Welcome to my first posting of 2018. For this posting, I intend to screen for stocks that have significant discount to its asset value based on the following criteria:

  1. Country: Malaysia
  2. Price to Tangible Book (not exceeding 0.60x)
  3. Total Debt / Total Capital (not exceeding 25%)
  4. Current ratio of at least 2.0x
  5. Market cap > USD50m
  6. P/E (normalised) of not more than 12.0x
  7. ROE of at least 5.0%

The following is the enclosed screened results, of which I will focus on KSL Holdings Bhd (one of the major property players in Johor and has been established for over 30 years).

KSL_screening.png

Although the Malaysian property market outlook does appear to be bearish for 2018 as well as numerous listed Malaysian property peers are trading below their book value, there is still significant value that may be extracted from KSL. As per the latest financial position, KSL is currently trading at significant discount to its tangible book value.

BS-KSL.png

Applying significant discount factor to its non-cash assets (40% discount) as well as ascribing 100% factor (no-discount) for its total liabilities, the adjusted networth per share for KSL is approx. RM1.42. KSL’s current share price of RM1.07 represents about 25% discount to its adjusted networth per share. Further, it is important to note that it is currently in a net cash position (potentially, offering financial flexibility for KSL to ride through this challenging business environment).

Adjusted.png

Historically, RM1.00 represents a significant support line (i.e possible stop-loss). If one is considering taking a punt at this counter, RM1.30 may be a possible target price giving you reward-to-risk ratio of approx. 3.28x (entry price: RM1.07, stop loss: RM1.00).

KLS_TA.png

It is imperative to note that the above analysis is a high-level simple desktop analysis and further fundamental / company analysis will be required.

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