Abaci's Common Sense Investing

This is a hard question. Because more often than not the share price of those losers would rise after I'd sold. At least I seem to believe it that way. But if I really did the math and included the total time I needed to hold the share and the extent of subsequent appreciation, then I'd also probably conclude that it wasn't worth the effort. The time is usually too long and unpredictable. It's for the same reason I now shy away from asset shares with little earnings stream, as I can never predict when the price will meet, if ever, the underlying asset value.

So this years' losers go to:

(1) Dickson Concept (down 9% from $7.91 in Dec 06)

I really thought this was one safe recommendation that I didn't have to worry much. Well looking back I've overlooked its owner Dickson Poon, whom I should've given more 'special' attention. I originally had hoped for a $300m earnings in FY2008, but now after reading the interim results which were flat, full year earnings are likely to be around $200m, at most $250m. That'd give a p/e of 10-13x.

Disclosure continues to be non-transparent and I don't really know what happened in each business line other than some qualitative description by management. There should be positive contribution from the TH stores acquired last year, better sales from Admiralty and Mongkok Seibu, offset by weaker than expected performance of TST Seibu and initial losses of China Seibu. As there's no breakdown this was the most information I could gather.

Dickson itself is still a good story waiting to happen. I guess my timing was wrong by one year as I tried to be clever. The new stores, especially China ones, really take time for their market to develop since they are not typical everyday department stores. HK and other Asian stores (save Taiwan) should also do great this year as everyone is feeling a little rich. Taiwan is never in my equation so I need not worry. $300m earnings a year should still be attainable, but one year later in FY2009.

The only thing which makes me wary though is its owner. I'm still unconvinced about the merit of the injection by Dickson Poon of the TH network in 2006 (I have no way to verify its post-acquisition performance since there's no separate disclosure) and especially over the fact that the entire consideration of $400m was settled in cash, when the issuance of shares could've been an option.

Subsequent development was more unsettling as the name of Dickson Poon was associated with many pre-IPOs placement (obviously making good use of that $400m) and then Dickson the company did a $460m placement in Oct, which caused the share price to drop like a stone from $8 to as low as $6 (since there's suddenly a whole bunch of placees making a quick buck). So it appeared Dickson the company needed the cash after all and one has to wonder why it passed it all to Dickson Poon one year earlier. Perhaps I shouldn't place too much hope on a company named after its owner. It's his concept that matters after all.

Dickson is a good company but with an owner who has questionable intent at times. I don't have a firm view yet but I incline to sell when there's more interest developed in this share. I shall make a note to review my decision again during the Chinese New Year holiday.

DISCLOSURE: I hold 113 at time of writing.