My under appreciated stock bore fruits!!

I last wrote about the company here
Here here and here. I mentioned that the growth in share prices have yet to reflect the growth in the company's earnings. Well, a look at the table above will show that share prices seemed to be at fair value now!

Solid 1st half results again!
As the results are rather stable quarter on quarter, I've annualised their 2016 results in the table above.

Although their earnings is expected to slow down to "only" 24% growth for 2016 (from mid 30%), it is still fantastic by any measure. This is especially so in such economic environment that see so many large caps and blue chips reporting bad results.

Is this one of the safer options for investment in this current economic climate?

Gushing Free Cash Flow with potential increase in dividend again
Management has a lot of room for growth in dividends. 

Low debt (almost no debt)
They entered in a finance lease arrangement for the purchase of their assets. Their total outstanding debt stands at $949k vs their cash pile of $10,394k.

Technically they can fully pay off their debt RIGHT NOW if they want.

In fact, their total liabilities is $9,389k vs the cash of $10,394k. Strong balance sheet anyone?

It's one of my STAR counter
Giving me a capital gain of 34%. Although Colex is not yielding "high" dividend, it was under appreciated back then and I love the fact that its business and balance sheet was so strong.

No longer attractive to accumulate more for now
YoY growth of 24% yet its share price soared 41%. This plays out when over a 5 year horizon though (30% CAGR of EPS vs 31% CAGR of share price)

It is fine if it continues to be unloved
It is fine if there are people who may think it's not a good business to invest in. The more Colex falls out of the radar, the better chances of its share price being unappreciated.

Remember how Raffles Medical started out, and became a monster now? 

In the long run, the Market will act like a weighing machine. Share prices will eventually reflect its earnings and results.

Stay strong when people try to dissuade you. Have patience, foresight and trust!

Exactly how defensive is this under-appreciated stock?

I last wrote about this company here

Fellow blogger DK left me a comment and I thank him for that :)

Even though this company is in a defensive sector, its survival depends on winning contracts. There is no guarantee that the contracts will be awarded to them. Competitors include 800Super and SembCorp. Revenue growth is very much dependent on the quotation of the contracts.

How defensive?

Remaining contract years - 5
Colex covers the western part of Singapore, with a 7 year contract awarded by NEA starting from 1 April 2013 to 31 March 2020. Investors have about 5 more years of certainty and that's rather great news for me. 

Re-awarded contracts
Since the new scheme has been in placed, NEA has re-awarded the contracts to the respective 4 Public Waste Collectors (PWC) in Singapore. Each of them have accordingly retained their "seats".

Uniform Fee
Yes, the waste collection service in Singapore is privatised (not all privatised schemes are "bad" and "costly", but I digress).

The Uniform Fee is set by the NEA in discussion with the 4 PWCs and is fixed for all households in Singapore (no price differentiation amongst the PWCs). The UF is fixed until the next review (something like transport fares?).

The next UF review is on January 2017 and once every 2 years thereafter.

Renewal of the next contract?
I tried googling for the criteria of the renewal of contracts to no avail. What I do know is that the Waste industry in Singapore practices the Uniform Fee scheme.

It seems unlikely that the award of contract to the PWCs will be based on price but rather service standards. I can only imagine NEA considering the service standards of the PWCs in considering their renewal applications.

Everyone is defending their own turf
From the last renewal exercise, it is quite evident that all 4 PWCs are focused on defending their own turf and not "expanding" their reach. After all, there are only 6 sectors in Singapore and it is only likely that NEA would want to inject competition into this industry.

To say otherwise is quite unlikely, given how the government lately is more keen on injecting competition into various industries (Transport, Telco etc).


But of course, nothing is certain! I'm only hoping for Colex to control its costs and enjoy the remaining 5 years of service in the Jurong sector.

This under appreciated stock is wow-ing me again

Revenue increased 13.6%
Segmental profits increased 33.1%

That was all that's announced via SGX. But it's good enough to let me know that their business is still stable (contracted) and their profits are still surging quarter by the quarter.

It's smelly and shunned by others. Yet, I'm loving it!

Since this stock is out of the radar for most investors, it's share price hasn't reacted according to their results.

	May-15	Oct-15
Share price	$0.25	$0.31
Share price % change		24%
Profits % change		33%

This may be a smelly business, but I love it for its value it holds. Although Colex doesn't have a high dividend yield, which is contrary to what my other portfolio is, I'd find it hard to pass this opportunity to grab this value stock.

What do you think?

The under appreciated stock

A Pen Quote wrote several times about it actually. Amidst all the crashes and burns in the stock market caused by the devaluation of the CNY, this stock would theoretically be shielded from all external factors.

This stock is none other than Colex Holdings. You can read more about it here, here, here, here and here.

The stock market is very volatile lately. The recent correction experienced by STI could be attributed to:

1. Devaluation of Chinese Yuan
2. Softening of China's growth
3. Commodities rout
4. Sustained low oil prices
5. Fears of Fed rate hike
6. Weak GDP in Singapore
7. Over valued Chinese stock market
8. Greece (forever)

However, Colex positions itself to be fairly immune to any of the above factors. Being a pure Singapore play, regarded as a "necessity", and having long contracts given by the authorities (7 years), Colex earnings will be more or less shielded from all these macro events.

Yes, you heard it right, Colex is also spared from the dreaded rate hike. That's because it carries no debt on its books.

Zero debt, high cash flow, increasing EPS and stable business. Got to love this smelly business ain't it?

Last week they released their half year results and it was good as expected:

Revenue up 12.5%

PBT up 29.0%

PAT up 28.1%

EPS up from 1.74 to 2.23

- P/E at 12.6

- P/B at 1.44

Strong earnings growth

Gushing cash and room for increase in dividend payout

Looking at the half year results, looks like the annualised EPS will be at least 4.2 cents (30% growth).

Due to the low profile nature of this stock, there has been much excitement after the release of the earnings since last week. In fact, the share price dipped 9% from $0.32 to $0.29 with the general market weakness.

That shows that theory doesn't equate to reality.

However, over time, the market will act like a weighing machine. heh!

From 11 cent in 2010 to 29 cent today, that's a 163% increase with a capital gain CAGR of 21.4%. Seems like this is half of the EPS CAGR of 49.5%. However, that's just a 5 year period. The Motely Fools wrote an article recently (here) on how the share prices of Raffles Medical, Super, Fragrance and CWT exploded overtime after their EPS grew year on year.

Hopefully, Colex will follow so. I've accumulated some shares recently and will continue to do so when the market goes more volatile.

People seems to be missing out on this hidden little gem.