Perak Corporation Bhd

PRKCORP, a new company that I've just added into my "value-stock" portfolio this week.

I bought it at the price of RM0.75 per share. According to its Mar-2008 quarterly report, its net working capital per share is about RM2.25, which means that my buy price is only about 35% of its net working capital, thus provide a good margin of safety.

Other supporting reasons:

• Cash per share about 80 sen. (as Mar-2008)
• Price-earning ratio is only about 6, calculated from latest 3 years' average EPS.
• Continuous profitable since 1995, including years after the 1997 economic-crisis.
• consistence dividend payment since 2000. (though the dividend yield is quite low).
• It main profit come from the business in Lumut Port, which I think is a locally monopoly business.

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However, there is one thing in PRKCORP that is quite different from my other "value stocks" -- It is not a debt-free (or very low debt) company. In other words, it doesn't meet all the requirement that I have listed out for this portfolio.

Though I think that the very low price/net working capital ratio has given me a good margin of safety, there are few more things that have to be take note:

1. the figures for net working capital and cash per share stated above, they are just the group consolidated figure. I didn't take into account the minority interest.
2. The huge cash that PRKCORP held is actually still less than its total borrowings, which means it's not in a net cash position. So, I see the Cash as an indicator of financial health (i.e. its profit is generating net cash inflow), rather than a strong safety factor.
3. The very big portion of PRKCORP's current asset is actually receivables and property development cost. The amount from each of them is higher than the revenue of the company (or, in other words, a few multiples of the company's annual profit).

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