This is a graham net-net stock ! A "net-net" is a stock which is trading for less than its current assets minus all liabilities. When you buy a net-net stock, you are basicallt buying a company that is extremely undervalued.
Let me introduce you to this company called $ASIA CEMENT CH(00743)$. Asia Cement (China) Holdings Corp engages in the manufacture and sale of cement, concrete, and related products. It is the 3rd largest producer of cement in China.
●Why is it a net-net deal?
It has a market cap of RMB 4.66 B. While in the bank, the company has cash of RMB 7.485 B.
Just by buying it at the current price, you are essentially getting more than what you are paying for.
The company has a total asset of 21.46 B and Total Debt of 1.57 B. This company has the best financial Health!
●In addition to that, the company produces solid free cash flow over the years:
2018: 2.75 B
2019: 4.64 B
2020: 4.54 B
2021: 2.15 B
(All values in RMB)
Based on 2021, its free cash flow is 46% of market cap!!
●How sustainable is its free cash flow?
Cement is an essential product. Cement and its by products are needed in building houses and roads. The company informed shareholders this year that demand for cement is cooling in China and it expects lesser sales. But due to it being so undervalued, I believe it will still be very worthwile to invest even if sales drop by 50%.
●What is its intrinsic value?
Based on a growth rate of -5%, and a discount rate of 10%, the company is worth 13.43B. With the current market cap of 4B, is is extremely undervalued!
●Conclusion:
This company is a huge value buy. Financially healthy, earnings are very good and sustainable. Plus, It pays a dividend of 17%! Itll be a great buy for all dividend and value investing portfolios.
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