This article is to share my analysis on Delong Holdings Ltd (SI:DELO). Delong first came to my attention with their explosive growth in share price. On closer inspection I found that they were seemingly undervalued, even after their share prices multiplied.
Delong's undervaluation is beyond explaination. Even after the tremendous appreciation the past year, it is still trading below fair value by nearly any metric. Granted some actions taken by management were questionable, it is still no reason for their stock to be trading at such outrageously low valuation.
Reason to buy Delong:
Reasons to avoid Delong:
Overall, It still baffles me why Delong is trading at such low multiples. Minority shareholders have written in with calls for management to distribute dividends and to take measures to shore up their share prices to much fairer valuations. But by the response it sees management aren't budging. While I do see the rationale for some dividends, I can understand if management do not distribute dividends - They are afterall the majority shareholder at 75%.
With such large amount of cash reserves, Delong could invest in improving productivity and/or venture other industries. There is potential for Delong to increase their earnings potential in the future.
In my view, even if Delong's earnings were to be cut by half. Or if their debt level doubled. Or if their free cash were to be halved. Delong would still be a value buy.
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