Saturday, November 24, 2007

Bright future for Asian Citrus

I have written before about Asian Citrus Holdings Limited (ACHL) - the AIM listed China - based orange producer.

Why invest in a Chinese agriculture company?

For the diversity, dividends and solid growth prospects I guess.

ACHL currently has 1.2 million trees producing oranges. It is about to start commercial production from another plantation with 1.6 million trees. And for the slightly more distant future it has just leased land for a new plantation where it will plant 2.4 million trees.

EPS for the year ending 30 June 2007 was 32p or 20p if the gains in value of its orange plantations are excluded. The dividend is 4.4p giving it a useful 1.5% yield. EPS grew at a rate of almost 20%.

The trailing PE based on operational profit is about 14.
Tony Tong, Chairman, said ''We are very confident that Asian Citrus is progressing on the right track and we will continue to deliver good value to our shareholders"

ACHL is nice but will I ever get around to buying it?

Being an AIM stock it does not belong in my mortgage portfolio so that leaves the growth portfolio. If any of my holdings ever reach a sell point then there may be room for a small position in a solid Chinese orange company that should show little correlation to European and American stock movements and therefore offer useful diversity.

Don't expect too much excitement from ACHL but when the market is as volatile as it is at the moment it is nice to have a bit of solidity.

Tuesday, November 20, 2007

British Land at half price

The severity of this market correction continues to amaze me.

Some of my blue chip bank holdings are down 40% from their highs in February. Not to be outdone, British Land (BLND) is down over 50% from its January high.

This fall has everything to do with fear of the future and nothing to do with the present.

On the 15th November BLND reported their results for the 6 months to 30th September. Net Asset Value (NAV) was the same but income was up 10% and EPS was up 30%. Real estate companies are valued more on their NAV than their PE and BLND is now available for 50% of its NAV. Even the trailing PE of 16 is starting to look reasonable as real estate companies typically have a PE of around 30. The dividend yield is now a very pleasant 4%.

So why has BLND been hit so hard? Part of it is a general market correction, part of it is a specific property market correction and part of it is a fear of any kind of real estate company due to the sub prime mortgage issue in the US.

However the shares look cheap at this level - so cheap that the company has started a buyback program.

I think the shares are a bargain at this level so I will accumulate some more. There is nothing to say that the price will not go down further though. Anything can happen in this market!

Tuesday, November 13, 2007

Shire is the answer

I have been struggling to find a new company to start accumulating in one of my portfolios. It has to be listed in London, at least a mid-cap, pay a dividend and not a bank or miner.

Previous holdings like ARM, Tescos and Vodafone are too expensive to buy at the moment. I considered Marks & Spencer but I would really like something with a bit more growth potential.

Could Shire be the answer? Shire described itself as a "global speciality biopharmaceutical company." It focuses on ADHD and rare genetic disorders. Revenue is growing at 30%, the market cap. is just under £7 billion and 2008 EPS should be above 50p. That puts it on a 2008 PE of 22.

That is not cheap but then there are not that many growth companies of the quality of Shire on the LSE.

The news that really attracted me to Shire was the announcement that it is partnering with US biotech minnow Amicus Therapeutics to bring its biological chaperone drugs to market outside the US. Amicus's drugs target lysosome storage disorders so it is a potential competitor to Genzyme. Amicus's drugs have the great advantage of being an oral therapy rather than delivered by injection.

I would have liked to have invested in Amicus but it is too risky for my tastes - no revenue and a small pipeline. However now that Shire is working with Amicus I can gain exposure to these exciting new drugs by buying into Shire.

Unfortunately most of Shire's sales are in dollars so I will have to grit my teeth and hope that one day the dollar stops falling.

So Shire it is. I just can't get enough of biotechs!

Saturday, November 03, 2007

The cost of not knowing

Remember me saying how much I liked banks as investments?

Well let's see how three of my bank holdings have done in the last six months:

Pretty isn't it?

Bank shares are being punished because the market just does not know how much they have been affected by the sub-prime mortgage mess. It is hard not to think the worst when the American banks have reported such horrific write downs.

The last reporting season for British banks was in early August and that was for the first half of the year, before the credit crunch reached its climax. The next round of trading updates starts in late November so all us bank investors have had to go on for the last three months is detailed reports of the demise of Northern Rock, shocking results from American investment banks and downgrades of UK banks by the brokers. No wonder the share prices are suffering.

It is pretty frustrating watching a big holding get hammered knowing that it is probably at a great entry price now but it would be irresponsible of you to add more. All you can do is grit your teeth and ride it out.
Solace can be found in the Vodafone chart for the last two years:

In mid 2006 the market was concerned about slowing organic growth and some possible extra tax charges from the government and the shares were punished all the way down to 110p. Just over a year later the share price is over 180p - a nice return for those lucky enough to buy at the bottom.
I am confident that in a year's time the current prices of bank shares will look like bargains. Despite what I said earlier I am still accumulating a few Barclays shares every month so I will enjoy getting some bargains and wait for the storm to subside.