FU YU CORPORATION: Trading At Less Than Its Cash Value

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Sign of Value or Trap?

With such a strong balance sheet, you wonder why the company is trading at a massive discount to its worth.

One main reason is due to its volatile business nature, which has seen the gross profit margin for its core business going up and down over the past few years.

The business has also been suffering net losses from 2006 to 2009 as well as in 2011. The company started to turn profitable only from 2012 onwards. Obviously, this is a turnaround play but we still need to see if it can sustain the profits.

Despite the massive cash on the book, the company has not paid dividends to shareholders since 2007.

My guess is probably in view of the recent losses and volatility, the management wants to wait it out until profitability is sustained before resuming the dividend payout. Nevertheless, the key is to look out for the margin of the business.

In terms of cashflow, the company seems to operate in a competitive industry where it needs to spend quite a bit of cash to ramp up on capital expenditure. A quick look at the PPE (property, plant and equipment) figures will show how much equipment they are using to operate the business.

Return on assets doesn’t look extremely fantastic; it's relatively reasonable given the industry it is in.

This is a stock on my watchlist. I'll be watching out for news regarding project orders and margins.

Counter Name	Last	Change
AEM Holdings	2.390	0.030
Best World	2.470	0.020
Boustead Singapore	0.940	-0.015
Broadway Ind	0.127	0.001
China Aviation Oil (S)	0.920	-0.010
China Sunsine	0.420	0.005
ComfortDelGro	1.480	-0.010
Delfi Limited	0.885	-0.025
Food Empire	1.280	-
Fortress Minerals	0.310	-
Geo Energy Res	0.300	-0.005
Hong Leong Finance	2.530	0.020
Hongkong Land (USD)	3.210	-
InnoTek	0.545	-0.005
ISDN Holdings	0.300	-0.005
ISOTeam	0.044	-
IX Biopharma	0.047	0.004
KSH Holdings	0.250	-
Leader Env	0.052	0.002
Ley Choon	0.049	-
Marco Polo Marine	0.069	-0.001
Mermaid Maritime	0.141	-
Nordic Group	0.315	-
Oxley Holdings	0.086	-
REX International	0.128	-0.004
Riverstone	0.790	0.005
Southern Alliance Mining	0.485	0.055
Straco Corp.	0.485	-
Sunpower Group	0.215	0.010
The Trendlines	0.065	-
Totm Technologies	0.022	-
Uni-Asia Group	0.840	0.020
Wilmar Intl	3.210	-0.020
Yangzijiang Shipbldg	1.720	-0.040

Counter Name

Last

Change

AEM Holdings

2.390

0.030

Best World

2.470

0.020

Boustead Singapore

0.940

-0.015