Joseph Yeo: Why I Am Vested In STAR PHARMACEUTICAL

Joseph Yeo recently posted the following content in the NextInsight forum. His claim to fame was via his stock picks at the start of the year (See: Joseph Yeo: My 5 small-cap picks for 1Q)

Star Pharmaceutical -- which manufactures and sells both western and traditional Chinese medicine (TCM)-formulated prescription drugs -- was listed on 15 Feb 2006 at 35 cts per share.

It registered losses in 2011 and 2012 and turned around with a small profit of S$770k in 2013.

It began to show improved profits in the next 3 quarters in 2014, with S$1.0 mil for 1st qt, S$6.8 mil for 2nd qt and S$681k for 3rd qt.

StarPharma_chart12.14 Shares of Star Pharmaceutical, which is headquartered in Hainan island, China, tumbled in 2011 and stayed low in 2012 as a result of losses.
Chart: www.ft.com

Below are some reasons why I am vested in this company:

StarPharm_XuZhiBin12.14 Star Pharm chairman Xu Zhi Bin.1. Turnaround company -- after losses in 2011 and 2012, the company turned around in 2013.

2. Improved quarterly profits for FY 2014. The S$8.6 mil profit in the first 9 months included an one-off gain of S$6.1 mil from the disposal of subsidiaries.

3. Impressive profits at 9 mths.

4. Company has no debt.

5. Huge cash pile. Company has cash and cash equivalent of S$11.8 mil.

6. Low capitalisation: Company is capitalised at only S$15.2 mil based on closing price of 6.5 cts per share on 12 Dec. This is grossly under valued considering that the company has a cash horde of S$11.8 mil and 9 mths profits of S$8.6 mil.

7. Small number of shares : 234 mil shares.

8. Trading below NAV of 12.2 cents against closing price of 6.5 cts as of 12 Dec '14

9. Low forward P/E -- less than 2 based on current 9 mths earning (inclusive of one-off gain).

Above are just my thoughts on the company. There are other good reasons why I am vested. If time permits, will share details.

Pls note ... What I expressed are just my thoughts/perceptions and they can be right/wrong. Take care n all the best!

More discussion on Star Pharmaceutical can be found in this forum thread.

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Counter Name

Last

Change

AEM Holdings

2.360

-0.070

Best World

2.480

-0.010

Boustead Singapore

0.950

0.005