The following was posted by Kevin Scully at his blog yesterday. Visit www.nracapital.com

Kevin Scully is a sought-after speaker. NextInsight photo

There were some suprises in that I found the financials strong with net cash of about S$17mn (its now S$23mn) against market capitalisation of about S$30-33mn..when I was told, its market capitalisation now about S$38mn.   It was also trading at about 0.6-0.7 times book which was about half cash.  

A quick look at the results and annual report showed that the bulk of profit came from home land security and consumer electronics.

There was a recent sharp price movement up to 18 cents on volume and I received several sms' suggesting all sorts of reasons in particular the entry of a prominent person as a shareholder.....anyway nothing was announced so its pure rumour at this time.

Back to the H1-2010 results,  the key points are highlighted below:

a) revenue rose 144% to S$28.3mn

b) net profit rose 135% to S$2.7mn from S$1.1mn

c) net cash is S$23mn up from S$18mn in 2009

d) EPS for H1-2010 is 1.2 cents while NAV is S$0.19

I have found out that TSH's historic core business under home land security comprises - the destruction of used/unused ammunition from our SAF ranges, maintenance of bomb shelters and the management and storage of all public fireworks displays.  This seems to be a very stable business generating about S$3-4mn net profit per year and growing modestly.

The new business is in consumer electronics....but as to how this will impact the P&L, its seems a little early to say now.  But some of the products from its annual report like photo readers and pc tablets look interesting but its more ODM now.

Can it be a four bagger ??!!

Based on what has been disclosed......in terms of its business fundamentals......I dont think so.  But PERs are low similar to under undiscovered small and mid-caps.  We have NAV protection and a strong net cash position that is more than half its NAV.  So unless earnings rebound strongly, and this has to come from its consumer electronics division, I find it hard to believe that on its business fundamentals alone the stock can be above S$0.40.

Fundamentals aside, the chart below shows a recent sharp jump in the stock price on good volume ?!   What is happening here ?  I would welcome any feedback on possible reasons for this interest?