Yechiu has finally rewarded...

I read the proposed privatization of Yechiu (go here) with great satisfaction. The proposed privatization involved a voluntary general offer to acquire all the remaining 29,005,117 Share representing approximately 35.45% of the issued and paid-up share capital of the Company not already held by the Joint Offerors, at an offer price of RM2.00 per Share.

I have posted on Yechiu on November 2006, where I had noted its attractive valuation as well as the breakout of a price pattern that could have been the start of a rally in the share price (go here). To be frank, Yechiu's share price has never rallied in a convincing manner. This could be due to insufficient research coverage & following by fund managers. The tight price range & the lack of clear price trend may have deterred many retail players. See the chart below.


Chart: Yechiu' daily chart as at August 1st (source: Tradesignum.com)

Looking at the last quarterly results for 31/3/2008, we can see that Yechiu's EPS for the past 4 quarters amount to 49 sen. Based on its closing price of RM1.51 as at 30/7/2008, Yechiu was trading at a trailing PE of 3.1 times. See the 8-quarter results below.



Yechiu's proposed privatization provides a good example that a thorough fundamental analysis can uncover good stocks at attractive valuation. This is in sharp contrast to the case of Axis, where a careful study of the account should raise serious doubts about the company's financial position. Unfortunately, there are many cases where the accounting problem will spring a surprise because one could not discover the problem through the account. It is in these latter cases that we need to rely on protective stops to safeguard our capital.