Thursday, December 4, 2014

I plan to go shopping - Pchem

Year end sales is coming... I plan to go shopping, this time, not in supermarket, but in stock market. Yes, our local stock market, Bursa index has been going south from 1880 point to 1750 points at time I write this blog.

The time finally come, money has been sitting in the bank for a while without doing anything. It's the time to make them work harder by accumulate some good stocks that will generate income. As per my plan, only blue chips will come in my buying list.

What is Blue Chips means? It's the industry leader with consistent profit record, good brand name and give consistent dividend/ bonus to investors. Further, the stock must be liquidate with big cap and revenue. This is important for fund manager like us, if not, it's quite hard to buy / sell.

The trigger points for this round of sell down was caused of the down trend of WTI price, which currently quote at USD70. Meaning Oil and Gas industry facing the huge damage now, most of their stocks price drop to record low. Further, the local currency, Ringgit, also weaken against USD. Base on these points, I want to look for a company that see it's stock price correction and at the same time it's a beneficial to weaken Ringgit.

After went through some companies, I think Petronas Chemical Group (Pchem, 5183) is one of the stock in my buying. For those who want to know who is Pchem, you may refer to my previous blog:
1. Petronas Chemicals Group Bhd - Part 1
2. Petronas Chemicals Group Bhd - Part 2

Four years ago, Pchem launched their IPO (Initial Public Offering) and I went to visit their company (a very big land with many building inside) and help their staffs to open CDS account. It was a great experience as I never seem to think the company is so big, overall they have 70 over factories across Malaysia. I still remembered, on day one, the stock price open at RM5.50, with the low of RM5.10, since then, the stock price never go south, it went all the way to record high of RM6.80 and being sell down recently till the current price of around RM5.30 to RM5.40.

Without the complicated calculation, just check Pchem's EPS, currently stand at 34 cents, compare to 32 cents during IPO time. The dividend was 20 cents last year, which come as 3.70% of DY at market price of RM5.40. They are in net cash position and the revenue is quoted in USD whereas 70% of cost is quoted in USD.

 Let's make it simple again, if you can buy a business with RM4.30B four years ago and today, someone going to sell you with almost the same price, don't you think it's a good deal? Just business and the asset park at the company, after four years, even I have no idea how to value it, but I know definitely the price must be higher than four years ago, with the company still generate the similar income/ profit.

p/s: Somebody ask me, what's the fair value to enter? Well, I will stick to my original pivot point RM4.90, or make it simple, when the price near RM5.


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