I am back again - Went on an overseas trip lately.
When I am back, the market became red. And then green. And then red. You can never catch the bottom in this volatility. Thus, as usual, my advice is to invest in good quality company with a long term view.
Therefore, I shall talk about one of the quality company in my portfolio (which I am deeply vested in) - Chuan Hup Holding Ltd.
Profile In Short
Chuan Hup Holding Ltd (CHH) is an investment company which has a major stake in PCI Ltd (Listed in SGX). It also has some shareholding in Finbar Group Ltd - an Australia property development company listed in ASX. CHH collaborated with Finbar Group Ltd and is deeply involved in various Australia Property Developments.
Previously, CHH also had some shareholding in CH Offshore Ltd but it has since been sold off to Falcon Energy in early 2015.
The Value Stock Scorecard
Price: $0.320 (as at 13 Sep 2015)
Net Current Asset Per Share: $0.313 (-5%)
% Cash of Price: 69.72%
% Cash of Current Asset: 55.89%
Cash/Debt: 13.623 times
Discounted Net Asset Value: $0.387 (+14%)
Price to Sales: 0.979
Earning Yield: 21.77%
Dividend Yield: 3.03%.
Debt to Equity: 3.82%
Profit Margin over 10 years: Significantly High (In view of profile of investment company).
10 year average PE: 5.35
10 years Average ROE: 13.96%
10 years Average ROA: 11.85%
Value Stock: Yes – 9/14
Why So Good:
Huge Cash Pile – US$158mil. Being an investment firm, Cash is King. Cash will give the firm the ability to invest in any opportunity that arise, especially during the current market situation. Cash will also give the firm the ability to endure through any difficult times, if necessary. Cash will also allow the firm to give dividends/more dividends to the shareholders, like the current year’s special dividend.
Stake in Finbar and PCI – Rival companies may try to acquire these stakes from CHH. This will give CHH the ability to increase its cash pile and the margin of safety for the shareholders.
Very Strong Balance Sheet – As per the figures of the value stock scorecard above, you can deduce that CHH has a very strong balance sheet. This is due to the ability to rank in profit every now and then due to its investments. In addition, it also has a very low PE, very low debt, high ROE and high ROA.
Why Not Good:
Investment Firm’s Business Activities – CHH has been buying and selling its stake in various companies over the years. Thus, the high income is mainly due to its ability to sell these stakes at a higher price. However, this is also due to its management ability to find good quality companies. In future, this may change if management changes, and there may come a time when there is no stake in subsidiaries to sell, then the high income may end. If only, it can suddenly become Berkshire Hathaway, and not sell stakes, but only the ability to buy new companies.
Australia Property Going Downhill – Australia property prices are going downhill as its property’s bubble has burst. Thus, the investment in Australia may not be as profitable as it was stated to be. Future income will goes down till the prices in Australia property started to rise again.
Despite the negativity stated above, I am confident that CHH is a good quality value company in view of its huge cash pile and its historical record over the last 10 years. Its ability to find good quality investment and to sell them at a much higher price over the last few years, without the need to request for any rights issue, speaks volumes about its current management team.