PHOL a laggard revisted.

PaulRen's picture
Company Visit

Revisiting a previous laggard.

(4.10) was a choice I favorably mentioned and wrote up some time ago, it never
went anywhere but slowly down and so disappointed.  Then earlier this year I gave up for a while
and did/do not have in my latest (or previous) model portfolio.   I stated somewhere that I still view PHOL
“as OK”, but was not excited now.  PHOL was
not listed in the last 2 models and got no real attention here this year.

I just
met with the senior there last week and tend to think the boredom is now  over.  I
would view  it with an accumulate
buy,  or “bottom picking” opinion.   PHOL will report a boring Quarter this week,
similar to last Quarter.  But this should
be the last low  Q. and so I think will
be its stock price!  The 4th
Q. should show a nice turn.  PHOL’s core business
will do better into next year due to mgt. revamp on profit margins and
expansion into Malaysia.  After a set
back on their water business due to a partner not compatible,  this firm had a bit of a set back and so had
to restructure their growing water.  This
is also expanding into Burma.  Look for a
grand opening there by December 1 2012.

company is expanding its water business now into Burma where the MD has some 15
year long previous in the country experience.  
PHOL will also aggressively pursue the healthier drinking water
alternatives’ to the Thai people. This so by installing, just for starters,
some 200 drinking water vending machines before year end into Phuket city.  These type of vending machines are popular in
Bangkok already, for all the right reasons. 
They have not yet taken off in other rising provinces.  They only make sense in densely populated
areas as they so then also prevent the hauling water around inconvenience.

mini-vending machines dispense  1 liter
of RO water (reverse osmosis) at 1 Baht per liter, vs. the 10 Baht per l, plastic
bottles cost.  And which is evidently not
a most healthy way to get your drinking water.   As always, 
members are welcome to comment on this here, but  I am told bottled (plastic P/E) drinking water
is just not healthy -over time.  While such
plastic bottles are hugely popular all over, they are expensive and not
necessarily the healthiest, especially when sitting around; besides they are
polluting.   Mgt. thinks these drinking vending machines,
smaller then a ATM machine,  these will
gain in popularity and they got the lead on it.   Hearing/listening to this, I ordered one
such on the spot.

super marketing company Avon (Thailand), which now has 60% of the market share
on in-the-home made drinking water,  sells drinking water mini-machines for in the
home/household  and it currently a 3.6
Billion Baht a year business!  This is
huge.  Yet these simple water purifiers
are not up to par…and they often fail to replace their filters -besides are
expensive (6000 Baht).   Not least, it is not RO water!   The healthier alternative is for city/town
dwellers is to get cleaner/better besides cheaper RO water from one of these dispensers
and right near their dwelling.   PHOL
will make their money on the 25,000-35,000 Baht a year it takes to service each
of these -which could amount to the thousands in a couple of years.  The company believes it can bring it up to
scale with little extra direct expenses  because it can utilize some of its own loyal employees
on hand, so to market/service these around the country. (i.e. No need to
increase employee expense.)

PHOL and
are expanding into Burma with their respective huge water business. We
will have to await more details on the size of this but I sense an announcement is
coming well before year end.  Its an
interesting indirect play into Burma of a huge utility business -well removed
from Western troubles.

the faster growth more direct play but it also commands a much higher
p/e valuation.   The more prudent investor
should probably own both, just like with CM and APURE, my 2 food stocks.

comments most welcome -as always.

Best Regards,

Paul A. Renaud.