Question from Cindy: I guess the rebound of 991 maybe higher than 902.
1. Big Investment Firms increased its shares: Because, most of the big investment firms increase its shares in 991 at the beginning of November. The supporting level is around $8.0 for a while. e.g. Morgan Stanley increased its holding at $8.05. I think it may not be bad to buy it at $7.2 level today.
2. Filled up the gap: There were 2 gaps after the fall on Aug 17. It was at $5.8 and $6.8. On Nov 13, the price of the stock dropped to $6.8. If this is considered to be covered the gap, then it will bounce back and rise above $7.7.
3. Technical Index: In addition, MACD and RSI are going up in an increasing slope. Yesterday, it went back above the lower limit of the Bollinger line. Besides, the reverse hangman was not too bad yesterday. The trading volumn is barely OK. I considered to be a good signal.
4. Difference between A & H share price: Of course, the PE ratio of 991 is not as good as 902. However, the difference between A & H shares of 991 (104% is larger than 902 (74%). So, the rebounce ability of 991 should be more than 902. I will take a look of this tonight and may buy it as a short term and sell it after it rises to $8.5.
Anwser from Bilibala: you analysis is good, Tai Tong is "under change" type vs Wala is "stable growth" type, in short term, price increase in "under change" type usually higher than "stable growth" ga. The 2nd thing is: big firm change Tai Tong's rating from "sell" to "buy" while remain Wala as "buy", should also create more room for Tai Tong to rise. A&H gap is another good observation, yes, Tai Tong's A&H gap is far beyond Wala, of course, there's reason behind, look at China Merchant Bank (3968), why the variance is that low? not because A shares to low, but because H shares investors think that it worth that much. Therefore, the higher the gap, the higher the risk and hidden issues within that company. However, I know you don't care about those. So your point about A&H gap is still great for short term investing. On top of your analysis, here's few more things you should consider about these 2 companies:
1. Productivity: according to 1/2 half yr 07, Tai Tong & Wala produced 56B MHz & 80.6B MHz electric, with a capacity of 93.88% vs 95%.
2. Debt/equity ratio: Tai Tong's debt increased from $63.5B to $70.6B and debt equity ratio remain at 230%; Wala's debt dropped from $63.3B to $61.8B and ratio remain at around 128%. Which means Wala able to generate 44% more with lesser debt. in 1/2 half 07, Tai Tong's profit increased 42% while Wala only rise 32% (mainly due to 1 time asset sold), but in balance sheet prospective, Tai Tong's profit increase is mainly due to the lauch of new power plant funded by the add'l debt. Continue interest rise in China will create pressure on Tai Tong's profit in long run.
3. Return on equity: Tai Tong's 06 equity return is 11.62% while Wala's is 13.97%. Once again proved that Wala can generate greater profit to shareholders with less debt and higher production.
I hope it helps. In short run, i agree Tai Tong's price should go higher than Wala's based on your analysis. But if it is only 5-10% different, then you also need to consider the trade off between higher potential return vs higher guarantee risk.
