FAIR VALUE -> S$2.05, currently trading at S$2.01
THESIS
My original target price for OSIM based on the comps as well as the potential EBITDA per store was S$1.80, updating that for recent earnings and comps, my updated price target is S$2.05. OSIM has surpassed that target and could potentially continue the trend however, there are two things that concern me:
I travel to Jakarta for work a few times a month and while I don’t mind the flight, I hate getting stuck in the traffic. When I talk to friends about the place, they’re naturally interested about the similarities and differences between Indonesia and Singapore, considering the geographical proximity and cultural distance.
Continue reading
Fair Value -> MYR1.84, currently trading at MYR1.22
Thesis
Prestariang is selling at half the price of other Malaysian education providers. While a majority of the earnings are currently coming from the software sales and licensing, the development of more educational services will bolster margins and profits in the business. It looks cheap now and even cheaper when the recently opened boutique university is fully online.
While I’d like to keep this blog focused on reviewing individual companies, I’m always looking at the macro situation in the countries that I’m looking to invest in or am traveling to. Therefore, I’m going to start posting some more informative macro pieces highlighting my experiences and views about the different countries that I’m visiting and investing in, beginning with Japan.
Continue reading
It was announced on Friday that Indofood Sukses Makmur had bought a 15% stake in China Minzhong through a rights offering at a 10% discount to the last traded price. This will inject S$85m into China Minzhong, which will be used to expand the industrial farming operations.
While this is marginally dilutive, it doesn’t change my original hypothesis. I still believe that China Minzhong is a good investment at these levels.
Fair Value -> S$2.35, currently trading at S$1.14 (revised because of dilution)
Fair Value -> S$2.70, currently trading at S$1.04
I’ve had a couple of readers request that I look at China Minzhong. It appeared on my original Singapore screen but I passed it up because of the S-Chip link. I subsequently decided to have another look at the company and since it’s had a bit of a run lately, I thought I’d see if it’s justified on valuation grounds or just a victim of the January effect.
Thesis
China Minzhong is a leading vertically integrated vegetable processor in China currently trading at 4.0x 2013F earnings. As the free cashflows continue to grow with earnings and market begins to understand and appreciate the business China Minzhong has the potential to see a rerating and failing that the growing earnings will mean an investor will still be compensated for the risk taken.
Continue reading
The second screen that I’ve decided to look at is Malaysia because of geographic proximity and ease of investment for investors located in Singapore.
When looking at Malaysia, I’ve tried to stay away from any agricultural companies that are purely focused on palm oil for ESG reasons. A quick scan of the companies on the list revealed that JCY has been struggling (although management is confident their situation will improve mid-2013). Puncak Niaga looks interesting prima facie but the profitability has been volatile over the past couple of years and the business model is based on receiving contracts to repair and operate dams making it difficult to value. I’ve also shied away from holding companies that have a menagerie of businesses in their portfolio.
A reader asked for an opinion on Ace Hardware (Ace) so I’ve had a quick look at it to determine whether it’s an investment worth considering.
Fair Value -> 1,780 – 2,280IDR, currently trading at 800IDR
Thesis
As the Indonesian middle class and discretionary incomes continue to grow, retailers will benefit as they nibble on pieces of an ever-expanding pie. The premium retailers who occupy a niche market and have developed sustainable competitive advantages will significantly outperform. Ace Hardware stands to be one of those players with no long-term debt and an expanding store footprint.
Looking at the traditional relative valuation metrics it appears that Ace is overvalued. The level of development and amount of growth ahead of Ace mean that it’s worth looking at the total potential market for Ace to determine the intrinsic value. I believe that considering the total market for home improvement in Indonesia, Ace will still be undervalued, albeit expensive on near term metrics.
Continue reading
Fair Value – >S$4.00, currently trading at S$1.35
Thesis
STX OSV (STX) is currently stuck in the mud because of pending rumours of a fire-sale to an Italian Ship Builder (Fincantieri). While the EV/EBITDA multiples and high ROE suggest that STX is worth significantly more than its current price (>S$4.00), rumors circulating surrounding the sale are suggesting that the sale could go ahead for 900bn KRW, which would only represent ~S$1.60 vs the current price of S$1.35.
Continue reading
Fair Value –> S$1.80, currently trading at S$1.4650
Thesis
OSIM is a high margin business that is producing lifestyle products targeted at the increasing upper-middle income demographic. OSIM is currently expanding existing store footprint, while deploying cash that was raised via a bond offering in other strategic investments and share buy-backs. As the current cash hoard is used the business will return to previous RoE levels, which at ~50% beats the competition.
Continue reading