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Harbour-Link Group Bhd (Insane Valuation): Estimated ex-cash PE of 0.8x, Net cash to exceed market cap in a year

Publish date: Thu, 09 Mar 2023, 04:17 PM
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It's pretty rare to find a stock so undervalued by the market that it's becoming ridiculous and astonishing at the same time. It's equally amazing that there's zero coverage of such a company, which is good as there's plenty of arbitrage opportunity available. Harbour-Link is such a stock. 

PE of 0.8x?

Latest quarterly net profit: RM46mil. Assuming the following quarters are better than this number (As indicated by boss), it can earn RM180mil per year. Current market cap is RM490mil, PE will only be 2.7x. Ex-cash PE (Net cash of RM340mil) will only be 0.8x!!! Note that this company has never been loss-making since 2004, despite all the volatility surrounding the shipping industry!!

Net cash to exceed market cap in a year:

Net cash currently is RM340mil. If it earns another RM180mil in a year, net cash will be RM520mil, more than its entire market cap. What will it do with this cash-hoard? Can someone just take over the whole company? He'll get tens of millions more cash for free and get the entire business earning RM180mil per year for free!!!

How to value this company? 

The market cap of this company is so ridiculously low that I don't even know where to begin. If RHB can ascribe 15x to TASCO in its valuation, Harbour-Link's integrated logistics should be worth RM500mil at least, assuming RM36mil per year earnings at PE of 15x. Let's give its shipping business PE of 5x, shipping business should be worth RM720mil. Net cash is RM340mil. Total market cap should be RM500mil + RM720mil + RM340mil = RM1.56billion, OR RM3.90 per share. 

Do your own research. All the best! Please share with me anything more undervalued than this. 

Prospects from latest quarterly report:

Shipping and Marine Services Division

Harbour-Link Intra-Asia/East Malaysia Container Shipping Trade had suffered low cargo volume and drastic drops of freight as from 3rd week of December 2022 until mid-February 2023 due to long festive season holidays. However, from now onwards, we foresee an increase in lifting volume based on recent space bookings by customers. Freight rates are expected to maintain.

Domestic trade are stable and lesser freight corrections. Shipping agency business are active and consistent after endemic.

Further to Sarawak State government’s announcements on implementation of various big investment projects which will stimulate our state economy in the coming years.

Harbour-Link’s shipping and marine division’s performance shall be favorable in the coming quarters.

Integrated Logistics Division

Logistics activities are stable and consistent after endemic. We shall expect more machinery rental and sales in the coming quarters particularly in the supplies of port and construction machineries. We shall expect to deliver a favorable result in the coming quarters.

Engineering and Construction Division

Most of projects works are coming to the tail end. New projects are under tendering and yet to be secured. We shall expect some good news soon.

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