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Why I believe Courts Asia is undervalued
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sheerluck
Supreme |
21-Dec-2017 13:07
Yells: "Work for your money first then let your money work for you" |
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Wait for Courts owner to cash out on the market as they did before......delist at dirt cheap price.....then come back again in a few years to rip off the market again.
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destinykraze
Elite |
21-Dec-2017 12:49
Yells: "Reality is only a matter of perception" |
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Courts still around? *Shocked* | ||
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YXK1234
Member |
21-Dec-2017 11:17
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After weak Q2 results, Courts Asia fell 20% in a few weeks. Even though revenues were not impacted much, profit fell dramatically from last year. As a result, most people wrote Courts off, thinking that new Malaysian regulations like the consumer protection act and falling margins would drag Courts into bankruptcy. As a result, Courts became heavily undervalued, trading at $167 million, when its net asset value is over $200 million. Some common arguments against Courts and why they are wrong: - Same store sales are declining rapidly and will continue to decline -> Singapore same store sales are improving and Malaysia same-store sales are likely to slow down its decrease or even stop decreasing. From September to November, ringgit appreciated against the SGD (http://www.xe.com/currencycharts/?from=SGD& to=MYR& view=1Y). I believe this should help improve same-store sales by making imports cheaper and increasing consumer confidence and thus increase consumer spending in Malaysia. - The Consumer protection act will impact courts margins -> The consumer protection act might impact margins a little, but in its most recent conference call, Courts CEO stated that the standard 24% rate included benefits and warranties, while the 15% rate imposed by the government is without including the effects of benefits and warranties. Decreasing interest rates will also allow Courts to be more competitive and possibly increase consumer confidence in general. - Ecommerce will reduce revenues -> This statement is true, but the impact of ecommerce is overestimated. The only items that are impacted by ecommerce are the items that are the most competitive. Most big ticket items that contribute the most to gross margins are unaffected much by ecommerce. Courts is also expanding its products to include services as well, which should help attract customers who want a higher quality product instead of quick and fast service. In conclusion, Courts is undervalued. Most people seem to think that Courts will not be able to survive in the next few years, but they have underestimated the pros of owning courts (A fast growing indonesia buissness) and overestimated the cons. Courts revenues and margins will improve and its true value will show as it works to produce cost efficiencies and as the economies of Singapore and Malaysia continue to improve. Thank you for reading! -YXK |
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