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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Thursday, December 15, 2005

My Best Hong Kong Stock Choice....

Nam Tai EEP [2633] currently trading at around HK$1.35. No debt. Has around 27 HK cents of cash on the balance sheet per share. Annual dividends are around 7+% but there is no guarantee that this dividend rate will continue. The price/earning ratio is around 6x at current prices. The company is around 71% owned by Nam Tai [NTE] listed in the US. The US company trades at around 13x earnings, so there is lots of room for the price to rise on the HK company versus the US listed company. The US company also owns around 70% of another HK listed company JIC [0987].

The main problem with Nam Tai is that management tried to pull a sleazy fast one on the minority shareholders in Hong Kong. In August, the US listed company inexplicably sold several million shares on the open market in Hong Kong, far more than liquidity would allow and panicked holders, since they didn't know why the large amount of shares had hit the market. The price fell dramatically over several days ultimately settling below HK1.50 a share, down from a price of more than HK$2.50 a share at the beginning of the summer. A couple of months later, after manipulating the price lower, they tendered a buyout bid at a price much lower than the company is worth, in my humble opinion. Luckily, they didn't get enough shareholders to agree to the crappy price and they didn't steal the company away. I will buy more of this one since the company has to dividend up cash to US listed company so that the US company can pay a dividend. Therefore, we will get paid to wait while the market figures out that the price should be higher for this little gem.

I currently own a position in 2633 and may buy more in the near future. I may also buy shares in JIC but do not own any currently.


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