Personally, I would like to devote my effort towards uncovering hidden gems in the micro-small cap space. I define micro cap as anything with market cap that is below $300m (local currency) and anything in between 300m and 1b is considered as small cap. I came across this small cap Malaysia-listed integrated poultry company through fundamental screening. Simple to understand business model.
Company Profile
Established on 5th August 1996, CCK Consolidated Holdings Berhad (“CCK”) is an investment holding company and was listed on the Second Board of the Kuala Lumpur Stock Exchange on 10th December 1997. CCK Group is the collective name for CCK and its subsidiaries, with the principal activities of poultry and retailing.
The integrated supply chain has its own feedmill, chicken hatchery, breeder farms, broiler farms, layer farms, and retail stores in Sarawak and Sabah. CCK’s poultry abattoir is fully equipped with coldstorage facilities and full logistics set-up, with the latest breeding farm technologies, computer-controlled hatching chambers and automated abattoir, capable of processing approximately 4,000 birds per hour. Currently, we process approximately 30,000 birds per day. Our abattoir is the only poultry abattoir in Sarawak with a HACCP certification from the Malaysian Government, thus poised to supply both domestic and international consumers with good wholesome chicken meat economically. We are awarded the Certificate of Authentication Halal by Department of Islamic Development Malaysia (Jabatan Kemajuan Islam Malaysia), and Certificate Veterinary of Health Mark (VHM) by Department of Veterinary Services Malaysia (Jabatan Perkhidmatan Veterinar Malaysia).
CCK entered into layer farming in 2013 to supply table eggs to consumers. The layer farm is located in Bau, Kuching, and the current daily production is between 180,000 – 200,000 eggs. Source: Company Website http://www.cck.com.my/
Quick Market Stats
Trading at above RM300m market cap (I deem this co as Small Cap)
Fundamentals
Impressive growth in EPS and operating cashflow over past 9 years. ROE > 10% and manageable gross gearing level at <10%.
| Date of change | Shares | Director/ Substantial Shareholder |
|---|---|---|
| 22 Jul 2020 | Acquired 400,000 |
MR LAU LIONG KII |
| 22 Jul 2020 | Acquired 400,000 |
MR LAU LIONG KII |
| 22 Jul 2020 | Acquired 80,000 |
MR LAU LIONG KII |
Analysts Recommendations
Indicative Valuation & Margin of Safety (Strictly For Illustration Purpose Only)
My assumed parameters:
- Equity discount rate = 10% (this is what my required rate of return per annum)
- 5.0% y-o-y growth rate in EPS for next 5 years, followed by terminal growth rate of 2.0%
Final Thoughts:
- As current price may represent MOS of >25%, I may consider this investment.
- Financial position – not overleveraged and annual growth seen in EPS / Op CF
- Backed by insiders buying + positive analyst recommendations
- Technically, this share price is not in an overbought or oversold position.
- Q2 results is about to be released soon. May see some short term volatility in the share price of CCK.
Various sources: TradingView / Shareinvestor / etc
Disclaimer: This is not an investment advice or endorsement. Please take a look at the general disclaimer of this Blog.
