Tuesday, October 24, 2017

105 - The New Mercury

105 - The New

Sometimes there are not much details or informations of a particular stocks that investors can have access to other than the occasionally announcements. Even then, the informations are also not easily understood by the average man on the streets.

Take for example, one of my early favourite stocks : Mercury Industries Berhad. It has successfully changed into a pure construction player exiting its car paint business. But I couldn't gather enough clear details from its announcements and I was left wondering how the new Mercury is progressing and how its financial positions would be.

Early birds readers who have been reading my every blogs would know that Mercury was one stock that I dared readers to walk the talk with me. (Refer back to my blog : Walk The Talk with Mercury Industries Berhad With Me. Dare You? It was dated : September 3, 2013).

At that time of "challenging readers invest with me together" this Mercury stock, it was on the premise of its easy to understand business of being in the car paint business. It was principally involved in the manufacture and trading of automotive paints and other related products used in the auto refinish business.

The automotive paint business is deemed resilient since there would be constant requirement of vehicles to repaint their car after several years on the road. Besides total vehicles sales were constantly in the range of 600,000 units per year.

It is a business that is easily understood by any investors. It is that reason why I invested in. Besides another plus point is its consistent dividends which is above bank's fixed deposit rates.

Then two years ago, out of the blue, Mercury began its journey to become a pure construction player. I decided to stick with its' new business venture to see how it pan out. But not much was understood by investors as Mercury is a rather low profile stock that is hardly covered by analysts.

As such, it didn't attract much investing attention and its volume is hardly traded  most of the time. Even so if there is, it is just a few lots changing hands.

But in the September issue of The Edge Weekly dated September 25, 2017, a good detailed coverage of Mercury Industries Berhad seemed to have a magic spell on its stock. The clear write up of the latest strong financial standings and its plans to grow its business by acquiring construction-related companies must have scored high marks.

Demands for its usually thinly traded shares spiked up the following weeks and from its last traded price of RM1.27 on Sept 21 (before The Edge Weekly issue on Sept 25), Mercury saw its shared surging days after days. It reached its 52-week peak (or perhaps its last six year high) at RM2.08 on Oct 11. Since then, it has been hovering at RM1.90 plus minus.

From what I am able to digested or understood from The Edge Weekly article is that Mercury is officially a cash rich company with RM10.5 million. While this cash amount is peanuts compared to other construction big boys, one must note that Mercury is a small based company with only 40,182.000 shares.

Also it is now more clear with its earnings visibility as it bends on acquiring small construction-related companies to strengthen its business.

So far its first half year 2017 net profit of RM11.6 million (thanks to RM9 million gain from the sale of the automotive paints division) has put it into a nice net cash position. Although it is unlikely to match its second half profits to its first half, as long as there is decent profits to be made, investors can confidently look forward to another good dividends of at least a six sen payout.

Besides, there might be a possibility of bonus issue or share split exercise as early as next year according to its managing director, Datuk Tiong Kwing Hee.

I also like to stress that I am still holding on to my 36,000 shares of Mercury even though it is now a completely different kind of company. Even though the share price has soared quiet substantially from my purchasing prices.

I am still walking the talk with the new Mercury. What about you?

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