The following was written a couple of months ago in Shares Mag:
"This is a play on China’s surging economic growth which should culminate in it becoming the world’s biggest manufacturing nation by 2015.
Demand for oil and gas is rocketing, necessitating new pipelines, refineries and storage facilities. Air transportation is reviving strongly after the SARS epidemic, which is leading to a sharp rebound in demand for jet fuel.
This is good news for Fortune’s jointly owned Bluesky Aviation Refuelling venture whose net profits fell £400,000 to £2 million in the first half due to SARS and sales in May two-thirds below budget.
Interim results released last month showed pre-tax profits only slightly lower at £2.4 million against £2.5 million, despite the SARS setback.
Fortune’s other big earner is its oil terminal which supplied over four million tonnes of oil to crude carriers. Demand for oil is about to exceed supply, so a second pipeline is likely to be built from the mooring point to the shore at a cost of some £17 million.
The West Zhuhai oil terminal joint venture has been making steady progress, following the increase in capacity and higher fees though profits were again hit by SARS and also by higher depreciation charges.
Losses at the Zhanjiang Fu Duo gas plant narrowed to £260,000. The withdrawal of a major competitor in May have boosted sales by a third and should result in a profit in the second half.
Construction of the new airport at Guangzhou is almost complete and will come in under budget at around £50 million. The airport goes into operation in around nine months’ time.
Fortune has a wide spread of activities in China not all of which are successful. However it seems to be winning more than losing led by its astute team of largely Chinese directors.
Full-year profits are expected to be around the same as last year’s total of £5.4 million (but higher taxed) with a big rise to nearly £8 million next year and maybe £12 million in 2005.
The shares have performed strongly in the past six months, after hitting a low of 0.88p, and could rise a further 50% over the next 18 months.
Shares Summary
Investing in companies with operations in far off lands is risky.
But China is an exceptional case and Fortune is one of the few direct plays on this fabulous growth story.
Business: Developer of infrastructure facilities in China
Vital stats:
Market capitalisation: £35 million
Historic PE 2002: 19.6
Prospective PE for 2003: 23.5
Prospective PE to 2004: 11.8
No dividend"
IMO Lots of good tips have come from this Mag. I held FTO since reading this and sold out today - hope I haven't messed up!! I based this on high RSI signalled a price of 4.97p. Upper Bollinger band was broken through yesterday (period 20, distance 2) the price then went higher in early trading. History shows this share to retrace 1 to 2 days after going through the upper bollinger band.
Still believe it is a strong company and will get back in again in the future be the price higher or lower (hopefully the latter!) after the volatility reduces - and on re-evaluation of the sum of the parts in order to evaluate the whole. No ramp / deramp intended, just my thoughts - anyone agree or disagree?
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