Wednesday, September 29, 2010

YLI Holdings

YLI holdings is a ductile pipe producer. What is a ductile pipe producer? Please google it. They hold a contract to supply Syabas(the water company) They are the largest producer of this product in Malaysia.

This company is really undervalued, at one point in time it was worth RM5, that was about 3 years ago. As of right now it's selling for RM0.63 cents, this gives it a market cap of 62 million. They have very little debt, if I'm not mistaken their debt to equity is something like 0.25. They have cash holdings of 32 million, thats more than 50% of their market cap that is in cash. Net tangible assets of RM2. The company is worth 3 times their market cap and 50% of the market cap is in cash. Seriously can it get any cheaper than this? Not to mention that it hasn't revalued its properties since 1996... What a value trap. I wish somebody would buy over this company, slice it up and sell off the pieces.

The whole problem with this company is that it isn't making any money, hasn't been making money for about 2 years, profit declining. However because of it's strong financial position and low debt it can probably maintain this status for quite some time.

The reason their profit has been declining is because many of the water projects that were supposed to be carried out in the 9th malaysia plan didn't materialise, and then there is the water tariff issue. There is a lot of water works project to be done in Malaysia, I can't remember where but I read a whole bunch of articles talking about it. Something about how there are 18,000 km of pipes that need to be replaced, and then all this about connecting the waterways between some state or another. The salient point is that there is a lot of built up demand for the products that this company is selling, and they are the largest producer in Malaysia, they also hold a contract that gives them a monopoly on supplying to Syabas.

I'm not sure when the water projects will materialise, but if it does this counter ought to skyrocket. Another problem is that the original ownder of this company, a chinese dude, sold of his major stake to a malay guy. YLI was doing very well... until it got sold to this Syed Yusof fella. Then everything went to the pits, management problem maybe? The company is still financially very strong, but any profit growth is going to be pretty much reliant on the water works project coming through, and maybe the water tariff hike.