On 23/2/17, I purchased shares in Kingboard Copper Foil at $0.32. My thesis for this trade is a speculative special situation play as the risk reward ratio seems to be attractive. My hesitation did actually cause me to miss the rally from $0.29, but I still felt its current price was undervalued. The company is currently pursuing an appeal against a court ruling that did not rule in its favour. A further EY report sought by the company has shown findings that are consistent with the court’s ruling. In essence, if the company loses the appeal, there is a possibility that the majority shareholders will have to buy out the shares held by the minority shareholders, at a price to be determined. Currently, the NAV of the company is around $0.67, which might provide an indication of where negotiations might anchor towards. The hearing is set for March, and this is a very short term speculative bet, probably the most speculative trade I am entering into so far.
On the same day, I also purchased shares in Tai Sin Electric at $0.405. The company produces and supplies materials to the construction industry, like cables, switchboards, electrical products and accessories, along with a test and inspection arm. According to an article on The Edge Singapore, it commands a 30% share in Singapore’s cable manufacturing market and its testing and inspection business is the second-largest in the country. It is a potential beneficiary of increased public infrastructure spending in the region. I have been impressed with Tai Sin’s stability and its management’s ability to grow the business steadily over the years. Revenues and earnings have grown in four out of the past five years. The company was also profitable during the crisis years of 2008-2009. In a 2010 interview with The Edge Singapore, Bobby Lim, who used to run the company and is the father of the current CEO, mentioned that one of his biggest takeaways from investing in other companies is to never over-borrow to expand the business. I am optimistic about their overseas expansion into neighbouring markets in Southeast Asia, especially Vietnam, which is experiencing a construction boom. In the previous year, revenue from Vietnam almost doubled. At my purchase price, PB is around 1.07 and PE is around 7.63. Tai Sin is more of a yield play to me, with dividend yield around 5.8% at my purchase price. The company has also reached a net cash position of $3.2 million as at end 1QFY2017.
My last purchase of the day was in Best World at $1.995. To be honest, I have been skeptical of Best World’s growth, as the company has just grown tremendously in the past year. A lot of reports have been written online about the prospects of the company, and I shall not go into detail. To me, I feel that buying shares of Best World now may be abit delayed, but I wanted to be sure that its growth in China was materializing, and not just a rosy picture painted by management. The recent earnings release answered my doubts, as China’s quarterly revenue grew tremendously from the previous year, ie. 143%, and FY16 revenue grew 193% yoy. I still feel that the stock could rerate upwards as it obtains more recognition from investors. At my purchase price, shares of Best World are trading at a PE of 15.9, which I feel is not expensive considering its room for growth. Dividend yield is around 2.5% at my purchase price. Best World is a growth stock, but as I am still wary of companies which do most of their business in China, I will be keeping a close eye on this.
Disclaimer: The author owns shares in the abovementioned company. The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog.