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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » PC House and the Global PC industry

PC House and the Global PC industry

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21PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 12:59 pm

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@kukumarx wrote:
@smallville wrote:
@seek wrote:A shop owned by PCH in Unit Plaza is now selling clothes. Smile

I went to UP after abt a year.. Didnt see the clothing shop though.. Where was it? Or just a joke Wink


Its on the basement level facing Galle Road, under BOC

yes, that's the one.

22PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 1:13 pm

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
This is a share that gave me 200% profit within 2-3 weeks, thanks to MW. It covered all my losses.

If trend continues, we will see this share is trading at 1/= very soon.

23PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 1:26 pm

Slstock


Director - Equity Analytics
Director - Equity Analytics
Some of us started warning about PCH since early 2012 when revenue started dropping along with profits. Think there is about a 60% drop for early 2012.

To keep up in the Hardware IT industry one needs to be very innovative, competitive with prices (while mainding margins), customer friendly with after sales and most importantly have a risk management system in place as tech changes every 6 months.


In a country like ours one needs to be more careful as many people do not have extra spending money to buy absolutely non essentials.

Along with Chinwi's great update and above issues one can realize why companies like PPCH will mot do well during times of high inflation.

If one is still interested in PCH , I think it is best to think short term only. Untill PCH comes up with better plan and a cost/risk management system I would not go long with PCH.

Positives:

However PCH is now trading at well below NAV (but many better companies are too) . PCH is also highly speculative as there are only few in its sector so any news can push this up suddenly.

24PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 5:34 pm

Chinwi


Associate Director - Equity Analytics
Associate Director - Equity Analytics

I did not predict anything for future.

Remember , when a company failed to perform its directors take remedial actions and normally withing few months or few quarters they convert it to a better one.


BTW,
However PCH is now trading at well below NAV

@ slstock, is majority of NAV in inventories ?

If that so,
1) they have to sell them before getting outdated.
2) it is another hindrance for this type of companies.

25PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 5:57 pm

Slstock


Director - Equity Analytics
Director - Equity Analytics
Their inventories are around 50% of assets. Seems very risky if they cannot dispose on time.


But their total Equity ( which makes up the NAV) is less than their inventory amounts right?


Didn;t these guys have BPO plans during the "hot period" ? Looks like it died down or never got implemented.

If they want to diversity into IT( as a buffer for hardware sale shocks), I think it might be wise for them to venture into software development side. But am not sure whetehr they have the contacts, the expertise or the timing right to do so now.



@Chinwi wrote:
I did not predict anything for future.

Remember , when a company failed to perform its directors take remedial actions and normally withing few months or few quarters they convert it to a better one.


BTW,
However PCH is now trading at well below NAV

@ slstock, is majority of NAV in inventories ?

If that so,
1) they have to sell them before getting outdated.
2) it is another hindrance for this type of companies.

26PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 8:24 pm

Fresher


Moderator
Moderator
I still can't find my post on this anywhere, posted a few months ago.

Let alone revenue and profit, look at the working capital
Loads of receivables and it keeps increasing - can they recover it?
Loads of inventories and it keeps increasing - most should be out dated and can they sell it?
Not much payables - no one seems to be giving them credit sales?
Increasing borrowings

Do the math
Where is it headed?

27PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Thu Feb 21, 2013 10:24 pm

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Chinwi wrote:
Remember , when a company failed to perform its directors take remedial actions and normally withing few months or few quarters they convert it to a better one.
I think that is why long term wise investers start to collect things at such a period while most of the so called traders sell their stake at a loss.But anyway If that's to work Directors should be competent and trustworthy.

28PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 3:52 am

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Thanks Chinwi, What a wonderful post. Thoroughly enjoyed it. study

I really hope Rishan will not become another Justin Meegoda.

29PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 7:35 am

stumpy

stumpy
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
cheers
Thanks a lot Chinwi for your awesome post!
Learned many background stories of well known guyz!
Keep up the good work boss!

30PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 8:55 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
npp wrote:I still can't find my post on this anywhere, posted a few months ago.

Let alone revenue and profit, look at the working capital
Loads of receivables and it keeps increasing - can they recover it?
Loads of inventories and it keeps increasing - most should be out dated and can they sell it?
Not much payables - no one seems to be giving them credit sales?
Increasing borrowings

Do the math
Where is it headed?

Nice npp.

See what we can get by looking at a report !

31PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 9:03 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@stumpy wrote: cheers
Thanks a lot Chinwi for your awesome post!
Learned many background stories of well known guyz!
Keep up the good work boss!

Mee too. Bein' in the IT ind for over 10 years, I only knew 10% of that story Wink

What a nice atricle it was by Chinwi..

I, sometimes wonder, where the hell Chinwi got this insights!! study

32PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 10:13 am

lion


Senior Equity Analytic
Senior Equity Analytic
Hi Guys, this turned out to be a great post....
points to remember,
1. Signifcant Drop in earnings/Revenue should not be ignored.
2. Continous awareness of the industies is essential.
3. The quality of the senior management is very essential to any bussiness.
4. Should not buy a share simply because its trading at all the time low price.

please update any points i have missed.

33PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 10:53 am

stumpy

stumpy
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Chinwi wrote:
npp wrote:I still can't find my post on this anywhere, posted a few months ago.

Let alone revenue and profit, look at the working capital
Loads of receivables and it keeps increasing - can they recover it?
Loads of inventories and it keeps increasing - most should be out dated and can they sell it?
Not much payables - no one seems to be giving them credit sales?
Increasing borrowings

Do the math
Where is it headed?

Nice npp.

See what we can get by looking at a report !

Learned a new lesson! Thanks a lot npp!
http://forum.srilankaequity.com/t22721-pch-report-finally-out

hashan2012

hashan2012
Manager - Equity Analytics
Manager - Equity Analytics
Actually PCH is good to buy now.Trading under NAVP and RSI 30 Below

35PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 8:05 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@hashan2012 wrote:Actually PCH is good to buy now.Trading under NAVP and RSI 30 Below

Buffett on "Cigar-Butt" Investing
By Reyer Barel, Tuesday, December 9, 2008, 1:15 PM | cigar butt investing, The Essays of Warren Buffett |
In the Essays of Warren Buffett, Warren describes some of his past investing mistakes. He notes that his first mistake was buying control of Berkshire, which at the time was involved primarily in the difficult textile manufacturing business. Warren admits that he bought the company simply because it looked cheap which was a mistake.

Buffett describes the cigar-butt style of investing as buying a company at a sufficiently low price and then waiting for a favorable "hiccup" in the companies fortunes that creates an opportunity to sell the stock at a profit. The comparison to a cigar-butt is made because the company in question usually has "one puff of smoke left". Buffett writes that "unless you are a liquidator, that kind of approach to buying businesses is foolish".

Buffett goes on to say that he had to learn the hard way, several times, to understand the principle that "time is the friend of a good business but the enemy of a mediocre business". He provides a clear example on this lesson with Hochschild, a department store company. Buffett bought the company at a large discount to book value and the deal included some hidden real estate value and a large LIFO inventory cushion. At the time Warren felt confident on the purchase, but three years later he felt fortunate to be able to exit the investment at a break-even.

Buffett comments that over 25 years, he has learned that it's best to avoid difficult business problems and not to try to solve them.

36PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 8:18 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Any share will be good to buy at the right time for a TRADE.

The issue is , is anyone very confident and comfortable to buy and hold PCH for severalk years as an INVESGTMENT.

There is a big difference .

People easily mix up trading with investing. If majority of the top 20 share holders of a company always traded, my god CSE will be in a terrible mess.



@hashan2012 wrote:Actually PCH is good to buy now.Trading under NAVP and RSI 30 Below

37PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Fri Feb 22, 2013 8:30 pm

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@hashan2012 wrote:Actually PCH is good to buy now.Trading under NAVP and RSI 30 Below
Having scanned the 9-month financials of PCH, I find nothing that makes me want to own the share:
Revenue down 43%, Profits down 96%.
Inventories have piled up; Receivables are also up.
Borrowings have increased.
Cash & Cash Equivalents are negative.

If I wanted to buy shares, I would buy shares of some other company...

38PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Sat Feb 23, 2013 12:03 am

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Chinwi wrote:The current plight of PC house is not strange or unexpected outcome for many of us. We cannot declare this was the definite state for that company but most of us suspected something like this would happen due to many reasons.

At this moment I did some unorthodox writing or analyzing to explain some significant facts, not about the particular company, but related to many similar kinds of companies engaged in the same business: computer hardware trading. .

The initial business model of all these companies was very simple: bringing computer parts from the countries like Singapore, assembling and selling them with a profit.

If you try to identify how they blossomed in the initial stages and what happened next you may find many similarities in most of these computer companies.

Actually these companies we talk were not established by any big firms in a big way to enter into this business.

About 25 years ago, there were few young individuals who came aware of the opportunities available in this field , mostly by chance, started hand carrying of computer parts from Singapore and selling here. Most of them were school leavers, set to this business after doing several odd jobs here and there.

We should go back to late 1980s to start this story.
One of the foremost of computer hardware business was one Jagath Ranawaka , a self studied computer enthusiast, with a good family background. He started a Limited Liability company called Jagath Robotics.
From mid of 1980s they supplied machines and services to Government Departments. I think they expanded opening some branches but later-on confined their presence to Colombo. They are still in software business at manageable capacity without much publicity.

Then, one Krishan , a boy recruited by Jagath RL who got the chance to visit Singapore for several times for his company while working here in marketing side. After learning everything about this mostly unknown bargain business he started a separate company with an educated chap called Ravi. (… I think, Kishan’s farther , Mr. Theodore worked in Irrigation Dept. and JRL supplied machines to them.... ) (I think this Ravi was then unknown Raigam owner – Dr. Ravi Liyanage) They registered a company named Kobian and supplied lot of computers to various Govt. institutes under the same brand name (Kobian) at healthy margins . Actually Kobian was the name of a shop in Singapore, Jagath RL and K. used to buy computer parts .

Then we see boys such as R. Gamini, Nilu, Janaka, Sanjiva , Wije etc. joined to this lucrative business. At the initial years all of them followed the same model and same routine. Fly to Singapore , stay 1-2 nights in a small room, go to Sim Lim Tower, find cheaper places to collect parts, hand carry the goods to Colombo and sell here with a good profit. If they buy a hard disk for 4000/- they sold it here at least at 7-8000/-. The profit margin of these initial players was over 80 – 100 % because assembling hardware and installation of software was an alien thing for almost everybody in SL .

Most of the chaps joined later in this list were actually the “Golayas” of senior players. Some were hired by some small companies for transporting goods from SIN to CMB by air. It was a risky setup. When you use a golaya to carry your stuff he quickly learn the secrets and places, starts his own business after few visits !.

Most of them used same room to stay in Singapore sharing same mat and pillow.
Actually some people who later became well known in the circle joined the group by accident.
One poor fellow ( name withheld) marooned in SIN after failed job attempt , given shelter of that ‘room’ by others. As a support, he was given chance to fly back to CMB carrying computer parts of some other guy who was in the game. As this innocent looking guy did it nicely he hired him several times. When they go to the suppliers at Sim Lim the new man was introduced to the Singaporeans as his partner. That boy did his job nicely for few months. Suddenly he disappeared and never came to that room again.

Few months later the senior guy found him Colombo, when he visited a big computer shop in Unity Plaza . Then he realized his lost golaya is the owner of that shop ! (when the cashier girl called him ‘Sir’.) By then, ‘golaya’ was hiring some other ‘golayas’ to carry parts for him from Singapore !.

At that time knowledge of hardware was rare and no one tried to even to open the CPU. Hence, this business was lucrative and most of these guys were able to earn lot of money, recruit staff , start companies and establish business places in Sri lanka. Supplying to the Govt. was very profitable even after paying commission to the officials.

Janaka (Ratnayaka) started a place called Computer Island. Sanjiwa (became Sanjiva Ayiya) who used to visit Neat Computers in Singapore to buy parts started a business in the same name, just like local Kobians did. Sanjiwa, a Sinhala man, later gave jobs to many youths and became a pillar in the industry now dominated by Muslims.

We also can find Naleem of Barclays and many others joining to this business. Naleem is still maintaining his reputation and satisfied within his limits. He did not try to expand his business to vulnerable levels like others.

Rishan of PC House is actually a young fellow joined at secondary stages of this hand carry business by watching at others progress. Not like for earlier guys I suspect he was given support by some big financial source because he joined the game when others starting to feel the lowering profit margins of the game.

All of these boys made lot of money at initial stages due to the situation prevailed at that time. Subsequently profit margin was reduced due to competition. Some people started importing bulk from manufacturing plants in Malaysia and Thailand.

Some of them went into troubles by believing they can grow and beat others if they expand and established bigger companies island wide. I think they had no idea about risk involved in expansion.

Present situation.

Now we see the bigger PC house created by Rishan did not produced expected prosperity compared to smaller PCH.
Sanjiwa of Neat also performed well and then saw upside down parabola in his graph. That boy , Janaka who created an island of computers was appointed ( surprisingly) as the head of a big financial institute because of the political work he has done. (SMS broadcasting from his servers in 2010) I think all who are in finance sector know his story better than me. They say, at present no one can trace him. ( Google and see the story if you have no idea about Janaka Ratnayaka.)

Nilu Wijedasa, Gamini and Kobian Kishan and many others soon realized the business is not that lucrative anymore, ventured into other fields. In those ventures also some succeeded some failed due to same reasons I mention below.

Jagath Ranawaka , the owner of JRL is still there as he controlled his desire for bigger expansions at the right time.
So is Naleem of Barclays , a simple down to earth person , still doing well at 1st floor of Unity Plaza and in his own building closer to Bamba Police. He did not excavate the well too deeper, knew the banks will collapse on him if dig too much. I think he knew the ground condition better than anyone and as a human being possess the ability to manage desires and greed for show.

Analysis

If we understand the overall picture of these companies and their leaders we can see they were smart guys used the opportunity created at that time to make their fortune.
In the process they had to use many tricks such as buying ‘almost new’ used parts from the 7th floor of Sim Lim, giving commissions to officials who were in purchasing committees, paying ransom to customs, over clocking, over pricing etc.

When you expand the business and made it public you cannot rely on all these things. Furthermore we can see these boys were from similar educational background, learnt the business by practice, have had no time to developed any academic and professional expertise.

Naturally these kinds of people always develop ego and overconfidence about their abilities and always tend to extrapolate blindly.
It is natural to think nothing will go wrong because they have enough experience in particular field than any other in the country.

Actually during their lifetime in the industry they miss and ignore the learning most of the very important aspects of business management. They are not like the boys or girls who join as executive trainees to the places like JKH , Hailey or SAMP who get step by step exposure and professional education in parallel and climb up towards CEO’s seat.

Although they performed at one stage due to born talents and temporary opportunities prevailed, they are not guarded by the shield of wisdom of real exposure to the business world. They were in the company of similar level of crowd for many years while those who spend their youth in reputed places meddle with CIMA or CIM devotees.

Unfortunately, they were the bosses from the beginning.

These limitations are hidden until they keep their work within their capacity.

When they expand, the setup becomes too big to handle and troubles start. In most of these places you cannot find enough professionals recruited to top positions. They always try to run with the people who make the venture successful during the progressive years.


Conclusion:

I do not write anything here. The reader can do it his own .

Somehow, I believe, anyone who wants to expand his business in future should consider these facts and get enough professionals to run the business at right time and also get their help in project planning and decision making. If you do not like, then keep doing it at your capacity while enjoying your ego.

I did not buy some IPOs in CSE due to the above reasons in additions to negative financial data.

Recommended reading:

What Got You Here Won't Get You There - Marshall Goldsmith


PC House and the Global PC industry - Page 2 510UvKxV80L._BO2,204,203,200_PIsitb-sticker-arrow-click,TopRight,35,-76_AA300_SH20_OU01_
In and Out explanation of computer hardware bussiness industry in Sri Lanka...Amazing....
When talking about greedy expansion of bussiness I think Dialog is also another good example who got burned their fingers.
A little question just out of curiosity.....Have/Had you involved in this computer hardware industry also Wink ?

39PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Sun Feb 24, 2013 12:22 am

Jake Sully

Jake Sully
Manager - Equity Analytics
Manager - Equity Analytics
Guys I have a question. I hold PCH shares at around avg 5. I hope it will go up. Ok let's say the company went bankrupt (worst scenario), and no more shares are traded at CSE. What will happen to my shares and how will I recover my money even at that mkt value.

40PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Sun Feb 24, 2013 12:35 am

Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
Bankruptcy administrator will settle the balance money if left after paying govt related organisations, creditors,banks and preference shares if exist.

In PCH case may be we'll get old sound cards, memory chips etc etc lol!

41PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Sun Feb 24, 2013 10:09 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Jake Sully wrote:Guys I have a question. I hold PCH shares at around avg 5. I hope it will go up. Ok let's say the company went bankrupt (worst scenario), and no more shares are traded at CSE. What will happen to my shares and how will I recover my money even at that mkt value.

At the verge of a bankruptcy, if the news travels faster, stock price may decline in a day or two even. Your hopes will be to sell your lot to the next sucker and wash your hands off or wait till a share goes to 0.10 and no buyers.

Look at what happened to SEYB shares once the Golden key case was exposed. I think it went down to 2-5 range (not highly sure) and ppl bought it. Now even at the current price ppl will be happy.

I think, if PCH goes to wind up, there'll be investors to anchor the company. It will take few years to make the public perceptions to clear but if I have money, I'd look at the inventories and its quality and bargain a considerable price to buy it. Then strive my best to up lift its image in the next six months. In the process I'll have to tame the already corrupted sales men or fire if they're damn adamant and hire a new crowd to make ppl believe the PCH after sales service has improved.

42PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Sun Feb 24, 2013 9:40 pm

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@ smallville,

Very smart thinking.

Eg. Ascot Mills, Mt lavinea. ( ACSO)

The production ceased and troubles started. Loan interests, Salaries , other debt , payables increased year by year. If asset value was 500million debt reached like 750. Share price dropped to 5/-.
Someone bought the big lot @ 5-8/- ( Budu mahesh story....?)

The new owner revalued the company specially the 8 Acre land in Galkissa.
New asset value became many thousand million.
NAVPS increased to 80/-

By the way, for PCH ,
Apart from other assets elsewhere, they own nothing in Unity Plaza.
They had over 10 rented places in Unity Plaza ( different names ) .
UP is the property of On-ally Holding PLC. (ONAL) Main shareholder of ONAL is UDA (47%)

PCH has to pay approx 20 million per year as the rent to ONAL. They have re-arranged one place to sell their garments. ( Unwise decision - location wise )
Now they are vacating another place. Onally/UDA will tender it .

The talk in around Unity is not that good. May be worst that the reports indicate.

I do not want to add any more to this topic .

43PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Sun Feb 24, 2013 10:40 pm

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@Whitebull wrote:A little question just out of curiosity.....Have/Had you involved in this computer hardware industry also ?

No.

I was working in the Govt. when they started this hand-carry business.
Somehow, I think I was one of the early guys who assembled a computer in SL.
Due to my self gained knowledge in the subject they put me to TECs. (Technical Evaluation Committees) .

In around 1998 I visited Sim Lim. - First and last.

Actually in Singapore I found a nice motherboard with all in-build. Sound, VGA and even the Processor. ( Those days they sold everything separately in Sri Lanka)

I brought some here and they worked superbly even in dry zone area for years. Bangladeshi people bought it heavily to make cheaper CPUs.

With that MB, Total cost of a CPU was 16,000/- while normal CPU was around 25,000. ( without the monitor)

Later I learnt the Unity Plaza gang blocked it coming and becoming popular in Sri Lanka to maintain their high profit margins.

44PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Mon Feb 25, 2013 3:07 pm

shanesmith


Stock Analytic
Stock Analytic
Thanks Chinwi posting such a long & nice review of the PC industry . I too was engaged in this business some time but never had much information . You seems to be highly knowledgeable about the industry.

Actually when the PCH initially came to the market most of guys in the industry was wondering that anyone would buy this kind of company as we were aware about the business practice of PCH.

But many people at that time following the rally , so most jumped in to this . And after that they used to spread some false news , one time there was a news that they were going to deploys a servers for google . This type of news could fooled a person who does not have much knowledge in the industry .

But time proved you cant fooled people for a long .

45PC House and the Global PC industry - Page 2 Empty Re: PC House and the Global PC industry Mon Feb 25, 2013 5:28 pm

Whitebull


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@shanesmith wrote:Thanks Chinwi posting such a long & nice review of the PC industry . I too was engaged in this business some time but never had much information . You seems to be highly knowledgeable about the industry.

Actually when the PCH initially came to the market most of guys in the industry was wondering that anyone would buy this kind of company as we were aware about the business practice of PCH.

But many people at that time following the rally , so most jumped in to this . And after that they used to spread some false news , one time there was a news that they were going to deploys a servers for google . This type of news could fooled a person who does not have much knowledge in the industry .

But time proved you cant fooled people for a long .
This is why investing is more difficult than trading.To be a good successfull invester you have to have the background knowledge of the company,of the relavent sector,of the main charactors of the company etc etc.....It can not take the decision by just looking at annual reports or financial statements.

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