Happy New Year Readers! May you have a prosperous new year ahead of you. There’s no reason why you should not, as long as you stick to good trading and risk management techniques.
In an earlier post I showed how to compare the companies against one another. In the attached you will find a PDF which compares all the power generation companies.
As you can see MFCB has the highest ROE, which is why it is one of the favourites in this sector - at least double that of its competitors like Tanjong and Tenaga. It also has the highest asset turnover, which means that its revenues are highest compared to its assets. It also has a pretty low equity multiplier, which means that it employs lower leverage compared to its peers. On the flipside, its profit margin is fairly low. Compared to the stalwarts like Tanjong and YTL it is only half, which means that it is pricing its products very cheaply and selling lots of them to compensate.
So, compared to its competitors this company is making more money, taking on less debt and selling more, and the only negative thing about it is that it is not that efficient. I would love to see its profit margins improve in the following years. And finally going through all the numbers, the runner-up in the list would be Tanjong whose only downside is that its ROE has nearly halved in the past 5 years. Other than that it is demonstrating better profit margins and hence greater efficiency - the only difference being that its asset turnover is not as high, indicating that it does not share the same pricing strategy as MFCB and is lagging somewhat as a result.
When analysing these companies, remember to keep one eye on the PE ratio. Tanjong is currently almost twice as expensive as MFCB with a historical PE of around 14 compared to about 7 because investors have more faith in its management. But the numbers speak for themselves. Could MFCB be undervalued? I’ll let you be the judge.
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