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	2.280	-0.080
Best World	2.450	0.010
Boustead Singapore	0.950	-0.010
Broadway Ind	0.127	-0.001
China Aviation Oil (S)	0.900	-0.010
China Sunsine	0.400	-0.010
ComfortDelGro	1.450	-0.010
Delfi Limited	0.895	-0.005
Food Empire	1.290	-0.030
Fortress Minerals	0.310	-0.010
Geo Energy Res	0.300	-0.005
Hong Leong Finance	2.480	-0.010
Hongkong Land (USD)	2.840	-0.010
InnoTek	0.520	-0.015
ISDN Holdings	0.300	0.005
ISOTeam	0.041	-0.002
IX Biopharma	0.040	-0.005
KSH Holdings	0.245	-0.005
Leader Env	0.050	-
Ley Choon	0.043	-
Marco Polo Marine	0.066	-0.003
Mermaid Maritime	0.135	-0.004
Nordic Group	0.310	-0.005
Oxley Holdings	0.089	-
REX International	0.140	0.005
Riverstone	0.785	-0.010
Southern Alliance Mining	0.445	-
Straco Corp.	0.495	0.010
Sunpower Group	0.210	-
The Trendlines	0.069	-
Totm Technologies	0.021	-0.001
Uni-Asia Group	0.825	-
Wilmar Intl	3.370	-0.010
Yangzijiang Shipbldg	1.740	-0.030

Counter Name

Last

Change

AEM Holdings

2.280

-0.080

Best World

2.450

0.010

Boustead Singapore

0.950

-0.010