Thursday, April 9, 2015

A Review of two extreme: Sin Ghee Huat Corporation & ISDN

After reading this post from ValueEdge, it prompt me to write about this 2 stocks of mine.

One - an old school value stock. The other - an established business changing its main focus.

Sin Ghee Huat Corporation Ltd

This is the old school value stock. The company do not have any exciting business - as per SGX - "...engages in the sale and distribution of stainless steel products primarily in Singapore, ASEAN, China, Australia, New Zealand, India, South America, and the Middle East."

But its ratios show lots of potential (Current Price: 0.260)

Net Current Assets Value: 0.330 per share (26% higher than its current price!)
Price to Sale: 0.91 (<1.5)
Dividend Yield: 5.77%
Debt to Equity: ZERO!
Price to Average 10 year Earnings: 7.85 (<10)


No Rights Issue EVER! Dividend every year! Pure Play!

What's more to ask for?

People may argue that this company is a stockist and they are normally a slave to the price of its product. If its product's value (in this case, steel) falls drastically, the stock price may fall drastically as well.

But please do not forget there is still a buffer of 26% and the company has NO debts. In addition, what happens if steel prices shot through the roof? (The margin of safety will definitely be much more.)

As usual, people tend to forget this kind of stock as it gets boring in the long run.

A value gem found.

ISDN Holdings Ltd

This stock is different from any value stock. Price has fallen more than half since July 2013.


Seems that the company is changing its business to a "power supply company in Indonesia". Without a track history in this new business (other than previous being an engineering firm), investor lost all confidence in this stock. In addition, it has launch rights and warrants issue. 

Having read about "Buy when everyone is fearful" - I decided to check out more. 

I found out the company has been on an aggressive share buyback since Oct 2014. In addition, the warrants has an exercise price of 0.600 cents (compared to the current price of 0.205!).

When I first looked at this stock, I was only able to retrieve 3Q14 financials. Its Net Current Assets Value is 0.171 vs Price of 0.200.

However, I decide to launch into a purchase of this stock in view of the following: 

1. The management is very assure of the plan they have in mind with the share buybacks and a warrant exercise price of 0.600.

2. Power Supply is actually a very good piece of business. It allows the company to have a consistent stream of revenue.

3. With its rights and warrants issue, it is able to minimize the use of debt to finance its new ventures.

Finally when the 4Q14 financials are out, I am in for a huge surprise:

Its Net Current Assets Value is 0.225 per share (10% higher than its current price!)
Price to Sale: 0.315 (<1.5)
Dividend Yield: 1.95% (FAIL)
Debt to Equity: 12.18%
Price to Average 10 year Earnings: 10.62 (FAIL)

Although this stock did not managed to become a value find, but the future seems bright. If the price continue to fall further, it may really become a value gem.

By then, I will load more of them then!

Conclusion:

In short, this post reminds me that an investor must always be flexible to change when an opportunity arise. However, we should still maintain our core view when analysing.

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