TOMEI (7230) Correction

I wrote about TOMEI CONSOLIDATED BHD a few times already (for links see at the bottom of this
page), as it is my long term investment and I personally believe this company has a very good long
term potential. But dips and corrections happen, especially when gold prices shorterm dip, FMCO in
place and traders right now prefer other stock which they think have potential right now.

Mr. Koon Yew Yin is also supporting this stocks and claims it is his major investment, he wrote an
article about his opinion TOMEI correction was overdone and mentioned some arguments to support
his claim.

At first have a look at GOLD chart:

From the chart you can see clearly prices of GOLD for the last 3 months going nicely UP, from around
1730 to 1864 which is 7.85% increase – still good, at least it is not down, which is important factor
when I will talk about earnings later. We can also see June wasn’t so far good, but its not any disaster
and I would just called a “small dip”. Healthy dip is always good.

Now how about FMCO? It is nothing specific for TOMEI, it has actually effect almost the same on
almost all companies, but if it will ends on 28. June it will influence around 30% of reporting period for
the next QR? Does it mean EPS will be down 30%? Hardly so, as TOMEI still running e-commerce
and it will be partly mitigated by the gold price increases. In my opinion it can have maximum -10%
effect only and it will be of course temporarily, who was unable to buy jewelry during FMCO will do it
after that and it should theoretically erase any negative impact during the FMCO.

Price 15 June: RM 1.14

Trailing EPS last 4QR: 29.53 sen
Trailing P/E Ratio: 3.86

Next QR EPS? If I consider my prediction of -10% impact it still should be elevated at around 37 sen.
Prediction next QR EPS: around 9 sen
Prediction Trailing EPS with next QR: 37 sen
Predicted P/E: 3.08

The worst possible scenario? OK let me be very, very pessimistic, FMCO no earnings at all and
remaining time will be even worse compared to the last QR (how that can happen, I don’t know).

The worst predicted EPS: 5 sen

The Worst Trailing EPS: 32 sen
P/E Ratio: 3.56

As you can see on these simple examples, even if next QR will be extremely bad, the trailing EPS will
still increase and P/E Ratio will be unbelievably low, very unjust valuation level for this company.
Correct P/E Ratio should be around 8+ and you can simply do your own calculation by multiplying the
expected EPS for 4 QRs with your target P/E Ratio to get your own fair valuation.

Read about P/E Ration HERE (for newbies).

TOMEI last 5QRs comparison HERE.
TOMEI weak hands HERE.
TOMEI gold chart HERE.

Disclosure: Im holding TOMEI.

Disclaimer: Im not a professional financial advisor, analyst, economist or an accounter.
This is not a trading recommendation / advise, just my personal view.

These articles are not trading recommendations, just expression of my personal views, please do your own "homework"
when deciding to invest! Im not licensed advisor by SC and I am not recommending any action to buy, hold or sell. All
articles here are based on publicly available data from Bursa Malaysia, accessible to the public and I am using investment
strategies / ratios which are too available to the public from many sources such as wikipedia or investopedia. This blog is
non-profit, non business, and I don't benefit from it in any possible sense.