I have been meaning to create a blog to lay down my thoughts on investing since the beginning of this year or since January 30 to be exact. I know for sure because that was when I wrote the other "The beginning...". So, I will treat this as the second coming, and hope this will continue. In fact, I have every intention to make it that way.
As an investment blog, what better way to start than to talk about one of the counters that I have a position in.
INTI Universal (69 sen)
I consider Inti to be one of the premier private colleges in Malaysia. It first caught my attention when I noticed that the company was buying back shares in large quantities back in 2006. The share buy-back has since ceased (presumably after the management via Inti Supreme Holdings owned more than 50% of the shares outstanding).
For the half year ended June 30 2007, Inti recorded a turnover of RM67.3m, a reduction of 1.2% as compared to the previous half. However, PAT was RM2.3m, an increase of 15% as compared to the previous half. This indicated an annualised EPS of 3.5 sen per share, or P/E of 20 times, hardly attractive. (Even worse if one take out RM1m earned in the first half due to gain on disposal of non-core assets).
However, the real meansure is the free cash flows. My take is that Inti's depreciation of RM6.5m (approx. RM13m per annum) was overstated. Management needs about RM8m to maintain the current level of operation.
Therefore, my adjusted look through earnings for Inti is RM7.6m. (RM1.3m x 2 + RM5m), or about 36 sen per share. Further, Inti has a cash of about 28 sen per share, with minimal borrowings. Management has been relatively 'reliable', so I assume they will do intelligent things with the cash.
My conclusion is that, trading at an adjusted P/E of less than 1.5, Inti is a screaming Buy! However, there is risk that the local universities will buck up, or the expansion of other private colleges including TAR college take students away from Inti. Unlikely. Another potential gravy is that, for colleges such as Inti, most costs are fixed. So, any addition in the number of students will mostly contribute towards the bottom line. This was what the management represented in the last AGM, and we hope they deliver!
Note: I hold Inti at the the time of writing.
