BrianHalimThis article was recently published on A Path to Forever Financial Freedom, and is republished with permission. The writer (left), who is in his late 20s, has a MBA degree.


IN A BULLISH market environment, it is often difficult to find companies that provide a long term value with a sufficient margin of safety to shareholders.

Because of such difficulties, we often see investors pumping up their investment in commonly sought-after blue chip companies, causing their price to earnings ratios to rise to record highs these few years.

However, this stock that I will be highlighting is currently trading at a massive discount. In fact, it is trading at less than the cash value on the book. I will be explaining in further detail later.

To give a bit of background, the company was started in 1978 and listed on the SGX in 1995. The company is in the business of moulding, fabrication and assembly and is a pioneer as a major plastics manufacturer.

I will not be doing a thorough review on the company’s foundation. Should you be interested to explore further, please conduct your own due diligence on the company.

The company reported its full year 2014 results recently on the last day of February.


Balance Sheet Strength

The one thing that stands out is the huge cash and cash equivalent balance which amounted to $83 million, which is equivalent to 11 cents / share. The current share price is trading at 10.8 cents / share, which is already a discount to the cash on the book.

The company has also positive net working capital excluding cash. This means that current assets (excluding cash) are able to cover the provision for current liabilities, mostly through their trade receivables.

The other thing which stands out on the balance sheet is the zero (or very minimal) borrowings. With an impending interest rate increase, the non-leverage factor is definitely a plus to have on any company’s book now.

The NAV of the stock is currently 23.23 cents / share.

FuYu3.15Fu Yu (share price 11 cents) has a trailing PE of 8.1X and a market cap of 82.83m SGD. Chart: FT.com 


Comments  

0 #1 Sheri 2015-03-16 16:43
Financial analysis is ok. You wonder why the stock is at big discount . A possible reason could be the legal cases that some of its past / present executives are/were involved in. Just Google and you will come across some articles.
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