Road to Success
Do You Always Buy In A Good Fundamental Company?
RicheHo
Publish date: Fri, 04 Sep 2015, 05:40 PM
Before I get to the main point, just want to ask a question. As an INVESTORS, what will you do before buy in a stock?
Based on my understanding, most investors will carry out analysis and valuation based on the company financial statement. They will look into the ratio and figure, such as PE, ROE, D/Y, etc. I did the same things too. But, this is not the only things that I will focus in. There are many others factors which I will look into details before decide.
You may refer my earlier articles as below:
1) How to spot unfavourable factors of a company? --> AYS Ventures
http://klse.i3investor.com/blogs/rhinvest/81543.jsp
2) How to spot unfavourable factors of a company? (2) --> CAM Resources
http://klse.i3investor.com/blogs/rhinvest/82004.jsp
3) Consistently Profit Making Company Not Necessarily Is Good --> London Biscuit
http://klse.i3investor.com/blogs/rhinvest/82368.jsp
4) Export-Oriented Company Not Necessarily Benefit From Weakening Of MYR --> Tong Herr
http://klse.i3investor.com/blogs/rhinvest/82431.jsp
5) Why A Good Company Doesn't Means Its Price Will Move Up?
http://klse.i3investor.com/blogs/rhinvest/81604.jsp
In this articles I would like to talk about this company, UPA Corporation Berhad.
Principal activities:
- Manufacturing of paper-based products and plastic products
- Selling, reconditioning and servicing of printing and printing related machines
PRICE = MYR1.57 D/Y = 5.10%
PE = 7.77 NTA = MYR2.51
ROE = 8.05% NCAV = MYR1.23
UPA had a very low PE and attractive D/Y. Its net tangible asset per share is MYR2.51 and its net current asset value per share is MYR1.23, which are pretty high! By referring to its ratio, UPA seems like a very good company.
For its business performance, UPA was doing great for the past 3 years. Also, there is nothing much to comment on it.
CASH FLOW
|
Year |
2011 |
2012 |
2013 |
2014 |
|
Net borrowing, RM'000 |
22,076 |
22,380 |
17,712 |
18,568 |
|
Free cash flow, RM'000 |
41,350 |
43,425 |
39,382 |
43,409 |
|
Net cash, RM'000 |
19,274 |
21,045 |
21,670 |
24,841 |
In term of cash flow, UPA had a very healthy financial condition and cash flow.
LIQUIDITY
|
Year |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Current ratio |
4.09 |
3.80 |
3.68 |
4.10 |
4.20 |
|
Acid test ratio |
2.64 |
2.48 |
2.41 |
2.65 |
2.71 |
In term of liquidity, UPA is also very liquid and healthy. It is definitely able to meet its short term obligation. Nothing much to comment on it.
Most of the time, the analyst reports and investors’ recommendation only mentioned about company fundamental and technical. For me, there are many factors to consider besides than fundamental and technical. In no doubt, I will say that UPA have a good fundamental. But, if a stock price of a very good fundamental company doesn’t move, will you still buy in? I believe this is the things that most investors do not aware.
This is the snapshot which taken from my trading platform at Thursday around 3pm. Look at its best buy and best sell column. The difference between the buy and ask price is 23 cent! There is still no trading transaction yet! If you want to buy UPA on the spot, you can only buy at MYR1.80! No matter how good is the company, when there is no player, there is no value. It is not worth to hold a good company when it’s very hard for you to sell it.
|
VOLUME |
June |
July |
August |
|
W1 |
155 |
200 |
163 |
|
W2 |
109 |
176 |
79 |
|
W3 |
90 |
104 |
|
|
W4 |
44 |
95 |
|
The above is the average daily trading volume in every week. The trading activity for UPA is very less! Someday, it might have no transaction at all. The highest in the table is 200 lots and the value is only approximately in the range of MYR30k to 40k! I believe there are many investors trade larger amount than this everyday.
Let’s look at its 30 largest shareholders. The 30 largest shareholders hold 75.22% of the company whereby the largest shareholder is UPA Holdings Sdn Bhd with 52.73% share interests. The second largest shareholder is Mastercraft Products with only 2.78%! With today closing price of MYR1.57, investor only needs MYR3.4m to become second largest shareholder in UPA! In addition, UPA doesn’t have any institutions or foreign investors inside the list. Besides than Mastercraft Products and KL Union Trading, the rests are individual investor. I believe it is the main reason why UPA is not able to raise investor’s awareness.
Besides that, have a look at UPA’s commentary about its future outlook. The below is the part which I extract from its quarter report.
"FY15Q1 -->The directors expect the business environment to be remain challenging. The Group will proactively undertake a strategic review of its operations, to mitigate any possible adverse effects arising from the volatility of the external environment.
FY15Q2 -->The outlook for the next six months appears to be not promising given the global and domestic slowdown. The directors expect the business environment to be extremely challenging."
From Q1 to Q2, the director had changed the words using, from “remain challenging” to “extremely challenging” and add on with “not promising”! It reflects that the management had become pessimistic and they are not confidence with UPA upcoming quarter result and performance.
You might think that I am too sensitive with the used words. But for me, I take it as the true words and hints from management. Else, why do they add in the word “extremely”?
As a conclusion, always remember, a good company doesn’t mean its price definitely will move. Everyone had their own method of stock selection. It is just part of mine. Feel free to comment if you disagree with me! :)
Just for sharing.
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Discussions
7 people like this. Showing 10 of 10 comments
year of birth 1992. you have future, kid.
Good writing. Thx and continue.
2015-09-04 23:07
It is good fundermental company. Unfortunately, sunset business. Doesnt seem like the business will expand. Only good for dividend holder.
2015-09-05 01:57
Other factors aside, if ones objective is to own the stock for more than 10 years, liquidity doesnt have much effect
2015-09-05 09:27
no wonder so many sifu said, do not look at share price everyday, read the news
2015-09-05 13:01
if you can't resist the temptation, then follow my bro tkp1, buy H and C
2015-09-05 13:03
As long as company giving me good return why not? 5.xx% dividend yield is consider good but not great
2015-09-05 15:22
I totally agree with you because when we buy this type of stocks and keep for few years , actually we are wasting a lot of time and opportunities . Sometimes we have to change our mindset and think twice before consider to buy this type of stocks. Thank you so much to you sir . Keep on educate to all newbies investor .
2015-09-05 18:32
BIOALPHA HOLDINGS BERHAD (KLSE: BIOHLDG)
Analysis of quarter financial performance
The Group’s revenue for the current quarter and financial period ended 30 June 2015
were RM8.25 million and RM11.48 million respectively, compared with RM8.13 million
and RM10.70 million in the corresponding periods in 2014. The increase was due to the
export of our herbal product to China market amounted to RM2.3 million as a result of
acceptance of the product by the China market.
The Group’s profit before tax (“PBT”) for the current quarter and financial period ended
30 June 2015 is RM0.50 million and RM0.51 million respectively, compared to RM2.36
million and RM2.18 million in the corresponding period in 2014.
Excluding the one-off listing expenses of RM2.18 million, the Group’s PBT for the current
quarter was recorded at RM2.68 million with
*** An increase of 13.56% as compared to RM2.36 million in the corresponding period***
CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD has increase 81.76 percent from 7.4 Million (2014) to 13.5 Million (2015). With the first two quarter of 2014, Management able to achieve 13.56% growth in profit. Imagine with the stronger 3rd and 4th quarter ( Usually stronger in last 2 quarter 40:60 ratio ) will boost the growth at least >30% which hit the target that management team has promised us earlier.
***Debt/Equity Ratio decrease from 0.224 (2014) to 0.142 (2015), low leverage making this company low risk***
Future prospect
Revenue and profit keep on increasing from year to year, even though with the implementation of GST which make Malaysia market decrease for the same corresponding quarter 30 June 2015 from 3,481( 2014) to 1,505 (2015), but soon or later consumer will start to increase consumption despite on GST tax. In addition, with the penetration of CHINA market and middle east region (products with HALAL cert) I believe BioAlpha going to make more big bucks in the future.
With the good financial results or business prospect doesn’t benefit the stock price to increase due to the uncertainty of major investing environment. Hence, major environment should take into consideration. The main reason for world stock market drop significantly last couple of weeks was because of revaluation. Let us have a quick looks from the past, after 08/09 crisis with the zero interest rate implemented by FED have come almost a decade which makes most of the U.S stock overvalue, another concern came in whereby after 08/09 crisis , CHINA play the role as the major movement for world's economy. However with recent CHINA economy data raise a second thought for the world to THINK the true value for stock market. However with the recent news many experienced expertise says that the bull market ISN’T over based on the latest data, they even suggested to grabs on “HEALTHCARE” STOCK with a strong balance sheet. BIOALPHA certainly fit into this category.
Be an investor but think like a business man, money making company will always give the best return.
Lee Chong Xiang, aged of 22.
2015-09-06 14:09
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goreng_goreng
I want to disagree but I think I got your point. This is all about popularity right?
"In the short term, the market is a popularity contest. In the long term, the market is a weighing machine."
2015-09-04 21:45