DMX Technologies - Chasing the long tail
Hong Kong-based DMX Technologies said today it is planning to get a regular stream of revenue by focusing more on digital broadcasting.
The company, which provides broadband infrastructure and provides digital media content for CATV operators, telcos and satellite companies, recorded a 37% increase in FY2007 revenue growth from digital media content.
It said the business environment for its infrastructure business was difficult due to a mature infrastructure market in Korea and China being slow in rolling out its infrastructure.
Revenue for the segment slipped 6.6% to US$125.8 mln in FY2007.
In DMX’s corporate presentation filed on SGX, it will be providing digital media content for 3G mobile phones and CATVs. It cites the Long Tail theory, which describes the niche strategy of certain businesses with huge inventories that help them realize significant profit out of selling small volumes of hard-to-find items to many customers.
Examples of such companies with inventories that cater to all kinds of consumer tastes are online auctioneer eBay, search engines Yahoo! and Google, retailer Amazon and the iTunes music store.
With this change in business focus, DMX Technologies is changing from being a business-to-business service provider to a more consumer-oriented business. It intends to start with the Chinese media industry and use content as the connecting thread for all its businesses.
As part of its aim to become a media player in China, It has taken an investment stake in a Chinese company that has the rights to operate mobile TV. Once in the consumer arena, DMX is sure to face a new set of risks like fickle consumer tastes, strict censorship rules in China, and potentially keener competition, to name a few.
But rewards could be bountiful - according to CCBN (China Content Broadcasting Network), China has the world’s largest subscriber base in cable TV, currently at 130 mln. And the Chinese government has laid down industry-friendly regulations to digitise all broadcast services by 2015. This is expected to pump up the number of digital TV household subscribers to over 180 mln by 2015.
In a country like China, government regulations often play a role in helping a company flourish, and DMX is most probably hoping its business will be on the good side of government mandates.
As part of the usual routine for companies that are trying out a new business direction, DMX announced on 13 March that it had been awarded an initial contract to implement a provincial scale interactive digital TV platform for a cable TV operator in Inner Mongolia, China. It did not say how much the contract was worth.
At least Aztech proudly announced a S$250 mln contract last month after it said it would venture into supplying construction materials. Perhaps DMX will announce more contracts (one or two?) in the next few weeks.
DMX Technologies is not covered by Reuters Estimates. It was last traded at S$0.216, around the same levels it was trading when it first listed in 2002. It has fallen since and has not recovered to above the S$1-dollar mark since May 2006.
As always, please see your licensed financial advisor before making any investment decisions.
- Tan Jin San
The company, which provides broadband infrastructure and provides digital media content for CATV operators, telcos and satellite companies, recorded a 37% increase in FY2007 revenue growth from digital media content.
It said the business environment for its infrastructure business was difficult due to a mature infrastructure market in Korea and China being slow in rolling out its infrastructure.
Revenue for the segment slipped 6.6% to US$125.8 mln in FY2007.
In DMX’s corporate presentation filed on SGX, it will be providing digital media content for 3G mobile phones and CATVs. It cites the Long Tail theory, which describes the niche strategy of certain businesses with huge inventories that help them realize significant profit out of selling small volumes of hard-to-find items to many customers.
Examples of such companies with inventories that cater to all kinds of consumer tastes are online auctioneer eBay, search engines Yahoo! and Google, retailer Amazon and the iTunes music store.
With this change in business focus, DMX Technologies is changing from being a business-to-business service provider to a more consumer-oriented business. It intends to start with the Chinese media industry and use content as the connecting thread for all its businesses.
As part of its aim to become a media player in China, It has taken an investment stake in a Chinese company that has the rights to operate mobile TV. Once in the consumer arena, DMX is sure to face a new set of risks like fickle consumer tastes, strict censorship rules in China, and potentially keener competition, to name a few.
But rewards could be bountiful - according to CCBN (China Content Broadcasting Network), China has the world’s largest subscriber base in cable TV, currently at 130 mln. And the Chinese government has laid down industry-friendly regulations to digitise all broadcast services by 2015. This is expected to pump up the number of digital TV household subscribers to over 180 mln by 2015.
In a country like China, government regulations often play a role in helping a company flourish, and DMX is most probably hoping its business will be on the good side of government mandates.
As part of the usual routine for companies that are trying out a new business direction, DMX announced on 13 March that it had been awarded an initial contract to implement a provincial scale interactive digital TV platform for a cable TV operator in Inner Mongolia, China. It did not say how much the contract was worth.
At least Aztech proudly announced a S$250 mln contract last month after it said it would venture into supplying construction materials. Perhaps DMX will announce more contracts (one or two?) in the next few weeks.
DMX Technologies is not covered by Reuters Estimates. It was last traded at S$0.216, around the same levels it was trading when it first listed in 2002. It has fallen since and has not recovered to above the S$1-dollar mark since May 2006.
As always, please see your licensed financial advisor before making any investment decisions.
- Tan Jin San
The nonsense of the "falling knife"
"When is it time to buy stocks again?" This was the question on everyone's lips at the Asia Trader & Investor Convention over the weekend. Like Singapore investors, Malaysians are just as keen to dive back into the markets. It's quite apparent that most people who showed up at the Kuala Lumpur Convention Centre were biding their time, getting ready to pounce once things turned. This is almost the smartest thing investors can do. Almost. While the Dow Jones Industrials Average gyrates in 300-point ranges, investors who've got their eye on the long term are not perturbed. They use the steady compass of valuations. They are, to borrow the oft-used phrase, walking placidly amid the noise and haste.
Which brings me to my favourite hobby horse: conventional un-wisdom. Stuff that people truck out and cling to because it sounds comforting, but which either makes no sense at all or contradicts common sense. Here are my two favourites:
"Good things come to those who wait". What nonsense! Anyone who teaches their children to take opportunities as they come along will know that this is pure and utter rubbish expounded only by those too lazy to get off their butts and make things happen. Plus it contradicts that other great adage, "don't wait for your ship to come in, swim out to it". Or as Confucius put it: "A man who stands on a hill with his mouth open will wait a long time for roast duck to drop in."
This is just as true in the markets as it is in other aspects of your life.
A worse version of the above is:
"No one wants to catch a falling knife". Here is another phrase which analysts use to explain the absence of buyers. This is more a sign of ignorance and the absence of a strategy than any real, valuable insight. The sentence means that no one knows how far the market is going to fall, and therefore anyone who buys in now will get "cut" as prices fall further.
Implicit in this sentence is the assumption that we don't know how far the proverbial knife is going to fall. I don't profess to be an analyst, nor do I know how far the market is going to fall. But then, I don't care about how far the market is going to fall. What I, and most investors, want to know is when valuations are reasonable, even when you take into consideration a decline in earnings. Only when you look at stock specifics, and forget about the market, do you start to get clarity.
The knife is not falling. In fact, there is no knife. It's more like a gold pan. Slowly we're washing out all the mud and rocks. What remain are nuggets. Those nuggets may fall in price before they shine through. But nuggets always shine through in the end.
Mark Laudi, who prefers to use the elevator metaphor. It doesn't matter which floor you're on, or even if your elevator goes down in the short term before riding up in the long-term - as long as the elevator you take is of good quality.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Which brings me to my favourite hobby horse: conventional un-wisdom. Stuff that people truck out and cling to because it sounds comforting, but which either makes no sense at all or contradicts common sense. Here are my two favourites:
"Good things come to those who wait". What nonsense! Anyone who teaches their children to take opportunities as they come along will know that this is pure and utter rubbish expounded only by those too lazy to get off their butts and make things happen. Plus it contradicts that other great adage, "don't wait for your ship to come in, swim out to it". Or as Confucius put it: "A man who stands on a hill with his mouth open will wait a long time for roast duck to drop in."
This is just as true in the markets as it is in other aspects of your life.
A worse version of the above is:
"No one wants to catch a falling knife". Here is another phrase which analysts use to explain the absence of buyers. This is more a sign of ignorance and the absence of a strategy than any real, valuable insight. The sentence means that no one knows how far the market is going to fall, and therefore anyone who buys in now will get "cut" as prices fall further.
Implicit in this sentence is the assumption that we don't know how far the proverbial knife is going to fall. I don't profess to be an analyst, nor do I know how far the market is going to fall. But then, I don't care about how far the market is going to fall. What I, and most investors, want to know is when valuations are reasonable, even when you take into consideration a decline in earnings. Only when you look at stock specifics, and forget about the market, do you start to get clarity.
The knife is not falling. In fact, there is no knife. It's more like a gold pan. Slowly we're washing out all the mud and rocks. What remain are nuggets. Those nuggets may fall in price before they shine through. But nuggets always shine through in the end.
Mark Laudi, who prefers to use the elevator metaphor. It doesn't matter which floor you're on, or even if your elevator goes down in the short term before riding up in the long-term - as long as the elevator you take is of good quality.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: Asia Trader Investor Convention, falling knife, Good things come to those who wait
Can the Olympics save Synear from snowstorms and inflation?
Fancy pesticide in your frozen dumplings? Or how about a rat’s head in your prawn crackers? Made-in-China products are getting a bad rep but at least this company is pretty safe from it.
For Synear Food, which makes frozen food like dumplings and desserts, the bad reputation of Chinese products worldwide is not going to affect its business since it sells its products in China.
But inflation is. Just like other food producers, Synear has to cope with higher raw material prices, despite raising its selling prices. It is affected by the rising prices of main raw materials such as pork, flour and packaging materials. This has caused its FY2007 gross profit margin to go down 1.4 percentage points to 32.2%.
Inflation in China was at 8.7% in February and at its highest in 12 years, due to higher food prices. Even the government has made tackling inflation its first priority. But like the previous efforts to cool down the economy or the property sector, it will take time for measures to work.
In the meantime, inflation will definitely affect Synear’s profit margins for this year if its move to increase the sales of its new and premium brand products do not work.
One day after it released its earnings report on 25 February, Synear saw a spike in trading volume and its stock plunged. A report by CIMB-GK had drastically downgraded the stock from OUTPERFORM to TRADING SELL due to the company’s increasing costs overshadowing its management’s aggressive expansion plans.
As if things can’t get any worse, Synear Food announced yesterday that it joins the list of Chinese companies affected by the severe snowstorms in China. It said the recent snowstorm in January had affected the transportation and sales of its products to southern China. It also said its sales in Northern China are not enough to fully offset the impact of the snowstorm.
It is expecting sales for Q1 2008 to be lower year-on-year, although it still expects the figure to be higher than the previous quarter.
But the group does have aggressive growth plans – it is intending to buy land outside six cities in China to build cold storage warehouses and stock more raw materials. And it is building an industrial district in Henan province to increase its production capacity.
The company is using its IPO proceeds of RMB 1.14 bln and is borrowing from banks to fund its expansion plans.
In yet another aggressive move, the company signed on Jackie Chan as its brand spokesperson in July last year. I’m thinking this is just for the lead-up to the Olympics, for which Jackie Chan is also a spokesperson. But how much are they paying him? From Synear’s FY2007 report, selling and distribution costs shot up 54% to RMB 207 mln due to TV ads and billboard advertising. I’m thinking that includes Jackie Chan’s massive fees as well.
This company’s aggressive trait can cut both ways. Analysts are downgrading their calls on this stock, but Synear seems to be betting on sales during the Olympics to make its FY2008 a good year, despite thinning profit margins. And after the Olympics, who knows?
- Tan Jin San
For Synear Food, which makes frozen food like dumplings and desserts, the bad reputation of Chinese products worldwide is not going to affect its business since it sells its products in China.
But inflation is. Just like other food producers, Synear has to cope with higher raw material prices, despite raising its selling prices. It is affected by the rising prices of main raw materials such as pork, flour and packaging materials. This has caused its FY2007 gross profit margin to go down 1.4 percentage points to 32.2%.
Inflation in China was at 8.7% in February and at its highest in 12 years, due to higher food prices. Even the government has made tackling inflation its first priority. But like the previous efforts to cool down the economy or the property sector, it will take time for measures to work.
In the meantime, inflation will definitely affect Synear’s profit margins for this year if its move to increase the sales of its new and premium brand products do not work.
One day after it released its earnings report on 25 February, Synear saw a spike in trading volume and its stock plunged. A report by CIMB-GK had drastically downgraded the stock from OUTPERFORM to TRADING SELL due to the company’s increasing costs overshadowing its management’s aggressive expansion plans.
As if things can’t get any worse, Synear Food announced yesterday that it joins the list of Chinese companies affected by the severe snowstorms in China. It said the recent snowstorm in January had affected the transportation and sales of its products to southern China. It also said its sales in Northern China are not enough to fully offset the impact of the snowstorm.
It is expecting sales for Q1 2008 to be lower year-on-year, although it still expects the figure to be higher than the previous quarter.
But the group does have aggressive growth plans – it is intending to buy land outside six cities in China to build cold storage warehouses and stock more raw materials. And it is building an industrial district in Henan province to increase its production capacity.
The company is using its IPO proceeds of RMB 1.14 bln and is borrowing from banks to fund its expansion plans.
In yet another aggressive move, the company signed on Jackie Chan as its brand spokesperson in July last year. I’m thinking this is just for the lead-up to the Olympics, for which Jackie Chan is also a spokesperson. But how much are they paying him? From Synear’s FY2007 report, selling and distribution costs shot up 54% to RMB 207 mln due to TV ads and billboard advertising. I’m thinking that includes Jackie Chan’s massive fees as well.
This company’s aggressive trait can cut both ways. Analysts are downgrading their calls on this stock, but Synear seems to be betting on sales during the Olympics to make its FY2008 a good year, despite thinning profit margins. And after the Olympics, who knows?
- Tan Jin San
SGX-Bursa link: do we really need it?
I have been a strong advocate of the trading link between the Singapore Exchange and Bursa Malaysia because it brings the two countries closer together, it fosters economic cooperation and it will likely add liquidity to both markets. It is heartening to read that they're finally getting it together. But while I hold firm to these points, it is merely stating the obvious that the trading link has been delayed so often that retail investors could be forgiven for thinking it will never happen. And now one wonders whether it actually should.
The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.
The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.
Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.
If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.
Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.
Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.
The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.
Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.
If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.
Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.
Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: Bursa Malaysia, SGX, Singapore Exchange, trading link
The SGX's "Watch-List": Complete duds or hidden value?
The Singapore Exchange is to be applauded for trying to raise the standard of mainboard listed companies, but generating a list of those which fail to meet minimum standards. Companies which have reported consoliated pre-tax losses for the prior three years can find themselves on this list. If they don't improve, they could find their shares suspended or even delisted. But while the motivation is laudable, the criteria used to judge companies could be debated.
Right up front: this is not a recommendation to buy any shares, nor am I going into bat for these companies. Not least, because they didn't acknowledge their "spoon award" beyond the necessary disclosure, and explain how they were working to make sure they weren't on the list again in the future.
But I'm concerned the SGX is using a profit number, rather than cashflow, as the category to measure companies by (loss-making companies must also have a market capitalisation of S$40 mln or more to escape being named). As we all know, "profit is opinion, cash is fact". And because profit numbers can be affected by property revaluations and other arbitrary, non-cash measures, CFOs of the affected companies can find ways to escape being listed.
If we then look at cashflow instead of profits, five of the eight companies named on the first list could perhaps we cut some slack.
Watch the video to see what I mean.
Fact is: none of these companies are stellar performers. But if the list was compiled based on cashflow, not only would we quite likely see a very different list, we would also ensure that CFOs had no way to cook the books to get their way out of trouble.
Mark Laudi, who thinks this would have been a good opportunity to convert investors from focusing on profit to focusing on cashflow.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Right up front: this is not a recommendation to buy any shares, nor am I going into bat for these companies. Not least, because they didn't acknowledge their "spoon award" beyond the necessary disclosure, and explain how they were working to make sure they weren't on the list again in the future.
But I'm concerned the SGX is using a profit number, rather than cashflow, as the category to measure companies by (loss-making companies must also have a market capitalisation of S$40 mln or more to escape being named). As we all know, "profit is opinion, cash is fact". And because profit numbers can be affected by property revaluations and other arbitrary, non-cash measures, CFOs of the affected companies can find ways to escape being listed.
If we then look at cashflow instead of profits, five of the eight companies named on the first list could perhaps we cut some slack.
Watch the video to see what I mean.
Fact is: none of these companies are stellar performers. But if the list was compiled based on cashflow, not only would we quite likely see a very different list, we would also ensure that CFOs had no way to cook the books to get their way out of trouble.
Mark Laudi, who thinks this would have been a good opportunity to convert investors from focusing on profit to focusing on cashflow.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: ASA Group, Chuan Soon Huat, Fastech Synergy, SGX, Singapore Exchange, Tri-M Technology, Unified Communications
Retail market alive and well
Judging by attendance at the Asia Trader & Investor Convention (ATIC) over the weekend, retail investors are still enthusiastic participants in the local stock market. Despite the rain and NATAS travel fair at Singapore Expo, the crowds kept coming, perhaps swinging by after visiting the bridal fair upstairs at the Suntec Convention Centre to find ways to pay for it all.
The strong attendance should be comfort to anyone - in particular institutional investors - who might be worried about the retail investors leaving the market. A quick check with my good friends at the SGX recently confirms that the number of active investors (=traded at least once in the last three months) still hovers at around the 200,000 mark. It is retail investors who provide the liquidity needed for institutions to throw their money around. All the more reason why retail investors should be better looked-after!
While the mood was obviously not as buoyant as last year, when the bull run was still in full swing, here are other adjectives we'd use to describe the frame-of-mind of local retail investors:
Expectant. True to form, retail investors are still on the lookout for opportunity. They expressed a mixture of apprehension and opportunity. Either those who have been completely scared off by the market plunge didn't show up at ATIC at all, or they came anyway to learn new trading skills to deal with the new realities of the market.
Skeptical. The search for opportunity is coloured with an increased skepticism of the gains to be had in the market. There is a general acceptance that the good times of recent years are over, as there should be. It made overly optimistic sales pitches by anyone at the expo much less credible. No wonder most exhibitors talked about minimising losses and capital protection, than leveraging to go all out for profits.
Insecure. No surprises there. Investors came to get clarity in a market that has become murky at best. But there is also still hope that they will return in some fashion. They were willing to listen to what was being offered. The problem I see is that there were obviously fewer people who are new to investing who wanted to see how they could jump onto the bandwagon. The bandwagon has passed. If only those people realised that now is precisely the time to start thinking about investing.
What adjectives would you use to describe your frame-of-mind about the Singapore market?
Mark Laudi, who would like to say thank you to all those Investor Central customers who dropped by and said hello
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website!
ArchivesThe strong attendance should be comfort to anyone - in particular institutional investors - who might be worried about the retail investors leaving the market. A quick check with my good friends at the SGX recently confirms that the number of active investors (=traded at least once in the last three months) still hovers at around the 200,000 mark. It is retail investors who provide the liquidity needed for institutions to throw their money around. All the more reason why retail investors should be better looked-after!
While the mood was obviously not as buoyant as last year, when the bull run was still in full swing, here are other adjectives we'd use to describe the frame-of-mind of local retail investors:
Expectant. True to form, retail investors are still on the lookout for opportunity. They expressed a mixture of apprehension and opportunity. Either those who have been completely scared off by the market plunge didn't show up at ATIC at all, or they came anyway to learn new trading skills to deal with the new realities of the market.
Skeptical. The search for opportunity is coloured with an increased skepticism of the gains to be had in the market. There is a general acceptance that the good times of recent years are over, as there should be. It made overly optimistic sales pitches by anyone at the expo much less credible. No wonder most exhibitors talked about minimising losses and capital protection, than leveraging to go all out for profits.
Insecure. No surprises there. Investors came to get clarity in a market that has become murky at best. But there is also still hope that they will return in some fashion. They were willing to listen to what was being offered. The problem I see is that there were obviously fewer people who are new to investing who wanted to see how they could jump onto the bandwagon. The bandwagon has passed. If only those people realised that now is precisely the time to start thinking about investing.
What adjectives would you use to describe your frame-of-mind about the Singapore market?
Mark Laudi, who would like to say thank you to all those Investor Central customers who dropped by and said hello
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website!
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