When your cash is more than your market cap, but still undervalued!

HOW MANY TIMES CAN THIS COUNTER LIMIT UP???

lifeisajourney
Publish date: Tue, 28 Sep 2021, 09:25 PM
lifeisajourney
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Recently, a friend of mine told me a stock under her watchlist.

After reading through the Annual Report of the company, it seems that this counter has been ignore by a lot of people. Yet, the fundamentals of the company is so strong while it has flew under the rader for so long.

The stock is KUB (6874). Based on the annual report of the company, KUB is an investment holding company and provision of management services to it's subsidiaries. The subsidiaries is involved in the business of Liquified Petroleum Gas (LPG), agricultural business, and ICT etc.

As of the moment of writing, KUB has just announce their Annual Report for FY2021. For those that are interested, you may use the link below:

https://klse.i3investor.com/servlets/staticfile/438566.jsp

 

A company with abundance of cash

What really caught our attention is the cash that the company is currently having. If you were to look at the financials of the company, you will realise that the company is sitting on RM423,108,000 NETT CASH. Part of the cash is due to the disposal of 2 lands in Johor (approximately RM158mil).

Currently KUB's market capitalization is only RM348mil. So if you're good in maths, you'll realise that the company can basically take the whole company private and still have 75mil cash remaining.

In another illustration:

RM423 = cash in the company

556mil = shares issued

RM423 / 556mil shares = 0.76 cents

As of the time of writing this article, KUB is worth 0.625 cents a share ( a discount of 0.135cents / 21.6%!! )

It just seems like a no brainer investment to me unless the company decides to throw all the cash into the sea tomorrow.

 

Not only that, it is interesting to note that KUB is sold to JAG Capital Holdings in 2019. With JAG holding around 33% stake in KUB, JAG is currently the largest substantial shareholder of KUB (Another company in which JAG is substantial shareholder is CIHLDG - 2828). JAG Capital Holdings is currently controlled by the former finance minister - Datuk Seri Johari Abdul Ghani. You can read more on him or the counter on your own leisure wink

 

Technical Chart

 

Technical wise, the chart seems to be doing well. With today's closing price at RM0.625.

1) The price is above its 7,14, 200 Moving Average.

2) The price seems breakout of it MA today. We should see the price moving north soon.

 

*somehow my chart is not showing today's volume and bar.

 

BONUS ROUND: Dividend of 0.015 cents

For those of you that have read through the Annual report, you would have already realised that the company has announced a dividend of 0.015 cents for this FY.

Based on the dividend given:

0.015 = dividend

0.625 = share price

0.015 / 0.625 = 2.4% yield

So imagine buying a share in which it is already a discount and the company decided to give more money. Who doesnt love cheap stuff? I mean i definitely do.

 

Based on the above analysis, I would definitely love to see what the future has in mind for KUB, and hopefully, what it has for me as well.

 

*My views does not constitute as a buy/sell call. I'm merely looking and analysing based on available facts.

 

 

KUB (6874)
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Be the first to like this. Showing 8 of 8 comments

Philip ( buy what you understand)

The first thing one should ask is not how much cash a business has, but what the business is going to grow the cash pile it has. Because as a minority shareholder you have no access to that cash, but simply whatever forms of dividends or share buybacks that the company is willing to do.

In this case the correct question is to ask why is the company valued lower than the nett cash it has?

The simple answer I can find is simply that the company doesn't make much money at all, and the earnings it has right now is simply by selling the plantations that it has for more prices instead of growing more (a trick that the old tradewinds manager seems fond of doing before, selling).

In any case would you buy a company whose central business model 77% is in the lpg business, and yet from 456 million in revenue, only makes 11+ million in profit? That is a gross profit of 2.4%.

Their ict telecommunications business is losing money, they are selling off the plantations they do have in agro.

So since we will not be able to access that pile of cash at all, and I fully believe management will be using that money to finance new business models( which may or may not be successful), the simple fact is you cannot value the company simply based on the cash they have which is the past, but try to estimate the future cash flow it will have.

That would be the real possibility of looking at why the share price will go up and how you will really benefit.

My 2 cents.

2021-09-30 08:08

cyeec2000

Philip why you look good at awc? Instead uem edgenta

2021-09-30 08:42

Bizfuneng

Tq, Philip you have presented your logic with business sense.

2021-09-30 08:46

VTrade

No wrong.
Stay safe

2021-09-30 12:00

Callmejholow

umno related mar

2021-09-30 15:42

hobobem

@Phlip so nice to read a good and competent analysis of the situation, in contrast to the article but with no insult and put down.

2021-09-30 16:38

lifeisajourney

@philip, I do not disagree with your comment. It is definitely interesting to see what development this company has in the future given that much cash in the company currently.

However, if you notice, there seems to be DBT transactions these past few days. Seems like a few big blocks crossing at 0.60 cents. If the costs to new owners is at 0.60, i think the price now would be very very attractive, unless i'm wrong.

2021-09-30 21:18

mahmudkashimj

We hope the new management will be play there role to manage the business well.

2021-11-18 20:00

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