Saturday 4 February 2012

Stock of the Week: Armstrong (A14) listed in SGX (Singapore stock market)

Company Background: (extracted from company website)
  • Basically this company manufactures assembly components for automotive, data storage and consumer electronics. For example of data storage, it produces majority of the parts that made up of a finished product - hard disc (see figure below under hard disc category) 
Revenue comes from:


1) Automotive 

2) Hard Disc

3) Consumer Electronics 


Company Update:  (extracted from latest annual report)
  • The Group will ease itself into the Indian market in 2011 via its joint venture with a local Indian partner. The Indian market is a market with huge potential, but as it is a relatively new market to the Group, it will take time to develop the skill set required to manage the risk and resources.
  • In 2011, the scorching growth of the Chinese automotive market is slated to cool with the PRC Government withdrawing its subsidies for vehicles. The China Association of Automobile Manufacturers expects the industry to grow 10 to 15 percent in 2011. Armstrong already has its factories covering the northern, central and southern part of China. Moving forward, the plan is increasing its presence in the western cities of China. We are planning to start two more plants in the next two to three years.
Industry: Automotive and Consumer Electronics
Company Type: Cyclical
Current Price: S$0.30
Intrinsic Value: S$0.58
Market Cap (M): 155.348
Share Price Performance (5 years chart):

Insider trade: 
Announce DateDate of Effective ChangeBuyer / Seller NameType aS / W / U bBought / (Sold) ('000)Price ($)Closing Price ($) dAfter TradeNote
No. of Shares ('000) c% Held c
24 Nov 201124 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS1,2450.24-0.2450.240--
23 Nov 201123 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS1,4230.240.240--
22 Nov 201122 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS9000.235-0.240.235--
21 Nov 201121 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS7190.235-0.240.240--
18 Nov 201118 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS3850.23-0.2350.235--
17 Nov 201117 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS6260.23-0.2350.235--
16 Nov 201116 Nov 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS3000.230.230--
23 Aug 201123 Aug 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS2000.2350.240--
19 Aug 201119 Aug 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS3000.24330.245--
23 Jun 201123 Jun 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS3000.320.320--
22 Jun 201122 Jun 2011ARMSTRONG INDUSTRIAL CORP LTDCOYS2000.3150.315--

Financial Data:
Armstrong (A14)










 units in SGD '000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
Revenue
225,449
173,683
182,415
182,994
141,922
127,932
113,255
94,026
83,482
64,954
Profit Attributable To Shareholders
24,903
14,059
13,131
17,556
10,237
8,132
5,898
4,208
1,411
-2,415
Historical EPS (cents)
4.97
2.81
2.62
3.49
2.04
1.6
1.19
0.91
0.42
-0.91
Gross Dividend Per Share (cents)
4
1.6
1
1.6
0.2
0.3
0.2
0.2
0.1
-











No. Of Ordinary Shares Issued ('000)
501,815
500,058
500,058
501,567
498,968
506,297
510,930
466,940
463,600
266,330
Reserves
55,152
48,845
39,799
33,406
21,292
13,204
9,168
4,799
1,413
11,005
Shareholders' Equity
100,794
93,768
84,722
79,240
68,041
63,834
60,261
51,493
47,773
37,638











NAV Per Share ($)
0.2009
0.1875
0.1694
0.1579
0.1364
0.1261
0.1175
0.1101
0.1027
0.1402
Price Earnings Ratio (PER) (Price/EPS)
5.95
10.54
11.29
8.44
14.48
18.23
25.13
35.23
105.06
n.a.
Return On Equity (ROE) [%]
24.707
14.993
15.499
22.155
15.045
12.739
9.787
8.172
2.954
n.a.
Debt To Equity Ratio
0.317
0.232
0.223
0.206
0.544
0.488
0.616
0.807
0.726
1.112

Conclusion:
1) Market price is lower than its intrinsic value! undervalued.
2) Business model is easy to understand, but we must be careful with this company because of cyclical nature.
3) From the market capital, this number tells us that this is a small cap company, which is considered risky.
4) From the chart, we can see that this company starts attracting investor, and now is in early stage!
5) The next bull cycle for this stock is arising. At least, I believe it is. A bull market is going to last for about 3 years at least. Now is just the beginning. I am buying it.


Entry and Exit Strategy:

  • Entry right now before it is too late. Current Price is stood at $0.30
  • This is cyclical stock, if the price soar too high, we got to dump it. 
  • The best way to check when to sell is to notice your friends around you. Start selling it bit by bit when everyone around you is buying/talking about stock market.
  • Expected holding period = 1 to 3 years.- within 2 years, this stock should soar 2 or 3 times, i.e. $0.60, if it didn't, then something is wrong. Need to re-evaluate by then.
  • There is no 100% guarantee on any kind of investment. You must make your decision based on your own judgement. But for me, the odds are in favour. Investment is all about high probability game. I will certainly buy this stock, maybe 5-10% of my asset allocation.
  • This kind of stock should not take your asset more than 30% (my suggestion). Majority of my portfolio are steady, stable, high dividend, blue chip stock. I will just allocate ~30% of my portfolio expose to high risk stocks, which may have 5-10 stocks, this is just one of them. 


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