Cementing my analysis on Conch Cement


 

Conch Cement - Boring companies Galore
 After applying my newfound method of automated stock screening into SGX, my interest zoomed towards Hong Kong market and US market. Although I have no expertise in market timing, the fruits of my research coincided with the recent market correction and I am trying to see if there are good performing businesses at a more attractive price. Looking through the podcasts of ValueInvestAsia, I got wind of aastocks which is a powerful HK stock screener tailored for the Value / Fundamental Analyst.

I shall not disclose my list of stocks that were picked up in my screens as I am still trying to discern what makes sense and what is not. But one thing is for certain. The sheer variety of companies as well as number of listed entities are much more populous and varied compared to the limited variety and number in the local scene. Aswath Damodaran is right in the sense that if I know nothing about the companies, I can more objectively value it according to its quantitative and qualitative metrics rather than falling in love with a stock.

Boring companies with a good balance sheet will be my preferred category as I do not have special insight in many other areas. But as I got wind of the real estate boom and mass skyscrapers construction in Shanghai, ShenZhen and considerable government in the One Belt One Road initiative, I have an interest in gaining exposure to the construction industry in China. Most of the real estate developers balance sheet are spotty and precarious and best avoided with a wide margin, but boring construction materials companies with a strong balance sheet, literally selling the fuel that feeds the flames is worth a second re-look.

I will need more time to go through Conch Cement annual report. Nonetheless, the <watching paint dry> content, simple analyzable business and  plainness of the AR is reassuring to me that this is most likely a business that even a idiot can run. There is a significant tailwind from the Macroeconomic policy managed by the China government and the balance sheet is exceedingly pleasing.

One grouse of Hong Kong market is that the board lot of the companies are immensely different. For a retail investor in HK market , even investing in an minimum amount requires a relatively large financial commitment and position size. There will also be ongoing scrip fees as corporate actions are declared in Hong Kong market. My experience in HKEX and Tencent also reminded me about the significant volatility of Hong Kong market. If I indeed proceed to set up a position in Conch Cement, it will be a large position play and I will have to be sure that this is a holding in the long run for 3-5 years or longer.

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