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From a fundamental perspective the ROE of the company has been up-trending for many years. The issue is not whether this is a fundamentally sound company. It is. The more important question is whether the stock price is trading higher than its intrinsic value. If it is then it is not an investment opportunity. Of course it boils down to valuation.
I have not looked at Uchitec in detail. My first cut analysis is to value it based on the formula Value = BV X (ROE - growth) / (cost of capital - growth). Assuming a 5 % growth, 10% as the cost of capital and using the past 5 year average ROE as the long term sustainable ROE, the intrinsic value is about RM 3.90. The question is whether you think that the future performance will be the same, better or worst than the past 5 years. If it better, then you may have some margin of safety at the current price. If you think it is worst, then the intrinsic value is lower. But you have to dig deeper into the company to make this call. I have not. It is not the computation that matters. It is whether you understand enough of the business to make the call. If you want to know more about how I analyze and value companies, visit my blog at https://www.i4value.asia
I already buy ur book at google play book. but I found it hard to understand valuation. I hope u can give some real example after your explanation. fcff didn't have some example !
