MWE (3921) : Food for thought: A look at MWE
I know this is a hugely uninteresting stock, but there is a reason for
me to look at it. It owns about 25% of Keuro where I already have a
decent exposure. I would also like to know why it has sold a business
where it has been earning between RM20-25 million a year and
part of that proceeds have been used to buy Keuro. MWE spent around
RM280-RM290 million to have a hold of 25% of Keuro. They purchased the
substantial stake from Chan Ah Chye at RM1.34 per share and later picked
up the rights at RM1.08 per share. There could be a reason it sold
controlling stake of a business to own an associate stake of another
business. Usually business people do not do that. And I am very sure
they are many times smarter than me.
Latest financial report
Now we know that it has borrowed some money to buy the 25% stake including the rights. What does that mean? Its borrowings is in the form of revolving credit and the borrowing costs seems low - around 5%. The dividend income from Magnum alone (see below) can cover for the interest to be paid from the borrowings.
Balance sheet wise it is definitely sound. It has a Net Asset Value of around RM2.88 per share against its share price today of RM1.47. Generally, I do not think that its business is much of a significant although if one is to read its annual report, nothing tells that. (This is the reason why reading Chairman's statement is NOT MUCH OF A VALUE). The value of the company is in the investments, not subsidiaries. However, in the Annual Report's statement by the chairman, he was dwelling on subsidiaries business which I do not get excited from. Nothing much is mentioned on the investments.
The three largest shareholdings are investments (investments in associates and Other Investments - largely Keuro (around RM270 million in value including Keuro-WE), Magnum and MPHB Capital which can be read through below.
Other than that, it owns textiles business, the remains of the
electronics business after selling to General Lighting Co. (Note that
Carlyle has sold the business after 2 years holding it to Philips at a
profit of course), some properties and a plantation in Kelantan (MWE
tried to sell it but was rejected by the state government).
Anyhow, I can see it interesting from this findings...it is trading at 50% of its NAV. Would you buy it? There are many things to think through though like dividends, share buyback etc. However, after reading the Chairman's statement it worries me on the level of disclosure the company is willing to share. Hmmm, SC and Bursa are not doing enough yet...although there are small progress.
Happy holidays to all the fellow bloggers and readers.
Latest financial report
Now we know that it has borrowed some money to buy the 25% stake including the rights. What does that mean? Its borrowings is in the form of revolving credit and the borrowing costs seems low - around 5%. The dividend income from Magnum alone (see below) can cover for the interest to be paid from the borrowings.
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| From MWE's 3Q14 financial report. The added on loans is after Keuro's rights |
Balance sheet wise it is definitely sound. It has a Net Asset Value of around RM2.88 per share against its share price today of RM1.47. Generally, I do not think that its business is much of a significant although if one is to read its annual report, nothing tells that. (This is the reason why reading Chairman's statement is NOT MUCH OF A VALUE). The value of the company is in the investments, not subsidiaries. However, in the Annual Report's statement by the chairman, he was dwelling on subsidiaries business which I do not get excited from. Nothing much is mentioned on the investments.
The three largest shareholdings are investments (investments in associates and Other Investments - largely Keuro (around RM270 million in value including Keuro-WE), Magnum and MPHB Capital which can be read through below.
 |
| Magnum's substantial shareholding with MWE ownerships worth around RM181.5 million |
 |
| MPHB Capital's substantial shareholding. MWE's shareholding value is around RM61.5 million |
Anyhow, I can see it interesting from this findings...it is trading at 50% of its NAV. Would you buy it? There are many things to think through though like dividends, share buyback etc. However, after reading the Chairman's statement it worries me on the level of disclosure the company is willing to share. Hmmm, SC and Bursa are not doing enough yet...although there are small progress.
Happy holidays to all the fellow bloggers and readers.
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