Posted by: donmihaihai | June 14, 2008

7 years of inactiveness.

TPV belong to the earliest batch of stock that I bought. 7 stocks were purchased at one go when I started my stock journey and at this moment, 6 stocks were sold, the last remaining stock is TPV. As a group, there were lots of activities, especially in the 1st and 2nd year after I bought these stocks, but for TPV, the activity is at minimum, the only other action after the initial purchases is buying an additional stakes in Mar 2007.

So what are the reasons that cause my inactiveness on TPV? Thinking about it and answering it myself.

1) Stock price. TPV has never reached a price where I consider as expensive. While the price is not a static and keep changing over the year, TPV is never an expensive stock. The decision to hold easy is relatively easy to make for TPV.

2) Reinforcement of growth stock and good results. It is easy to hold on to a stock when the company keeps growing and producing good results. After seeing what had happened, it is easy to expect more of the same thing in the future even without noticing that some part of the company is deteriorating.

3)Reinforcement of good results from holding on to TPV leads me to hold on longer. This is easy, the early benefits from holding on to TPV make me to hold it longer, expecting the same kind of results in the future from holding it, sometime missing opportunities too.

4) The stake is small. It doesn’t worth the effort to make chances, or try to trade around when amount invested is small.

5) Dysfunctional thinking.

Inactive yield good results too. With the initial purchase price of $0.42 and the last trade price of $0.88 and dividends collected over the years, sitting on my ass, doing nothing produce a annualise return of 14.11%, near to the 15% target I like to cross. And this return does not happen because TPV share price merely become more expensive. In fact, the reverse is true as TPV is trading at a cheaper valuation compare to my initial purchase price. This also means the current return come from increase in earnings over the year. The return will be higher if there are no dilution of shares through stock options and new shares issue.

TPV had just announced it 1Q2008 results. Pretty good as NPAT increased by 75% while revenues increased by 27% as the reverse of margins compression and cost control yield better NPAT. TPV is gathering bigger market share in the monitor business, faster than its competitors. This is good news as the business of TPV is the story of scale. But this growth rate is going to decline as the industry growth rate is slowing. Consolidation of market share will be in the hand of the top few players which can be seem in that within the quarter, top 3 player hold 55.7% of the total supply, an increased of 3.2% from 4Q2007. TPV alone take 2.7% of the inclement while Samsung market share dropped 0.1% and Innolux market share increased by 0.6%. I won’t be surprise that the top 5 or 6 players in this segment will gather bigger market share going forward as the growth in LCD monitor is slowing toward single digit going forward and TPV will be one of the winner or biggest winner.

Another helping hand for TPV is the LCD TV as it helps to share the cost. While this is a promising segment, independent contractors are not benefiting much from it as most of the LCDs are still being manufacture by the brands inhouse, which are mostly from Japan. TPV is losing market share to the brand name. This show that unlike LCD monitor, it will be a hard and long road for independent manufacturer like TPV to gain large market share in a short period.

While LCD TV is going to be the future for TPV, the wave for LCD monitor is over and has been attacked by alternative product like notebook which is not what TPV is in.

While growth is going to be slower, CAPEX will not increase as much too. This path the way for better balance sheet by reducing debt and increasing dividend payment. It can be seem that despite huge CAPEX requirement in the last few years, TPV is unwillingly to increase debt and actively reduce debt when it is able to do so. In fact, the unwelcome news is that TPV is diluting EPS by placing big block of new shares but that do help in reducing debts. With a history of giving out a portion of it earnings in dividends, I am expecting TPV to do more of the same thing in the future with increasing cash.

While TPV is a well ran company, I am not expecting myself to holding it for another 7 years. In fact I don’t think I will hold on to TPV for anything more than 10 years. The current reason for holding on to TPV is that it is selling at a cheap valuation so it is illogical for me to sell them now or swap TPV for another attractive company selling at a depressed price. But in the next few months/years, movement of the market will provide opportunities for me to sell TPV at a valuation that value TPV more properly or in a situation where TPV can do a meaningful swap for something at a better price or at a depressed price.

This small investment in TPV provides lot of lessons and learning, which benefit me more than the monetary gains.

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