Sunday, June 22, 2008
Tanjong PLC : Q1 '08 Review(Ref $ 14.2)
This is what I learn about why we don't buy low and sell high. Stocks are only available for low price when majority of people hate it, the fear of losing more money. People will not fear for no reason, you must be mad if you're fearful for no apparent threats. The threats that most people perceive now are fear of changing government, fear of riots, fear of the US market crashes, fear of further credit implosion, fear of inflation, etc. Whole of KLSE is selling for 11 times PE at 1200, this is cheap, even cheaper when Malaysian market shunned by foreign investors after we imposed capital control. I'm sure Mark Mobius salivates now.
In the case of Tanjong, the revenue has been growing solidly with overseas power asset acquisitions but stock price seems to be bouncing around, even trending down lately. The latest acquisition in Bangladesh contributed another 90 mln in the latest quarter to the group's top line but not much contribution to bottom line due to development cost. Normalized profit contribution from Bangladesh operation will be around 100-120 mln. Tropical Island which has been the black sheep in the group has been showing improvement after launching new attractions, losses narrowed to 2 mln in the latest quarter. Going forward, I would estimate Tanjong will generate about 800 million PAT per annum without the IPP windfall tax. Even you shave off 75 mln in the worst scenario of IPP windfall tax, Tanjong will still generate about 725 mln PAT or EPS of 1.68. Apply 12 times PE, Tanjong worth at least RM 20/share.
(click all images for larger image)
Let's see how crazy the market is going to offer me. Even we have to wait for 3 years for this phase of uncertainty to pass, this is a good bet to get 15% return.