Originally published in Bargain Stocks Radar on 8th July 2024Dear Readers,
Welcome to another edition of ROE The Boat.
For this issue I would like to once again highlight a small selection of ‘under-the-radar’ companies that could be worthy of further investigation.
Please note: this article should act as an introduction the companies and is not a complete deep dive. Make sure you do your own research before investing in any company mentioned in this newsletter.
Table of contents:
1) Beximco Pharmaceuticals
2) San Miguel Brewery Hong Kong
3) High Liner FoodsFor your convenience please find the PDF version of this issue below -
Beximco Pharmaceuticals (BXP) 🇬🇧
Beximco Pharmaceuticals isa Bangladesh based company listed in Dhaka, and also London with the ticker BXP. The London-listed shares are technically depositary receipts, not shares.
The company manufactures and markets generic pharmaceuticals. These products include solid, liquid, creams, and ointments, suppositories, metered dose inhalers, dry powder inhalers, nasal sprays, etc. I suggest visiting their website to see the full range of products.
BXP is led by CEO Mr. Ahmed Sohail Fasihur Rahman, who founded the company in 1976.
What’s intriguing is the gap between the Dhaka price and the London price.
At time of writing the Dhaka shares trade at ৳ 124.90 taka per share which coverts to 80p per share. However in London the shares trade at 38.5p per share, a wide discount to the Dhaka price. Just on that discount alone BXP should be worth double.
It’s not clear why the LSE price should be trading at such a large discount. One possibility is that many share trading platforms now disallow certain holdings in an ISA, which may have contributed to selling pressure as investors were told by the platforms to transfer their holdings into another account such as a SIPP or regular trading account.
From a quant perspective BXP looks a high quality operation.
Revenue has compounded at an average of 17% since per year since 2018. Operating margins hover around 18%, and return on capital employed at 14%.
Valuation looks very cheap…
PE 4.8
PEG 0.2
PB 0.55
The current dividend yield is 7% with cover of 3. The yield is predicted to go to 8% next year.
The main risk here is the impact of currency headwinds. The taka is becoming increasingly weak against USD and GBP. The share price has barely budged for 12 months, but the dividends keep on flowing to shareholders.
San Miguel Brewery Hong Kong ðŸ‡ðŸ‡°
Moving from Dhaka further east, the next company to highlight is San Miguel Brewery Hong Kong, a microcap listed in HK.
As the name suggests the company is engaged in the beer business, both manufacturing/distribution of it’s own brand, and distribution of imported brands into Hong Kong and southern parts of China.
A bit of history for the beer enthusiasts…
San Miguel Beer was first produced in 1890 by La Fabrica de Cerveza de San Miguel (San Miguel Brewery, now known as San Miguel Corporation) in Manila, Philippines. The brewery received the Royal Grant from the King of Spain to brew beer in the Philippines, which was then a Spanish colony.
San Miguel Brewery began exporting San Miguel Beer to Hong Kong in 1914. In 1948, San Miguel acquired Hong Kong Brewers & Distillers Ltd and renamed the company to The Hong Kong Breweries Ltd.
Then in 1963, the company name was changed to San Miguel Brewery Ltd and listed in the Hong Kong Stock Exchange. On March 25, 1994, the company adopted its present name, San Miguel Brewery Hong Kong Ltd.
Back to the present era.
As you can imagine sales of beer via public venues vanished during the lockdowns. Since the lockdowns ended the sales have bounced back well.
Operating margins are 9%, return on capital 9.5%, with a healthy balance sheet. The valuation, as with most Hong Kong stocks, is cheap. The stock trades on a PE of 4, and a 5% dividend yield with a plenty of cover.
The shares are thinly traded and very illiquid with only 22% float available to the public.
High Liner Foods 🇨🇦
For the last company lets go from a part of the world which is becoming increasingly authoritarian to a country that is also becoming increasingly authoritarian.
Yes you’ve guessed it… Canada.
High Liner Foods has a market cap of $461m CAD. The company was incorporated in 1967, and listed on the Toronto Stock Exchange in 1980.
High Liner Foods is a leading North American processor and marketer of value-added frozen seafood.
Retail branded products are sold throughout the United States and Canada under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Catch of the Day labels, and are available in most grocery stores.
The company also sells branded products under the High Liner, Icelandic Seafood, Mirabel and FPI labels to restaurants and institutions, and is a major supplier of private-label, value-added frozen seafood products to North American food retailers and foodservice distributors.
Revenue has hardly grown since 2018. The debt has been reducing but at $241m still looks too high.
However in December 2023 a new CEO Paul Jewer was appointed. Since then the company has begun strengthening the balance sheet by reducing debt, and also returning value to shareholders through a steadily increasing dividend together with share buybacks.
What’s even more intriguing is High Liner has strategically invested into two Norwegian publicly listed microcaps.
In March 2024 they bought a 10% stake in Norcod AS, a Norwegian fishing company listed in Oslo, ticker NCOD. Norcod produce farmed cod. The value of those shares have doubled since High Linear’s investment.
In May 2024 HLF also bought a 4.5% stake in Andfjord Salmon AS, ticker ANDF, who specialise in farming Salmon.
This is not a share that‘s going to make you a millionaire over night however the nature of the business makes it a reliable operation with a nice dividend (currently 6% with 2 times cover).
And the valuation looks cheap…
PE 7
PEG 0.5
PB 0.86
If you’re bullish on the long term consumption of fish, High Liner could be worthy of further research.
All this talk of beer and fish makes me want to have a barbeque.
Thanks for reading.
Please note the information in this report is for informational purposes only and should not be seen as investment advice. Please do your own due diligence before investing in any company mentioned in this article.