Reasons for Buying CROWN

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After reading CROWN's prospectus, I came up with a list of reasons for buying this stock on its IPO day:

• Lower number of outstanding shares. The firm's total authorized shares is 1.3 B. Its present total number of shares is 472.8 M. Through this IPO, 158 M shares will be added. The total number of common shares will be 630.8 M after the IPO. This will increase the BVPS from 1.19 to 1.22. This is still small compared to other firms. This means that lesser number of stockholders will share with the firm's profit. 

• I see CROWN as an emerging growth stock. The firm has been growing since 2012. It is adding 62 new employees into its 246 existing employees, purchasing new land, and building new structures beginning April 2015 to March 2016.  

• Dividends policy is clear. Its 10% of net income.

• Strong financial ratios: D/E - 0.47; E/A - 0.67; BVPS after the IPO - 1.22; P/BV - 1.15; P/E - 10.07; ROE - 11.61%; DY - 1.04%, and; ROI - 12.65%.

• Reasons for capital raising: plant and equipment, debt retirement, modernization of plant, and working capital. Debt retirement will strengthen the firm's balance sheet.

• Competitive strengths. The firm has been in operation for 25 years and has been offering quality and USP products. The company considers DNL as compounds' leader. CROWN's total income is close to 1/3 of DNLs. Since DNL is trading @ 21.00/share, CROWN could potentially be trading fairly @ 7.00/share in the near future. In pipes, Neltex is the leader and CROWN is the fifth, but in terms of net profit, CROWN is the 3rd next to Emerald. 

• Impressive website and prospectus. These demonstrate that the firm anticipates something big beginning this April 2015. 

• Taking advantage of the opportunity in construction sector. 

• Favorite words of the company: quality, relationship, customization, modernization and increase. Great company culture.

• The firm has strong customer base.

• The firm owns 51 motor vehicles.

• Products and services. The company has 2 business groups, compounds and pipes. Compounds are used in wires, cables and bottles. Pipes are used in electrical, potable, telecom wiring and gas pipelines. The company is a pioneer in PP-R pipes. 

Retail Sector

In terms of total assets under the retail sector, CAL is the smallest. It has 1.6 B total assets as of Sept 2014. RRHI is the leader with 57.4 B; followed by PGOLD, 53.6 B; SSI, 15.1 B, and SEVN, 7.8 B. 

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In terms of earnings per share (EPS), on the basis of September 2014 quarterly report, CAL is the highest considering its small total assets compared to its competitors. ITS EPS was 0.22. Others have the following EPS:

RRHI - 2.60

PGOLD - 1.63

SSI - 0.29

SEVN - 1.91

Concerning debt to equity ratio [D/E (x)], RRHI is the most conservative followed by PGOLD. Their balance sheet is very strong. SSI is the weakest.

RRHI - 0.39

PGOLD - 0.56

SSI - 2.96

SEVN - 1.39

CAL - 0.96

How about price to book value ratio [P/BV (x)]? I think CAL is the most fairly valued with 1.52. SEVN is overpriced with 15.59. RRHI's P/BV is 2.92, PGOLD's is 3.18, and SSI's is 8.58.

Again, when it comes to price to earnings ratio [P/E (x)], CAL is the cheapest stock with 15.86. SEVN is the most expensive, 58.63. RRHI has a 32.15 P/E ratio, PGOLD has 24.20, and SSI has 34.13.

When it comes to return on equity (ROE), SEVN is the highest with 26.90% followed by SSI with 17.62%. PGOLD has the 3rd highest ROE with 13.20%. CAL is the 4th with 9.65%. RRHI has 9.53% ROE.

Finally, concerning dividend yield, PGOLD is the first with 0.50% followed by RRHI with 0.49% and SEVN with 0.26%. Both CAL and SSI have no dividend yield. CAL stopped paying dividend last 2014. And SSI was just publicly listed last November 7, 2014. 

On the basis of these numbers, CAL will be the best choice for investment. However, since its financial report for 2014 is still not available, its better to wait first to know the firm's financial standing as of 2014. Once the report is released and shows an unfavorable outcome, the next investment option in retail sector would either be RRHI or PGOLD. As for me, I will go for RRHI provided that both its P/BV and P/E ratios will go down a little bit.      

SHNG and LAND

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Among 86 companies under the property sector, PSE included 15 in its index. The existence of these numerous companies shows that real estate industry is booming in the country. Whether it is a bubble or not is another question. Among 15 companies, in PSE property index, my broker selected 7. They are ALI, CPG, FLI, MEG, RLC, SMPH and VLL. During my first three months in the stock market, I tried three stocks from my broker's list: ALI, SMPH and MEG. As a result, I gained once in ALI, twice in SMPH, and almost even in MEG. However, after reaching a price almost close to their "fair value," these three stocks started to dance sideways. This makes it difficult for me to enter. And so I did my own research and came up with my own list after using fundamental analysis. I came up with 11 stocks. My only criterion is to do further research on stocks that are consistently paying out dividends. To my surprise, 8 stocks in PSE property index did not appear in my list and 1 in my broker's list, CPG. I think if there is any common opinion I share with both PSE property index and my broker, it is about MEG and FLI. What surprises me is the exclusion of both SHNG and LAND. Among the 11 stocks in my list, I see SHNG as the most attractive. Its P/E ratio is 5.60; P/BV ratio is 0.64, and; its ROI is 16.5%. LAND on the other hand is the next undervalued stock following SHNG with a P/BV ratio of 0.75. I wonder about the reason for exclusion. Perhaps, the experts know something about these 2 companies that the financial statements do not show. That's the limitation of a small time individual investor.