10-baggers in 4 years - my case study

If i invested $100k into this company in Feb 2013, my investment would have grown to be $1mil today.....is this possible in stock investing as if investing in a business?


Innovalues was incorporated in 1997 and listed in SGX in 2001.

Innovalues specializes in the manufacturing of customized precision machine parts and components, including automotive components, printer rollers, mechanical devices, and sub-assemblies, as well as surface treatment services such as electroless nickel plating, zinc phosphating and hard anodizing. The Group’s products are mainly produced for the automotive and office automation equipment industries, with its automotive products geared towards fuel efficiency, environmental protection and vehicle safety (taken from Innovalues' AR 2015).

Innovalues' share price was traded at about 10cts in February 2013, and now it is trading at 99.5cts as per my writing today. It was offered at $1.01/share by Northstar Equity Partners IV Limited to acquire all the issued ordinary shares in the capital of the company in October 2016.


Below are some basic financial information of Innovalues's from FY2011 - FY2015:

(1) FY2011 (share price was traded at about 7-8cts/share):
- revenue: $87.7mil.
- incurred loss from expenses due to flood in Thailand -->$13.6mil.
- cash inflow from operation -->$10.6mil.
- debts: $26.1mil.
- AU sector remained strongest contributor to the group's revenue: 53% of total revenue of FY2011.
- gross profit margin: 12.8%.
- dividend of 0.6cts/share.


(2) FY2012 (share price was traded at about 9-10cts/share):
- revenue: $91.8mil (up by 4.6% from FY2011).
- net profit of $15.3mil - mainly ($12.5mil) was from insurance claims arising from floods in Thailand.
- cash inflow from operation -->$25.6mil.
- debts: $23mil.
- AU sector remained the main contributor to the group's 2012 revenue: 67.2% of total revenue.
- gross profit margin: 14.9%.
- dividend of 1.2cts/share.


(3) FY2013 (share price was traded at about 14-15cts/share):
- revenue: $97.6mil (up by 6.3% from FY2012).
- net profit of $8.6mil - $2.2mil was from insurance claims arising from floods in Thailand.
- excluding insurance claims for both FY2012 & FY2013, net profit has increased by 129% from 2.8mil in FY2012 to 6.4mil in FY2013.
- cash inflow from operation -->18mil.
- debts: $12.5mil
- AU sector remained the strongest contributor, 76.5% from total revenue in FY2013.
- gross profit margin: 17.2%.
- dividend of 1.2cts/share.


(4) FY2014 (share price was traded at about 60cts/share):
- revenue: $108.4mil (up by 11% from FY2013).
- net profit of $15.8mil.
- net profit increased by 146.1% from FY2013.
- cash inflow from operation -->$24.3mil.
- debts decreased to $8.9mil from 12.5mil in FY2013.
- AU sector remained the strongest contributor, 80.9% from total revenue in FY2014.
- gross profit margin: 26.6%.
- dividend of 2cts/share.


(5) FY2015 (share price was traded at about 80cts/share):
- revenue: $113.7mil (up by 4.8% from FY2014).
- net profit of $23mil.
- net profit increased by 45.5% from FY2014.
- cash inflow from operation -->$27mil.
- debts decreased to $3.8mil from 8.9mil in FY2014.
- AU sector remained the strongest contributor, 78.7% from total revenue in FY2015.
- gross profit margin: 30.7%.
- dividend of 3.8cts/share.



All above data clearly indicates Innovalues' business has been in growing phase since the business recovered back from floods in Thailand in 2011.

The best return in stock investment is investing in a growth company with high barriers to entry business and run by good management. Although, it is always easier to be said than done, however, stock investment provides opportunities for every entrepreneur to be a millionaire.

But of course, in investing, it requires our entrepreneurship to be able to understand business and management's quality, the gut to take the risk based on our data analysis, and the faith we have in the business we invested in.


Above are only my personal views and it is solely for my personal references/case study. The accuracy or completeness of the information provided in this blog cannot be guaranteed. Readers should carry out independent verification of information provided.



   

My 6 years of Investment in Stock Market

Six years ago, I was introduced by a friend of mine about investing in stock. Prior to that, i had a very ugly impression in stock market. When i was young, i always watched Hong Kong movies, and some of the movies shown about speculating in stock market. Stock market was all about gambling, pure speculation - that was all in my mind.

But thanks to my friend for introducing me about value investing and even asked me to read investment books like "One Up On Wall Street" by Peter Lynch and "The Zulu Principles" by Jim Slater.

Since then, i started to read many investment books. So far the book i really like the most are "Common Stock and Uncommon Profit" by Philip Fisher and "Intelligent Investor" by Benjamin Graham. I bought "Security Analysts" 3 years ago and until today i have not finished reading the book yet. I think I have been having much difficulties in interpreting the contents in the book :(  I guess my investment knowledge is really very little. 

There were times when i stop myself totally from learning about investment. If my memory serves me right, i skipped reading financial reports in 9 months from June 2015 to March 2016. I picked up reading the financial reports again in March 2016 and at that time i found 2 companies which i really liked: Best World & Cogent. I bought Best World in April this year @$0.53 per share and Cogent @$0.41 per share. Too bad i sold my Best World somewhere in June at about @$0.78 per share and my Cogent at about $0.50 per share in May. I managed to have $10k profit from Best World and $1.5k profit from Cogent. Actually i was not supposed to sell these 2 stocks earlier. I sold Best World as i heard this stock was in restricted stock from one of the broker's list - so i was not able to transact Best World online (if i wanted to buy/sell i had to call the broker). I was not really comfortable with this news, so i sold all my shares. I realized my decision is a fool. The fundamental of the business was still good and i still liked the company. It means clearly that my decision was wrong and my investment knowledge was really very little. If i did not sell my Best World's share from my initial purchase, my paper profit would be $43k now (my initial capital was $20k). I bought back Best World at about $0.71 per share and i am still holding it now. The same story goes to Cogent as well. But i had decided not to buy back Cogent for certain reason.

I like the way Warren Buffet buying stock - is like buying a business. I hope i can be like him to be able to hold my stock in a very long period of time along with the business grows. I am doing my best to focus on the company in my investment.

I started my investment with the capital of $2k six years ago. Along the way, i have made a lot of mistakes, countless mistakes which i should had avoided them earlier. In fact, i keep repeating the same mistakes again and again.

However, i feel thankful i am still able to see my capital appreciation of a high five-figures.

Although i am very sure i will make many more mistakes in future, but i do hope my mistakes will be much lesser.

Let's work harder to keep learning and always decides based on the data (not assumptions). Ganbatte!

My Portfolio Update as of 14th December 2016

I had added a new counter to my Portfolio: Tai Sin Electric.
This company is a good growth company with paying regular dividend. 
Will elaborate more next time......

Below are my latest Portfolio update as per 14th December 2016:

(1) Sunningdale Tech: bought @$1.02/share
(2) Best World: bought @71cts/share (ex-cludes Bonus Share of 4 to 1)
(3) Global Invacom: bought @12cts/share
(4) Avi-Tech: bought @28.85cts/share
(5) 800 Super: bought @78cts/share
(6) Innotek: bought @24.4cts/share
(7) Tai Sin Electric: bought @38cts/share

My Portfolio Update as of 5th November 2016

Below are my latest Portfolio update as per 5th November 2016:

(1) Sunningdale Tech: bought @$1.02/share
(2) Best World: bought @71cts/share (ex-cludes Bonus Share of 4 to 1)
(3) Global Invacom: bought @12cts/share
(4) Avi-Tech: bought @28.85cts/share
(5) 800 Super: bought @78cts/share
(6) Innotek: bought @24.4cts/share

Investing is all about searching an undervalued growth company with good balance sheet and holding it.....

Investing in stock market....in my own opinion:

Investing is all about searching an undervalued growth company with good balance sheet, holding onto it, until the business matures or until we have found another company in a better bargain & higher growth rate.

Investing is not about wanting to make quick profit, more profit, much profit from stock trading (in my own thoughts).

When we bought into company, after a short period of time, says one week - the price of the share has already rose to 20% from our purchase price. The question i always ask my self is: SO WHAT IS NEXT? Am i going to sell all my shares? Sell partial of my shares? Am i supposed to be happy? Satisfied? Proud? Or selling all my shares and looking/moving to other company to start like what i did on this counter before? Or keep my cash to wait for opportunities to come?

All these are tough questions when we face them in real life. As a human being, we are filled with emotion: happy, sad, greedy, satisfied, competitive, proud, self-esteem, scared, regretted, giving up, etc etc... It is not unusual our emotion has taken over our mind in our daily life. This applies to investing in stock too. I would say most of the time, it did. At least.....to me!

(1) I will sell all of my shares and hold the cash, how can i assure myself not to buy back this shares again? Or will i buy into another company in a similar way of investing? How can i guarantee that this company is better than the previous one? If the previous one's share price has been moving up while my new company's is not, how can i control my emotion?

(2) I will sell partial of my shares with the price of 20% above my profit, will keep the balance of the shares. Will i use this cash to buy another counter in similar way or keep the cash? If the share price has been moving up after my partial selling, will i be greedy to add in some shares? Or will i feel just satisfied and keep holding the balance shares? Will i have the urged to sell the balance shares since the price has been corrected many times even though it is in the up path?

(3) When the price of my shares has been moving up by 20% from my purchase price, will i be happy for that? So what should i do next? Will i have the urged to add more shares? Or to sell partial/all of the shares?

(4) I will be satisfied and proud to myself, so what is next? If i always feel satisfied and proud to myself, it might be the beginning of a disaster of my financial failure in investing in stock market. When i feel too confident on myself, i might think i am good enough, i know enough, i do not need to study more or continue to study. This will be a real DISASTER.

(5) As long as the fundamental of the company remains intact since my first research and the price is not overvalued, i will keep holding the shares. This is the key in investing - continue learning and focusing on the company's fundamental analysis, stay away from the market's noise!

Bought Innotek --- why?

I bought Innotek last week at the average price of $0.23 per share.

Will add in some shares next week. With the addition, my cost might go up a little bit (about 6%).

Why am i investing in Innotek:

(1) Trading below NAV of 52.9cts per share (2.3x against of my cost of 23cts per share)

(2) Cash per share: about 9.8cts per share (0.42x against 23cts)

(3) Negliable debts of $77k

(4) It has turned around since the first Quarter of this year under new management lead by the Group's Executive Director/Chief of Executive Office of Mansfield Manufacturing Company Limited, the group's operating unit: Mr Lou Yiliang:

1. 1. Gross Profit margin improved to 21.9% from 4.6% (Q32016 to Q32015) and 18% from 5.1% (9M2016 to 9M2015).
2. 2. New management has been working on improvements in performance and margins follow operational changes – to reduce costs (lower cost of material, lower salaries & wages, lower depreciation & PPE, maximise inhouse production to reduce subcontractors), increase productivity and strengthen customer engagement.

(5) The management is optimistic in the higher demand of Automotive & TV sector, while maintaining good relationship with existing top Japanese brand from Office automation sector.