China Paper - Rights Issue Review

About China Paper Holdings Limited (www.chinapaper.com.sg) 
Located in Shandong province in the PRC, China Paper is a vertically integrated paper manufacturing company equipped with in-house production facilities for the manufacture of wheat pulp, paper products and paper chemical products. The Group’s core business is in the manufacture and distribution of mixed-pulp based paper products made from a mixture of wood pulp and wheat pulp, with printing paper being its largest product segment.

Rights
The  Company is proposing a renounceable non-underwritten rights issue of up to 907,922,418 new ordinary shares in the capital of the Company ("Rights Shares") at an issue price of S$0.036 for each Rights Share "Issue Price"), on the basis of 1 Rights Share for every  1 existing  ordinary  share. The Issue Price of S$0.036 for each Rights Share represents a discount of approximately 42.86% to the closing price of S$0.063 for each Share traded on the SGX-ST on 30 March 2012.

CY Executive Chairman & QYG SS both committed to take up their rights issue representing near 40% of the total outstanding shares of CP. 

Rationale and use of proceeds
The estimated Rights Issue proceeds of approximately S$32.27 million (after deducting costs 
and expenses) will be used to fund the Project.

1) expansion initiatives to attaining an annual paper production capacity of 350,000 to 500,000 tonnes. 
2) for the construction, installation and operation of an inhouse power generation facility for the Company's paper production facilities.

S&C Quick Analysis:
Financial position before rights: net cash of about S$0.05 per share.
After rights: net cash about S$0.044 per share.

2011 net profit fell about 40% as compared to 2010 due to increasing cost and lowering of sale pricing to keep competitiveness. Group is cautiously optimistic about its next 12 months. I believe CP will still remain profitable for YR2012. However, shareholders will not like its call for rights issue. Even before rights, CP is sitting on so much cash. 

1) Why didnt the company consider utilizing internal resources to fund expansion and for building energy facility?
2) Being S-chip and penny stock, shareholders would likely dump the shares and bring it down to near S$0.036 per share. 
3) Given net cash of S$0.044 per share, this may not be the case as most part of S$32 million raise may be use for expansion. Assuming all proceeding to be used up, its net cash position will be around S$0.025 per share. Thats about 70% net cash to share price of S$0.036. 
4) Resignation of independent director whom is the chairman of audit committee will not bode well with the company too. It also happen at the time when CP running fund rising activity. There must be something we are not aware of.

This rights issues may be well a chance for CY to accumulate more of CP shares if shareholders are not buying its expansion story. Being still on net cash position, given that if the cash position is real, there is no reason why CY wouldnt use this chance to buy up all un-taken rights offering. Then take the company private. I used to own CP shares, but offloaded it long ago at S$0.12 - 0.16 range because of limited upside and alot of scandal relating to S-chip. Indeed, many S-chips are now trading at super low price and only a few are able to sustain the sell down. 

S&C will likely to buy only when CP is trading below S$0.036. I understand the risk of buying penny S-chip. But worth a bet when the price is right. Sure buy price will be below S$0.03. 

Quick Snap Shot: Olam, MinZhong, Wilmar & Ezra

4 heavenly king gathered to bring you cash.

Olam (Bot) - Current price 2.33 (super strong buy)

Wilmar (Bot) - Current price 4.92 (strong buy)

Minzhong (going to buy soon) - Current price 1.025 (strong buy)

Ezra (going to buy soon) - Current price 1.14 (buy)

Olam - update

Call for strong trading buy. Mini showhand if you can afford. All sign for rebound shows up. Wan4 Si1 Jun1 Pei4.. just waiting for the Tong1 Feng1. Selling volume falls, MACD divergences with pre cross over period now (last time i mentioned b4, pre cross over is the time where most rebound take place), RSI starts to see recovery, and also long term wise, 50MA line cross 100MA line (sign of long term trend reversal. the last major MA cross down was in Jan 2011 where Olam starts its downtrend.) So time to position yourself for a rebound. Recommended entry $2.23 to $2.30. Buy at your own risk ;).

S&C already in at $2.30. With cash to pump in more if i wish to double up my stake. 

Wilmar and Olam - call for trading buy

Back to posting after about a month break. After I clear off all my 3 holdings in early Feb. Market continue to rise until very recent fast to see some correction. This may offer some buying opportunity as some corporate results aren't showing good results as expected.

Time for selective trading buy. Some blue chips had fallen to catch my eyes again. Olam and Wilmar are on my list for trading buy. However, one must note that STI or HSI may be consolidation or mild correction mode. Therefore, trade with care for those whom are going to long the market.

Wilmar, fallen from a high of $6.00 to near $5.00. Translating to a near 17% drop in share price in a short 2 weeks. Some analysts said its over reacting to weak result, some expect more correction. Based on chart reading, I still see some weakness ahead before rebounding. Best entry will be somewhere near $4.90 - $4.95 range. However, those whom cant wait can still buy in phases at current price. Remember, do not showhand at this price yet. You may get caught badly... 

Olam, share price also drop about 16% from a high of 2.72 to 2.35. Represent about 15-16% drop too. As you can see, Olam is a very volatile stock. it can easily swing 10cents up or down in a single day. Currently, MACD still turning sign, and RSI also shows oversold. Best bet will be anything near 2.3. Same as Wilmar, buy in 2 phase in case rebound didnt materialise. 

Both call for trading buy now. Good luck.

My Stock Holdings update 21 Jan 2012

Happy Dragon Year 2012 to all readers. I wish all have a smooth dragon riding year ahead and good health.


I decided to share with readers my current share holdings. I will continue to add more holdings slowly as stock price are still consider low. Some of the blue chips had already rebounded off their low and also breakout of their resistance level. However, there are still many mid-cap which are laggers. These are the companies which I will be picking using my bottom out-pick (BOP) theory. 


Reviews:
AscendasIndia Reits: My entry: $0.70. 
Reasons: low gearing, high yield at more than 8% p.a. TA: bottom out at below $0.70.

Xin Ren: My entry: $0.29
Reasons: Reasonable earning report in 2011, current pricing affected by S-chip scandal (waiting for potential re-rating). TA bottom out below $0.30.

Pac Andes: My Entry: $0.21
Reasons: Consistence earning, outlook remains bright. TA: Bottom out at $0.20. Waiting for potential rebound.

Portfolio (P/L) Percentage: 2.9%

Sakari Resources Limited

Sakari hitting long trend downtrend line near $2.10. RSI hitting over 70%. MACD yet to officially turn down. Opening short position at 2.08 for a try. Using risk reward ratio 1:2. Cut loss at 2.13 and take profit at 1.98. Overall market has been quite resilience. Therefore short with care too as there maybe possible breakouts.

Market Review 8 Jan 2012 - STI, HSI, Singtel

1st Market review for 2012. I will 1st examine the STI and HSI to see its general trading direction.

STI should be trading in a restricted channel between 2740 to 2640 range. A breakout over 2740 may propel higher, however I do not see any good news on the horizon near term. Most indication looks boring, STI currently trading below 100MA line. Recommend trading sell on STI at 2720 - 2740 range with 2750 cut loss.   

HSI looks slightly more interesting as the formation of the flag is nearly formed. Suggestion big movement either up or down can be on the line soon. Judging for the gloomy overall outlook from the europe side, I am more bias to a down side. Recommend small position on trading sell on HSI from 18900 - 18500 range with cut loss at 19100.

Singtel appears to be a good shorting target. Recently technical glitches coupled with nice indicators point to my recommendation to short at $3.15 - $3.18 range. Take profit below $3.06.