Dapai: Is the Bull Coming?

Dapai has a spike in trading volume today and break the 200D MA resistance, down trend resistance and 61.8% Fibonacci Resistance. Dapai may start an uptrend if the stock stays above $0.235, a very reliable resistance turned support level.

This Post Has 29 Comments

  1. isaac

    any idea of the reason behind the spike in volume today?

  2. Marubozu

    I have no idea.. Let see whether Dapai continues to shoot up.. Sometimes may have some indirect insiders start buying up because they know some unreleased news.

    Anyway, this is my long term value investing stock. I invest this stock but not trading this stock. Will only sell when the stock price reaches the intrinsic value.

  3. Marge

    Hi, thanks for sharing….what is intrinsic value for Dapai? is it same as “fair value”?

  4. Grace

    Hi Marubozu,

    May I ask how much is your valuation on Dapai’s intrinsic value? I am invested in this too, and I see the value shall worth mininum 40-60 cents.


  5. Marubozu

    Hi Grace, I have attached my intrinsic value calculation for different scenarios using different valuation methods in the above comment. Pls click the link and you will be directed to my previous post. You can find my IV calculation for the worst case and best case scenarios too.

    Using MOST CONSERVATIVE Intrinsic Value calculation (ie. 0% Growth for the next 10 years), IV = $0.48 (51% Discount to current price of $0.235)


  6. Grace

    Thanks Marubozu. Yes I read those links and the 3 methods you mentioned for valuation. Cheers!

  7. Desy

    Bro, you smell anything fishy about this counter? Will it be like chinamilk?

  8. Marubozu

    Fundamentally the company is still good. Base on the latest earning result, the luggage production problem is at least contained. Dapai is on the way to build up new luggage factory and open the new stores. The company is still making money and generating positive cash flow. So, nothing fishy from business point of view.

    Of course, if Dapai’s Top Management “fakes” the number, nothing we can do as retail investors. We can only depend on the Independant Director to do their due diligence.

  9. Desy

    Agree, in your point of view do u think it is a good investment counter?

  10. Marubozu

    Base on all the facts now (excluding those things we don’t know in the public), I think this is a good long term investment.
    (1) The stock is extremely under value.
    (2) PE is only 3 (base on $0.195)
    (3) Dividend Yield is 6.85%

    I don’t think we can find many stocks in Singapore with so huge upside potential and with good dividend.

  11. Desy

    Bro 0.18 .. Advice..

  12. Marubozu

    Spill over effect from China HongXing and Hongwei. People lose confidence on S-chip stocks. If you look at the Time & Sales, mainly sell down by the retail investors.

    The risk remains whether you trust Dapai’s financial report and whether the auditor audits the account in due diligence. There is nothing wrong with the recent financial result.

    Current stock price is even more attractive now.

  13. Desy

    Bro, where do you see the counter transaction to determine retail or fund mgrs?

  14. Marubozu

    Fund Managers will not enter the trade with 10 lots, 20 lots, 50 lots…

    If you convert these lots to the $$$, you can see how small is this amount compare to the amount Fund Managers invest.

  15. xinyang

    Marubozu,how is your loading for Dapai now? are you buying somemore for this 0.18 prices? confused now…

    Now every half cent downwards is 3% chopping off…

    one more question, from the analysis of past annual reports, is ChinaHX and Hongwei really having scam on faking financial statement? i thought ChinaHX report was healthy, until recent issue surfaced. Same “healthy” feeling goes to Dapai, that is why a bit uncomfortable.

    Please advise. thanks.

  16. Marubozu

    Xinyang, I understand how you feel. It is the battle of emotion vs logic, greed vs fear now!

    If you analyse logically, there is nothing wrong with this company. The “feeling” is just guessing and emotional response.

    Stock investing is a risky business and we as retail investors depends a lot on the auditor and independant directors to do their due diligence. This can happen to any company.

    Suggest you do a Risk vs Reward Analysis & your Risk Appetite Analysis on this stock.


  17. Desy

    This counter day by day resemble “HongXing”, I choose to divest. Not being able to see the potential n risk exposure. CiaoZ..

  18. Marubozu

    Dapai Chairman bought 14,100,000 shares at $0.19 on Mar 31, equivalent to S$2.8 Million. AGM on April 19, Suntec City.

  19. Jaz

    Marubozu, I loaded this at .215, and got a shock of my life when I found it to be .1 now. What is your opinion of this counter now?

  20. Desy

    Bro.. Why happen to dapai ..

  21. Marubozu

    Dapai proposed to issue Rights of 1 for 4 $ $0.08 for a potential acquisition of a backpack and luggage business segment.

    For detail annoucement, check SGX Announcement website here. http://www.sgx.com/wps/portal/marketplace/mp-en/listed_companies_info/company_announcements/

  22. Jaz

    u think dapai worth holding on?

  23. Marubozu

    Jaz / Desy,
    I extract the key points in the announcement here for my view.

    Purpose of the Rights Issue and the Use of Proceeds
    The estimated net proceeds of the Rights Issue (the “Net Proceeds”), after deducting estimated
    transaction expenses of approximately S$0.5 million, will amount to approximately S$19.3
    The Company intends to utilise the Net Proceeds for the following purposes:-
    (i) the entire amount of the Net Proceeds of S$19.3 million for financing in part the potential
    acquisition of a suitable target in the backpack and luggage business segment which the
    Company is currently negotiating, or
    (ii) if the potential acquisition being unsuccessful, the entire amount of the Net Proceeds of
    S$19.3 million will be used for the Group’s future expansion of sales and distribution
    networks and channels as well as general working capital purposes.
    Pending the deployment of the Net Proceeds, the Net Proceeds may be deposited with banks
    and/or financial institutions, invested in short-term money markets and/or marketable securities,
    as the Directors may deem appropriate in the interests of the Group.
    The Company will make periodic announcements on the use of the Net Proceeds as and when
    funds are materially disbursed and will provide a status update on the use of the Net Proceeds in
    the annual report.
    4. Irrevocable

    if the potential acquisition being unsuccessful, the entire amount of the Net Proceeds of
    S$19.3 million will be used for the Group’s future expansion of sales and distribution
    networks and channels as well as general working capital purposes.

    Personally I feel there are good and bad elements in this announcement:
    Good (to me):
    (1) Approximately 40% ($0.08 compare to $0.14 prior to announcement) is a HUGE Discount to long term shareholders in view of the company NAV of $0.32 and PE of 2.
    (2) Issueing Right to acquire a business in the same field to enhance Dapai competitive advantage is a right business strategy if the company can get a higher Return on Investment. There are a few scenarios of the acquisition targets: it can be a Foreign Brand to be sold in China, Foreign Brand in oversea market (so that Dapai can expand their business outside of China), Local Chinese Brand (so that Dapai can extend their market share in China). If Dapai can acquire a Premium brand which can command a higher selling price, this will definitely have a nice adder into the Top line Sales Revenue and Bottomline Profit Margin. In addition, this acquisition strategy has been shared in 2010 General Meeting and this is not a shock to me.

    Bad (to me):
    (1) Offering Right with 40% discount to the market price is very unusual. This discount will definitely send Dapai stock price to close to $0.08 which is happening now. The chairman is either worried that not enough subscribers to raise enough fund or he really thinks about the shareholders. Just imagine that if Dapai is able to acquire a SOLID PREMIUM Brand, it is really cheap to own the shares of Dapai. Another thing to take note that the Chairman has more than 50% Dapai shares and he will fork out less money by himself for this Right Subscription.
    (2) if the potential acquisition being unsuccessful, the entire amount of the Net Proceeds of
    S$19.3 million will be used for the Group’s future expansion of sales and distribution
    networks and channels as well as general working capital purposes.
    To me, this is a bad management decision to the shareholders. Dapai is cash rich base on the balance sheet and does not need to hold so much cash. Dapai can choose to return the fund to the Shareholders by either giving out special dividend or buy back shares. This decision really creates fear to the existing shareholders and investors, worrying the company has serious cash issue. I attended the last GM in May and the Chairman, Singaporean Auditors and Singaporean Independant Directors have pledged their assurance that the cash is really in the bank. It is up to the retail investors whether to believe them but this is the only choice if we want to invest in the stock market. NO COMPANY CAN BE TRUSTED 100% in Stock Market.

    From business strategy perspective and company valuation, the company is doing the right thing and the valuation is cheap. I am using LOGIC for the analysis (NOT EMOTION) which I think many investors out there who get burnt do not agree to my analysis. Investing Dapai is base on our TRUST and CONFIDENCE in the company in the LONG TERM, but not for those weak heart investors.


  24. Jaz

    thanks Marubozu, your analysis is much appreciated. will continue to look out for this stock and hope its strategy succeeds soon!

  25. Desy

    Gd luck to all dapai supporter.. I long long ciao Liao.. Bet it will be chinam n hongx ..

  26. Darren

    Hi Marubozu,

    I have always appreciated your insightful analyses and I have a few questions for you:
    1. Are you still holding on to Dapai?
    2. Is this still a good investment?
    3. Do you have a cut loss?
    4. Do you think it will reach $0.02?
    5. Is it ok to average down?


  27. Marubozu

    Hi Darren,
    I am reducing the size of the investment of Dapai to free up cash to short sell other stocks. This means that I am cutting loss partly but I am still holding some for long term investment unless the company fundamental become very bad and start losing money badly.

    In this bear market, anything can happen even though the stock is under value.

    It is not advisable to long any stocks (not Dapai only) in this bear market. Thus, this is not the right time to do any average down in any stocks.

    Hope it helps.


  28. Marubozu

    Base on the latest Dapai’s Earning announcement on Aug 12.
    Some WARNING signs observed:
    (1) Revenue drops 20% comparing YoY.
    (2) Big drop in Net Profit Margin.
    (3) Decline in Gross Profit Margin due to 11% YoY drop in ASP (Average Selling Price) –> indication of fierce competition in the market.
    (4) Huge increase in Trade Receivable as Dapai extend the credit terms to the distributors from 60 days to 90 days!

    In short, the above indication does not look good because Dapai’s fundamental is weakening and it is not expected to see improvement in the next 2 quarters. Need to monitor how’s the newly opened 500 stores are doing for the next 2 quarters. If Dapai still does not have significant improvement in their Sales Revenue and profit margin, that means that their business expansion strategy has failed.


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