Monday, November 23, 2009

Why I Like Kim Hin (A Lot)



Another one which is part of the recovery story. This is is even better that the couple that I have featured recently. Kim Hin had a troublesome spot a few years back but has "revamped its thinking and strategy" to be a an out-and-out transparent, diligent and professional company. The first couple of years, not many believe that the tiger has changed its stripes. I have been monitoring the company, on and off, and I must say, I am giving it near full marks. They did not simply play their shares anymore like before. I mean, look at the 52 week high-low, its just 84 sen and 1.15.

Its been moving this morning and I am already typing as fast as I could. Please do not think that I am whacking the shares before posting. Kim Hin Industry is an investment holding company engaged in manufacturing and distribution of ceramic floor, homogeneous and monoporosa tiles. The company through its subsidiaries is involved activities that include trading of building materials, property letting, property and investment holding; and wholesale and retail of ceramic tiles. Kim Hin primarily operates in Malaysia, China and Australia. It is headquartered in Sarawak. The company recorded revenues of MYR251.5 million in the fiscal year ended December 2008. Its net profit was MYR4.2 million in fiscal 2008. Thats fine and dandy because it was the difficult 2008. To even come out in the positive is an achievement to cost control and product acceptance.

Basically, there is only one big catalyst:

For the 2Q ended June 2009, its revenue was RM63m and net profit was RM9.48m (note that the whole of 2008 its net profit was just RM4.2m. The !Q2009 was still difficult for them, the carry on effects of the financial crisis, which saw only a net profit of RM1.37m.

Those who monitor quarterly results (they should, especially when you are looking for srong recovery stocks) will note that they released their 3Q2009 figures on 18 Nov. It was outstanding. Revenue was RM65.3m and net profit was RM11.9m!!! If you take in the first 9 months of 2009, its total net profit came to RM19.82m or a net EPS of 13.77 sen. If you assume they make a similar sum for 4Q 2009, basically you can add another 6 sen to the figure, making it a net EPS of 20.77 sen.

Now 20.77 sen is very significant for a stock that trades below RM1.30. A PER of around 6x. Its net asset per share is RM3.08. Its got RM87.2m cash in bank, and about RM40m in liabilities. All that will become very significant when you consider they only have 154.9m shares. That translates into:

Net cash per share of 30 sen
Net tangible asset of RM3.08
Share price below RM1.30
Net EPS (likely) for 2009 of 20 sen

In a recovery, this stock should see a similar surge in business over the next 2 years at least. The stock and figures sell by itself.

The above were views on stocks and sectors that I like, not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.


8 comments:

Kingsmen said...

why i like what u like about kim hin toady...a golden opportunity to unload my 50 odd k shares for unsuspecting stock chasers....next stop...how about myeg?

elizabeth said...

Dali,

Net cash per share is much more than the 30 sen ... the coy also has a big chunk of other investments (mainly on unit trusts in fixed income instruments), so I reckon at RM1.13, it is at least 90% backed by cash.

What do you think about the director remuneration levels. for FY2008, its 1+ million per head, I think. Last year was not a good year, so the dir remuneration added together came close the the net profit attributable to shareholders.

nicholas said...

Hi

How come each time you mention a particulr stock, the volume has a sudden surge. I notice that in the last few stock you mentioned. Your readers must follow your opinion quite closely.

hate anti burning said...

If you disect the balance sheet actually the market price now is only reflective of its cash position. Check out their balance sheet. Other Investment (Unit Trust, stock)= 76.9m, Fixed Dep = 72.8m, Bank bal=14.3m. This translate to rm163m. Total ordinary share RM154 less treasury share RM24m = net share RM130m.
As such Cash Equivalent position = RM163m/130m = RM1.25/share

DT said...

You are only half right that Kim Hin's cash is RM87m. If you look at the long term assets, there is RM70m investment in fixed income securities (bonds) and unit trusts. If you take that into consideration, cash and equivalent is more than RM150m. Meaning cash per share is RM1.17

please correct me if I am wrong

DT said...

on top of 80m cash, kim hin has 70m investment in bonds and unit trust. With RM150m cash, cash per share is approximately RM1.00

DT said...

apart from RM80m cash (under short term assets), Kim Hin also has RM70m investment in bonds and unit trust (under long term assets).

With RM150m cash and equivalent, cash per share is approximately RM1.00

1M'sia Boleh! said...

Hi,

Could you please share with us the impact of AFTA on KIMHIN? Will both KIMHIN and WTHORSE be battered badly when China goods flow into S.E.A?

Thank you.