06 September 2008

UMS Holdings Berhad

Few months ago when I discovered this stock, it is reported that there's a fire incident occured at the company's store in February 2008. I decided not to buy it because the impact from the fire incident was unknown.

Last week, its lasted quarterly report (Jun-2008) said that the extent of damage to date was approximate RM389,000 only, which is, in my opinion, not quite significant to the company's operation. So, I decided to select it into my value-stocks portfolio.

I managed to buy UMS at 70 sen per share yesterday. According to its latest quarter-report, this price is only equal to 60% of its net working capital per share. Other factors are:

  • very low debt. (borrowing/equity less than 10%)
  • stable profit in the past seven years.
  • net DY more than 5% in the past four years.
  • low PE ratio. (about 5, based on three years average EPS)

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Caution about this company:

  1. It has high amount of receivables and inventories, compared to its yearly earnings. Both figures are about 4 times of its PAT. However, when compared to its revenue, these figures are still acceptable. The inventories and receivables are maintained around 40% and 30% of its revenue respectively.
  2. There may be some consequential loss (due to the fire incident described above) that yet to be finalized. In my opinion, it shouldn't have any significant impact on the company. However, I may be wrong.

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