Hi friends,
Back in Nov last year, I wrote about the handsome profit made by Hour Glass for being a 5%-seed investor in Gems TV. It was listed at $1.08 and went to a high at $1.80. Today it is in the region of $0.70.
What is Gems TV's business?
It sells coloured gemstone jewellery, made in Thailand, on TV in UK.
What happened?
The company went from a loss of US$200,000 in 2004 to a profit of US$28.8mio in 2006.
On Feb 12, 2007, Jason Choo, the Chief Executive, gave a conference call interview and painted a very rosy picture for the business.
Share price went up 17cts to $1.45.
On Feb 22, 2007, Credit Suisse reinforced the positive aura of Gems TV by recommending a buy call with a target price of $1.94.
Share price went up by 5cts to $1.54.
On Mar 27, 2007, DBS-Vickers raised their buy call from $2 to $2.60 on the basis that the company will grow at a compounded rate of 60% for next few years. Share price went up 14cts to $1.80.
On May 14, 2007, Gems TV reported a 12% drop in 3rd Qtr sales and a whalloping 88%-drop in profit. The business's expectation for the next 2 Qtrs will be DIFFICULT.
Moral of the story
It is not easy to do business and make money. A business is not built over night.
Stock analysts from big and small broking and finance houses are prone to mistakes too. You must know who are these people doing their analysis. Do they do site visits planned by prospective companies? Or do they just do desktop evaluation of a business by someone who has not run a business before in their life?
Couple of years back, a journalist asked me why I didn't sell my China Aviation Oil shares when SIAS changed their recommendation to SELL. My response then was how do you know who is right and who is wrong at THAT point in time.
My last learning point as highlighted by R. Sivanithy is whether investors do their own homework. Or we rely on entities like Credit Suisse or DBS-Vickers to do that for us?
I will continue my comment on this in my next posting.
Caveat emptor, my friends.
4 comments:
Hi Edgar,
I am stucked with 10 lots of gems tv that i bought at 0.845 cents now till 0.675 cents. i do not dare to sell, as i make a loss of over one thousand. Any advice. I am holding on to the stock. Thank you very much.
Hi,
Based on my observation, the counter has weathered the storm of sell-off already ie. it has already more than 50% of its peak.
Downside would be limited.
Based on Jun 4's share price of 70cts, its current PE ratio is only 1.3!!! (Unless the company is expected to go into the red.)
Based on what I have read, Jason Choo's conduct in representing the prospect of the company is less than desirable.
I would have exited rapidly while the share price was on its way down. Refer to my quick exit from AEM with a loss.
Hi Edgar,
can you pls advise if i shld release now, today suddenly go up to highest at 0.795. i bought at 0.845. i queue for 0.805. u think got chance??
sorry i newbie in these, the things u write sometime is a bit chim, can u write more simple.
thank you.
Friend,
It is really not appropriate to give trading advice to an anonymous person over blog postings.
For a newbie, you have placed $8,450 on a single counter... erm
Send me an email. Cheers.
Post a Comment