Wednesday, September 16, 2015

A look back at Nam Lee

I had posted about Nam Lee last year.

Is this an investment blog or a fitness post might be your take?

On that day, the big news was Defence Minister says IPPT to be reduced

An attempt at levity, to get you to relax and read this post.

To read up more on Nam Lee, it would be a good idea to refresh your memory with this link below.

Old Post on Nam Lee

One key element in my entry point was that it does not seem like there is much room to fall further.

Here is a look at Nam Lee from then till now.

That part was more or less true as Nam Lee did not really fall by much from 29 cents.

From 29 cents, it is now at 28 cents, which in the context of the overall crash and correction seen in the STI, is not much, as you can see from the chart below.

So, in that sense a good defensive stock, plus you would have made up the one cent fall in dividend which they paid out this year.

In the last post, the key statistics showed a low EV/EBITDA.

Market Cap (intraday)5:69.97M
Enterprise Value (Jul 23, 2014)3:44.05M
Trailing P/E (ttm, intraday):10.36
Forward P/E (fye Sep 30, 2015)1:N/A
PEG Ratio (5 yr expected)1:N/A
Price/Sales (ttm):0.41
Price/Book (mrq):0.61
Enterprise Value/Revenue (ttm)3:0.26
Enterprise Value/EBITDA (ttm)6:4.53

If at all anything, it has gotten cheaper since then.

Valuation Measures 
Market Cap (intraday)5:68.76M
Enterprise Value (16 Sep, 2015)3:48.29M
Trailing P/E (ttm, intraday):6.79
Forward P/E (fye 30 Sep, 2016)1:N/A
PEG Ratio (5 yr expected)1:N/A
Price/Sales (ttm):0.46
Price/Book (mrq):0.57
Enterprise Value/Revenue (ttm)3:0.32
Enterprise Value/EBITDA (ttm)6:2.75

And in a way, it has become at least 39% cheaper in terms of the value placed against its shares.

My original position is valid and I am still long.

IMHO, it is worth adding to this as the stock has got appreciably more valuable by close to 40% and the market has not appreciated it.

Compared to the STI, it is likely to provide better returns as it has become more valuable as a company.

Secondly, my hypothesis is that the market will slowly start appreciating the additional value created and mean reversion itself will take the stock up by at least 15-20%.

Lastly, the downside is limited.

As always, only time will tell on whether this is the correct decision.

The way to examine this is as follows:-

a) Does Nam Lee continue to provide better risk adjusted returns than the STI in the coming year ?
b) Does the stock appreciate by at least 15% in the coming year?

 Disclaimer :- 

I am not an investment professional.
I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.
Nothing written here is an invitation to buy or sell any particular stock.
At most, I am handing out an educated guess as to what the markets may do.
The market will always find a new way to make a fool out of me (and maybe, even you!).
Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.
I am not immune to that, so please understand that any past success of mine will probably be followed by failures

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