Stocks With Likelihood Of Corporate Exercise: Gopeng

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Gopeng Bhd

Gopeng is best known as a former Perak-based cement player, with a stake in Perak Hanjoong Simen as its key asset. Its 35.2% stake in the cement company was sold for RM200 million cash to YTL Cement in 2010, and Gopeng has since turned into a cash-rich entity with a small plantation and property arms.

Gopeng has also diversified into other businesses such as quarrying, management of water treatment plants and manufacturing and sale of cement. Nonetheless, all of its revenue in 2013 was generated from palm oil.

The company’s revenue has been declining, from RM17.5 million in 2011 to RM10.2 million in 2013. Net profit in 2013 rose 36.9% to RM3.6 million, but was largely due to RM4.95 million in fair value gains from investment properties and short-term investments.

The main attraction of Gopeng is not its plantation or properties assets, or its earnings, which are unexciting. Indeed, its total plantation land bank is very small totaling just under 1,000 ha and lack economies of scale.

Rather, the key attraction is its very strong, cash-rish balance sheet – a legacy from the disposal of its cement business – which perks up the potential for future corporate exercises or higher dividends.

As at 30 June 2014, it had net cash of RM109.9 million as at 30 June 2014, or 61 sen per share. Interestingly, its net cash is just slightly below its current market capitalization of RM131.8 million and accounts for a significant 84.7% of the current share price of 72 sen. The stock is trading at 0.4 times its net asset value of RM1.64, with trailing 12-month P/E of 63 times. Dividends in the past two years have been 3 sen per year, or a yield of 3.2%.


This article first appeared in The Edge Financial Daily, on October 31, 2014.