Now that I have explained "the path", I found a similar restoration / revamp / reinvention company in Mah Sing, something I blogged on 15 November 2006. That was a good example of what I meant by figuring out "what path" is the company on. This is not what I am buying now, its an example of spotting a company reinventing themselves, and seeing how the transformation resulted into a favoured stock by institutional investors and a corresponding hike in share price / market cap.
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Must Relook Mah Sing!
simon_alibaba said...
i agree with your list except mahsing, surely the sunrise, igb, ytlprop & spsetia can do better, hear anything in twscorp?
My Take - MahSing now is not MahSing 15 years ago. 15 years ago, I would not even touch it with a pole. If ever a company can have heart surgery, then MahSing is a prime example. It used to be just a specky specky stock... but over the past 5 years, it has buckled down well and managed the company like a very professionally managed one.
One of my reasons for including it in as a rising star is to alert people to the company's change of ways from thuggery days to upstanding ways. Still helmed by Leong Hoy Kum, the company has stood by its strategy and promise to accumulate decent land banks with short turnaround times. It has gross development value of good landbanks in prime areas valued at RM1.8bn, and would be looking at pretax margins of 25%-30% - hence they are safe for the next 2.5 years.
The other reason why they have changed their stripes is that their payout ratio is very decent and even rising. When you give out steadily rising dividends, everyone will notice because you are no longer screwing your minority shareholders. They have also reduced their gearing to even below 50% over the past few years.
Laugh if you must, but MahSing is very much like a company that has experience a "born again-Christian-like" phase. Came out of jail a better person!! As the bulk of their projects are prime locations and piecemeal types, the risk premium is reduced substantially. The quick turnaround times from landbank to revenue is a shrewd and welcome tactic. Its 3-year CAGR is nearly 25%, no joke. They have solid projects with good financial terms (low down payment, quick turnaround times and good profile projects) such as the :
a) 261 acre JB freehold project to be developed within a 3 year time frame and a GDV of RM526m
b) a 10 acre freehold land at 9th mile Cheras to be turned into semi-dees and bungalows and a GDV of RM63m
c) a 21 acre leasehold land in Shah Alam next to Kota Kemuning and Kemuning Utama with a GDV of RM130m
d) the recent strategic purchase of 40,000sf U-Thant commercial land that should have a GDV of RM250m in just 2-3 years time
The owners and senior management have come to the conclusion that to run a good business is actually quite simple. Have a good strategy, have a good team with good execution skills, keep paying down debt, have positive cash flow always, don't over-commit, don't do projects that tie up funds for way too long, don't mistreat minority shareholders, pay good dividends, don't hoard funds if you don't need it, always measure cost of capital before jumping into projects, payback rates must be fair and swift, keep a healthy balance sheet, always manage costs and budgetary items well, .... even Fidelity is a long term buyer of the stock.
Like they say in Cantonese,.... this stock made me drop my spectacles... man!!
p/s photos: Dawn Yang
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