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Today’s business is so cheap, I couldn’t stop staring at it.
It has my favourite combination of cheap to assets AND cheap to earnings.
Obviously, there are a few little quirks to it.
First of all, it’s a Singaporean nano-cap, listed on the Australian exchange.
Secondly, the chairman controls over 50% of the votes, and is still involved in managing the business.
This instantly rules out my preferred set up where an activist could theoretically build a controlling stake.
However, there isn’t really any need to do this, as far as I can tell.
The management have far more of their future wealth-generation tied up in equity than they receive in salaries.
And, they have also been acting like rational owners in recent years (because they are).
Crucially, they seem very aligned with the rest of the shareholder base, and they clearly understand that the stock of their business is mispriced.
And, what a mispricing it is...
Here are the ratios:
TBV = 0.43
EV/FCF = 3.57
P/FCF = 4.7
This tells us that we can acquire the tangible assets (cash and property) at a significant discount, and get the operating business for free.
In fact, the property alone is worth more than today’s market cap.
And that operating business is far from worthless.
In fact, if we bought the whole business at today’s price, we’d make our money back in under 4 years, while still holding all that property.
This implies the business is already dead, which is strange because it objectively isn’t.
When I started digging into the financials, I found that all divisions are profitable, the balance sheet is net-cash, and the business remains comfortably profitable even when when revenues contract.
In other words, the business looks decent, but the price looks absurd.
Let’s take a look…