Saturday, February 25, 2012

Reasons I buy in Vitrox, another advanced technology company

I just bought in Vitrox at RM0.76 on 20th Feb. The reasons I bought in this stock are:

1. Innovative technologies

The company is very innovative in designing new and advanced technologies which can be applied in many manufacturing companies, especially in IC manufacturing sector.

Innovative means new, and unique. I myself would like to invent something innovative too. Therefore, I am admired to those company which are innovative in designing and providing solutions to other companies.

Like the smartphone today, which is one of the innovative technology that we can’t see 10 years back. Innovative is a very important key of success today at entrepreneurial level.

2. Earned different Awards

Company needs reputation. Reputation comes from recognition from public. Vitrox has been awarded as one of the best company in Asia under the 2011 Forbes Asia’s 200 Best Under a Billion List.

Besides that, it also earned the Best Product in Asia from Global Technology Awards 2011.

Forbes Asia award. Source from: http://www.vitrox.com/award.aspx

It might not be the best in the world, but in Malaysia, it could be one of the best company as compared to other technology companies. Therefore, I choose it.

3. Lower PE compared to other companies in same sector

As I mentioned in previous blog, PE is a measure for the price I buy in a stock. Its PE is currently at 5.66, compared to other profitable technology companies, it is low.

PE can also be used as the number of years I earn back the modal. 5.66 means I need 5.66 years to earn back the money. Which means, 100%/5.66 = 17.67% every year.

4. High ROE

The Return on Equity is high, which is averaged at 29.57% over the past four years. ROE high might represent the good management of the company, as the management takes good care about investor’s money, and used them well to make sure the company is earning profit every year at averagely 29.57%.

5. Increasing Dividend Pay

The company’s dividend is increasing from 1.5sen in 2007 to 4sen last year (2011). Ratio of dividend payout depends on the management, whether they are expanding the company or refund the investor. Computing the return with the price I bought in, if I would get 4sen dividend next year, it would be 4/76 = 5.26% of annual return. This is still higher than the FD rate in bank. But, it hasn’t reached my target, which is 10% annual return.

Conclusion

Temporarily it’s like that. I think these five reasons are more than enough for me to buy in this stock. These few days the market is fluctuating, not able to determine its direction. Is the correction coming soon? Or the bubble is big enough to explode? Well, will see. I am waiting for the day where I can add in more to Vitrox again, because I want to accumulate more. Hence, I am waiting the Vitrox to drop instead of rise.

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