Friday, March 8, 2013

Asian Bamboo

Asian Bamboo a chinese forrest company


The fourth company that I acquired was Asian Bamboo. Especially in North America there has been some disappointments for investors when stepping into Chinese companies that are traded or even registered on other markets. In this specific case it was Sino-Forest Corporation that was involved in a multi-billion fraud. What the Chinese companies almost always does is to have one company in the country of the market where they are registered.

This company then owns one or several companies in Hong Kong that then "owns" the companies in China. The company structures always looks complicated and leads in many cases to that one get the feeling that one should not invest at all... and maybe one should go with that feeling.
When it comes to Asian Bamboo there is the same complicated company structure with the founder sitting with his shares from a holding company on the Virgin islands.

When I was on my way to make this investment I had a second option that I found very interesting called A.S. Création Tapeten who are over internet was all as in a shop are selling wallpaper. The wallpaper business has been dead for a long time because everyone has been painting their walls (especially white) but one have to admit that with a wallpaper one can get really spectacular things. And the concept of only putting up a piece here and there or maybe even only one wall is very interesting. I did however not buy this stock. Since then it has gained over 50%.

So back to the real topic Asian Bamboo. I bought this stock because bamboo is an excellent material. You can not only use it like wood (furniture, use the fibres for clothing, floors etc.) but you can even eat it. The forest companies are cyclic and this company seemed to be pressed down significantly which meant that it was very cheap in my eyes.

The first time I bought the stock (back in April 2012) was at 10.6 € per share (I then bought 170) which was a P/E of around 6 and the company had a book value of 20.5 so the P/B was almost 0.5. The company was cheap. Since then my buy rule has been triggered three more times and I now have 950 shares at a cost of 7.1 €. So I have currently a significant loss on this stock. But not only me. At least the founder increased back in 2011 when it was standing in over 20 € and also the Norwegian Governmental Oil Fond also have some significant losses. Last time I checked they had increased their shares by 10%. So if we look at the P/E today it is down around 2.8 and the P/B is down at 0.25. So 25 cents for 1 euro of a bamboo company... even thought it is in China I do not find that so bad!

The sell order will be placed when either the dividends drop below 1% (wooops they will cancel it this year) and/or the P/E reached a value above 22.

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