This week, I bought two more companies into my value-stock portfolio: Lysaght, and Sbagan.
Lysaght Galvanized Steel Bhd.
According to its Jun-2008 report, Lysaght's net working capital per share is about RM 1.34. I bought it at RM 0.85 per share, a discount of about 37% from its net working capital.
Others criteria of Lysaght:
- zero debt.
- low PE ratio. (around 6, three years average)
- stable growing revenue and profit in recent years.
- good dividend record. (net DY about 4.7%, three years average)
As most others company in my value-stock portfolio, Lysaght also has a very low trading volume in KLSE.
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Sungei Bagan Rubber Company (M) Bhd
I bought it at RM2.40 per share. Sbagan is a special case in my value-stock portfolio. instead of net working capital, it's selected based on its total asset value. This is because it is a cash rich company, and most of its other assets are quite solvent.
According to the quarterly report of Jun-2008, Sbagan hold a cash amounted RM 142 million, equivalent to about RM 2.35 per share. That means my investment in Sbagan is paying almost solely for its cash only. Other assets are all free.
According to the quarterly report, Sbagan’s hold some investments worth about RM 170 million at Jun-2008. These assets are equal to about RM2.80 per share. Since I’m getting these assets for free, I won’t feel panic in the coming economy crisis.
Just assume that the market value (or NAV) of all these investment asset will be falling for another 50% from their level at Jun-2008, they will still worth about RM85 million (equivalent to RM1.40 per share of Sbagan). Even based on this discounted value, my buy price is still more than 30% below Sbagan's total asset value.
For detailed analysis on Sbagan's asset, please read my post: Sbagan - a candidate for value-investing.
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1 comment:
Regarding the huge cash amount in Sbagan, a friend reminded me that it still bearing the risk of fluctuating exchange-rate.
He is absolutely right.
According to its FY2008 audited report, the cash component of Sbagan is about 30% in EURO, 40% in SGD, 10% in USD.
the depreciation of Euro in recent months (partly compensated by the appreciation of USD), had caused a decline of about 2.5% to the value of cash held by Sbagan.
This degree of fluctuation is within my acceptable range. In my opinion, the effect of exchange rate fluctutation on the cash value of Sbagan is minimal.
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