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AEI Corporation
June 7, 2007, 7:21 am
Filed under: investments/finance/economics

AEI Corporation (SGX:A18)

As of 7 June 2007

Price: SGD 0.220 per share

P/E Ratio: 9

Earnings Yield: 11%

What AEI does

The company is principally engaged in the production of quality precision aluminium alloy extruded profiles. It also provides anodising services in order to meet its customers’ finishing requirements. 

Why buy

  • Selling below book value of SGD 0.29 per share. It is selling at 0.220 without any apparent reason in terms of bad news or change in business conditions.
  • Substantial shareholder The Nassim Fund has been increasing it’s shareholding over the last 3 months.
  • 50% owned by leading Directors.
  • No long term debt.
  • Very very healthy current ratio and balance sheet.

Why not buy

  • Fluctuating net profit margins which might indicate lack of competitive advantage
  • Revenue not increasing at a fantastic rate; about 24% for 2006.
  • Vulnerability to raw materials prices, especially aluminium prices.

Strategy

  • Buy and wait for it to rise above book value
  • Depending on performance, sell or keep after it has appreciated
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