BAZ:SG – Lion Asiapac

[mjohn707]

Lion Asiapac is a Singapore listed company that is engaged in a money-losing basic chemical business.  Additionally, the company has a recent history of spectacularly unsuccessful real estate development, and a possibly questionable transaction with an entity controlled by Tan Sri Cheng Heng Jem, who holds around 66% of the company’s common stock.

 

Despite these issues, I think the company is a reasonable investment at current prices using a basket approach with a similarly situated group of statistical bargains, due to the company’s large cash balance, low level of liabilities, and relatively small operating losses.  Against the current market value of 43M SGD the company has cash balances of 71M SGD and total liabilities of only 2.3M SGD, or a current price around 63% of cash on hand less all liabilities, giving no value to the 10M SGD of receivables, inventory, and plant in the chemical business.  For 1Q18, the company showed a small profit in total, probably due to interest income covering the operating loss from the chemical business.

 

Despite the potentially questionable transaction, management has a history of paying dividends including one very large special dividend that amounted to a partial liquidation of the company several years ago.  The risk with this thing is that management might not do things that are wonderful with the cash, but as large holders of the company’s stock they have the incentive not to lose it totally.  Could go either way probably, but at current prices you have the odds in your favor.

 

I’m attaching a copy of a spreadsheet with a 10-year summary of the company’s income and balance sheets.  Shares are not super liquid.

 

Current Price:  0.530 SGD

Market Cap:  43M SGD

P/E:  N/A

P/B:  53%

Lion_Asiapac.xlsx