Posted by kcchongnz > 2013-11-11 11:55 | Report Abuse

The Graham net net valuation gives a minimum value of Hexza per share of 81 sen. This assumes that the owners say we don't want to do any business now and let us sell us all the assets we have; the equity investment we have at market price, collect all the receivables and assumes that 75% of them are collected; sell off all the inventories, properties, plant and equipment and assuming get back only 50% of the book value of them, and then pay off all liabilities and share of uncontrolled interest. So one can see this is quite a conservative way to value Hexza, and yet it should worth at least 81 sen.

But Hexza is an established manufacturing company engaged in the manufacture and sales of formaldehyde based adhesives and resins for timber related industries, ethyl alcohol, natural vinegar, cooler, liquefied carbon dioxide and kaoliang wine for a long time. They have been consistently making profit and cash flows, paying dividends to shareholders for years consistently. It is still a viable going concern, albeit with little growth. So if the company wants to sell off its business, it can still base on an earnings valuation.

Hexza has an earnings before interest and tax (Ebit) of 9.33m last year. It has an excess cash of 129m, and no debts. If Hexza's business can be sold off at just a reasonable low price of enterprise value 8 times its Ebit, Hexza's market capitalization should worth about 200m, or a share price of RM1.00 per share.

Posted by miketyu > 2013-11-13 10:15 | Report Abuse

If a share is trading below its net asset per share, does it means that the share is undervalued? or we have to take into account of their cash balance as well?

Posted by kcchongnz > 2013-11-13 11:05 | Report Abuse

Posted by miketyu > Nov 13, 2013 10:15 AM | Report Abuse
If a share is trading below its net asset per share, does it means that the share is undervalued? or we have to take into account of their cash balance as well?

Not all assets are equal. Would you prefer the assets of a company to be more valuable assets such as land bank at good locations which has not been valued for ages, commercial properties giving high yields, investment in liquid investment such as bank deposit, listed shares; or do you prefer assets in plant and equipment which is obsolete, inventories which is out of fashion and use, receivables which you don't even know they are collectible?

Read the article posted by Tan KW long ago below:

http://klse.i3investor.com/blogs/kianweiaritcles/38350.jsp

Posted by bugle > 2013-11-13 18:56 | Report Abuse

Excellent analysis, Master Tan KW. Believe it will have more upside potential. Thanks for sharing!

Posted by AyamTua > 2013-11-22 16:05 | Report Abuse

read this .. Hexza, zero debt with cash .. aka bank vault with extra safety protection - a future $1.00 company

Posted by steelman > 2014-06-27 21:29 | Report Abuse

No issue on liquidity with almost zero gearing. Business performance indicate sustainability but management team apparently conservative. At this price it can be target of takeover, if major shareholders willing to sell.Very good upside. Ayam Tua is right!!