We've said it before, but it bears repeating. In our view, GEM-listed Kanstar Environmental Paper Products Holdings Ltd (Kanstar, 8011) is a bubble stock. The paper maker just announced 2005 net profits of $103,219 on turnover which increased 6.7% to $53.67m. At yesterday's closing price of $0.325, the market capitalisation is $1,300m, so that leaves it on a P/E of 12,595. Ah, you may say, but what about the net asset value, surely that underpins it? Nope. Net asset value is just $55.27m (about $0.0138 per share), so it is on a price/book ratio of 23.5. At the end of Feb-06, Kanstar was the 15th largest company on GEM, accounting for 1.75% of the entire GEM market value. When we last warned readers about this stock on 10-Aug-04, it was trading at $0.39. The SFC subsequently investigated the ownership of the company as at the snapshot date of 17-Aug-04, and on 20-Oct-04 a concentration warning was issued by Kanstar. In addition to the 75% owned by Jacky Chim Kim-kiu and the 5.5% owned by his dad, former jailbird and current legislator for brokers Chim Pui Chung, a further 14.7% was owned by 10 other shareholders, leaving only 4.8% unaccounted for. Details of the 10 shareholders were not disclosed. Kanstar said in that announcement that it would make a further announcement after investigating the beneficial ownership under section 329 of the Securities and Futures Ordinance, but 16 months later, no such announcement has yet been made. Turnover in the stock averaged 116m shares per month over the last 12 whole months, equivalent to about 15% of the "free float" - shares not owned by Chim & son. However, if a syndicate is controlling the stock then most of that turnover is just internal to the syndicate. Copyright Webb-site.com, 2006 Sign up for our free newsletter Recommend Webb-site.com to a friend Important notice: All material on this site, except where otherwise accredited, is copyright to Webb-site.com. Media and researchers are welcome to quote from articles on this site, provided that such quotation is attributed to Webb-site.com. The information in this site should not be relied upon by any person in making any investment decision. No responsibility or liability is accepted by Webb-site.com or any person related to it for any loss arising from or in reliance upon the whole or any part of the contents of this site. Persons who are in any doubt about an investment or potential investment should take professional investment advice. From time to time parties associated with Webb-site.com may own long or short positions in securities issued by or related to companies or governments on which we comment. |