Crazy person betting on crazy stock (2010-10-25 DBA telecom analysis)

It's almost the end of October. There will be several influencing economic data such as GDP this week, together with the maturity of index futures and options, we could expect a higher volatility arriving.

I have found another worth-watching small stock today: 3335.HK - DBA Telecom. This stock is quite interesting though. Here is some of the basic backgroud of the company:

The Group is principally engaged in the design, manufacture and sales of telecommunication equipment and related products under the brandname "締邦" (DEBAN), self-service business and agency business for telecommunication products in the PRC. The Group’s revenue is generated from three main categories, namely, manufacturing business, self-service business and agency business for telecommunication products :

(i)	Manufacturing business: the design, manufacture and sales of telecommunication equipment and related products.
(ii)	Self-service business: sales of telecommunication payment cards through smart cards vending terminals and promote, design, produce and publish advertisement.
(iii)	Agency business for telecommunication products: to act as an agent of the suppliers to sell telecommunication products to cooperative distribution networks.

In early September, it announced an annual increase of 34.9% on gross profits , and 52.72% growth of net income.

With the snowing demand of telecommunication in China, being the top5 telecommunication in PRC, DBA has great potential to grow bigger. Recently, the release of iPhone4 might also help lift the market of telecommunication, and these companies can benefit from it too.

The fundamental supports a BUY of this stock. How about the technical one? Let's see.



DBA was only listed since 2006. The above chart is all the prices it has since listing. After going up to 1.80-1.86, it fell like roller coaster to as low as 0.4-0.5. Then it started moving upwards again, but the volatility was not an usual one. It is really hard for any normal people to accept such high volatility without any pain in their hearts.

But I found that, when the price were dropping from late 2007 to early 2009, volume was not high. This might show us that the corporate investors were not selling their shares. The price was lifted up again in 2009, the large volume at the range of 0.5-1.0 showed that these investors probably were buying some more shares as well.

Together with the IPO price of 1.26, they should have an average price of around 0.9 per share. Obviously, their aim would not be only double or triple. Usually they can have at least 5-6 times growth when playing around with small stocks. I would expect a breakout of the green line and even breakout of the highest price 1.86. Just keep an eye on this stock, we could buy if breakout of green line confirms.

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One more thing on this stock, I found that the company had a record of manipulating data during IPO. Also, it had high net income but did not pay dividend, this might somehow make us suspect whether the net income was true or not. Therefore, I do not recommend a long-term holding of this stock. Just follow the trend and gain the bit and leave.