Rare Opportunity $CEB
In the world of investing, rare opportunities often present themselves in the wake of unfortunate events. Such is the case with the recent margin call faced by a founder, which has opened a window for savvy investors.
It’s not uncommon for founders to pledge shares as collateral; it’s one of the most tax-efficient ways to unlock the value of their holdings while retaining control over the company. However, leverage is a double-edged sword, and in this instance, it worked against the founder. The loan-to-value ratio must have deteriorated to the point where it triggered margin calls. Yet, despite the turmoil, the stability in the share price suggests that these calls have been managed and the loan-to-value ratio restored.
From a fundamental perspective, the company remains solid. The recent acquisition of Iconn stands to enhance their performance further. The concern over high goodwill from acquisitions is misplaced, especially in the electronics systems solutions sector, where light asset models are the norm. Iconn’s offerings in connectivity solutions are not just reliable but essential, helping clients build efficient and durable electronic systems. This acquisition has the potential to elevate $CEB (5311.MY)$ ’s position in the value chain.
Valuation-wise, $CEB (5311.MY)$ is currently trading at a mere 0.85 times its book value, a significant discount when compared to $ATAIMS (8176.MY)$ , which trades at 1.20-1.30 times book value despite being loss-making. This discrepancy is hard to justify. $CEB (5311.MY)$ is profitable and, by all rights, should be trading at a multiple exceeding 1.30 times its book value. A fair valuation should place the price at least at RM0.60.
As always, fortune favors the brave.
Disclaimer: The above reflects an opinion based on current information and should not be taken as financial advice. Investors are encouraged to conduct their own research and consider their risk tolerance before making any investment decisions.
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