I bought Ocean Sky on 29th August 2007
Business Overview
Ocean Sky is an one-stop fully integrated fabric and apparel manufacturing with value added supply chain management (SCM) capabilities. They provide services from embroidery, screen printing and apparel dyeing to logistics management. Their service centres are located in Singapore, Hong Kong and USA while their manufacturing hubs are located in Central America, China and Cambodia.
Reasons for purchase
Ocean Sky compete in a cut throat industry. Margins are meagre. With margins so low in such a low technology business, I believe the only way to stay in business is pure efficiency. Two factors keep Ocean Sky lean and mean.
1) With production in low cost centres such as Central America and Cambodia (I believe cost of production in China is growing very rapidly), cost are kept to the minimum.
2) Their successful implementation of Supply Chain Management (SCM) and real time Enterprise Resource Planning (ERP) seems to be able to help the company manage its resources efficiently to stage a turn around ever since 2005. ROE and Profit margin had been slowly improving since then.
Valuation
Base on earnings projection in 2007 and 2008, and using Residual Income Model, I valued Ocean Sky at slightly over 35 cents.
Labels: My Actions, Ocean Sky
posted by Market Uncle at
00:27
3 Comments:
I recently got interested in this stock. Has your valuation of Ocean Sky changed? It's trading at about 10cts now.
I wrote something on my blog as well...
In the midst of recession, I had actually divested ocean sky to pursue other intestest:
http://market-uncle.blogspot.com/2009/10/cut-loss-on-united-food-and-ocean-sky.html
As a 'typical' manufacturer, I thought they had quite a bad challenges ahead, competitive pricing and escalating costs. Faced with falling orders, I jettisoned from it.
Things seems to be better now, as they returned into the black. But think I'll keep away from it as I doubt they really have the competitive strength.
I believe that the main reason most investors are not more successful is simply because when theirs and kind of panic they are unable to control their impluse to sell. Thats the way it is
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