This article first appeared in The Edge Financial Daily, on February 12, 2016.

Pan Malaysia Corporation Bhd (-ve)

SHARES of Pan Malaysia Corp (PM Corp) (fundamental: 1.5/3, valuation: 1.1/3) rose 5.2% to a one-year high of 30.5 sen on heavy volume yesterday. A total of 9.5 million shares were traded — 11.2 times its average daily trading volume.

PM Corp is primarily involved in the manufacturing of own-brand chocolate products as well as distribution of confectionery and beverages of third-party brands. The company is 27.5%-owned by Malayan United Industries Bhd and controlled by Tan Sri Khoo Kay Peng.

For 2014, revenue was down 12.1% to RM70.8 million from a year ago and it recorded a net profit of RM1.5 million. PM Corp attributed the uninspiring performance to lower domestic sales, heightened competition in the local chocolate market, and higher raw material costs.

For 9M2015, revenue increased 4.8% year-on-year to RM50.2 million while net profit jumped more than seven-fold to RM8.3 million, thanks to a foreign exchange (forex) gain of RM9.3 million. The company said the unrealised forex gain is mainly due to the depreciation of ringgit against Singapore Dollar on translation of amount owing by a foreign subsidiary.

With minimal borrowings, PM Corp is sitting on a net cash position of RM143 million. This is equivalent to 20.2 sen per share, or a substantial 70% of its market capitalisation.

On Nov 25, 2015, it proposed a reduction of par value and share premium to eliminate its accumulated losses as well as a capital distribution of RM56.7 million or 8 sen per share to shareholders. The proposals are subject to shareholders’ approval at forthcoming extraordinary general meeting on March 3 and expected to be completed by 2Q2016.

The stock is trading at a trailing 12-month P/E of 23.6 times and 0.57 times book value. Both trailing ex-cash P/E and trailing EV/EBITDA stood at 7.2 times. No dividend was paid for the past 10 years.