I don’t want to look like I am stalker of Mr. Koon Yew Yin, but he came out again with interesting pick.
Lets have a look - LEONFB (5232) Leon Fuat Bhd.
Nice uptrend, short term / swing it looks like it can dip somehow, but again, once selected and get attention by Mr. KYY there is expected some short term high volatility, right now, surprisingly, its going little bit down, as technically it suggests can be a good entry if the drop continue little bit more – and if you think it is a good buy.
Note 5. May there was a placement of 31m shares at 0.85. For more details read the report.
What we see here is a typical KYY selection, last 3QR (in this case 5!) increasing profits / EPS.
His reasoning and expectations are, the next EPS stay same or increase compare to the last one.
Based on this, I am expecting KYY target price to be maybe even up to RM4, if based on P/E 10 as he likes to do. Right now at the time of writing this post, market price is 1.14, slightly lower -0.01 change today.
International paper industry average P/E ratio is around 9+ right now. In this particular case we need to give some more discount in my opinion and keep good margin of safety.
Before I try to calculate my own fair value, lets see my favorite ratios:
It looks OK, and it is improving, but there are some numbers im not so happy about, which is not visible from ratios – short term debt is bit high, but they have a good cash flow, again - see the report yourself for more details. Generally speaking it looks good.
Fair value in my opinion? Well it depends if you believe the company will keep or even increase profits in the future, my favorite formula with trailing EPS and P/E,
Trailing EPS: 20.53 sen
Target P/E: 8
Fair price? RM 1.64
BUT – in this case EPS growth is very huge, if the EPS stays elevated, or even really increase some more, trailing EPS will be logically lag behind actual numbers. My valuations are based more on the fair value right now, with numbers black & white, not future predictions.
In case the EPS will really stay at the same level, the target price can be at least RM 2.4 based on P/E ratio of just 6.
Mr. KYY can be right about this one as very undervalued.
More posts on my BLOG.
Disclosure: Im not holding LEONFB
Disclaimer: Im not a professional financial advisor or a financial analyst or an economist or an accounter.
This is not a trading recommendation / advise, just my personal view