Posted by kcchongnz > Apr 2, 2013 01:50 PM

Cold Eye’s 5 yardsticks for Muar Ban Lee 

Yardstick 1: ROE 
MBL reported an earnings of 17.1m for the common shareholders, or EPS 18.6 sen for the year ended 31/12/2012. With its net asset backing per share of 89 sen, ROE is 20.8% which is much better than the benchmark of 15%. This is excellent as it was achieved with no debts. 

Yardstick 2: Cash flow and free cash flow 
The cash flow from operations (CFFO) is 22.6m. This is 132% of its earnings of 17.1m. This shows the quality of the earnings is good. After spending 2m in capital expenses, there is a free cash flow (FCF), or owner’s earnings of 20.6m. 12.1m dividend was paid out from the FCF . This FCF is at 26% (>>5%) of its revenue or 45% (>>12%) of its invested capital. I can only use one word to describe this; Fantastic. 

Yardstick 3: PER 
MBL is trading at 98.5 sen at the close of this morning session. With EPS of 18.6 sen, the PE ratio is only 5.3 (<<10). This is a reasonably low PE and considering that it has a healthy balance sheet with excellent earnings and cash flows. 

Yardstick 4: Dividend yield 
MBL paid a dividend of 10 sen for last financial year, or a dividend yield of 10.2%, more than twice the FD rate. Very good indeed. 

Yardstick 5: NTA 
The net asset backing per share of MBL is 89 sen. Hence at a share price of 98.5, the price-to-book value is 1.1 (<1.5). It is inexpensive. 41% of its assets is hard cash. 

Yardstick 6 (Non Cold Eye yardstick): Growth 
The CAGR of MBL’s revenue and net profit for the last three years was 46% and 26% respectively. Last year’s growth was 43% and 40% respectively. This growth is a very high growth. 

MBL meets all criteria of Cold Eye as an investment grade stock by a wide margin. For those who is going to harp on its ill-liquidity, the table below shows its long and short-term return from 2 weeks to 3 years since listing. 

MBL 0.985 1/04/2013

MBL’s compounded rate of return can be summarised with two words: very good. 

Oh I just bought this stock not long ago, I am not promoting this stock, but merely for knowledge sharing purpose. I am also not asking anyone to buy so that I can sell him high.