The diamond dust story.
There was a story that happened back in the late 1990 s, depicts of a young man who got hired as a maintaince worker (cleaner in short) in a diamond refine factory in Japan. His daily job scoop was to make sure, the factory was clean and free of dust before and after the factory closes.
Diamond refinery operations back in those days were still somewhat medieval, there were no machines, no proper cutting tools, everything from the unloading of raw diamond rocks to the crafting of diamonds where done by hand.
Because the factory was huge, everyday the young man would sweep for hours upon hours and carry tons of plastic black bags, filled with dirt and dust to throw into the nearby dumping container. But there was one evening he noticed that one of the bags he was about to throw into the container, had a small cut underneath and shinning dust was flowing out, in small gentle amounts on the ground.
Sensing an opportunity, the young man took one of the bag of dirt, home and started sifting through the dirt , painstakingly separating dirt from diamond dust. Eventually after 68 days of doing so, he managed to come out with a bag of diamond dust, that was eventually sold to a underground dealer. This resulted in a huge inflow of cash for him that was enough to get him through his university education.
Came across a bag of diamond dust.It was a Wednesday evening; the sky was heavily burdened by dark clouds, threatening to rain at any moment. I just came back from camp and was in dire need to do something fun on my lap top. As I was about to scroll my mouse towards the Warcraft Icon, my friend on msn nudged me. He asked me whether this company trading on SGX, whether is it a good buy? He quickly linked me to the website, which was -bidibadaboom-
. I was initially surprise to hear him say he wanted to invest, because, just like many of my friends, they have no interest what so ever in investing, some even go as far as saying stocks are from the devil. Regardless, I took a quick look at the website and was pleasantly surprised that this company “Sunshine Holdings” was trading at a disgusting low of 3 cents (18th Nov 2008).
My mind quickly project these words in my mental frame, “Penny stocks-High risk....good buy?-Maybe-maybe not.....go study it-find what’s left over” . So I took the liberty of researching quickly through their company’s website to see first if I understand what they are doing , their business model and most importantly what’s left over in the company. What invoked my interest further is that the company has assets amounting to 2,188,968,000 RMB and Liabilities at 1,135,704,000RMB as of September 2008 in their annual report.
Simple Theory of NAVSo common sense depicts, in order to find what’s left over in the company one has to take total assets (what the company owns) subtract liabilities (what the company owes) and then you get the NAV as known as Net asset value. The NAV for sunshine which I calculated was $SG0.24, the company share price is trading at 3cents, so in theory , if I was as rich as Paris Hilton who can spend $26 million on shoes/clothes/bags , I would have used the money to buy up the entire share holdings at $0.03, delist the company, pay off their debts by selling away all their assets , the left over, which in theory is 0.24-0.03 = 0.21 multiply by the total no. of shares which is around 890 million, I would have pocketed $186million Sing dollars in cold hard cash. Sounds good? Of course, who doesn’t want to earn $186million just by doing simple primary school maths and applying simple financial theory? But like all things in this world (especially in Singapore), nothing is that simple and straight forward... the rest of this article is at -move it move it-