Another leader at low valuation.
Another leader at low valuation. METCO is another leading company which has not had a run-up in price lately. One of the few growth stocks left with an expected 10% dividend for year 2002. Read here exactly as we published for our members, last March 14 "02.
Exactly as published to our members, last March 14 "02.
Here is a stock (METCO) I much liked in the past, then it ran-up in market price and so I back then advocated profit taking. Now I think it’s time to come back.
Metco then had a fabulous run above 100 Baht per share in April and May of year 2000 and then again briefly last June, 2001. Both times I though the stock was ahead of itself. Currently right around 90 and at a higher earnings level then ever before, I wish to select it again as a renewed and prudent income choice with the SET increasingly volatile.
Trading at a 2002 p/e of only 3.5 and just having paid an 8.50 dividend, this stock appears too cheap. With a book value of 125 per share and cash at some 42 Baht per share, METCO (89) is a "renewed-buy", select choice. I expect METCO to earn around 26 Baht per share this year and 29 per share in 2003.
Here is a company with a clean balance sheet, a strong foreign partner (Matushita, Japan) and with a solid record of paying yearly high dividends. Some 95% of their sales are in US $, hence should the Baht weaken, this would be a plus. Call it some Baht insurance.
Why is METCO currently rated at a huge discount to the market P/E?, after all:
The company is a leading global producer of CD changers in cars. This is now an increasingly standard feature in Toyota, Nissan and Honda cars; all indirect clients of METCO. The average wholesale price per CD changers has been increasing from 60 US$ to 70 US$, according to a recent brokerage report.
METCO was listed on The Stock Exchange of Thailand in 1992; for most of 1993 & "94 METCO enjoyed a p/e of over 20. But this has long since dropped to currently low single digit.
This company used to generate 69% of their total sales on and around, VCR parts (1999) and back then no income at all from CD changers. Today the VCR parts are only 45% and CD changers are 36% of total sales, hence METCO knows how to change fast -to new products. METCO also produces critical parts for flat monitors and DVD components/players. The Japanese parent has solid connections with several leading Japanese electronics companies.
Main ProductsVideo Deck Chassis CD Auto Changer AssemblyElectric Appliance Parts Automobile Electronics Parts Cathode Ray Tube Steel Parts(Frame, Inner Magnetic Shield, Shrink Band) Magnetron, Electron Gun Precision Metal Parts, Plastic Parts
Hence METCO’s customers are well known Japanese electrical appliance makers. You can see their web page at www.metco.co.th If you have trouble opening this web site, please insert the following address in your browser: www.metco.co.th/FrameSetE.html
I estimate long term earnings growth around 9-12% per year over the next up cycle in this industry, now slowly happening in my view.
This stock is right around at the same price it was at the end of January 02, after it went XD by 8.50 Baht. Hence unlike many other shares, including the electronics sector, METCO shares have not had a deserved rise lately. Yet, the electrical sector of the SET index where METCO trades under was at 249 at the end of January, it is now around 265, or about 7% higher.
METCO has an established dividend pay-out policy of 40% of earnings, hence I think around a 10 Baht dividend for the next year is a reasonable expectation. Hence, METCO is one of the few good stocks left which have a 10% forward looking dividend income.
Comment from a METCO happy shareholder:
"A 9.5% dividend yield, covered by earnings nearly 3 times. A P/E of 4 or less….. Trading at 70% of book value. Reinvesting nearly two thirds of profit, at 18% ROE. METCO remains a bargain and should be worth 30-50% more! "
We recommend you use our search engine to check if we previously wrote on a stock. For example on June 15 "00 we compared Metco with a similar USA firm called Rockford Corp (NASDAQ NM: ROFO). The difference in valuation was then and remains today astounding.
"While METCO stock is up some 40% (including dividends) we still recommends it. (Metco stock which closed at 78 Baht per share on 6/15/"00 was over 100 Baht per share in March/April "00 when Thaistocks.com then advocated profit taking)." From Thaistocks.com on June 15th "00.
Best Regards to all visitors,
Paul A. Renaud & Team.
