This article first appeared in The Edge Financial Daily, on October 6, 2015.
LCTH Corporation Bhd (-ve)
SHARES of cash-rich LCTH (Fundamental: 2.7/3, Valuation: 1.4/3) rose 3.8% to close at 68 sen yesterday. Since it was first picked by our momentum algorithm on Mar 2, the stock has jumped a staggering 96%.
LCTH is involved in the manufacture and sub-assembly of precision plastic parts and components. It also fabricates precision moulds and dies. The stock has net cash of RM105.8 million or 29.4 sen per share. This equates to 44.9% of its market capitalisation.
The company’s focus on higher margin jobs appears to have paid off. For 1H2015, net profits surged 90.8% to RM8.3 million despite revenue dropping 9.3% to RM59.2 million. The weakening ringgit also benefited the company as 58% of its FY2014 sales were denominated in foreign currencies.
SGX-listed Fu Yu Corporation Limited ultimately owns 70.6% of LCTH. The stock trades at 1.2 times book and an undemanding ex-cash P/E of 7.7 times.