Eric FongNvm i will post the whole paragraph here.
Eric FongThis article first appeared in The Edge Financial Daily, on July 25, 2016.
KUALA LUMPUR: The slowdown in the property sector has prolonged for over a year. Most analysts opine that the weak consumer sentiment and banks’ stringent lending policy will continue to pose earnings risk to property developer.
Even after Bank Negara Malaysia’s recent cut in the overnight policy rate by 25 basis points, analysts are not convinced that the move will be enough to revive much of the property market.
The question of how resilient property companies are still lingering among the investing fraternity.
“We think it is important for property companies to have a strong balance sheet, cash and flexibility to weather the downturn of the market,” said TA Securities’ analyst Thiam Chiann Wen.
Indeed, cash is king in times of uncertainties. A sizable cash pile would be a good buffer against the fall in sale revenues.
A random check on 32 property companies with a market capitalisation between RM300 million to RM2 billion, only six companies’ cash ratio is higher than one.
The six are SHL Consolidated Bhd, Plentitude Bhd, TAHPS Group Bhd, Land & General Bhd (L&G), Amcorp Properties Bhd and Daiman Development Bhd. Tambun Indah Land Bhd’s cash ratio is at 0.99 based on the latest balance sheet. (see chart)
Cash ratio is a gauge of companies’ ability to cover their short-term liabilities.
L&G is among the few companies that has a cash ratio of higher than one, at 2.22 times, indicating more than sufficient cash on hand to pay off short-term debt.
L&G is on a net cash position of RM288.5 million, which is 67.4% of its current market capitalisation of RM427.9 million.
The company’s cash pile had grown significantly to RM525.9 million as of March 31, 2016 from RM398.3 million a year ago. In fact, the cash pile has more than doubled from RM183.8 million two years ago.
On the other side of its balance sheet, L&G’s borrowing was at RM83.1 million as at March 31.
As for companies’ prospects, L&G had, at the beginning of this year, planned to launch three developments with an estimated total gross development value (GDV) of RM1.67 billion. The launches are the Astoria serviced apartments in Ampang, phase 2 of the Damansara Foresta service apartments in Bandar Seri Damansara and the first phase of landed development, Taman Sena in Seremban.
The group’s net profit for fourth quarter financial year ended March 31, 2016 (4QFY16) was close to eight times higher at RM55 million from RM7.1 million in 4QFY15. The company has been profitable in the last ten years.
Like other property stocks, L&G’s share price has tumbled from its five-year high of 62.9 sen in August 2014 to a low of 33.5 sen in March this year.
L&G has declared dividend regularly since 2014. On May 30, the board declared a single-tier final dividend of two sen, reflecting a dividend yield of about 5.12% — even higher than some of the Real Estate Investment Trusts (REITs) on Bursa Malaysia.
Invest33With RM288.50M net cash, does it means RM0.263/share while its share price is only RM0.385?? If so, really under-valued.
FlintstonesL&G is a value trap. The cash is already in the books since many years ago and now we have many carrots discovering this stock.
Eric FongPlease read their whole century annual report for their history for more accuracy of their value. Please study more about this company before any judgement.