Monday, December 31, 2007

Housekeeping: What to do with those losers? part ii

(2) WKK (up 12% from $1.12 in Jan 07)

This one is technically not a loser as it share price is above water, but its significant underperformance against the index made it so.

I had hoped for something to happen to this M&A prospect when I suggested it last year. And a second privatisation attempt did come by, at $1.68 in April which wasn't generous but still would have netted a 50% return if I sold it back then. Actually I had planned to sell part of my holdings just before the SGM as a hedge, as I knew Senta Wong and his parties would be buying all votes they could muster so there'd be no problem getting rid of my shares.

Then something unexpected happened as David Webb showed up and announced he had enough votes to block the deal. He obviously tried to force a better offer (he suggested $2.5) but failed as Senta Wong did nothing. In the end the share price retreated and we are back to square one. I don't blame Webb for raising the stake as shareholders' movement is sorely missing in HK and his work is good for everybody in the long run.

Things then took another downturn as WKK announced a worse than expected interim results (Jan - June 07) with turnover and profit both sharply down. This was confusing as Senta Wong should've known about this already and if he had waited until say Oct to put up his offer, he would have likely succeeded. From what I saw in the SGM, Senta Wong appeared a competent business man and I guess he should have known about this better than anyone.

So what really is his plan? Is the business really going downhill or is there unspotted value inside that's worth two privatisation attempt? This continues to be a mystery.

I begin to see a pattern in my bad calls. I tend to hang on too long with owners who are smart but sometimes too smart for us shareholders - a good lesson learnt for 2007.

Similar to Dickson, I'm thinking of unloading this share when there's more turnover. Another reason for doing so is to keep fewer shares that have little or no (margin) financing in the portfolio, which is another goal for me in 2008.

DISCLOSURE: I hold 532 at time of writing.

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