PARAMON - INVESTORS SHOULD BE LOOKING OUT FOR THIS
UNDERVALUED STOCK !!!
Hello to all readers out there. In recent weeks, I saw that investors have been bargain hunting for stocks which are undervalued. One of the criteria to look at is the stock Net Tangible Asset (NTA).
Having said the above, the stock which I'd like to talk about today is PARAMOUNT CORPORATION BERHAD (PARAMON - Stock Code 1724, Main Market, Property)
BASIC INFORMATION ABOUT PARAMON
PARAMON was listed in BSKL in 1971, with core business in:
i) Property Development
i) Coworking Space
Market Capitalization : RM 448.54 million
Shares Float : 614.44 million
Website : https://www.pcb.my/
1. TRADING AT 68.5% DISCOUNT TO ITS NTA OF RM 2.32 !!!
Below is summary of PARAMON latest quarter results. The loss in Q2 of the year which was caused by the Movement Control Order (MCO), which made the company lose 2 months construction revenue due to closure of sites. This had caused the price of the stock to dive down to its recent low.
However, we notice that the NTA stands at RM 2.32. As at the latest closing price of 73c, this means that the stock is trading at 68.5% discount to its total NTA. Some long term investors might view this stock as undervalued and a bargain at current market.
2. ASSETS RM 2.7 BILLION VERSUS LIABILITIES RM 1 BILLION !!!
Refer below snapshot of the Assets Versus Liabilities summary taken from the latest QR.
As we can see, the total Assets stood at RM 2.7 billion, and total Liabilities stood at RM 1 billion.
Therefore, this means that the total Assets exceed the Liabilities by about RM 1.7 billion, which shows the company is a net asset company.
Also, cash position improved to RM 324 million cash compared to RM 135 million in the same quarter last year.
Take note that the company cash amount of RM 324 million, is equivalent to cash per unit of 52.7c, which is about 72% of its total market cap. Therefore, I believe that this company should not have any problems weathering the COVID19 storm.
3. TECHNICAL ANALYSIS - LOW RISK ENTRY, LOW DOWNSIDE, HIGH
Refer below the basic price and volume chart with key EMAs for PARAMON daily chart :
A few observations on the daily chart:
i. Refer Circle 1, there was a surge of volume entering this stock in June 2020, which caused prices to spike above the support line S1
ii. Refer Circle 2, price reached a year high of RM 1 at the Resistance, R2 before reversing downwards
iii. Refer Circle 3 & 4, where the price had retraced back to the S1 support line, and seems like buyers are rejecting further lower prices as there are strong buyers waiting up to support at 71-73c range. Volumes of sellers are also deteriorating
iv. Should buyers be interested in this stock, we might see an upmove back to test the R1 resistance around 85c, then R2 resistance at RM 1, before breaking upwards
4. LOWER CAPITAL ENTRY INTO PARAMON VIA PARAMON-WA
Refer below the basic profile of PARAMON-WA, for investors looking at a cheaper entry into the company :
A few observations:
i. Maturiy of the warrant is July 2024 (45 months life), which means a long time to go before expiry
ii. Premium of the stock is 159%, with strike price of RM 1.79, which is reasonable considering that the warrant still has 45 months life
iii. Latest closing price of the warrant is 10.5c, which allows for a cheaper entry as compared to the mother share of 73c.
Considering all the above, I opine that current price for PARAMON is attractive due to below:
i) Trading at 68.5% discount to its NTA
ii) Net asset versus liabilities of RM 1.7 billion showing a healthy asset backing
iii) Net cash of RM 324 million (52.7c per share)
iii) Chart showing low downside, and high upside potential
LET’S SEE HOW THE SHARE PRICE MOVEMENT IN THE NEAR FUTURE FORBEARING ANY GOOD CORPORATE NEWS.
Disclaimer : The above opinion is never intended to be a BUY CALL whatsoever. I am sharing my observations ONLY based on fundamental; past history; current trading pattern; charts etc. Please make your own informed decision before buying this share or whatever share for that matter.