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Saturday, July 25, 2009

Value Buy Mamee-Double Decker

Mamee-Double Decker (M) Berhad, an investment holding company, engages in the manufacture and marketing of food and dairy products, and soft drinks primarily in Malaysia, the People's Republic of China, Myanmar, and other Asian countries. The company offers various products, including instant noodles, snacks, dairy products, chilled products, beverages, and confectionery. It also exports a range of products, including yogurt, cultured milk, fruit juice, instant noodles, snacks, and beverages to countries in Asia, the Middle East, Africa, the Americas, Europe, and Oceania. In addition, the company engages in the development of commercial buildings; and provides advertising contractor and agent services, as well as information systems management and motor vehicle rental services.

Mamee is currently selling at 2.46 per share at P/E 6.6. In 1Q2009,it made 10mil which is almost 2.5 times compare to 1Q2008. By analysing historical earnings,Mamee is expected to make 30 mil this year (compare to 20 mil for previous years)

Its balance sheet is very strong.It holds about RM51 mil in cash with no long term debt.Its current ratio is 2.88 and quick ratio is 2.26.Historically,it gave about 6% dividend yield.There are a few possibilities on how MAMEE will utilize its cash

1) Make acquisition to enhance cashflow. Recently it acquires Charmille Pte Ltd (Charmille) which is a company that has involved in the precision engineering industry in the Asia Pacific for more than 25 years. This type of business has some synergy element in manufacturing and trading business.

2) Buy back shares if the share price is undervalue.Mamee-Double Decker has been buying back its shares since a few months ago.Hence,it's downside is pretty small.

3) Take over target.Mamee is a good take over target by Pang's Family or other companies.But Pang's family,which own around 70% collectively of MAMEE may not takeover MAMEE since these owners are in their 50s already.Thus,MAMEE may be taken over by other companies.


MAMEE has net asset per share of 2.46 and based on current share price,it is selling at RM 210 million for the whole business. Stripping the cash of RM 51mil away,the whole business is selling at RM 160 mil.By estimating a net profit of RM 30 mil this year,the actual P/E is 5.3

At share price of RM 2.46,investors are getting a good bargain for defensive company with further growth prospect such as MAMEE.