TMCnet News

Tech stocks are cool again with Alibaba listing [Sunday Times (Islamabad)]
[September 20, 2014]

Tech stocks are cool again with Alibaba listing [Sunday Times (Islamabad)]


(Sunday Times (Islamabad) Via Acquire Media NewsEdge) Singapore tech stocks to watch With the listing of China's e-commerce giant Alibaba on the New York Stock Exchange, the buzz around tech stocks is back.

Sunday Invest looks at popular stocks like Apple, Google and, closer to home, Singapore tech stocks that investors can explore.

Analysts say the potential for tech companies is great, but that tech stocks are a medium- to long-term investment, and the technology sector has traditionally been considered cyclical.

Hot new listing: Alibaba Mr Kay Van-Petersen, Asia macro strategist at Saxo Capital Markets, is bullish about Alibaba's long-term prospects.

He says: "It is the kind of company your kid, grandkids or great-grandkids will go, five or 10 years from now, 'How can you not buy Alibaba?' It is the kind of company that seems very crystal clear in hindsight that you should have bought it." Analysts note that at US$68 per share, you are buying the stock at a price earnings ratio of about 29 times, and compared with Facebook, for instance, it is a 50 per cent discount.



Mr Van-Petersen says Alibaba has an entrenched monopoly in China. United States companies such as Amazon, Facebook or Google "can't enter China the same way Alibaba can enter Europe or the US".

The risks of investing in Alibaba include its unusual structure. Investors are not buying its stock per se, but into a Cayman Islands company which has a contract to receive Alibaba's profits.


Dr Jay Ritter, professor of finance at the University of Florida, has previously said that this is "just one more risk on top of many others, such as corporate governance, political risks and business risks, that investors have to bear".

Other popular tech stocks No introduction is needed for giants such as Apple and Google, which also compete against each other in the smartphone market, for instance.

CMC Markets analyst Desmond Chua says that as a product-based company, Apple is still the market leader in terms of innovation.

His take: "That is why it will remain as one of the key stocks to have, as Apple still comes up with strong creative solutions." Google, on the other hand, is facing a lot of competition from various online search engine platforms, notes Mr Chua, "from Alibaba's search engine to spin-offs from Tencent or Baidu, which are also search engine and e-commerce combined".

As for social media platforms such as Facebook and Twitter, Mr Chua notes that there is a Chinese equivalent for every type of social media, such as Weibo, often referred to as China's Twitter.

Analysts have said that Facebook and Twitter are overvalued, but some believe their growth potential makes up for the current stock price.

Mr Van-Petersen says long-term investors must also be aware of potential drawdowns.

For instance, Facebook's stock has gained 100 per cent in a little over two years since its listing, but it did hit a low of US$17.55 from its offering price of US$38 at one point.

Mr Chua also adds that the Chinese companies seem to be growing at a faster pace.

"With Alibaba's listing, it changes the landscape. Previously, very few people knew about Chinese e-commerce companies," he says, adding that this could bring other Chinese firms to the attention of investors.

Singapore stocks under the radar While big names such as Apple and Google dominate the list of tech stocks that investors like, here are some Singapore names that have gone under the radar.

A portfolio of patents, the potential to license products or software and constant innovation are some of the reasons these companies may see an upside.

Name of stock: Acma Price: 1.6 cents, as at Friday What: In the 1990s, Acma was a well-known company which had many large deals focused on tech and engineering, especially with Russian national gas provider Gazprom.

More recently, the company has been pursuing fuel-saving technologies.

For instance, its unit Neftech has its own technology to reduce fuel usage on ships. The potential to help shipping firms save millions in fuel, and the potential of licensing such technology, may give Acma a boost back into the limelight.

Name of stock: Creative Technology Price: $2.14, as at Friday What: In Creative's heyday, its name was on everyone's lips, and co-founder Sim Wong Hoo went on to become the poster boy for aspiring Singapore technopreneurs.

Creative came up with the sound card in 1989, and soon became the leader in sound cards and the MP3 player business in the 1990s, when it listed on the American stock exchange Nasdaq.

However, Apple's iconic iPod spoilt the party.

These days, Creative is focused on the audio space, producing new products such as portable speakers with its Sound Blaster technology.

It revealed its latest product, the Creative Sound Blaster X7, at mega electronics show IFA in Berlin.

It is perfect for home owners, as it can link laptops, smartphones and even game consoles directly to dedicated speakers.

Creative also has a portfolio of patents, which could be unlocked for rights or licensing fees in future.

Name of stock: Trek 2000 International Price: 32 cents, as at Friday What: The thumb drive will forever be known as the memory device that took down the floppy disk, and is a product born and bred in Singapore by technology solutions provider Trek 2000.

The company failed to capitalise on its invention, too eager to share the then new thumb drive technology while the patent was pending.

But Trek 2000 has since bounced back from its mistakes with a patent treasure chest. It has been granted more than 380 patents around the world.

In February, Trek 2000 announced that its proprietary FluCard was granted patent protection for 20 years across major jurisdictions.

The FluCard can be used with gadgets that have an SD host slot. The device adopts the Wi-Fi function when plugged in, allowing it to wirelessly transmit files to other Wi-Fi enabled devices.

Trek 2000 has won the support of the global SD Card Association, which is founded by Panasonic, Toshiba and SanDisk.

The idea that a home-grown company has the potential to once again revolutionise the market is appealing.

A stock on the Singapore Exchange (SGX) that realised its potential Name of stock:Sarine Technologies (formerly Sarin Technologies) Price: $2.97, as at Friday What: The Israel-based precision technology com-pany, which specialises in diamond cutting and grading tools, is one company that shows there are gems in SGX.

Its automated inclusion mapping system, for the rough diamond industry, may become a market leader.

Remisier Alvin Yong says: "Sarine is an example of a very successful tech stock that has realised its potential. It was favoured by fund managers and is profit making." He noted that it has good patents and good patent application.

He adds: "Diamond companies lease or license Sarine's software, and use it when they try to model or cut the diamonds. As the saying goes, how you cut a diamond will determine a diamond's value.

"For those who spotted this company - it was quite lacklustre for a while - they are being well rewarded now. It started going up over the last two years." What else to consider when investingin a tech stock Mr Yong says: "There is a potential that some of the underlooked technology companies could go the same way as Sarine, but the onus is on the investor to spot these companies." He says valuing tech companies is an art, because you never know when their patents might come into the market in a commercially viable manner.

Mr Yong says: "Creative was, at one point in time, more than US$60 (per share), now it is $2. It could be the case of the market underlooking Creative now." He also says that this is an example of how tech stocks are cyclical in nature, a risk that investors have to bear in mind.

The remisier adds: "The tech company you invest in must have a very good research and development team. They have to keep coming up with products that are relevant to the market." [email protected] (c) 2014 Singapore Press Holdings Ltd. Provided by SyndiGate Media Inc. (Syndigate.info).

[ Back To TMCnet.com's Homepage ]