Even After Gaining 58% Over The Past Year, This Stock May Still Be A Bargain

Kingboard Copper Foil Holdings Limited (SGX: K14) has been a great stock to own for its investors over the past 12 months with its share price having climbed by some 58%.

For perspective, Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI), is down by 17% in the same timeframe.

Interestingly, Kingboard Copper Foil may still be a bargain despite having made those strong gains. That’s because the company still has a really low valuation.

Based on its latest financials, Kingboard Copper Foil has current assets of S$278.7 million and total liabilities of S$17.7 million, which works out to a net current asset value of S$261 million (current assets minus total liabilities). At its latest share price of S$0.25, the company has a market capitalisation of just S$184 million.

As you can see, Kingboard Copper Foil’s net current asset value is higher than its market cap. This makes the company a net-net stock.

Theoretically, net-net stocks are great bargains. That’s because investors can get a discount on a company’s current assets (assets such as cash, short-term investments, and inventory etc.) net of all liabilities. That’s not all – the company’s fixed assets (things such as real estate, factories, long-lived equipment etc.) are also available for free.

That said, net-net stocks come with great risks too. It’s often the case that net-net stocks are companies that are in trouble, and those troubles could be of the insurmountable variety. This explains why net-net stocks have such low valuations.

Coming back to Kingboard Copper Foil, its recent business results have been anything but good. In 2015, the company’s revenue jumped by 20%, but its profit plunged by 85%. Then, in the first-quarter of 2016, revenue slipped by 11% while profit tumbled by 74%.

Investors who are interested in Kingboard Copper Foil would have to be confident that the company’s current troubles are not permanent in nature. Even cheap stocks can become expensive long-term losers if their business fundamentals are to weaken.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any companies mentioned.