I had been sending order to buy Tomei during the past few weeks. Finally, my transaction was done at 45 sen per share few days ago. So, here come the new member of my value stock portfolio.
According to its Mar-2009 report, Tomei's net working capital per share is about 77 sen. This means that my buy price is at a discount of about 40% from its net working capital.
Others supporting criteria for this investment:
- low PE ratio. (< 5, three years average)
- high dividend. (net DY about 7%, three years average)
One thing had to take note here, is that the current asset of Tomei is mostly made up of inventories. Though I'm not worried about this, some people may think that the value of its inventories is subject to impairment(loss) if their recoverable value fall, which is quite possible in the current (weak) economic condition.
Another thing about Tomei is that its debt ratio is a bit high as compared to my others value stocks. However, this new member of my value-stocks portfolio had a much better liquidity than those earlier picks, i.e. advpkg, sjc, yahorng, ...
2 comments:
I am interested on net working capital investing method too.
Anyway, although Tomei fulfill the criteria, I check and worry about it's cash flow/cash on hand.
It still owe 100 million in debt(80 million current borrowing), and sold it's land properties and sub-company for cash.(The selling off properties and sub-company all related party transaction). But it still pay RM2.5million to shareholder. And high level of inventory.
I am not from account background. Any interest to help to check on its cash flow health?
Thanks
its cashflow is still ok.
about its inventories and the cash level, maybe can try to think like this...
the inventories are golds, and golds are money, feel any better?
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