Saturday 8 November 2014


It is quite common to see companies writing something like "the operating environment remains challenging and the company is working to improve its performance" in their quarterly results notes.

The above is part of the IFCAMSC's notes to 3QFY14 financial statements. It is not so common to see a company giving such a bullish outlook of it business.

If I interpret this sentence (The group expects order growth to continue to surge, with,,,,) correctly, it is not only the order is expected to grow, but there is GROWTH in order GROWTH!

The share price is now 10 folds of that at the beginning of the year. Has the share price run ahead of its valuation? There is possibility that the share price may succumb to profit taking after a strong surge. But when investing in a stock, I think the outlook and future earnings are more relevant than the historical share price movement.

If we simply annualise the diluted EPS in 3Q14, the stock is traded at a PE ratio of 14.1x, which I think is not too demanding for a growth stock in net cash position. The PE ratio will be reduced if there is earnings growth in future quarters.

BFM's interview with its CEO, Ken Yong, provides a good insight into its business, why the surge in profit, whether the share price can go higher, how it competes with other players in China, its competitive strength, how much the company is expected to benefit from GST implementation etc.

Cost to develop the software has been sunk in. It is now making profit by "duplicating CDs"

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