Hi Guys, just some updates prior to sharing on the Bio-Tech company. Been rather busy lately transferring my stock holdings from various brokers to Interactive Brokers (IB) & Phillip Securities (POEMS) and subsequently, having a mini celebration with my family over the last weekend.
Glad to see that my holdings in Ping An alone crossed the HK$ 1.1 million mark. 1% price movement in Ping An stock is equivalent to HK$11,230 or S$2,000. I try not to look at its short-term price movements too much so as not to affect my emotions. Hopefully, my Alibaba and Tencent holdings will also cross the same mark quickly. If you’ve followed my posts for some time, you saw that I shared my Alibaba purchase early April this year in the article “EngineerInvest.com’s go-to Charts to Determine Market Bottom” (links below). As of 10th July 2020 closing, the returns is more than 35% in 3 months’ time.
I’ve shared in my Telegram & Facebook page that I did a S$73k single buy transaction for Alibaba (HK: 9988) but in fact, I bought a total of HK$602k (S$108k) worth of Alibaba shares on the same day. Reason for splitting it into 2 transactions is due to some FX issues (admin). You can see in the receipts below that one was settled in HKD and the other in SGD. Due to this lag time (around 1-2hrs), I paid HK$1.8 more per share 🤓.
As you know, I’ve been sharing Warren Buffett’s famous quote to be “Fearful when others are greedy and greedy when others are fearful.” That day, I put what I believed into practice by putting S$108k into 1 company and in just 1 day. Warren Buffett’s generous sharing guided me a long way in my investment journey. During my earlier investing days, a S$5k transaction already somewhat made me shit my pants out with sleepless nights. It’s the 17 years of experience that gave me confidence to carry out this transaction. If you can manage small accounts, big accounts are somewhat similar. Of course, with slightly more free play to utilize various strategies.
In April 2020 alone, I’ve bought a total of S$300k worth of stocks during the COVID-19 rout. Yes, I do still have some war chest left to be utilized only for golden opportunities (further black-swan events). Will share more when I do utilize them to buy stocks in future.
Screenshot taken from EngineerInvest.com Telegram / Facebook page on 11th July 2020
Updates from On-going Telegram / Facebook Sharing
I shared my purchase of INMODE on both my Telegram & Facebook page last month. As usual, every time after I share my stock purchase, the share price will continue to “lao sai” further 💩. However, glad that INMODE had a great run recently, a 35% spike in just 3 days this week. Q2 results will be out on 5th August 2020. However, management announced that its Q2 revenue would likely be between $30.2 million & $30.6 million (significantly higher than analysts' expectation of $16.9 million) [1].
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On the 11th & 14th July 2020, I’ve shared in Telegram & Facebook page that I preferred a gradual bull instead of big spikes so that the bull run is sustainable. I commented that Tech stocks were currently expensive and to adopt a cautious stance, not to chase the rally. This is similar to my stand on Tesla as I saw some articles advocating to buy Telsa. However convincing the moat/future growth story is, I will never touch Tesla at this price. It's ok to miss the boat for this one.
Shortly, take a look at how “tech crashes” on the 16th July 2020. Despite good news such as China avoiding recession with strong GDP growth [2], tech continued to crash big time. SMIC tanked a whopping 25% in just 1 day. This re-iterates the importance of not chasing bull.
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Why Did I Buy Essex Bio-Tech (HK:1061)?
After getting a few suggested articles from readers, I thought of doing a poll in my Telegram for you guys to choose for yourselves which article you would like to read most. Thank you for participating. Essex Bio-Tech is the hardest to write, good choice!! I actually voted China Tower because it’s easier to write 🤣.
Business / Story:
The company manufactures and sells biopharmaceutical products for treating and healing of surface and eye wounds, focusing on their domestic China market. Their flagship products are Beifuji (sprays & powders to treat wounds & cosmetic plastic surgery), Beifushu (to treat eye conditions) and Beifuxin (stimulates the repair and regeneration of cells to treat bruises, burns, surgery incisions, etc.).
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While most Chinese pharmaceutical companies focused on generic products in the early 1990s, Essex Bio-Tech focused on and became the pioneer in the use of recombinant DNA technology to develop their own unique series of biologics.
Apart from obtaining patents for drugs developed, Essex Bio-Tech is a major player (more than 50% market share from past data in [5]) in its niche areas and its products are selling at very affordable prices. To illustrate, their Beifuji spray, sells at more than 80 times cheaper compared to a competitor’s alternative [5].
In 2019, Essex Bio-Tech was awarded second place in the National Scientific and Technology Progress Award. Also, their Beifuxin gel is added into the National Drug List for Basic Medical Insurance, Work-Related Injury Insurance and Maternity Insurance (the “NDL”) issued by the National Healthcare Security Administration and the Ministry of Human Resources and Social Security of the PRC [6]. This is their fourth product that is listed on NDL.
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My Story “From N-Level to Masters, From $20k at 19 to over $1m at 33” (Also shared by Dr Wealth / theFinance.sg / NextInsight, etc.) >> About me
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Management / Shareholder
I like companies where the founders are the current management and shareholders of the company to show that they have more skin in the game. Both Patrick Ngiam and his brother Benjamin founded the company two decades ago [7].
Substantial shareholders includes notable big funds like Fidelity Management & Research Co and of course Ngiam being the largest shareholder [8].
Financials
The company enjoys growing revenues, profits, cashflows. Even while marketing its products affordably, it comes with an attractive 28.04% operating margin. A very financially stable company with a Quick Ratio of 2.27, Current Ratio of 2.49 and Total Debt to Equity of 30.85% [9]. GuruFocus ranks its profitability 9/10 and 4.5 stars business predictability [10].
Dividends wise, the yield is less than 2% based on current price. However, I don’t mind the low dividend actually. This is because most growth stocks don’t really give out dividends. Will take it as a bonus if they do pay out dividends.
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More from EngineerInvest.com:
“Stock Market & COVID-19” where I cautioned (a month prior to the crash) of the possible market tumble & how to protect your portfolio published Jan 2020
“EngineerInvest.com’s go-to Charts to Determine Market Bottom” The all-time favourite article where I shared how I determined it was time to buy stocks published early April 2020
“After Jack Ma, is Alibaba an enduring 100-year growth machine?” published 6th June 2020 where I shared on how we can identify a visionary company and why Alibaba is one of my largest holdings
“10% Dividend Small Cap Stock & a Potential Multibagger” published 16 May 2020. This stock is later sold at more than 40% gain in a month since the post. The transaction was shared in “A 40% Gain Stock (Since our post last month), Recent Trades & “China’s Goldman Sachs”
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Verdict
It is rare to come across companies like Essex Bio-Tech with stable financials, growing revenues, cashflow and with good operating profit margins. Moreover, Ngiam actually bought 300k shares over the last 12 months at an average price of HK$5.06 [13].
On the 23rd June 2020, the company issued a profit warning due to COVID-19 significantly disrupting clinical operations of hospitals in PRC as it has prevented non-emergency patients from visiting hospitals and outpatient clinics [14]. The stock price tanked more than 8% on the same day. A lot of companies suffered in terms of profitability due to COVID-19, not just Essex Bio-Tech. It is only during these uncertain times when good companies will be selling at a cheap price which led me to click the “buy” button that same day at the price of HK$4.85. I have also shared it over in my Telegram and Facebook page.
Just a small position though, under my “multiple small caps” asset allocation where I allocated a certain amount to buy a number of small cap companies to spread out the risk. Do note that there are risks of the share price tanking further (cheap can become cheaper). Not encouraging any trades & my positions might change without notice. Just sharing the stock idea for reference, learning purposes only. Do not follow trade, practise due diligence and do check out our full disclaimer.
I doubt COVID-19 will hinder us forever as history have shown that humans are always resilient to fight and recover from any crisis thus far. I’m confident and hopeful that the world will win this battle against the pandemic.
Cheers & Great Weekend!!
Disclaimer: Just sharing from experience as I have put my own money into the stock market over the period of 17 years. I am not a Chartered Financial Analyst (CFA) Charterholder and do not have any finance-related qualifications. Please also check out our full disclaimer.
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Reference Links:
1.https://www.fool.com/investing/2020/07/13/why-inmode-shares-are-soaring-137-today.aspx
2.https://www.scmp.com/economy/china-economy/article/3093371/china-gdp-economy-avoids-recession-second-quarter-growth-32
3.https://twitter.com/BabyGo2014/status/1240986521055850504/photo/1
4.Essex Bio-Tech 2019 Annual Report
5.https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/essex+bio
6.http://www.essexbio.com/about.php?act=chairman
7.https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/essex+bio
8.https://www.marketscreener.com/ESSEX-BIO-TECHNOLOGY-LIMI-6171162/company/
9.https://www.investing.com/equities/essex-bio-technology-ltd-financial-summary?cid=990590
10.https://www.gurufocus.com/news/1169157/5-highquality-asian-health-care-companies-to-consider-for-2nd-half-of-year
11.https://www.investing.com/equities/essex-bio-technology-ltd-financial-summary?cid=990590
12.http://aastocks.com/en/stocks/analysis/company-fundamental/dividend-history?symbol=01061
13.https://finance.yahoo.com/news/insiders-buying-essex-bio-technology-222610236.html
14.http://www.essexbio.com/uploads/pdf/202006/2020062200701.pdf
15.Google Finance
16.AASTOCKS Application