised his fair value price to S$0.28 per share. Like most companies, business was badly affected but has since improved. Q1 and Q2 2010 are its better quarters and the business has picked up but the visibility remains poor. The S$50mn or so cash is still there and this is one of the main attractions of AVI Tech to me. The cash enables it to ride the storm if there is another downturn and also to look for new investments or acquisitions. I still like the stock but its very poor liquidity means investors have higher exit risks. Other than this, i believe accumulating at current levels offers investors a decent upside on a six month view.

Company visit to AVI Tech.....encouraging performance and better outlook but visibility remains poor
Monday, 31 August, 2009 3:23 PM
Posted by Kevin Scully

I accompanied our analyst on a company visit to AVI Tech last week after the release of their Q4 2009 results. Calendar Q1-2009 was the worse and the business has improved in calendar Q2-2009 was double calendar Q1-2009. Full year 2009 earnings came in within expectations. Read the report by our analyst Chee Keong - he has raised his fair value price to S$0.28 per share.

Like most companies, business was badly affected but has since improved. Q1 and Q2 2010 are its better quarters and the business has picked up but the visibility remains poor. The S$50mn or so cash is still there and this is one of the main attractions of AVI Tech to me. The cash enables it to ride the storm if there is another downturn and also to look for new investments or acquisitions. I still like the stock but its very poor liquidity means investors have higher exit risks. Other than this, i believe accumulating at current levels offers investors a decent upside on a six month view.

Comments

Broad market perhaps more important than stock pick (for now) Kevin, if Shanghai returns to a cyclical bear market in the next 6 months or more, will STI follow suit? After today's 6.7% bloodbath, SHCOMP is technically entering a bear market. MACD and DMI indicators for both Daily chart and Weekly chart all points to further decline. Also way past the 20% decline mark since 4th Aug peak. SHCOMP peak was 4 Aug. STI has taken some hit during the correspoding period. But S&P 500 has been resilient. Leong on 31 August 2009 04:01 PM
Broad market Remember I decided not to comment on indices because of the huge volatility caused by liqudity. Nevertheless, I think that a correction has been overdue for sometime and markets have over shot on the upside and they undershot on the downside in March 2009. In my July 2009 investment seminar analysts were forecasting -18% EPS growth for STI index. In August 2009 seminar this had swung to +18% but even with this STI was on forward PER of about 17 times - fairly valued. But risk now is stocks and earnings might be too optimistic. On August 12, 2009 Mark Mobius called for a 30% correction in China and by default in Asian equities - we could be seeing this happen now. My current strategy is to identify good undervalued stocks - low PERs, strong cash position and a good earnings or earnings recovery story. These stocks will do well and be supported by their fundamentals. Kevin on 2 September 2009 11:19 AM

Broad market perhaps more important than stock pick (for now)
Kevin, if Shanghai returns to a cyclical bear market in the next 6 months or more, will STI follow suit?

After today's 6.7% bloodbath, SHCOMP is technically entering a bear market. MACD and DMI indicators for both Daily chart and Weekly chart all points to further decline. Also way past the 20% decline mark since 4th Aug peak.

SHCOMP peak was 4 Aug. STI has taken some hit during the correspoding period. But S&P 500 has been resilient.

Leong on 31 August 2009 04:01 PM

Broad market
Remember I decided not to comment on indices because of the huge volatility caused by liqudity. Nevertheless, I think that a correction has been overdue for sometime and markets have over shot on the upside and they undershot on the downside in March 2009.

In my July 2009 investment seminar analysts were forecasting -18% EPS growth for STI index. In August 2009 seminar this had swung to +18% but even with this STI was on forward PER of about 17 times - fairly valued. But risk now is stocks and earnings might be too optimistic. On August 12, 2009 Mark Mobius called for a 30% correction in China and by default in Asian equities - we could be seeing this happen now.

My current strategy is to identify good undervalued stocks - low PERs, strong cash position and a good earnings or earnings recovery story. These stocks will do well and be supported by their fundamentals.

Kevin on 2 September 2009 11:19 AM

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