Thursday, February 1, 2007

Value Investment on Singapore Stock Exchange - Valuation Report of Chuan Hup

Evaluated on 31-Jan-2007 and I am currently invested in this company.

Note: Exchange rate assumption: 1 USD = 1.5 SGD

About the company:

  1. Core Business: It was founded in 1970 as a tug and barge service provider for the PSA. On 30 September 2005, it completed the sale of its marine businesses to Scomi Marine Bhd. It is now a a pure investment holding company with substantial interests in the marine, electronic manufacturing services and property sectors.
  2. Date of Listing: Dec-1983
  3. What I like about this company: It has got very diversed investments, across marine, services and properties sectors. In my opinion, with the risks spreaded out, it is very unlikely that its investments will all turn sour at once. Also, I like the chairman (non-exec). Furthermore, one of the exec directors (previous MD) is also a substantial shareholder. Its profits and net tangible assets has been increasing steadily last 4 years, before it decided to sell away its marine operations.
  4. What I do not like about this company: It is in its initial years as a full investment holding company. Thus, there is no historical performance to benchmark it against.
  5. Competitive advantage (if any): None at the moment, this is risky bet... I am betting it to be a great instutitional investor.

Valuation Statistics (base on 1Q07 financial report)

  1. Earning Per Share: S$0.018 (annualized, converted from USD)
  2. Price/Earnings ratio : 18.06 (annualized, excl subsidary dividends, not calculated in 1Q)
  3. Operating Profit: 52.27% (excluding other income)
  4. Return on Equity Ratio: 0.0039
  5. Current Ratio: 3.97
  6. Cash & Receivables per share: S$0.12 (converted from USD)
  7. Debt/Total Equity Ratio: 0.08
  8. Net Tangible Assets: S$0.381 (converted from USD)

Conclusion

  1. Price: $0.33 (31-Jan-07)
  2. Estimated Fair Price: $0.471 (highly subjective)
  3. Maximum Price I would purchase at: $0.377 (highly subjective)
  4. Price to Estimated Fair Price: 70%
  5. Final word: To me, this seems to be another great business to own.

Information sources

  1. Chuan Hup company website at http://www.chuanhup.com.sg/
  2. Share investment magazine, issue 296, 01/01/07 - 12/01/07

Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.

5 comments:

Desmond said...

I was wondering why Chuan Hup chose to sell their marine business when it is doing fairly well and has been the engine of their growth so far.. Wats the rationale behind it? And is the sale of their business the cause of their stock price plunging from the highs of 80 cents? Do u think it is an overreaction on investors part?

Fu Chin said...

Hi Desmond,

Thanks for leaving the comment. It is something that puzzled me as well, which prompted me to read up on it.

In essence, the sharp drop in price happened after the special dividend of 44cents. You can get the announcement from SGX or you may like to refer to the following discussion thread.

Please see discussion thread on the shareinvestor forum, from link below, for details...
http://tinyurl.com/2j2tnt

Hope the above make sense to you. :)

The sale of the business is to "unlock" shareholder value...

Overall, I believe it is a positive move. But then, again it is just my personal opinions...

Warm regards,
Fu Chin

DEsmond said...

Thanks for your info... Anyway for the value investment club that u talked about is it open to everyone? Maybe you might wan to publicise it a bit more like giving more details on the usual routine of the group cause i feel that there will be many others who might be interested.

Regards,
Desmond

Anonymous said...

hi fu chin thanks for sharing your methodology in determing a undervalued stock. may i know your trigger point/methodology, if any, in deciding when to exit after making a tidy profit on that stock.

Fu Chin said...

Hi anonymous,

Thanks for your query. :)

The more I read, the more I realize the mistakes I am making.

So, I am really not in a good position to provide future advice.

Apologies to disappoint you that I do not have a good answer to your query.

Warm regards,
Fu Chin