Julia Ong's comment on LIIHEN. All Comments

Julia Ong
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The 1st quarter result is good! Just announced today, more than 100% growth.
cheng
agreed. despite the historical lower sales in beginning of the year, Liihen was able to grow its sales by approx. 5% compared to last year Q1. within the furniture segment at the back of 10% tariffs for China furniture, Liihen was able to grow its America region sales by approx 7.5%. Asia region recorded a 16% growth in sales. Europe increases by more than 10% as well. USD exchange rate for Q1'19 averaged at 4.09 vs 3.92 the previous year.
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cheng
looking ahead, current USD exchange rate in Apr to May ctd is going up from low of 4.07 to currently 4.19, tariffs for furniture from China increased to 25%, on going cost savings (lower cost of sales at the back of higher revenue comparing to same quarter last year) seems promising for Liihen moving forward.
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eng hock ooi
@Muniandy, what is your own goal for this counter?
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eng hock ooi
@muniandy, Thanks for advise.
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Lee Guan Hong
Muniandy krishnan is ur brother name agilan?
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cheng
thanks to Liihen's mgmt for the great effort in cost savings and managing its bottom line. Going into 3rd week of uptrend. it's been a while since it last recorded 3 straight weeks of uptrend. technically, if it can achieve 4 straight weeks of uptrend, it is a strong indication that the trend will continue technically. fundamentally, Q1 free cash flow is approx 36M versus 46M the whole of 2018. imo - it's doing great and not surprised by the analyst upgrades. congrats to all that bought/holding
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cheng
investment bank has their own valuations technique. I am just using simple dcf to value it based on risk, growth, profitability and margin of safety. in the event Liihen's fcf exceeded the initial target that I used to value it, I will relook at it the following year to determine how much is the value for a safe entry to add / initiate / exit position. best is to follow your own plan. hope it helps.
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Lee Guan Hong
U buy how many lot muniandy?
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eng hock ooi
Goh, what do you think of Airasia special dividend of 0.90 cent? is it a good buy?
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cheng
hi eng hock, in general, investing in dividend stocks is to hope for sustained / growing dividend over time. special dividend is not rosy at it seems most of the time, its euphoric often. please do your own due diligence as there will be emotions involved due to the special dividend. nevertheless, I will get back to you tomorrow as its late now. I will have a look at its financials tomorrow.
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cheng
hi eng hock, had a quick glance on airasia financials. imo - if you don't have any position on airasia and thinking of buying for the special dividend, you should reconsider it again. if you have been holding airasia and thinking to add on for the special dividend, as long as your average price is below 2.4, it's ok.
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cheng
looking at its numbers, airasia is trying to manage it's financial/liquidity. cash flow is negative for the last two years. debt/ebitda is on the high side ~ 4.78 for 2018, 3.96 for 2017, and 4.51 for 2016. it's highly leveraged. some may argue that airlines business model is generally asset heavy and normal to be highly leveraged. I had a look at Indigo airlines and its debt/ebitda is at 3.6 only; quite consistent for the last 3 years.
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cheng
recent sales of airlines and leasing back means airasia doesn't have to carry depreciation which in return will boost its ebitda moving forward and possible lower debt/ebitda ratio. nevertheless, it's good to be clear with your dividend investment objectives instead of driven by special dividend announcement if you will. these are just my opinions and could be wrong. hope it helps.
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eng hock ooi
@cheng, Thanks for the details advise
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cheng
you are welcome, eng hock
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eng hock ooi
Thanks very much. Thanks for sharing liihen. I bought it at 2.60. Not sure when to sell.
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cheng
hi eng hock, it's your own decision. congrats. It depends on your own investment objectives. only you know better. I can share my opinions but best is to make your own decisions.
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cheng
globally, there is the trade wars rhetoric and possible global recessions. US T-bill yield curve is being watched closely by many economist currently as a possible inverted yield curve signals possible recessions. won't happen immediately and the US gov is also watching it closely. locally, Malaysia gov securities yield (equivalent to US T-bill) 10 years versus 5 years is bridging. 10 years was at 3.80% in May and 5 years was at 3.46%. inflation at 0.2%
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cheng
when the short term rates is higher than the long term rates, it is said that it signals possible recessions - known as inverted yield curve. right now, short term is still lower but close. with so much uncertainties, it is not surprising that there are calls to rebalance portfolio towards defensive stocks that provides consistent dividends. imo - Liihen is one of it though it doesn't have any contracted dividend sharing policy.
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cheng
imo - as shared previously, the lower end valuations is at $3.20 and higher end is at $3.61 by dcf. some said HLG tp was at $4.2. you will have to relook into your initial investment objectives and make the decision. just my opinions and hope it helps with your research.
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eng hock ooi
Thanks, Cheng. yes, HLG revised target price to 4.22 in May. can see from the app here. I decided not to buy Airasia. Since HLG TP is 4.22, I think I want to add Liihen. can add now?
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cheng
still depends on your objectives. if it is dividend, imo - the intrinsic value for Liihen by ddm is $2.76 based on a set of assumptions. I need to find that as I shared it previously. as long as your average is below the intrinsic value, imo - it is a safe buy/add.
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cheng
here it is: last 4 years dividend per share is ranging from 0.17 cents to 0.26 cents. 2018 payout is 0.21 cents. assuming Liihen maintains 0.21 cents payout, 15% required rate of returns, and lower TP at $3.20 by next year, the intrinsic value is estimated at $2.76. if your purchase price is below $2.76, all is good then. please note that these are conservative numbers, just my opinions and hope this helps.
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eng hock ooi
Alright. Will look at it. Thanks.
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Ice Lollipop
Cheng may I know how to calculate the intrinsic value?
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cheng
hi Ice, I am using dividend discount model (ddm) for dividend stocks to determine it's intrinsic value. the elements to compute it is above. you can research about it and then we can exchange opinions. the reason I prefer you to research it first is that (1) you get to understand the model and apply it (2) don't take my words as it is (3) you can also share it with your friends if you find it useful. I hope it is not too much to ask that. :)
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Ice Lollipop
Thanks cheng, I will look into and appreciate so much for the great info
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cheng
you are welcome, Ice. looking forward to discuss again. more eyes looking for undervalued dividend stocks :)
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cheng
nice article by HLInvest for Liihen under the headlines section. top pick and with attractive div yield. 2017 special div was 0.10 cents and 0.08 cents for 2018. a return of 0.10 cents special div will be nice for all liihen shareholders; hopefully.
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