Value Investment on Singapore Stock Exchange - Valuation Report of Jurong Technologies

Value Investment on Singapore Stock Exchange - Valuation Report of Jurong Technologies

Evaluated on 10-Jan-2007 and I am currently not invested in this company.

About the company:

1. Core Business: Provides Electronics Manufacturing Services ("EMS") to local as well as overseas electronics Original Equipment Manufacturers ("OEMs") since 1988.
2. Date of Listing: Apr-2000
3. What I like about this company: Its Revenue, Profit, Net Asset Value and Earnings Per Share has been increasing for the last 5 years, from 2001 - 2005.
4. What I do not like about this company: For the first time in the last 6 years, 2006 may see the company's revenue declining. Although the Q306 financial report mention it more as a difference in the business model, i.e. from Turnkey Buy/Sell to Consignment, I would still not look at it favourable. Thus, 2007 may be an important year for the management for it to find more streams of revenue for the company. Also, it is expanding and building manufacturing facilities in Suzhou, Tianjin and Brazil, which seems to me like a high risk venture, with its cash tied up in the fixed assets.
5. Competitive advantage (if any): No comments.

Valuation Statistics (base on 3Q06 financial report)

1. Earning Per Share: $0.259 (projected)
2. Price/Earnings ratio : 7.3
3. Operating Profit: 6.32%
4. Return on Equity Ratio: 25.03
5. Current Ratio: 0.98
6. Debt/Total Equity Ratio: 1.9
7. Net Tangible Assets: $0.471

Conclusion

1. Price: $1.10 (10-Jan-07)
2. Intrinsic Value: $1.76 (highly subjective)
3. Maximum Price I would purchase at: $1.15 (highly subjective)
4. Price to IV: 62%
5. Final word: At a 62% price to IV ratio, it may seem like a good buy. However, I do not really understand this business and thus, I do not have high confidence in its future earnings. Thus, I would not consider buying this stock at this point. Having said that, I would be keen to keep track of its business performance in 2007.

Information sources

1. Jurong Technologies company website at http://www.jurtech.com/
2. Share investment magazine, issue 296, 01/01/07 - 12/01/07

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