Based on its 2012 audited account and its Q1 2013 result announcement, I see a few very attractive point about the company:
1) Strong net operational cashflow generation
Approximately RM291 million in FY 2012 [and RM79 million in Q1 2013 (RM316M annualised)] against RM33million in investing cashflow giving it approximately RM258 million in free cash flow per annum..
2) Strong balance sheet...
Its audited cash balance at 31 December 2012 is approximately RM 944 million against total liability of approximately RM110 million, giving a net cash position of RM 834 million. There's also various receivable, inventory, fixed asset.. but for the purpose of this exercise I've assumed no recoverable value from these assets.
3) Dividend
Based on its short track record listed on Bursa, they've been paying regular dividend... 0.018 interim dividend was granted back in October 2012 and another 0.016 will be approved as final dividend.. giving a total dividend of 0.034, which is a yield of approximately 9.7% based on the current price of approximately 0.35.
These dividend are paid out of operational cashflow.
4) Earning yield
Based on 2012 audited account, the company generated approximately RM232million of profit. Based on current price of RM0.35, the PE is less than 1.9X.
5) Discount against IPO price.
It was listed back in Feb 2012 at RM0.95 which is approximately 4.75X historic PE. Current price is only 0.35.
6) Active purchase by major shareholder in open market.
There have also been a series of purchase by its major shareholder from the open market.. however this is also a downside, based on 2011 annual report, the free float of the share is way below 30%....
Conclusion - I don't generally like companies with poor corporate governance issue. But just like how you can overpay for a good company, there should be a price where a lousy company can be a good buy. Well that's the theory anyway, I have bought a little bit of this counter but with a very experimental mindset to this investment.
It's so cheap I can't understand it.
Thanks for the write up. Yes. It is so cheap and hard to believe. (9++ % dividend yield, no play play)
ReplyDeleteHowever, I try to only invest in the company which I'm familiar with (Which means, I use their products, services, ... regularly. And I'm a happy customer). For CSL, its accounting figure looks good. Since I never use or heard this company's products before. I would rather avoid it.
This reminds me of one of warren buffett's quotes : Rather buy a good company at fair price, than buy a fair company at good price. Of course, we still don't know CSL is a good company or fair company. Time will prove...
Thanks Yan for dropping by!
ReplyDeleteYeah, I like the quote about good company at fair price rather than fair company at good price. But it's pretty dang hard to find a good company at fair price.
In the case of CSL, I do think it's a fair company - but the price is so rock bottom cheap it's beyond good.
Yes - there's no way I will place CSL as a big portion of my portfolio, however I do have a small speculative part of my portfolio which I think this CSL fit right in. I do kick myself for missing their latest AGM.. but I think the market may be unduly punishing CSL for it's "China" link.