Investment Thesis: Solid Group Inc. (PSE: SGI)

Current Market Price: P 1.29/Share

Annual Sales: P 6.4 B

Net Income: P 486 M

Book Value: P 9.5 B

Current Market Cap: P 2.3 B

5Y Chart

Summary:

1. Very cheap valuations

P/E = 5.64

P/B = 0.24

P/S = 0.29

Dividend Yield = 7.81%

It even becomes more compelling when you compare it to PCOMP with a P/E ratio of 21.07, P/B of 2.48, P/S of 2.71 and a Dividend Yield of 1.7%

2. Skin in the game from the Lim family (company insiders)

The company is run by it's owners hence there is an alignment of interest from management to it's shareholders.

Individually the insiders own a significant amount of stock

In addition to this, as implied by their SEC filing information below, we can see that they are also the people behind AA Commercial Inc and AV Value Holdings Corp w/c suggest their stake in the company is actually larger than their published individual stake. We cannot dig in dipper by exactly how much though as AA Commercial Inc and AV Value Holdings Corp are private companies. But we can comfortably say that company management is well invested in the company - hence the alignment of interest of company management to the common stock holder.

3. Despite depressed valuations, the company is actually doing relative well, sales are increasing and they have posted a relatively good EPS last year - in addition their balance sheet is very conservative with very little debt and very good short term liquidity.

Income Statement

Balance Sheet

Liquidity Ratios

So our view here is SGI seems to be a compelling investment because it is selling at very cheap valuations where management has skin in the game and our evaluation of business operations and the company balance sheet does not seem to merit those depressed valuations hence we started accumulating last July 20 at 1.25 and we are looking to add opportunistically.

Position: Long

Average Entry Price: P 1.2537

Exposure: 4.8% of Philippine Portfolio, Looking to add opportunistically.

Regarding reader question:

How does the company's strategy and management meeting etc affect the quantitative part of your analysis? Or do you just select based on a quant screen?

We start with our quant screen to narrow the universe down to a few names and from there, we do the analysis and make a judgement on w/c one we think is the most compelling given our limited capital.

Cheers,
Filipino Investor

DISCLAIMER: 

This is not an investment advice and the author shall not be responsible or liable for any trading or investment decisions made based on this information.

The author hereby expressly disclaims any responsibility for any error or inaccuracy in the information.