Wednesday, November 14, 2012

My investment adventure with YHM (formerly known as China Enersave)

I invested in YHM, formerly known as China Enersave, since 2008. Recently, I noted that it is currently one of the top traded stock in Singapore stock market. I would like to share with my readers my investment experience on this stock.

Back in 2008, China Enersave was a company that specialized in building and operating biomass generation plants in China. The business model was good as it collected waste biomass from farmers in China and used the waste as feedstock to generate electricity. However, instead of focussing on the renewable energy sector, the company made the terrible mistake of investing in one coal powerplant. The management team hope to generate revenue from the coal powerplant to fuel the expansion of its biomass plants. Apparently this strategy did not work out as the fluctuating coal prices hurt their revenue from the coal powerplant. Second mistake by the company was that it had diversified it's business ventures too much and had lost focus. At one point, it had 7 to 10 business associates/subsidiaries, ranging from property investment, renewable energy and marine scaffolding. Because of these factors, coupled with the financial crisis in 2008-2009, the company was on the brink of being liquidated in 2011. In 2012, the management was changed and the company changed its focus to marine offshore operations. It subsequently changed its name to YHM, which stands for Yew Hock Marine.

One of the amazing things about China Enersave is its ability to attract white knights investors to its rescue despite losing money year after year. In its heady days, they even counted Dubai soverign wealth fund as one of their institutional backers. Unfortunately, because of mismanagement, they lost the plot and subsequently everything went downhill. At one point, the company even have to pay their accountant through issuing shares. So to be honest, when YHM announced that they are in the midst of securing investment with a partner, I am not surprised that they would be successful. After all, this company has a knack of securing funding from big players.

My current investment in YHM is only worth less than a hundred dollars after the share consolidation in 2011. I had invested $8000 in total and still held on to the shares, but I had long written off this investment. Even though Ezion had declared an offer to invest in YHM, I had much reservations on whether the company is able to turn around and sustain its operations. For the last 4 years, I had lost faith in the company as I saw the stock prices tumbled from $0.22 to $0.0001. Even though the management had changed and the business model is different from its predecessor, investor should still exercise caution when investing in this counter and refrain from speculating. At least wait for another three years of sustainable profitable operations before considering to invest in this stock.

Magically yours



2 comments:

  1. Just curious - why did you not accept that you had made a mistake and cut loss?

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  2. You are right, I was blinded by greed and ego. All signs pointed that I should have cut loss and pulled out but I was stubbornly stupid. Instead of cutting loss, I dollar averaged and pump in more money. It was a stupid mistake.

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