Posted by kcchongnz > May 29, 2013 12:28 PM | Report Abuse X

Posted by jtpc2006 > May 28, 2013 08:22 PM | Report Abuse 
Hi KcChong, any possibility you can comment on Mercury? 
thanks very much. 

Wah there are really a lot of stocks in bursa which I don't know. Take for example, Mercury. I got no idea about this company at all previously. How can I comment. 

Just looked at it. Mercury is a smallish industrial product supplier. Small revenue of about 50m and profit 6-7 m. No growth last year and in fact profit dropped. And as mentioned I don't know about the company at all; its corporate governance, management credibility etc. So how can I place it as a great company? 

Its ROE and ROIC appears to be good though at above 15%. However, that is because of the seemingly low equity it has but with a huge accumulated loss in its balance sheet which tips its amount of equity and hence raises its ROIC. Adjusting for this accumulated loss, ROE and ROIC will be only about 7%, way below the cost of capital. Hence though it is selling cheap, but I won't be interested in it. Below is my assessment. 

Mercury a Good company? at 1.33
Good governance ?
Durable business Neutral
Growth No
ROTC Yes 16% >WACC 
Balance sheet Yes

Screens for investing
ROTC 6.8% <WACC 
P/B Yes 1.0 <2.0 
PE ratio Yes 8.5 <20