This is a painful one. we initiated BUY at roughly ~$1 after evaluating that it is undervalued compared to historical valuation and price. Indeed, our hypothesis was validated initially within 6 months when the share price rise ~30%. Never did we imagine the market change their view point so fast with the on-going china trade war and the competition with man-made diamonds etc, that the share price keep tanking. We keep holding the position, thinking it is temporary but the market keep hitting us back. As of today, the share price is $0.3, a 70% drop from our buy price! Indeed, this is a tasting of our patience and conviction towards of strategy.
As of 1Q 2019, the balance sheet is still very sound with no debt and cash in place. The losses make so far are NON-cash in nature comprising of depreciation and amortization. If dividend is not cut, the yield is very attractive at > 10%. However if current loss making trend continues, we believe at some point, the dividend will be cut when cash flow generation is not sustainable.
We will closely monitor and wait.
We reiterate, this is a painful waiting process...
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