“Asian Profit Play #1: $3 Stock Headed to $9”

By Travis Johnson, Stock Gumshoe, July 28, 2011

Sometimes the world just gives you a bad case of the “blahs.” The politicians are disappointingly putting their own political prospects above national interests, unemployment is terrible, friends are out of work, our houses are worth less than we thought, the world is in decline and we should be moving to a rural farm, burying gold coins in the root cellar, and learning how to make our own clothes out of switchgrass and tree sap.

When those feelings come over me, I have a few go-to things to do: Hug my wife and kids. Lavish attention on our old dogs and get a good face-licking. And read a teaser for a growth stock or asian stock newsletter — most of those guys shovel out optimism like they’re trying to dig another Panama Canal.

So let’s have a look at Tony Sagami’s latest teaser pitch, shall we? He runs the Asia Stock Alert for the folks at Weiss Research (who are otherwise quite definitively in the “Debbie Downer” camp), and in exchange for your $350 or so he’ll share with you his “triple your money” Asian growth plays. I’ll sniff out at least the first one for you now, and I’ll probably get to the other two shortly.

Here’s a bit from the cheery intro:

“… the best you can ever hope for in the U.S. markets is that, on an inflation-adjusted basis, you’ll breakeven.

“That’s why I am living here in Asia — hot on the trail of no less than three TRIPLE-YOUR-MONEY opportunities to help build my subscribers’ wealth — where Asian stock markets and currencies have none of the challenges the U.S. economy faces….

“These types of Asian growth companies represent what the world-renowned magazine, The Economist, recently called ‘Bamboo capitalism’ — an army of new entrepreneurs in China and other East Asian countries.

“And they are catering to the world’s largest consumer market ever.

“Take a guess at how many consumers I’m talking about: In the U.S., there are 311 million. But in Asia, there are 3 billion, or 10 times more! That’s a very big market indeed.

“It’s why Asian growth companies are ringing the profit bells in almost every sector across the board — natural resources, technology, biotech, shipping, transportation, construction, healthcare, and more.

“In fact, right at this moment I have …

“15 Asian Growth Companies On My Radar Screens That Have Gained An Average Of 65% — Just Since The First Of This Year!”

And he also throws in the hint that he’s not just looking at the same big ADRs and ETFs that you’ll see mentioned in mainstream money magazines … he’s also looking at stocks that you sometimes have to buy directly overseas, or that are dual listed, or that trade in the US on the pink sheets — in part because, more reason for cheer, it’s easier than ever for US investors to trade wherever they want … or, in his words …

“Grabbing the awesome profit-making potential of Asian growth stocks has never been easier.”

So you see? Reason for hope! The US is essentially doomed, he reiterates, but Asian stocks will still give you a chance to light your cigars with $100 bills. Or maybe $1,000 bills, if devaluation accelerates the way his boss Martin Weiss is predicting.

Now that we’re full of hope and joy again, what is this “Asian Profit Play” that we should be buying? Here’s the short story:

“Asian Profit Play #1: $3 Stock Headed To $9. An Asian company producing and distributing one of the world’s most-in-demand commodities, used to produce soaps, lipstick, candles, shampoo, detergents, toiletries, lubricants, even glue and rubber-based products. Company profits are on fire, soaring 192% over last year.”

So that’s probably enough — after all, the Thinkolator is mighty, indeed … but we won’t turn down a few more clues, and we get ’em in the meat of the letter:

“Asians are eating more of everything, from corn, to wheat, to coffee, chocolate and more. Heck, bagel shops are now even popping up all over Asia.

“But palm oil tops the list in terms of demand, because the typical kitchen in Asia is very different than an American kitchen. They don’t use ovens here. They stir-fry almost everything. And they use oodles of palm oil in Asia….

“Global demand for palm oil is exploding higher, and so is its price. Demand is soaring and the U.S. Department of Agriculture is forecasting a supply deficit of 246,000 metric tons per year.

“The price of palm oil is up more than 24% in the past year alone.

“Malaysia is one of the world’s largest producers of palm oil, and the company I just visited here is the LARGEST palm oil company in the world, bar none.”

Sounds pretty good, right? Palm Oil has also been a big biodiesel story in recent years, and Sagami touches on that as well as the cavalcade of clues continues:

“… owns more than 1,900 square miles of palm oil plantations here and in Indonesia. It’s a fully integrated company, producing and marketing its palm oil, and also distributing juices, drinks and sauces with palm oil ingredients….

“… its real estate is becoming more and more valuable every year. It owns over 93,000 acres of developable land.

“And it reinvests some of its profits into other businesses it controls, including industrial and farm machinery, biofuels and it even owns BMW dealerships in China.

“Profits are on fire. Nine month earnings from its latest report show the company’s earnings soaring 192% over the same nine months last year.

“Now the company is branching out into palm oil-based biodiesel fuel, which is going to be hugely profitable for it going forward. Palm oil biodiesel is much more efficient than ethanol-based fuels, and is rapidly becoming the green energy of Asia.”

Well, that’s enough of an embarrassment of clues that I hesitate to even take the tarp off the Thinkolator for this one … but still, better to be thorough. Feed ’em all in, let it chug for just a few seconds, and we get our expected result: This is …

Sime Darby Berhad (SMEBF on the pink sheets, 4197 if you can trade directly in Kuala Lumpur)

This is one of the big conglomerates that are so common in Indonesia and Malaysia — indeed, throughout much of Asia. It started about 100 years ago as a rubber plantation developed by a couple UK expats (Messrs. Sime and Darby, as you might have guessed). Market cap is just under $20 billion (or about 54 billion Malaysian Ringgits), so it’s a big company, and they are indeed in all of the businesses Sagami notes in the teaser — the foundation now is a big palm plantation business and a palm oil processing empire, but they also do own a lot of auto dealerships around Asia (Ford, Hyundai and BMW, it looks like — as of the last report this became their biggest revenue generating division, thanks to huge Chinese BMW demand, though the plantations are far more profitable), a number of industrial companies, an energy and utilities division, some healthcare businesses, and a lot of possible “higher and better use” real estate they’re monetizing — mostly, it appears, through high-end housing developments (that was the weak link in the last quarter — some development delays).

And yes, their earnings did jump 192% year over year in the last nine-month period — you can see the details in their latest quarterly release here. They’ve paid a small dividend (in the 1% range), and the stock is priced for growth (or undervalued assets) with a trailing PE of about 24 and a price/book value of a bit over 2 (I don’t what value their most valuable assets, the plantations, carry on their books — might be worth digging into that, huge property-owning companies often carry valuable land at decades-old purchase prices).

If you want a bit more detail, their latest quarterly analyst presentation and their detailed financials are available here on their website. Do note that Kualu Lumpur’s market is never open at during the same hours as NY, so buying or selling on the pink sheets will almost always be done at a bit of a premium (to buy) or discount (to sell), since whoever trades with you is taking a risk that the valuation in Malaysia is changing overnight.

The share price is right around $3 right now for the US-traded pink sheets — if you want to check the fair closing price in KL you could enter 4197.KL in Yahoo Finance, for example, check the exchange rate (a dollar is 2.94 ringgits at the moment, though it changes), and find that the closing price of MR9.15 in Malaysia means it ought to be worth $3.10 today in NY if the world or business didn’t change much in the hours since Kualu Lumpur’s traders went home to their families (about 5am EST). It last traded at $3.20 on the pinks, so that’s pretty reasonable — pink sheets shares like these often have to be bought at a premium of a couple percent over the home trading, and sold at a discount of a couple percent, so they’re not so good for trading in and out of and it’s best to be comfortable with a long-term position when buying stocks in this way.

So there’s an idea for you from Tony Sagami — growth in Palm Oil demand worldwide, growth in housing, health care and energy demand in Malaysia, growth in auto demand in China, all tied up into one nice tidy little conglomerate. Sound like your kind of pick? Let us know with a comment below.

Related Gumshoe Articles

Leave a Reply

17 Comments on "“Asian Profit Play #1: $3 Stock Headed to $9”"

avatar

Richard
Guest
0
Richard
July 28, 2011 11:51 am

The Malyasian ETF, EWM is a nice play!

tony
Guest
0
tony
July 28, 2011 12:10 pm

I subscribed to Sagami's Asia Stock Alert for a couple years and discontinued it. The picks wound up being too volatile for my taste. A plus is he visits the recommeneded co's in person, and has had some big winners like EDU. But he's also had some huge busts like HOGS (after a good run first) and SNOFF (Sino Forest). Those are both victims of some bad Chinese press which may or may not be true, but I dropped my subscription even before then as being too wild.

Hey Yu
Guest
0
Hey Yu
July 28, 2011 12:16 pm

Your "Thinkalator" is better than mine. I originally thought that the company was Golden Agri-Resources

Malcolm Jensen
Guest
0
Malcolm Jensen
July 28, 2011 12:34 pm

This is really a complaint with Tony Sagami's misuse of the English language.
3 Billion is not ten times more than 311 Million. It is a little less than nine time more or a little less than ten times as many. Tony misuses "times more" much as do many others who can't control their over-hyping. I hpoe this deliberately mistaken usage doesn't become even more common among those who don't know better or just don't care.

Patrick
Guest
0
Patrick
July 28, 2011 2:00 pm

So annoying when investment opportunities come with ethical problems… Palm Oil plantations are more or less wiping out huge areas of wildlife habitat in the tropics… the devastation is truly mammoth. Primates, birds, many of them endangered species are losing gigantic areas of former forest. In addition, many of the plantations are illegal and encroach on native people's land.

Stara
Guest
0
Stara
July 28, 2011 4:29 pm

Now you left us with a teaser, Gumshoe? Africa? No current environmental impact?Hmmm?

John
Guest
0
July 28, 2011 7:58 pm
Let's not be too hasty in pontificating about Sime Darby's environmental record. The current corporation comprises 3 previous giants in the industry, all of which were leaders in the Round Table for Sustainable Palm Oil, RSPO. They take their responsibilities seriously and I believe you will find that the area of new land taken from virgin forest or HVCF is negligible. The deforestation was done over the past 100 years primarily for rubber plantations that have since been converted to palm oil. The environmental profile of this perennial tree crop is arguably far more attractive than an equivalent amount of… Read more »
Fatboy228
Guest
0
Fatboy228
July 29, 2011 10:49 am
Don't know why I'm so late to the party. Most of the comments were made more than 17 hours ago so even the Gumshoe himself has probably moved on to new puzzels to conqor and my post may not be seen. Just an observation…. These tease letters that people are paying hefty fee's for – unless they know the Gumshoe – are supposed to produce stocks that help grow our wealth. I have been following the stocks that GS has decoded for over 2 years and the vast majority have been "dogs" (and not the face licking kind). How is… Read more »
Jesaja
Guest
0
Jesaja
July 29, 2011 1:10 pm

When we talk about Agro-company I think the best of them all is a China-company name Sino Agro Food SIAF.PK They have P/E 1 for 2012 and growing all the time and the market no nothing about the company yet.
But soon they no more about SIAF because they shall go in to Nasdaq-list.
Normal for this growing-company is P/E 10 and SIAF have P/E 1 so I hope you understand
we have here maby 3,5 or much more times up on this company.
I have look on SIAF homesite and everything look very good!!

Ian
Guest
0
Ian
July 31, 2011 10:49 am
For investors keen on a pure palm-oil or rubber play see the end of this. Sime Darby Berhad. I worked for them for 8 years, trading rubber and briniging rubber consuming companies to Malaysia. They are generally well ahead of the game in adding new divisions to the conglomerate and this means a lot of divisions trade at a loss for years. Caterpillar agency and the western car agencies being two examples When they told me they were converting their rubber plantations to palm oil and converting their factories I begged them to buy into rubber again north of the… Read more »
Brian
Guest
0
Brian
April 21, 2015 6:06 pm

I’ve had SMEBF for 4 years now having bought it at US$3.26 but here we are in April 2015 and the thing still hasn’t gone anywhere and is now trading at only US$2.62 …. that is IF you can sell it ! Each time I’ve tried to unload it I’m told there are no brokers that will accept the order ! I do collect a small annual dividend (currently 8 cents per share) but the whole experience has prevented me from giving any consideration to any of Tony Sagami’s promos.

martin
Guest
0
martin
July 28, 2011 1:29 pm

Malcolm,you made my day,with your reply;))Just review every line you wrote,especially the one with the numbers;))
Sorry for being offtopic,but i could not resist answering,lol;)
Thanx Tavis for the DD:))
Martin;)

hedy1234
Guest
0
hedy1234
July 28, 2011 2:20 pm

Ok so it is 9.6 times more. Do we really think the population of Asia is exactly 3.000 billion people? If this is the only hype in the article I would be thrilled.

hedy1234
Guest
0
hedy1234
July 28, 2011 2:18 pm

Patrick-This is a common problem we face with many companies. Philip Morris, all the alcohol companies, over harvesting of whales and other wildlife and many others based on "vices'.

Gravity Switch
Admin
11
July 28, 2011 2:34 pm
It's true that many companies with interesting investment prospects don't pass through all social or environmental screens — but I also think investors all have to make up their own minds about what those "ethical problems" and investment screens might be, some folks will care more about union-busting management, others will care more about environmental impact, and to widely varying degrees. I personally own shares of a palm oil plantation company — but it's in Africa, and claims that they're the one palm oil producer that can expand "without deforestation". Of course, that's because they're the new owners of a… Read more »
Gravity Switch
Admin
11
July 28, 2011 4:48 pm

Sorry, didn't mean to tease, I just hate to write much about microcaps to a big audience — it's Feronia (FRN on the venture exchange in Canada). Extremely speculative at this point, in the not-abundantly-peaceful DRC, they own the old Unilever (I think — would have to double check) palm plantations and processing equipment, and tons of land. So far, it's been a bad investment (or, as we're supposed to say, "I was early").

Lisa
Guest
0
Lisa
August 4, 2011 1:58 pm

Me, too, but I realized it was too small..

wpDiscuz