Note: SP Chemicals (SP) is a China-based chemicals producer and distributor. Listed on SGX in 2003, it currently has market capitalisation of $315m at a price of $0.86 per share.
The financial performance of SP since listing has been phenomenoal from day one. ROE for their 1st year was 17%, rising to 37.5% for FY2006. Based on latest 3Q results, the performance for FY2007 is set to surpass that of last year's. Other exciting facts about SP Chemicals include the following:
1) Price/NAV = 1.45: an attractive and relatively low-risk stock.
2) P/E = 5.9: an underpriced stock. Considering that FY2007 is set to be better, this is significant.
3) 52-Week Low = .825: the current pricing of SP at 0.86 is not shored up during 2007's bull run. Hence, SP is likely to be an unpopular stock and underpricing is likely.
SP Chemicals appears to be severly undervalued, even in light of the current bearish market sentiments. Indeed, because SP Chemicals' clientel base is increasingly global, while the cost base is in low-cost Jiangsu region in China, it is in a good position to ride out any economic downturn. Also, as a preferred lowest-cost chemical producer, it will be less affected in a downturn.
My target 6-month price for SP Chemicals is between $1.05-$1.25, which will translate to a potential 20% - 50% gain.
Goodnight, and good luck!
No comments:
Post a Comment