Meng Teck is an author, investor and entrepreneur.
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I like something that I can understand. Predictable & Certain, that's my thing.
Before I proceed with anything, please read this article after reading our disclaimer. I've been holding this share for my client for almost 3 months now. (Don't bother asking me about this, my fund is extremely private, you wouldn't want me to invest for you, and I wouldn't want to invest for you). The average purchase price is 3.16. Current price is 2.72. ( A 14% paper loss). Did I screw up? I don't think so. I'm writing this article today as a proof to the amateur investors who will read this in the future date that you don't always make money immediately after you purchase a share. You need to be able to hold it eventhough there is volatility and paper loss. What we are concerned is the business fundamentals and this one is doing very fine. I would say it is one of the most undervalued if not the most I have seen. And it is certain. Why? Let's proceed.
For your information, at the time of writing, I am still an undergraduate in Universiti Teknologi Malaysia. I first saw this share around April. At quick glance, it seems cheap with low PER. However, previous earnings has been bad. I quickly skipped this share because of 2 reasons:
1) Unstable Earnings in the past. (I like it predictable and stable)
2) I don't want to add another company in property industry to my portfolio.
However, last August, one of my graduate highlighted this to me (Thanks Kenn!)
as he was considering to buy this share. Being an overly concerned tutor, I checked this company out. (More in depth analysis).
As I was reading through their description, I immediately fell in love with this company when I found out they built the Taman Universiti that I go for meal every day, every meal (Almost). They are also situated in Johor, I can visit them easily. And so I did.
Being a curious investor, I drove to their showroom, about 20 minutes from my university. I disguised as a prospect looking to buy properties and went in to ask the salesgirl some questions. What I found out was great! Most of their shoplots and houses are sold out. I couldn't remember what phase and or the name of those projects. But the impression that I get is most of their projects are sold out and now they are concentrating on 2 things.
1) Their One Sentral Project and,
2) To build some affordable houses around that area (Government Requirement)
One Sentral Project. A Condominium.
A Quick Ratio will give you a current ratio of more than 2. Which is good enough to avoid liquidity issue. We can also observe that the borrowing is not too much. Overall, the balance sheet seems healthy albeit the high receivables.
I went away from their sites with 3 impressions.
1) Their sales is doing very well and income streams for another 1 and a half to 2 years wouldn't be a problem.
2) Their houses built are getting smaller and smaller.
3) They are building on a very strategic location. Only 5 Minutes drive to Kota Iskandar, Puteri Harbour, and Legoland.
Now, having this insight is good, but proper investing process needed to be followed. So next to do is to analyse the financial health of the company.
We can observe that the recent years has been very well for the shareholders of CView with a good uptrend in earnings. ( I reckon these earnings are contributed by the finished projects) The trailing 4 quarters result @ 16.11.2014 turns out to be even better than the performance in 2013 with a profit of 82 Million which is a EPS of 82.52. The total dividend paid out throughout last 4 quarters has been 28 Cents.
Method 1 : Cigarette Butt Method.
Assuming the company's income stream will be constant for the next 1.5 Year.
2.81 (Current Book Value) + 1.5 (0.8252) = 4.04
Assuming that the price to book ratio is at 1. Which what is has been valued at throughout the years. At current price of 2.72. A Potential Gain of 47.2% within a 1.5 Year.
Method 2 : Comparing PE across Industry
Based on the approxiamte industry average PE of 8 (For Propery Development Industry)
The fair value of this company should be 0.8252 * 8 = 6.60
A potential 142% gain.
I think method 1 is more appropriate with this company. Just like finding a cigarette butt on the floor,you saw there is still some puff to it, you pick it up and have that last puff. It's not sexy, it's not a great business. But it's a cheap last puff. Even if you do not agree with my valuation method, at current price, you're getting 10.30% dividend yield. All you need, is to be certain that they will pay out this dividend at a constant rate for more than a year.( A projection I am quite certain about). My target price for this company is 4.00.
(Note: This is not a recommendation to buy, hold or sell, the author disclaims any risk or liabilities as a result of the use of this article.)
Update (Nov 2015) - This turns out to be my first major mistake in investing.
2 Things you can learn from this:
1. Don't buy just because they are cheap. Focus on quality first.
2. Don't buy companies that you are not certain they will grow in earnings.
Sold my share at 2.80 when I notice the eps started declining steadily due to no project launch. Cut my losses of 15%. Lesson learnt. Lost few thousands on this. :(