I Was Wrong

I posted an earlier tweet last week (read this), whereby I was quoting CB Industrial Product (CBIP) as a ‘directionless‘ stock (even with solid fundamentals). I believe that the tweet is erroneous (perhaps from a longer time frame perspective).

As shown below, CBIP has been on a relatively stable uptrend (instead of being ‘directionless’) since 2009:

7076.MY.png 

Fundamentals Are Relatively Solid

CBIP is currently in net cash position:

CBIP_BS.png

CBIP has been consistent in maintaining double-digit return on equity:

CBIP_ROE.png

Not too excessive (in fact, declining) P/E and P/B:

CBIP_PER_PBR.png

Analysts have  a higher average target price of RM2.306 for CBIP:

CBIP_Consensus.png

Some recent buying support by the insiders:

CBIP_Insiders.png

As per management, in spite of current challenging environment, Management expects the Company to achieve satisfactory results (FYE2017):

CBIP_Prospects.png

Since CBIP appears to command solid fundamentals, what would be the indicative valuation range?

STRICTLY FOR ILLUSTRATIVE AND EDUCATIONAL PURPOSES ONLY

As long as earnings remain relatively stable across the financial quarters, it would be relatively easier for one to value a company. As shown below, the CBIP’s quarterly results appear to be rather consistent across the quarters (with exceptionally high seasonal earnings for the last quarter of the financial year).

CBIP_quarterlyPAT.png

Taking a simple average historical quarter PAT of the last 18 quarters (since 2013),  an average quarter PAT of approximately RM23.6 million (annualised: approx RM94.5 million) was derived. Given the relatively low beta nature of this stock, we assume 10% to be reflective of its required equity rate of return.

CBIP_Equity Value.png

Based on the above high-level desktop analysis (assuming perpetuity growth rate  to be in the range of 2.0% – 3.0%), a possible indicative equity value range of between RM2.30 and RM2.66 is derived. This indicative range represents a potential margin of safety of between 13.2% and 24.8%.

In my previous postings, I did consider CBIP as a potential candidate for possible swing trading opportunities. I was wrong again in this aspect. Given its relatively solid fundamentals, one may consider CBIP as a potential value stock, rather than classifying it as a momentum stock.

 

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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