Art of Investments


Publish date: Mon, 15 Feb 2021, 09:32 AM

Most of you will be familiar with PA Resources Berhad. It is on the top volume list almost everyday and its share price has also tripled from about RM0.08 in October 2020 to around RM0.24 (before share consolidation). The share price of PA Resources tripled mainly due to the very good results it posted in the most recent quarter.

Another stock that does the exact same business as PA Resources and reported even better results than PA Resources is LB Aluminium. The best part is LB Aluminium has gone completely unnoticed by investors which is why I am calling it a hidden gem.

LB Aluminium does exactly the same business as PA Resources and that is aluminium extrusion and fabrication. The difference is PA Resources has 1 customer, which is First Solar, contributing more than 90% of revenue whereas LB Aluminium has a larger number of customers. This makes LB Aluminium even better than PA Resources.

Here is a summary of LB Aluminium's recent quarterly performances:


In the most recent quarter, LB Aluminium reported its strongest ever profit in their history. Similiar to PA Resources which reported one of their strongest quarterly profits as well.

How to value LB Aluminium?

It is simple. It should be close to PA Resources since it does the exact same business.

Firstly, lets see how PA Resources is valued. If we were to annualise PA Resources' most recent quarterly profit of RM3.4 million ( 3.4 x 4 = 13.6 ), using their current market cap of RM543 million, PA is valued at a PE ratio of 39.9x !! 

How much is LB Aluminium valued now? If we were to annualise its most recent quarterly profit of RM9.3 million ( 9.3 x 4 = 37.2), using their current market cap of RM155.3 million, LB Aluminium is currently valued only at 4.2x !! 

At LB Aluminium's share price of RM0.62 now, the difference between the valuations of LB Aluminium and PA Resources is too extreme. Even at 10x PE ratio (lets not talk about 39.9x), LB Aluminium will be worth RM1.50!

LB Aluminium has gone completely under the radar of investors and it is a matter of time before this hidden gem's valuations catches up with PA Resources.


UPDATE: Since recommending this stock at RM0.62, the share price has more than doubled to RM1.30 now and I would suggest that you do not be greedy and take profit at these levels. 

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