I wrote about TOMEI CONSOLIDATED BHD a few times already (for links see at the bottom of this page), as it is my long term investment and I personally believe this company has a very good long term potential. But dips and corrections happen, especially when gold prices shorterm dip, FMCO in place and traders right now prefer other stocks which they think have potential right now.

Mr. Koon Yew Yin is also supporting this stock and he claims it is his major investment at the moment (June 2021), he wrote an article about his own opinion that TOMEI correction was overdone and mentioned there some arguments to support his claims.

At first have a look at GOLD chart:

From the chart you can see clearly prices of GOLD for the last 3 months going nicely UP, from around 1730 to 1864 which is 7.85% increase – still good, at least it is not down, which is important factor when I will talk about earnings later. We can also see June wasn’t so far good, but its not any disaster either and I would call it just a “small dip”. Healthy dip is always good.

Now how about FMCO? It is nothing specific for TOMEI, it has actually almost the same effect on almost all companies, but if it will ends on 28. June, it can influence only around 30% of the  reporting period for the next QR. Does it mean EPS will be down by 30%? Hardly so, as TOMEI still running e-commerce and it will be partly mitigated by the gold price increases. In my opinion it can have maximum -10% effect only and it will be of course temporarily, who was unable to buy jewelry during FMCO will do it after that and it should theoretically erase any negative impact during the FMCO.

Lets see some numbers to help us find a fair value:

Price 15 June: RM 1.14

Trailing EPS last 4QR: 29.53 sen

Trailing P/E Ratio: 3.86

Next QR EPS? If I consider my prediction of -10% impact it still should be elevated at around 9 sen.

Prediction next QR EPS: around 9 sen

Prediction Trailing EPS with next QR: 37 sen

Predicted P/E: 3.08

The worst possible scenario? OK let me be very, very pessimistic, FMCO no earnings at all and remaining time will be even worse compared to the last QR (how that can happen, I don’t know).

The worst predicted EPS: 5 sen

The Worst Trailing EPS: 32 sen

P/E Ratio: 3.56

As you can see on these simple examples, even if next QR will be extremely bad, the trailing EPS will still increase and P/E Ratio will be unbelievably low, very unjust valuation level for this company. Correct P/E Ratio should be around 8+ and you can simply do your own calculation by multiplying the expected EPS for 4 QRs with your target P/E Ratio to get your own fair valuation.

[Read about P/E Ratio HERE (for newbies).]

TOMEI last 5QRs comparison HERE.

TOMEI weak hands HERE.

TOMEI gold chart HERE.

Read more on my blog: https://miloshtrading.blogspot.com

Disclosure: Im holding TOMEI.

Disclaimer: Im not a professional financial advisor, analyst, economist or an  accounter.
This is not a trading recommendation / advise, just my personal view.

These articles are not trading recommendations, just expression of my personal views, please do your own "homework" when deciding to invest! Im not licensed advisor by SC and I am not recommending any action to buy, hold or sell. All articles here are based on publicly available data from Bursa Malaysia, accessible to the public and I am using investment strategies / ratios which are too available to the public from many sources such as wikipedia or investopedia. This blog is non-profit, non business, and I don't benefit from it in any possible sense.