Well I didn’t get many days of celebrating a first year of strong performance, the hangover came quickly and pretty brutally. I was very upbeat about the upcoming annual report for Coslight Technology. They even released a profit alert a few days before, which I took as support that second half figures would come in strong, just as the first half had. But I couldn’t have been more wrong, the second half did not come anywhere near the first half. The market was rightfully pretty brutal today, trading down my largest holding by -20%. What one could ask though is, how the hell is the HK exchange rules set when a company is obligated to send out a positive profit alert before its year end figures are released, which refers to the old information released in H1. You live you learn, but this time it cost me some money too.
So what happened?
- Lithium battery sales did not continue to increase, but rather flattened out. So even if it’s profitable business it did not grow profits or margins (both flat).
- The company is not able (or does not want to?) to entirely cut the lead acid battery business (I had thought they were switching over the last production to lithium only), and this still loss making (20 cents per share loss only from the lead acid battery for H2).
- The gaming business which has been a solid cash-cow came with a very weak H2, Average half year profit has been in the 15 cent range, in now came in at 3 cent. This was the biggest surprise for me.
So H2 profits for the company became a disappointing EPS of 0.04 cents. Where I had expected around at least 20 cents, but hoped for 25 cents.
I’m not ready to give up yet though, so I keep my shares.
- Lithium battery sales long term case still looks strong (EV S-curve coming in a few years), although many companies are ramping up production, there is far fewer that has Coslight’s track-record of selling quality batteries (not even Samsung SDI has managed that as well as Coslight).
- Still hopeful that they will cut their losses in the lead acid business, or that it turn profitable (competitors in lead acid like Tianneng has been talking about better margins going forward).
- I hope the gaming business can bounce back, although I do not have much support for that more than that historically over all the years they managed to keep and grow this business. I believe if they spun out the business with it’s track-record, given how hot mobile gaming companies are today, just that company could be worth somewhere around 30-40% of Coslight’s MCAP.
Sell Summit Ascent Holding
Another report, on the same day, also disappointing. The volume ramp up I was speculating about, did not materialize in Q4 and I exit this position which was my smallest holding and more speculative (high risk/reward). In hindsight I should have been more patient to wait for a better entry level in this more speculative trade and this would have been a profit.
One thought to “Anniversary hangover & sell Summit Ascent”
A manager made a mistake and lost 1m $. He was not fired. Instead, his boss kept him with the understanding that the guy had learn stg (at a high price). His boss only asked him not to repeat the same mistake again.
Think of this guy today !