You would have noticed that I put my hands into a stock called DKSH. Who are they? Why I decided to put money into such a company? When I looked at the odd stock, it attracted me, however due to the low free float, it puts me on a cautionary position.
When I said odd, this is because DKSH is a stock that nobody follows, no analysts provide recommendation to this stock. Well, analysts only takes care of their own rice bowl. You do not make money out of a company where it is difficult to get hold of the stock. The free float value for the stocks at the time I put my money in was some RM12 - RM14 million. Nobody follows stocks that has such a low free float.
However, it does not leave my sight when I see a good, well run company. The parent company in Switzerland owns 74.3% of the company. LTAT (Lembaga Tabung Angkatan Tentera) - Malaysian military fund, owns 15%. Hence, it is left with about 10% free float. I am sure based on the list there are some shareholders who do not sell. Hence it is a very low liquidity stock. In fact, back in Switzerland, DKSH is a private company. Why it is listed in Malaysia, I do not know. DKSH has very strong presence in Asia. It calls itself a market expansion company, but in easier terms it is a distributor of products with its strong logistic presence in the countries it operates in. It has a very strong warehouse and logistic management that allows companies which do not have a strong distribution strength in the respective countries to engage them.
DKSH in Malaysia distributes for Wyeth, Mead Johnson, Pfizer, even for some Kraft products. These are no small companies. Although, DKSH has competitors such as Harrisons Holdings and other smaller companies, it does have a strong competitive position. Larger companies like Nestle, F&N, Dutch Lady do their own distribution. Other than that, DKSH is a winner in what it does - at least in Malaysia.
So at what price do you put for a company that is a winner? Think of it this way - what price would you pay for a company that has a strong distribution strength in Malaysia? I don't know actually, but for an economy like Malaysia, if you ask for a number I feel that it may cost around... maybe RM500 million is a number which sounds not too high. Hence when I bought at RM0.87 or at RM140 million market capitalisation, does it sound cheap even for a company that has low free float? Perhaps. It was trading at around 5x PE for a company that is probably the strongest in what it does specifically in Malaysia. I like cheap and well managed companies. DKSH meets that criteria.
And I look at my portfolio, I seek to invest for long term. DKSH seems ok even though I may not enjoy capital appreciation over the short term. Voila! However, this stock appreciates to RM1.02 at the point of writing, but this is just making me smile but I am not cashing the gain. And if you do a bit of research, reading its Annual Report, for a small free float company who perhaps have to do proper reporting to its 2 largest shareholder only, they report very well. They, to me - maybe is one of the best Bursa Malaysia listed company in terms of reporting. Better than even Nestle, F&N, or any of the bank companies who year in year out win the not so coveted "Best Annual Report". I think the party that does the awarding does not know how to award.
Well, I can only say with signs that says do not touch a company that has low trade volume - this one screams to me - Buy me! I am cheap.
Serious Investing!
No comments:
Post a Comment