Thanks for sharing CYF. It's good info.

I wouldn't mind this cheap stock if the sell off is due to bad publicity. For me, the sell off is mainly due to CKP's pro BN stand. Govt contracts are sure to be affected. I'm sure they are survivors and price may move up again but I wouldn't bet on their poor management reputation.

They seems to have improved the net profit margins in the past few years. around 10% margin is ok for me, which I think is normal for textile manufacturing. Largely the low margin is due to the bulk volume ordered. One must also consider the ROI which is very healthy. I'll be more concerned If the capital outlay is huge to generate a slim margin. Magni is the opposite. The capital outlay is not high to generate the profit return.

Buyer and seller only agreed on a price. Hedging is via future contracts at the futures currency market, not against the purchaser. The purchasers have their own policy and hedging instruments independently from the seller.

Good point Khuen. Putting forex influence in right perspective

Targeted mushroom business at RM10M is only about 2% of Hevea's turnover. Provided everything goes well and there is continuous market demand, it will probably take about 5 - 10 years before the mushroom business can contribute significantly to Hevea's bottom line. On the other hand, if everything in the mushroom business goes south, no significant harm done.

Fabien, agreed to your comment.

Bottom line is, if you are banking on KESM's performance, I think the profit potential is higher than Sunright.

Can anyone explain why invest in Sunright rather than direct at KESM?

I thought KESM earnings are already consolidated into Sunright's group figures. As far as earnings is concern, it has already been factored into Sunright's price.

The value of KESM's share though is shown at cost value instead of fair market value. Sunright also has other subsidiaries in Thailand, China and Philippines. They are all taken up at cost value rather than market value - probably the main reason why Sunright's share has not moved in tandem to KESM's performance.

One must also consider KESM constitutes not a big portion of Sunrights earnings or assets. If you are banking on KESM's performance, why not invest direct at KESM? As far as earnings is concerned, KESM's performance does not have a significant influence on Sunright's share price.

Buying Sunright's share means you are buying into its whole business overall. It's share price depends on the performance of other subsidiaries too. It is also quite costly in my opinion since the PE is about 34 (much higher than its peers in Singapore).

KESM is at PE of 18 (some IT peers in Malaysia have much higher PE).

Singapore relies a lot on foreign investors and liquidity is generally low given the market condition now. From investors' perspective for Sunright, they give more weight to dividend earnings from KESM than the share value. Akin to many property developers companies, their share values are mostly undervalued if you consider the underlying property they are holding. Given a choice, one would prefer to invest in undervalued shares backed up by property assets than a company backed up by shares (as shares value are more volatile).

Booyah??? Exactly my point. Whether a stock price is cheaper or not is in relative to the underlying quality of assets and return potential. Lowest price does not mean cheapest.
Pantor was commenting Arank is the cheapest alum stock. You disagreed and said Lb is cheaper.
???

Booyah, care to share why lbalum cheaper? I thought Arank is cheaper.

Arank has better return and fundamentally stronger than Lbalum...

Management has proven to be resilient. That's what I was hoping to hear - that they diversify away from O&G.

slts not worth buying. fairly valued already

I think its undervalue... Most businesses go through business cycle. fundamentals and the underlying business are still strong. The business is doing well considering the economic downturn.

Good start

I think it is also because it was undervalued previously...

Agreed. LB alum is bigger but I think A Rank has better fundamentals

Niki, can share why you think Magni fairly valued?

Agree with Raider that the debt of Evergreen is manageable given its massive assets. However, return is not computed based on cash or debt amount but on the amount of assets invested to generate that return. In Evergreen's case, a massive more than RM1 Bn worth of assets to generate RM71 M of profit is considered poor return for me. That's why its ROIC is low at 6%. It's ROE has never exceeded the 10% for the past 10 years.

One can argue that Evergreen's return is within industry standards. If that's the case, then it is not an industry I will consider investing into.

Some thoughts to consider :

- market cap for Hevea RM780 M, EverG RM766 M

- Hevea Net Profit at RM80M exceeds that of EverG at RM71M despite its turnover almost double that of Hevea (indicating EverG has to work doubly hard to earn same level of profit of Hevea - business not efficient in generating profit as shown in ROIC figures below.

- NP margin for EverG is only about 6% (cost of debt interest would have been factored in). NP margin for Hevea is 15%.

- Return on Equity for Hevea is about 20%, ROE EverG 6.6%;

- Return on invested capital Hevea 20%, ROIC EverG 6%;

- PEG ratio measure the company's PE ratio in relation to the growth rate of the company. Generally, a PEG ratio < 1 is considered undervalue while PEG ratio >1 is considered overvalue. PEG ratio for Hevea 0.63 (indicating price is undervalue given the earnings growth rate of the company)
PEG ratio for EverG 1.75 (indicating the price you pay for EverG share now is considered high as far as earnings growth rate of the company is concerned - in other words, its difficult for the earnings growth rate of the company to justify its current PE level).

It is obvious EverG's business is different from Hevea. EverG's business appears to be capital intensive with generally lower margin. EverG's business may be in a very good business but from an investor's perspective, I'm more interested in how much return and how efficient every dollar I invested can bring. Between the two above, there is quite a stark difference. Hevea's capability to generate higher return for every dollar invested is definitely more superior than EverG.

Maybe EverG's business will improve significantly in future but for now, I am more incline to put my money on Hevea.

Technical chartist has Hevea on strong uptrend while EverG on strong downtrend.

I think result is good given its share price. Favco is still undervalued considering its strong cash generating capacity.

Sounds like an interesting article to read although I'm also thinking I don't need my stock to be big winner every time. So long it is still a winning stock, I think I'm fine with it...