Investments: Companies In View, New Ratios.

Its really tough to find undervalued companies now, as the market is continue to boom positively, as stated in http://extraordinaryprofits.blogspot.com/2007/06/stock-alert-update.html. However there are still a few companies which I want to look into and research, they are:
1) WesTech Electronics
2) Aussino Group
3) Courage Marine Group

In addition to that, i would like to include a few more financial ratios that i understand recently. They are price/cash flow per share (lower that P/E is a signal), current and quick ratios (measuring the company's liquidity, of course higher the better), and dividend yield (for long term holding).
Plus, the next research, i am going to include something call the industry average as well, as i felt that it would be more indepth if i can compare my research results with the overall industry competitiors as the subjectivity will come into place.
Stay Tuned!

Investment: Noel Gifts International

(A)Stability in its Core Business
One may say that Noel is a boring company. Noel is a mature player in the premium retail industry with over 800 creative floral arrangements and quality gifts. Just the brand Noel, is already a strong economic moat for the company. Noel has dominated 40% of the market share despite the high compeition. It have leveraged on almost all the seasons and reasons available, such as the most recent Father's Day.
With extensive network with various hotels, event management companies and online shops such as Yellow Pages commerce mall, Yahoo! shopping, Noel has position itself to be the 'name first pop in your head' if a company require such a service.
(B)Property Investment
Noel have entered the property market since 1987. Throughout the many years since, it has made a few property investments, of which all was profitable. The most recent property investment is a 25% stake in an exclusive residential development, Balmoral Crest. What we can look forward is that Noel will continue to focus on its property division for the many years to come.
(C)Cash Rich Position
Noel is standing at $12,465,000 after clearing all its long term debts, and giving out 34% dividend yield in 2006. With such a strong cash position, with appropriate planning for the future, and the perpetual focus on property investment, Noel can be a company with renewed rewards if the cash is properly invested.
(D)Strong Financial Outlook
With the recent improvement of 60.5% in the first half attributed to strong economy, we can see Noel to continue its improvement in the second half as many of the festive seasons such as Chinese New Year, Valentine Day will be ready for Noel to provide for.
Noel has net current assets $0.168 per share and standing at a EPS of forecasted at least 1 cent for the year 2007. Noel's compared to industry, its ROE is at 48.42% (pointed out by donmihaihai) and its EBITDA margin is at 9.18%. It has a very good quick ratio of 1.9x
(E)Value-Added Events
Long term view for Noel can be very excited as many events such as F1 Racing and Opening of Intergrated Resorts. Such events normally has spill over effects, both direct and indirect to retail companies. Hotel will repackage themselves for these events will utilise Noel's premium service to ensure that they remain aesthetically positive.
(F)Establishment of online gift business
Recently, Noel has won the Hitwise Online Performance Awards for being the Number One website in the category of Shopping & Classifieds – Flowers and Gifts for 2006. I believe as people are more internet savvy, this will be another channel for Noel to position itself to be the one-stop gift shop for everyone.
(G)Strong dividend Yield and willingness to shares its gain with shareholders
Noel aims to give at least 20% of its earnings back to shareholders as an appreciation for their loyalty. Especially in FY06, when they sold their building away for a whopping $9,8M, they gave out a total of 7.3 cents per share or 34% yield. This shows the management's willingness to share and think like their shareholders.

Valuation:
At the current market price of $0.215, the risk-reward ratio is skewed in the investor’s favor. We consider the worst downside to be limited to the cash floor of $0.190. Noel should turn in EPS of $0.015 for FY07. Applying the annual growth rate of 35%, the fair price is at least $0.50 within the next 3 years. Hence, the upside potential return of 132% from the current price compares favorably against the downside risk of 11.62% to the cash floor.

Risks:
(A)Mis-management of the rich cash position
Even though this may not be likely to happen, however, to err is human. If Noel made a wrong investment, or acquire a poorly managed company, the cash will return a negative rate on investment. Thus, we must keep a look out for FY07,08 and 09, to make sure they make a good investment using its cash.
(B)Economic Recession
Retail industries are always vulnerable to recession as their reliance on both corporate and retail consumer is high.

Conclusion: IV for this stock valued at $0.40

Investment: Update on new investment principles.

John Neff's investment principles:
1) Low Price to earning ratio (P/E)
2) Fundamental growth of 7% and more
3) Yield protection
4) Superior relationship of total return to P/E paid
5) No cyclical exposure without compensating pe multiple
6) Solid companies in growing field
7) Strong fundamental case

Care and Maintenance of a Low PE Portfolio
1) Inflection Points Abound (Bulls and Bears)
2) Beware the drumbeat of popular Opinion
3) Measured Participation (Buying the correct sector)
4) Don't chase highly recognised growth stocks (Limited upside appreciation)
5) Weigh the virtues of less recognised growth
5a) Growth rates of 12 -20 percent
5b) Single digit multiples of 6-9 earnings
5c) Dominance or major participation in definable growth areas
5d) Easy Industries to understand
5e) Unblemished record of double-digit historical earning growth
5f) Outstanding returns on equity, therein signifying management accomplishment, not to mention the internal capacity to finance growth
5g) Significant capitalisations and net income totals therein qualifying companies for insitutional consideration (in short: M&A targets)
5h) Ideally, although hardly essential, some wall street coverage, so those that need their hand held will have a wet nurse (in our context: some brokerage coverage so that there is motivation for buyers to buy)
5i) 2 to 3.5 percent yield in most cases (Dividend yield)
6) Moderate growers are solid citizens
7) Don't sweat market weighting (Concentrate assets in undervalued areas)
8) Learn what makes an Industry tick (Top down and bottom up)
8a) Are an industry's prices heading up or down?
8b) What about costs?
8c) Who are the market leaders?
8d) Do any competitiors dominate the market?
8e) Can industry capacity meet demand?
8f) Are new plants under construction?
8g) What will be the effect on profitabilty?

Building a Fact Sheet:
For any value investor, a fact sheet is very important as it will show everything at once infront of your very eyes. What should you include in your fact sheet?
1) The amount of shares owned
2) Average cost
3) Current price
4) Historical and projected EPS
5) Historical and projected growth rate
6) Historical and projected PE ratio
7) Yield
8) ROE
9) Price projection based on earnings expectation and resulting PE ratio
10) Appreciation potential

After finish reading the book: John Neff on Investing with S.L. Mintz, i realise what i need to add on to my FA analysis. In addition i just read finish a small booklet on Candlestick reversal technique. Hopefully, i can combine this 2 techniques to gain a fruitful experience.