Thakral Corp : A cash bargain

Thakral Corp is a company that operates under the following business segments:

1) Supply Chain management
2) Electronic Manufacturing Services
3) Media Technology
4) Property
5) Investments

Recently the board room tussle has ignited media interests with the founder Katar Singh being attempted to be ousted by majority shareholder Hong Leong. Along with the recent drop in market prices and the system risk in our financial markets today, Thakral has fallen to a price of 4 cents oer share, a price low enough to warrant a closer study of its circunstances. The story goes that Mr Katar Singh was to take the company in a different direction by going full swing into the property market while Hong Leong was to pursue interests in the Electronics Business by focusing on controlling expenses and improving operating margins. I presume that these 2 goals are different in nature and hence the boad room tussle which has spilled over to the media.

Looking at its financials:

Cash and cash equivalents $111,980,000
Available for sale Investments $41,401,000
Debt $3,865,000
Outstanding Shares 2612113668

Looking at the above figures, Thakral Qualifies as a cash bargain as its net cash per share is 5.72 cents and definitely qualifies as a Benjamin Graham Stock with the net=net value being 6.1 cents according to the balance sheet.

However, despite the cheapness of the stock, i do urge readers and investors to be cautious because this company is literally bleeding cash. As of 30 June 2008 as compared to a year ago, its cash and equivalents position fell bled by 13 million. At such a rate, it could cease to be a cash bargain after bleeding more than 50 million in cash although i think that that is not likely to happen anytime soon.

But because it is so cheap, we should monitor it for any impending catalyst available that might unlock shareholder value because great things happen to cheap stocks due to the way the market reacts in an assymetrical way. The bad news should already be discounted into the stocks price.

Using inverted thinking, for it to be worth 8 cents which is its NAV, it must earn 1 cent per share which works out to 8 cents if i put a multiple of 8 times(it is debatable if this is a suitable multiplier) which works out to approximately 26 million of net income which it has been achieved before. Not entirely impossible but it has made such profits before. But because of a cyclical down swing, that would not happen any time soon.

But if it should sell any of its business segments for above book value, that is something we might look out for which could be a catalyst.

This write up is not a recommendation to buy but rather to illustrate the point that the market does throw you some bargains which are worth acquiring. For the true value investor, he must be salivating now for there is so much to choose from. The appearance of cash bargains also signals that the market is already in a recession, at least on a technical basis and we should take advantage of that.

In the meantime, happy searching for bargains and do contact me if you have any ideas to share!

Best regards,
Lucas