Trading With A View

Tradeview - 2016 Value Stock No. 5 (Perusahaan Sadur Timah Malaysia (PERSTIMA) Berhad)

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Publish date: Tue, 19 Jan 2016, 05:21 PM
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Author of Once Upon A Time In Bursa : The MONEY Equation. A corporate strategist, lawyer & avid investor who has two great passion in life: Financial Markets & Real Estate. A true fundamentalist and financial writer motivated to tip the scale in favour of retail investors. Believe the stock market can be force for good.

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Following Message

 
Dear fellow readers, 
 
I have shared 4 value companies namely : 1.Magni  2.UPA  3.Apollo  4. FFHB
Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. To join my telegram channel : https://telegram.me/tradeview101
____________________________________________________________________
 
Value Stock No. 4: Perusahaan Sadur Timah Malaysia (PERSTIMA) Berhad
 
With volatility in the market, I would suggest a more defensive pick and Perstima fits the bill. At current price, it is only trading at 10-11x trailing P/E while offering yields in excess of 6%. Given the above average dividend return, I think share price will be well supported. Further, Perstima has a strong balance sheet with a net cash position (RM0.96/share vs. current price of RM5.54). Considering this, the stock is priced at a mere 8-9x trailing P/E (ex-net cash).



What really excites me it is business prospects. Perstima has a monopolistic position in Malaysia with around 50-60% market share, granting it pricing power and the ability to maintain profit margins. For growth, it has exposure in Vietnam where the economy is still growing robustly. Further, Vietnamese Dong has strengthened against Ringgit over the past one year and this bodes well for Perstima. Another plus point is that its tinplates are used for the packaging of food, beverage and sanity cans, which are generally resilient in nature (non-discretionary consumer products).



Delving deeper into the financials, for the past 3 consecutive quarters, I observed that revenue and profit accelerated despite low tin prices. This was thanks to volume increase and forex tailwind. In turn, margins were lifted as well. I believe Perstima will continue to perform well in the upcoming quarters. To further back up my investment thesis, Perstima has raised its interim dividend to 18sen from 15sen recently, implying optimistic business prospects. 





At RM9.00 (60% upside), Perstima would reflect 16-17x trailing P/E and 14-15x on an ex-net cash P/E basis. On the other hand, dividend yield is still attractive at 4% at RM9.00 (assuming 38sen DPS - already paid out 18sen and typically the 2nd interim dividend is 20sen). I don’t think this back-of-the-envelope valuation is steep since this is a growth stock. Further, as EPS grow, the P/E would narrow while dividend payout would increase and hence, provide higher yields. FYI, Perstima’s payout ratio is between 60-70% (so much more room to dish out dividends) and yet the yield is superior compared to many listed companies on Bursa. However, as Perstima traditionally have been undervalued despite its monopolistic position, conservative individulas can provide a 15% discount for a conservative FV of RM 7.65.
 
To join my telegram channel : https://telegram.me/tradeview101
Email me at : tradeview101@gmail.com 
 
Food for thought: 
 
Sacrifice is risking everything without guarantee. 
May good fortune come your way!
 
Disclaimer: This is not a recommendation to trade. It is merely the expression of the author's personal opinion and shall not be held responsible for potential gains or losses executed by readers.
PERSTIM (5436)
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Discussions
2 people like this. Showing 5 of 5 comments

DLGF

indeed, putting aside the export's play with Vietnam, very convincing figures seeing the net cash ... will load up tomorrow perhaps.

2016-01-19 21:01

eimajz

wow already moving upwards quietly even thought weak market! I havent collect yet

2016-01-20 10:43

lyo82

A defensive stock in volatile market.

2016-01-23 23:37

tc88

Quarter result will be on 29 Jan 2015.
Buy now before late.

2016-01-28 11:28

tradeview

Finally moving and hit RM6.05. Let's see can march to my TP

2016-04-06 09:59

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