Ugly Little Monsters • Value Stocks
APRIL 12, 2015
“Are there any stocks that you recommend?” asked by a friend of mine. This is one of the hard ass question to answer, is not that I don’t have some stocks in mind, it’s just that I don’t see an individual stock or a group of a few stocks as an engine for generating returns. To be exact I see it as a tiny component part of my value stocks portfolio. I will be doing a great disservice for them if I just say stock X, Y, Z & A are good without explaining that, they are only good by holding a group of say 20-30 stocks. And not 2-3 of them! The followings are some of the stocks that will probably perform well as a portfolio.
Nam Lee Pressed Metal
Nam Lee Pressed Metal balance sheet
Total Liabilities : 20,056
Cash : 27,303 !
Mkt Price : 0.290
Adj NAV : 0.420 [MOS 45%]
EV/PBIT : 5x
Debt : Zero
The cash itself has already fully covered and with excess of its total liabilities!
Eliminate worthless items and some discount to its major assets. The net of it is 45% higher than the current traded price!
EV/PBIT of 5. There’s no debt and with great amount of cash which suggested one thing which is the earning of the company is low.
cf
Stable dividend yield of 4-6% with slight increase of DPU.
0.51 Payout which is quite high, given the pretty stable FCF and good cash reserve. Likely that constant stable dividend won’t be a problem.
Nam Lee Pressed Metal NAV growth
The growth of NAV – I love it.
Conclusion – It deserves a 5% allocation of my capital
PNE Industries
PNE Industries balance sheet
Total Liabilities : 11,312
Cash : 19,390 !
Mkt Price : 0.121
Adj NAV : 0.176 [MOS 47%]
NCAV : 0.169 [MOS 40%]
EV/PBIT [most recent 12 mths] : 1.937x !
Debt : Zero
Same as the above, cash itself has already exceeded its total liabilities. And the discounted value of its assets still higher than its current traded price by 47%
Dirt cheap price to pay for its earning, reason being the cash holding and zero debt makes its EV cheap.
PNE Industires dividend and CF
Steady increase DPU with 5-6% div yield. Payout pretty good 0.35 on average.
Good cash reserve with up trending. Great FCF with decreasing capex.
Oh! And 25% dividend yield on last year after they sold one of their subsidiary(I’ve excluded the div on the above pic)
PNE Industires NAV growth
Again I love IT!
Conclusion – 5%
Captii Ltd
Captii Ltd Balance Sheet
Total Liabilities : 5,847
Cash : 11,880
Mkt Price : 0.045
Adj NAV : 0.064 [MOS 42%]
NCAV : 0.051 [MOS 13%]
EV/PBIT [most recent 12 mths] : 3x
Debt : Zero
Very similar to the two above stocks, cash exceed total liabilities, NAV consist of receivable, PPE & Inv. property. Since large portion of its NAV is Inv property and receivable, thus buying this stock is equate to buying property & receivable. Again, MOS is 42%.
EV/PBIT is rather cheap 3x, same reason as PNE Industries – great cash reserve & no debt.
Captii Ltd Div and FCF
Super healthy FCF with stable cash in reserve. And reduction of capex over the years.
DPU increased steadily since 10. Pretty low Payout except for 13, not so concern on no div. during 09,08 &07.
Captii Ltd NAV growth
Needless to say about the growth on NAV.
Conclusion – Likely to include this stock in my portfolio, one concern I have is the super low liquidity, but I guess such concern likely to deter many investors and with low supply of stocks and high demand in the event where value being unlocked a spike in price will not be something of a surprise.
Envictus
Envictus Bal Sheet
Total Liabilities : 79,822 RM
Cash : 110,458 RM
Mkt Price : 0.118 SGD
Adj NAV : 0.164 SGD [MOS 39%]
Debt : 0.04 debt to equity
The P/E of the stock is 0.373 as there is one huge disposal of asset which boosted its earning.
Company has been making net loss for two conservative years, due to the positive P/E and net profit market might not realize the existence of net loss after excluding exceptional item. Thus there’s a possibility where subsequent earning released, the market will reacted strongly.
Envictus Div and FCF
2014 has a 78% special dividend yield[Excluded from the above]!
However normal DPU has been dropping years after years. Payout as well, however is still very high. Cash reserve is still pretty good.
NAV is quite volatile unlike the above three stocks.
Conclusion – My investment mantra has always been clear which is invest in value stocks , not just stocks with dividend. Thus it does not really matter to me whether the years ahead will have dividend.The question is more toward whether is there a bargain in this stock. From pure balance sheet point of view there is, but because is M’sia company with balance sheet figure started in RM and I did the rate conversion self, chances are mistake will be made, hence together with the currency risk, I would think being conservative is better. Furthermore, there is downtrend in the price and as mentioned in point 2. And say the market price declined by 10%, I might invest in it.
Powermatic Data
Powermatic Data Balance sheet
MOS[price to adj. NAV] : 82%
EV/PBIT : 7.73x
Will talk more about it in further post.
Hong Fok
Hong Fok Balance sheet
MOS[price to adj. NAV] : 75%
EV/PBIT [Based on 5yrs avg earning] : 11.12x
Will talk more about it in further post.Ugly Little Monsters Stocks.
After being stunt by my lengthy explanation about the rationale of investing in a portfolio of value stocks. I was then asked about the expected returns, which I conservatively said probably 5-8% and if one is good with some bits of luck then probably 10-15%. Then he replied “But hor there is one guy in the seminar say he can easily made 50% on just 3 months and he’s driving Ferrari some more”. And now I stunt – not because of the return, but because of his level of financial maturity.