Posted by Horsefield > 2014-11-12 21:09 | Report Abuse

Hi GemDigger,

1 The CapEx for past few years is much lower than its depreciation (CapEx < Depreciation), do you think this is sustainable? Without CapEx, how much growth you expected?

2. ROIC can be boosted by lower tax rate, do you know why the tax rate is so low (< 10%)and is it sustainable in long term?

3. FCF can be misleading as explained in (1).

4. How you compute the fair value of RM 1.50, especially for cyclic business?

Posted by GemDigger > 2014-11-13 09:09 | Report Abuse

Horsefield, yes you are right. The business seems to be stagnant already. But what I am looking for is for the past 3 years,(in 2013) the business EPS is 0.14, then they reward shareholder 0.08, keep the 0.06 for themselves. To me it wasn't stated in Annual report that they are going for any massive expansion, but they are buying new machinery to improve their efficiency, hence improve their profit margin. Buying this stock we might not expect growth but having dividend yield of more than 5% per annum is rewarding for me.

2. I have looked through their sheets and I could not find the reason why. Perhaps you could enlighten me on this?

3. My idea of fair value is assigning 15% discount on the 3 years average FCF which is about 11 million. Then expect the FCF to grow 1% forever.
Or the other way round, if the management pays 0.06 sen of dividend as the worse case senario, at RM1.50, the dividend yield is 4%, which is exactly what you get in the bank.

Posted by Stockker > 2014-11-13 09:13 | Report Abuse

Thanks for sharing, but I am puzzled and uncomfortable as to why the major shareholders sold about 1.5 million shares from 1.20 to about 1.12 recently. Any idea ?

Posted by GemDigger > 2014-11-13 11:23 | Report Abuse

Stockker I have no idea. The taiwanese have been selling since last year. However, the risk of this business will be:
1. less than expected dividend.
2. US economic recession.
3. MYR gets stronger.

This coming quarter I will expect a weaker quarter due to the weak USD in past 3 months. My average price is around 1.2-1.5. I will only consider to add in more when price dips below my average price. Coincidentally writer from the edge shares the same view of mine. Please have a look at the link below

http://www.theedgemarkets.com/my/article/stocks-likelihood-corporate-exercise-focus-lumber

Posted by CoMBoFisT > 2014-11-13 14:29 | Report Abuse

I bought this counter 3 years ago at RM1.28 during IPO, the share price never gone up above my buy price since then until 3 years later i sold them all at RM1.40. I have to admit that my entry price was wrong, I did not average down my price because I do not want to do that.

This had been a relatively quiet low cap company, just look at the early Oct14 trading volume during market correction, when market went wrong, its harder to sell them, buy queue and sell queue was above RM0.10 gap in some trading day. When market started to rebound later on, The share price did not move up, its not that investors don't aware of the good FA of the company, in fact it has been shared before in July. The share price is not sustainable compare to other company.

Peoples who prepare to goreng up this stock already accumulated more than enough below RM1.18. They just need lot of buyers to buy from them with help of some good news and articles, and little average up from time to time, and unload their portion.

To buy them and hold for another few years, I am not sure if I would willing to do that again at this moment, probably very short term like a month and sell them before year end. I see the uptrend is coming. I don't mind to unload my portion to them at RM1.48 which I bought at RM1.15, I am happy with 28% gain.

Just my sharing.

Posted by crossroad > 2014-11-13 22:36 | Report Abuse

When IPO the founders already said it is not to gain access to capital market, but to raise company profile because it is in export biz. Company healthy, but share cap too small la - what company need to do is to do corp exercise to increase the no of shares, do a split, give some bonus! The founders are getting along in age, they also want to enjoy some fruit from their labour, so selling is not bad.

Posted by Stockker > 2014-11-14 14:20 | Report Abuse

Sounds like a plan, but it would be good for owners to sell their block via off market. Does not give comfort if major shareholders sell in the market.

Posted by Stockker > 2014-11-18 09:23 | Report Abuse

Major shareholder just announced daily selling. How to go further ? Based on past years, dividend should be soon, yet shareholders selling. Very difficult to commit buying although fundamental and yield is good.