Well, the title was a silly question to debate, but I'm sure you know what I meant here. (Wink)
Today once again, we are going to discuss about ARB Berhad (7181), which we will continue to address them as ARBB. So I know a lot of investors are concerned about the current retreat of the share price, which at this point of time RM 0.250. And yes, as investor this is indeed scary!
But if you look into the company's fundamentals again, ARBB with a PER of 3.04 times is certainly a no-brainer, for technology stock that is.
Tell me, can you find another fantastic company that thrives under MCO, and still register a QoQ increase in profit? I doubt you can find any, and even if yes, probably you won't be able to get it with anything below PER of 20 times!
So why is ARBB selling so cheap? That is because of the general perception of the market that ICPS are bad. ICPS, or Irredeemable Convertible Preference Shares is indeed and factual a mean for companies to raise capital via rewarding shareholders to invest in the company in a cheaper price. So, some pundits speculated that someone is "purposely converting ICPS and drive down the share price".
Hello, you live in Lalaland?
ARBB-PA is currently trading at a premium of RM 0.020, which means that if you were to buy ARBB's ICPS and convert it into mother share at the price of RM 0.200, your total investment cost would be RM 0.200 + RM 0.070 = RM 0.270, and with the closing price on 3rd October 2020 RM 0.250, you are paying a premium of RM 0.020 on EACH SHARE in order to drive down the price, meaning that for every share you buy, convert, and sell you are losing out 8% immediately, who in the right mind would do that?
So, I urge investors not to listen to those bullshit. Instead, focus on the pricing of ICPS. Why would people perceive ARBB-PA worth RM 0.070? That is because they think that ARBB price will go up in the future, hence there would be a premium on the ICPS. Think about it - are you willing to pay for premium for a stock you think it would not perform? Not for me!
Again, the uniqueness of the ARBB in the market with its ERP positioning, I do not see ANY competitor can even come close to them yet, let alone consume their market share. But sure enough, perhaps in 3 - 5 years competitor might arise, but by the time ARBB had already made a fortune (In cash and name), good bye competitor!
Personally, I expect ARBB's upcoming quarters profitability to be at RM 10 Million or so, or RM 30 - RM 34 Million for FY 2020 full year net profit. Compare it with the market cap of RM 111 Million?
Ulala.. Undervalued is an understatement!