There are two ways to evaluate a company.
1. Evaluate the company by treating it as stable business. In this way, the performance of the company: the Return On Invested Capital (ROIC) will be pretty predictable through reading past financial statement. Any change of ROIC will not be sudden and can be detected through trend analysis.
(See here for a discussion on important of ROIC)
2. Evaluate the company by treating it as a fast growing business. In this case, very large CAPEX is expected during the first few years of growing phase, where higher depreciation will results later. This type of company cannot be evaluate through studying the past financial statement. They can only be evaluated, by understanding the industry environment the company operated at for the next five to ten years, then predict if they can recoup from their initial Capital Investment.
Earning for some types of the company , such as utilities, are fairly predictable. Just that some of the key information like Power Purchase Agreement, Detail CAPEX amount, future financial interest, quality of management to ensure reliable operation, long term issue affecting probability of the company are not generally available to public investors.
Earning for the others, like Hotel & Leisure (such as Genting adventure in Singapore and Las Vegas), are however highly unpredictable. Which their share price should reflect a discount to compensate for uncertainty that investor faced.
Key Information For Analysis
Additional Info: Chairman and CEO are major shareholder. This is a typical family business company.
Discussion
Major business activities by New Hoong Fatt Holding is in trading and manufacturing autovehicle parts. The company had expand its operation to oversea (like Thailand, China, Indonesia). However as revenue and profit trend stable, i will analyse it by treating it as stable business.
Positive
1. Growing autovehicle market means growing demand for its part.
2. Stable dividend payout.
Negative
1. Stagnant Revenue trend despite high CAPEX.
2. Fluctuation in profit
3. ROIC trending lower.
Conclusion
Dividend rate of 4.2% is better than Fixed Deposit. But given the stagnant revenue, near negative ROIC for now, the company is overpriced.
Disclaimer
The data above was taken and calculated according to information supply from the company's quartery report and annual report available at the Bursa Saham website.
The author bear no responsibilities of any buying/selling action of the investor, and any profit/loss incur by the investor.
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