Its me again. Finally after completing a very big project in my thankless job, I am finally able to find time to look at a stock which has been on my shortlist for some time. It is rather unfair that I did not manage to make the call at a lower price because I have been meaning to do so.
Many people are very worried about the current sell down and they are calling me all the time to ask if this is the end of the rally for the year. From my experience, as long as there is skepticism the market will defy it. Is the rally over? Nope. Is there going to be weakness? I think so.
I am not going to reveal how much conviction I have in this rally because I may be committed to an asylum if I told anyone. But I have my own reasons for believing in it. All I can ask for is for you to believe in me.
Ok now to the stock in mind, Reyoung Pharma. I know...many of my friends think that I like to find needles in a haystack. Why can't I just buy stocks that are hot? Novena? Biosensors? Haha. I am like that. I do not like what is popular. I like things that are obscure.
Reyoung is engaged in the manufacture and sale of pharma products and personal hygiene products for women and infants. This is one of the few pharma companies left listed in Singapore. Gone are those like Sihuan and Asiapharm. This is one company that is still trading at a cheap price. It has quietly been bought up over the past 2 weeks. Just go look for yourself. Low volume and not many sellers.
The company generates good positive cash flow and sits on good cash levels. It is leveraged but gearing levels are comfortable. For the first half of 2009, the company made 1.44 cents. That is a potential 10 times p/e which is very reasonable for a Chinese Pharma company.
What I like is not the medicinal business segment for the company, but more of the personal hygiene side of its business. I have to say I love consumer staples and to me nothing is more beautiful than stable recurring income.
The fact that the company bought back almost 20 million shares at 11-12 cents and placed them as treasury shares was even more impressive. Buying back shares at such low prices has helped to raise the company's EPS and benefited its shareholders.
Company is still trading below its book value of 31 cents and that makes it attractive to me. A company that trades below its asset value, highly profitable, strong operating cashflow, manageable leverage and lastly a defensive business.
It could be the next pharma stock to be taken private. Look at the performance of the chinese pharma stocks, Sihuan taken private, Asiapharm bought by private equity, Tianjin Zhongxin doubling...So could Reyoung be the next one?
We shall see.
Best,
SVI
Subscribe to:
Post Comments (Atom)
Posts
you are truly the 'mad' investor. yesterday i saw a sanitary napkin on the floor outside the women's toilet and had a revelation. you are the revelation.
ReplyDelete