It appears many investors in the KLSE market are living in a bubble believing all Chinese stocks are necessarily bad.

Nothing could be further from the truth. Malaysians have come a far way since gaining independence in 1957. But like the rest of the world we remain shackled to our fear and prejudice.

When was the last time we felt the need to stand up to the giant out there? You see the human mind is a funny place to be in. It perceives the enemy is out there. That anyone and anything alien, not aligned with us are bad. Yet, it conveniently forgets the source to all our troubles lies within.

Our mind compels us to believe we’re right even though our conscience may tell us otherwise. It does not pause to question itself. If we care enough to connect the dots between our thoughts now and past, we’d soon find out that there’s a reason we think the way we think. Why we feel the way we do.

The day we’re able to rewrite our emotional algebra, will be the day when we’ll witness at least half of the world’s problems disappear. Why do I say half? To solve a problem is like pinning down a cloud. One half the ingredients is wisdom. Having found the way you’d think a change is imminent. On the contrary, that only happens if you assume all of us think alike. And we don’t. To solve a long standing problem, we’d have to find the other half. The bigger and better half of the equation. It’s time we found within us the will and courage to do the right thing.

The human mind can be so indecisive especially when it’s asked to discard old thoughts and embrace a new one. We all fear the unknown. That fear is understandable.

But understand this: our decision is right – only insofar our assumptions are. So, if we knew our assumptions are wrong, it’s time we changed that for the better.

With this forethought, allow me to deal with the facts as regards Xinghe Holdings Bhd and so by the way respond to Icon8888 when he commented last Monday of 6 July 2015.

Contrary to what has been bandied about, Xinghe’s profits are not over the top. In fact, Xinghe’s peanut oil and peanut protein cake are deemed higher end products – as opposed to soybean oil – in China.

It appeals to a consumer market which has a higher purchasing power and a growing awareness of nutritional benefits.

Unlike Wilmar, Xinghe is not vulnerable to regulatory restriction on pricing which usually affects soybean oil margins.

Nevertheless, Xinghe’s profits aren’t excessive given the industry it is in. In fact, it registered a decent pre-tax profit margin of 15.5% in Q1 2015, 7.3% in FYE 31 December 2014 and 12.5% in FYE 31 December 2013. The lower than expected profit margin in FYE 31 December 2014 was owing to the one time financial expense incurred as a result of the reverse takeover exercise allowing Xinghe to take over the listed status of an existing firm on KLSE back in April 2014.

So, the contention that “Xinghe’s profit being too high…unless it’s owned by (President) Xi Jinping” is not only misleading but factually untrue.

Of course, there’s nothing unusual about its cash balance of RM215.7 million as at the close of 31 March 2015 which is compatible with profits it has been making over the years.

And why should it expend a large sum of money on taking the company private barely a year after having completed a backdoor listing on the KLSE?

Keep in mind Xinghe is a conservative company and needs the cash for building a peanut protein powder production plant in Henan this year – based on a peanut protein extraction technology which it has co-developed with Henan University of Technology – for sale of peanut protein powder to the US and European markets which is expected to contribute 60% of its net profits by 2017 as well as setting up an edible oil plant in Port Klang Free Trade Zone for the production of blended edible oils for sale to the Middle East as reported in the news last 4 October 2014 and 1 April 2015 respectively.

You may read the full news at http://www.theantdaily.com/Main/XingHe-has-to-deliver-to-escape-China-stock-malaise and http://www.thestar.com.my/Business/Business-News/2015/04/01/Xinghe-sees-RM200mil-revenue-from-JV-with-Asfar/?style=biz

The poor market capitalization of the company today is the result of an ignorant market that continues to subscribe to a false assumption that ‘Chinese companies are bad’ a myth which certainly does not apply to a financially healthy company such as Xinghe.

The current stock price of 7 sen per share represents an immense buying opportunity as it has a huge upside potential of 14 times its current price.

If only the common investors took the time in digesting these published facts for what they're worth, Xinghe would have long ascended to its fair price of RM1 per share.

I have twice explained why the Chinese fear factor is a non-issue in my previous articles entitled “Why did Xinghe's initial rally on 1 June 2015 fizzle out?” dated 3/6/2015 at http://klse.i3investor.com/blogs/Xingheanalysis/78386.jsp and “It’s time we judged Xinghe on its merits – and not tar it with a Chinese brush” dated 17/6/2015 at http://klse.i3investor.com/blogs/Xingheanalysis/78527.jsp

I suggest readers go through the same so no one else makes the mistake of living inside the bubble believing that all Chinese stocks are bad. Suffice it to say, Xinghe is a financially sound company that should be on everyone’s investment radar for undervalued growth stock of the year.

                                                                                                                                      Ezra, 14 July 2015