Luen Thai – A Cheap And Small Conglomerate
|March 17, 2016||Posted by Oddmund Grøtte under Stock Analysis|
Share price when article published: 1.27 HKD
Luen Thai is listed on Hong Kong stock exchange with ticker 311 (0311.hk on Yahoo!). Market cap is 167 million USD. Just like Datronix this is a very cheap company that sells close to nothing if you strip it for cash.
- long line fishing
- distribution of fresh tuna
- footwear manufacturing
- supply chain services
- air and ocean cargo services
- real estate
- travel and tours
- wholesale distribution and retail
Still, the company has a market cap of only 167 million USD. Operations are in China, Micronesia, USA and Asia-Pacific region. Company started back in 1960 originally as a fishing and navigation company. Since then it has invested in all of the businesses mentioned above.
Profitability and balance sheet analysis:
10 year ROIC is 6% and it has run a profit every year. The company has just 3 million HKD in long-term debt but about 80 million in short term debt. Excess cash is about 100 million, ie about 2/3 of the market cap of the company. That means you can hand out a lot of cash as dividends or buybacks and still have working capital to run the business, which is profitable.
|Revenue USD Mil||7.570439|
|Gross Margin %||-0.60111|
|Operating Income USD Mil||-1.89242|
|Operating Margin %||-9.11281|
|Net Income USD Mil||3.904209|
|Earnings Per Share USD||7.177346|
|Book Value Per Share HKD||5.277846|
|Operating Cash Flow USD Mil||-0.64331|
|Cap Spending USD Mil||-4.84316|
|Free Cash Flow USD Mil||2.174417|
|Free Cash Flow Per Share HKD||9.004867|
Last years dividend equals a yield of 8.3%. The company has no formal dividend policy I’m aware of. It will go up and down according to business profits. It has at least paid dividends every year since 2004 (twice per year).
Stock price today: 1.27 HKD
Based on last 3 years net income PE is about 4.7. The interim report of 2015 showed a 55% decrease in profits because of lackluster sales in retail division. Net profit was 7.3 million USD. Calculating a TTM this gives a PE of 11. The company is cheap and P/B is just 0.4. However, according to history the stock is now more or less fairly priced. History shows that Luen Thai has always had a rebate to market, except for a colossal share price rise in 2012 that I’m not sure why happened. However, if it drops 10-15% from todays price of 1.27 I believe it’s a good buy. P/S is a very low 0.13.
It’s hard to see any synergies in this conglomerate and thus I believe this stock deserves a rebate, unless they will divest, which I find highly unlikely.
I own shares in Luen Thai. I bought a bit lower and plan to sell if it reaches 1.35 HKD.