Purchase: Lion Rock Group (HK: 1127)

Not sure if timing is right--world economy slowing, China-US trade war likely to get worse, etc--but decided to take a position in two Hong Kong microcaps.

You can find low P/E stocks in HK and unlike Japan, where you can also find low valuation , capital allocation is better (many actually pay out dividends instead of sitting on cash) and try to grow (may Japanese companies are facing deflation and population shrinkage). However, fraud risk is higher is HK compared to Japan.

I will try to write up my evaluation when I get time but here are intial thoughts:
  • out of view micro cap
  • rolling up in big fragmented industry
  • insiders and reputable investor (David webb) own big stake
  • low tax (Bermuda and HK have no witholding tax)
  • competitive industry
  • no moat
  • low growth but potential for China growth if they decide to enter market
  • strong balance sheet
  • high dividend 

Purchase price (HK: 1127): HK$1.18


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