I love to buy shares of companies with little or no debts. I hate companies where investors keep pouring new money though it has been running at a loss like ‘forever’ (over 5 years) and these new money is used to subsidise new POTENTIAL customers and then they (the company’s management) tells everyone that their market share is growing. Focus on service lah, not subsidy.
Anyway, what about companies where its assets value trumped its share price? Here’s one. Article in NST here. As at end-September, UEM Sunrise’s net asset per share was RM1.56, or more than double its share price. It’s share price today (27 Dec) at 4pm? RM0.64 per share. Technically what this meant is that if we buy this stock and it decides to delist, then the company will give us back RM1.56 if they sell all the assets. Okay, it’s not that straight forward but the idea is around there.
By the way, for the nine months ended September, UEM Sunrise posted a net profit of RM260.25 million on revenues of RM1.29 billion. This is on a rising trend; up by over 66 per cent compared to the previous corresponding period. Earnings per share for the same period was at 5.56 sen. (Yes, this is definitely on the high side and if sustainable meant that its share price is low for its performance. That’s why the average price target is above RM1. Read it here)
UEM Sunrise’s fiscal year 2017 annual report shows that it has 9,816.9 acres in Johor, about 600 acres (potential GDV of RM14.8 billion) in Kuala Lumpur, Selangor and Negri Sembilan, 2,405 acres in Tapah, Perak, and pockets of land in Melbourne, Australia, and Durban in South Africa. The land held for property development is valued at RM4.93 billion. There are now news that Tan Sri Halim Saad, former executive chairman of Renong Bhd (now UEM Group Bhd) may be making an offer to buy Khazanah Nasional Bhd’s stake in UEM Sunrise Bhd that could trigger a mandatory general offer (MGO). NST Business understands that Halim, who was The New Straits Times Press (M) Bhd chief executive officer (CEO) in the early 1980s, may be eyeing more than 30 per cent stake in UEM Sunrise, sources said. It will cost RM973 million for a 33 percent stake based on current market capitalisation. Article in NST here. (Lots of comments from different analysts too)
I have no shares in UEM-Sunrise yeah. However, I think when the market does not appreciate the company enough, perhaps those who do will swoop in and then make it more valuable in the future. The only issue is this. The stock may be undervalued but it will take time for the market to adjust to its right value. No wonder they say if you are cash-rich, you will become richer when the times are bad. During good times, it’s hard to find ‘cheap’ opportunities. Yes, exactly like property investments. From the days of queuing potential buyers one week in advance, today it’s more of doing many more things to get more potential buyers. It’s always a cycle. Happy understanding.
written on 27 Dec 2018
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