Tuesday, October 22, 2013

MWE Holdings Berhad (Stock Code: MWE 3921) Strong Fundamental Company to Invest

Hi all,
Here is another superb company to invest in. The company is MWE Holdings Berhad. MWE is a company majoring in textile manufacturing for garments (clothing and sales of clothing), property investment, telco, contract manufacturing for electronics, insurance, gold club, club houses, freight and forwarding and trucks distribution. It is a highly diversified company and this means it is stable but its business will not have a super boom like other small medium companies that is focusing only in one sector. This company is like a diversified mutual fund. (Just my opinions. :) ) Company website: http://www.mweh.com.my/company.html

Below is my analysis on MWE, I hope you can have a look at its superb company fundamental.

Net Tangible Asset
 Shareholder'sFund/Equity                  597,452,000.00
 Total Shares                  231,559,015.00
 NTA                    2.58
 Current Asset                  346,463,000.00
 Current Liabilities               (113,452,923.00)
 Net Current Assets                  233,010,077.00
Free Cash Flow
Free Cash Flow 216990227
Total Shares 231559015
Free Cash Flow Per Share 0.937083909
Income Statement          Profit/Loss
Net Profit attributable                   134,444,000.00
EPS 0.58060361
Cash Flow Statement     
 Operating Activities                    15,053,080.00
 Investing Activities                  160,700,358.00
 Financing Activities                 (75,398,329.00)
 Exchange Rate                           70,639.00
 Cash at beginning of Year                  116,564,479.00
 Total                  216,990,227.00

 Net Cash  216,990,227.00

 Cash Per Share (cents)                93.71
 Cash to Liability (%)              191.26
 Margin of Safety Intrinsic                 5.93

Well, from all the numbers that is highlighted with yellow, you can see that this company is amazing.
1. Net Tangible Asset Per Share: 2.58
- This means the stock of this company theoretically should be selling at RM2.58 per share. But it is now selling at RM1.78 only (as of 22 Oct 2013). Isn't it cheap?

2. Net Current Asset: RM233,010,077
- Positive value of Net Current Asset is important because current asset is liquid. So, in case of financial problems, company can use it to liquidate to get cash to pay for their liabilities. From this net current asset, we can understand that the current asset is > current liabilities by almost 2 times.

3. Earning Per Share (EPS): 0.5806
- For every share you held, the earning is RM0.5806. If the PE is 10, means this stock is selling at RM5.806! OMG, that is simply amazing.

4. Cash Flow generated Net Cash: RM216,990,227.00
- The company has good management. They manage to create positive cash flow throughout the year with RM116,564,479.00 at beginning of the year ad end with RM216,990,227.00. That is almost increase 100% in cash.

5. Cash Per Share: RM0.9371
- The stock is selling at RM1.78 with cash per share of RM0.9371. You buy this share at RM1.78 is actually buying at RM1.78 - RM0.9371 = RM0.8429 per share after deduct cash per share.

6.Cash to Liability (%): 191.26%
- From this value, we know that the cash is almost double the liability. In time of financial crisis, this company can easily gain access to cash. In other words, this company has the ability to clear out all the debt using the cash in hand and even after clear all the debt, they still have a lot of cash left.

7. Margin of Safety: RM5.93
- This is calculated based on Warrent Buffett and Benjamin Graham value investing method. I am using the simplified formula. The margin of safety of the stock price for this company is around RM5.93. Well, this value is too high because I did not take into account the previous years performance. So, I personally, think that this company can at least reach the NTA value of RM2.58.

Share some of your thought with me if you have any. :) This is a great stock to invest in. what do you think?



Kok Meng Tchun said...

this is quite a detail analysis and indeed it is a worth-to-buy company. However, there's one concern in my mind - isn't it obvious that the operating activities is much lower than the investing activities? or is it because it is holdings company?

William Lee said...

Kok Meng,
I have gone through around 10-20 companies and I found that Operating, investing and financing activities is the way the management is making money for the company.

So, I do not really put any stress on whether it is operating income or investing income or financing income. I ever saw some company make money from financing activities but lose money in investing activities with operating activities so so only. So, these 3 item, in my opinion, as long as management use their skill to make money for the company and generate positive income, it is very good.

I am more concern about Cash and liabilities. Cash need to be more than liabilities because this means the company is actually a debt free implant with a lot of cash. The cash can be used for purchasing land, property, expand business or even give out as dividend.

And asset more than liabilities also important. It is because more asset and a lot of cash. This type of company is super strong even in down turn or when low time in the business cycle. They have the ability to continue running. Asset more than liabilities also means NTA is big. Big NTA is good as a guidelines or investor to find a safety investing price.

It is like if you want to buy a company, what price would you pay to buy its share? Imagine you want to buy a kopitiam, operating is normal but it has a lot of value in the asset such as the value of the shop is very high. The owner selling per share RM1 but in fact asset alone worth RM2 plus a lot of free cash in the company and low debt. That is what I am looking for. Hahaha.

That is my idea but not 100% correct. :)

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