Wolf Money(Fu Yu Corporation)

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(Image credit: Fu Yu Corporation)

The below article is for educational purposes only. Kindly refrain from taking any action. It shouldn’t constitute as an investment advice. Please read the disclaimer.

I have taken an initial interest in the company. As most people who know me, I don’t quite like manufacturing companies, but the profitable trade in Valuetronic previously whipped up my appetite for more investment in manufacturing stocks.

The company is struggling with boardroom issues. What is attractive to me is the net cash in its balance sheet. They have 6.4c in cash, which represents 64% of the current market cap. The company is also trading at a 43% discount to book value. 

There are signs the company is turning around. The losses this year are mainly attributed to one-off charges. They are profitable without those one-off expenses. This year one-off expenses amounted to $8.1m. There is likely to be another $2m contingency payment to the ex-CEO if he won his lawsuits against the company over the promised compensation. Fu Yu was also profitable in their latest quarter to a tune of $2.4m. The smart factory seems to be gaining momentum.

(One-off expenses masked the recovery?)

On a steady state, Fu Yu makes around $14m a year before their recent problems. I estimate if the company turnaround holds true. They should make net earning around $8m to $12m or around 1c to 1.5c a share going forward. Support can be seen at 9.5c and 8c. My position can reverse course depending on the news coming out of their company. The company might still report another quarter of losses due to contingency expenses pending the outcome of the latest lawsuits. The road to recovery is filled with uncertainty. Please don’t follow. More details at the end of month update. God Bless.

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Disclaimers 

All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.

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