Tuesday, April 23, 2013

Finding Undervalued Singapore Stock: Ocean Sky

This is a stock that I came across while reading a stock report recommendation from OSK-DMG. The stock is called Ocean SkyOcean Sky International Limited and its subsidiaries is a one-stop fully integrated apparel service provider with global end-to-end supply chain management capabilities from design to distribution. The Company’s divisions include Corporate Services, Apparel Agency and Apparel Production Services divisions. The Company's subsidiaries include Ocean Sky Marketing (HK) Ltd, Suntex Pte Ltd, Bright Sky Pte Ltd, Suntex Investment Co. Ltd, Bloom Time Embroidery Pte Ltd and Ocean Star Apparel (Guangzhou) Pte Ltd. 

Why is Ocean Sky undervalued?
The stock is currently trading below cash and offers a dividend yield of more than 11%. The company recently sold off its core apparel business together with two properties in Hong Kong which left the company flush with cash. OSK-DMG estimated the cash to be 30-
40% higher than the entire market cap of the company. With the huge amount of cash on hand, management will be expected to be dishing out some SGD0.016 of special dividend. Together with the final dividend of SGD0.008, this would mean that the yield on the company comes up to just over 11%. OSK-DMG estimates the intrinsic value of the stock to be about SGD0.29, which represents an upside of close to 40%. 

Valuation of Ocean Sky
Below is the valuation done by OSK-DMG. 

Risk of investing in Ocean Sky
In value investing, we are always focused on the risk of losing money; the downside. The risk of investing in Ocean Sky is that management might not be able to find a good business to reinvest the excess cash. 

An update was posted on Ocean Sky in October 2013. Check out the update here

Disclaimer: This is not a buy or sell stock tip. Please do your own research. 

1 comment:

  1. Very nice and informative post...for Singapore stock market investment.


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