I've been receiving many messages thanking me for the 3 articles I wrote earlier on LB Aluminium, APB and Texchem. So happy for all of you that doubled your money. Always remember that you should not fall in love with the stock and I would suggest that you realise your big profits for some of them like Texchem and APB. LB Aluminium definitely can rise even further but you should take profit soon. As always, no hidden agenda, just sharing on undiscovered gems. Which is why you will only see less than 10 articles from me in a year.
The extremely undervalued hidden gem that I want to share today is TAS OFFSHORE.
TAS Offshore reported their results on 22 April and they posted their best results in more than 5 years!
What does TAS Offshore do? They build tugboats for the oil & gas industry but in the last 2-3 years, they started venturing into building tugboats for the coal shipping industry. For the coal shipping industry, TAS Offshore's main source of revenue is from Indonesia, one of the biggest coal miners in the world.
How did TAS Offshore start to perform well? It's mainly due to the sharp increase in crude oil and chemical prices which have seen activity in the oil and gas industry pick up rapidly while coal prices have also shot up significantly. Another factor was China banning the import of coal from Australia due to political tensions. This caused coal exports from Indonesia to soar, increasing demand for tugboats significantly.
Below is a screenshot of what management said in the prospects section in their quarterly financial report:
Here is a screenshot of coal prices for the past 1 year:
Here is a summary of TAS Offshore's recent quarterly performances:
How to value TAS Offshore?
There is one company that builds tugboats and that is Sealink Berhad. Many of you will be very familiar with Sealink as the share price has shot through the roof over the last 2 months from RM0.175 to RM0.465 now. That is a 165% increase and guess what? Sealink has been reporting massive losses up to now but the market is expecting them to turnaround with the rapid pick-up in activity in the oil and gas sector. If Sealink can increase 165% with no profit to show yet, TAS Offshore's share price should increase by more than 200%! Over the last 2 months, TAS Offshore has only increased by 45% and that is why I am saying that this is an undiscovered gem.
If we were to annualise TAS Offshore's recent profit of RM4.6million and use a conservative PE multiple of 8x, TAS Offshore should be valued at RM0.84. TAS Offshore should not have a problem sustaining their performance given their orderbook of more than RM40m as at end-2020.
When TAS Offshore used to make
RM4-5million in profit per quarter about 6-7 years back, they paid 2 sen
in dividends every year. They should have no problem giving out the
same dividends with this kind of performance and outlook. At today's
share price of RM0.35, that would translate into a dividend yield of
about 6%. With that kind of dividend yield and looking at how the share
price of Sealink has moved over the past 2 months, it is a matter of
time before the share price of TAS Offshore shoots up.