King Wan raises yield to 11%

Thai associates’ value may increase on KTIS IPO. Effectively 74% of market cap is net cash. The Thai associates were sold to Kaset Thai Industry Sugar (KTIS) for 5% in cash and 95% in shares of KTIS (equivalent to an estimated 3% of KTIS), which is headed for IPO within five months.

Being the third-largest sugar miller in Thailand, and the largest listed one, we expect the IPO to perform well, which provides upside to the value of the Thai Associates. KWAN has no moratorium on the sale of its KTIS shares and thus enjoys full flexibility on the timing of the sale.

From another angle – if KWAN sells its KTIS shares immediately on IPO, its net cash balance would be 74% of its entire market cap.

Core M& E business is stable and growing. KWAN’s core business is set for stable growth with its highest order book on record of $176m. This compares very favourably with the $129m to $146m order book range of FY08-FY11. With this positive outlook, we expect the base-case scenario of 1.5˘ dividend to be easily maintained.

Very strong balance sheet prompting increasing core dividends. KWAN’s balance sheet is solid with a net cash of $21.5m (23% of the market cap). As the core businesses no longer require much capital expenditure, KWAN has been aggressively returning cash to shareholders – dividends grew by at a CAGR of 82% over the last five years. At the current 1.5˘ dividend,

KWAN still has four years of dividends in its net cash balance.

Valuation: TP $0.40 based on 7.5% yield. DDM/DCF values of $0.40/$0.44. We value KWAN at $0.40 based on a dividend yield of 7.5%. This valuation ties in very closely with our DDM and DCF values, which are $0.40 and $0.44 respectively, and they incorporate some very conservative assumptions. In this yield-hungry environment, high-yield instruments like REITs have been compressed to a 5.9% average yield.

We believe that early movers into this stock can enjoy both capital gains (+48%) from yield compression and a very attractive sustainable dividend (+11%) for a total return of 59%.

Business: King Wan Corporation Limited is an investment holding company. The Company’s segments include plumbing and sanitary, electrical, toilet rental, paint and investment holdings.

Value: Value is a measure of a stock's current worth. KIWC.SI has a current Value of $0.48 per share. Therefore, it is undervalued compared to its Price of $0.32 per share. Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitability increase, and when interest and inflation rates decrease. VectorVest advocates the purchase of undervalued stocks. At some point in time, a stock's Price and Value always will converge.

RV (Relative Value): RV is an indicator of long-term price appreciation potential. KIWC.SI has an RV of 1.25, which is very good on a scale of 0.00 to 2.00. This indicator is far superior to a simple comparison of Price and Value because it is computed from an analysis of projected price appreciation three years out, AAA Corporate Bond Rates, and risk. RV solves the riddle of whether it is preferable to buy High growth, High P/E stocks, or Low growth, Low P/E stocks. VectorVest favors the purchase of stocks with RV ratings above 1.00.

RS (Relative Safety): RS is an indicator of risk. KIWC.SI has an RS rating of 1.26, which is very good on a scale of 0.00 to 2.00. RS is computed from an analysis of the consistency and predictability of a company's financial performance, debt to equity ratio, sales volume, business longevity, price volatility and other factors. A stock with an RS rating greater than 1.00 is safer and more predictable than the average stock in the VectorVest database. VectorVest favors the purchase of stocks of companies with consistent, predictable financial performance.

RT (Relative Timing): RT is a fast, smart, accurate indicator of a stock's price trend. KIWC.SI has a Relative Timing rating of 1.12, which is good on a scale of 0.00 to 2.00.  RT is computed from an analysis of the direction, magnitude, and dynamics of a stock's price movements over one day, one week, one quarter and one year time periods. Once a stock's price has established a strong trend, it is expected to continue in that trend for the short-term. If a trend dissipates, RT will gravitate toward 1.00. RT will explode from bottoms, dive from tops, and reflect changes in price momentum. VectorVest favors the purchase of stocks with RT ratings above 1.00.

VST (VST-Vector): VST is the master indicator for ranking every stock in the VectorVest database. KIWC.SI has a VST rating of 1.20, which is good on a scale of 0.00 to 2.00.  VST is computed from the square root of a weighted sum of the squares of RV, RS, and RT. Stocks with the highest VST ratings have the best combinations of Value, Safety and Timing. These are the stocks to own for above average, long-term capital appreciation. VectorVest advocates the purchase of safe, undervalued stocks rising in price.

Recommendation (REC): VectorVest gives a Buy, Sell, Hold recommendation on every stock, every day. KIWC.SI has a Buy recommendation. REC reflects the cumulative effect of all the VectorVest parameters working together. These parameters are designed to help investors buy safe, undervalued stocks rising in price. They also help investors avoid or sell risky, overvalued stocks falling in price. VectorVest recommends that investors buy high VST-Vector, Buy-rated stocks in rising markets.

Stop (Stop-Price): Stop is an indicator of when to sell a long position or cover a short position.  KIWC.SI  has a Stop of $0.30 per share. This is $0.02 below below KIWC.SI's current closing Price. A stock's Stop is computed from a 13 week moving average of its closing prices, and is fine-tuned according to the stock's fundamentals. High RV, high RS stocks have lower Stops, and low RV, low RS stocks have higher Stops. In the VectorVest system, a stock gets a 'B' or 'H' recommendation if its Price is above its Stop and an 'S' recommendation if its Price is below its Stop.

GRT (Earnings Growth Rate): GRT reflects a company's one to three year forecasted earnings growth rate in percent per year. KIWC.SI has a forecasted Earnings Growth Rate of 22.00%, which VectorVest considers to be excellent. GRT is computed from historical, current and forecasted earnings data. It is updated each week for every stock in the VectorVest database. GRT often foretells a stock's future price trend. If a stock's GRT trend is upward, the stock's price will likely rise. If GRT is trending downward, the stock's Price will probably fall. VectorVest favors the purchase of stocks whose GRT is rising and is greater than the sum of current inflation and interest rates, as shown weekly in our investment climate report.

EPS (Earnings per Share): EPS stands for leading 12 months Earnings Per Share. KIWC.SI has a forecasted  EPS of $0.03 per share. VectorVest determines this forecast from a combination of recent earnings performance and traditional fiscal and/or calendar year earnings forecasts.

P/E (Price to Earnings Ratio): P/E is a popular measure of stock valuation which shows the dollars required to buy one dollar of earnings. KIWC.SI has a P/E of 10.67. This ratio may be deemed to be high or low depending upon your frame of reference. The average P/E of all the stocks in the VectorVest database is 14.41. P/E is computed daily using the formula: P/E = Price/EPS.

EY (Earnings Yield): EY reflects earnings per share as a percent of Price. EY is related to P/E via the formula, EY = 100 / (P/E), and may be used in place of P/E as a measure of valuation. EY has the advantages that it is always determinate and can reflect negative earnings. KIWC.SI has an EY of 10.26 percent. This is above the current average of 7.43% for all the stocks in the VectorVest database. EY equals 100 x (EPS/Price).

GPE (Growth to P/E Ratio): GPE is another popular measure of stock valuation. It compares earnings growth rate to P/E ratio. KIWC.SI has a GPE rating of 2.26. High growth stocks are believed to be able to justify high P/E ratios. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00. Unfortunately, this rule of thumb does not take into account the effect of interest rates on P/E ratios. The operative GPE ratio of 1.00 is valid when and only when interest rates equal 10%. With long-term interest rates currently at 5.26%, the operative GPE ratio is 0.28. Therefore, KIWC.SI may be considered to be undervalued.

DIV (Dividend): VectorVest reports annual, regular, cash dividends as indicated by the most recent payments. Special distributions, one-time payments, stock dividends, etc., are not generally included in DIV. KIWC.SI pays an annual dividend of $0.02 per share.

DY (Dividend Yield): DY reflects dividend per share as a percent of Price. KIWC.SI has a Dividend Yield of 6.25 %. This is above the current average of 2.97% for all the stocks in the VectorVest database. DY equals 100 x (DIV/Price). It is useful to compare DY with EY. If DY is not significantly lower than EY, the dividend payment may be in jeopardy.

DS (Dividend Safety): DS is an indicator of the assurance that regular cash dividends will be declared and paid at current or at higher rates for the foreseeable future. KIWC.SI has a Dividend Safety of 75 which is excellent on a scale of 0 to 99. Stocks with DS values above 75 typically have RS values well above 1.00 and EY levels that are much higher than DY.

DG (Dividend Growth Rate):     Dividend Growth is a forecasted annual growth rate of a company's dividend based on historical dividend payments and dividend predictability. It is a subtle yet important indicator of a company’s financial performance. It also provides some insight into the board’s outlook on the company’s ability to increase earnings. KIWC.SI has a Dividend Growth of 16% This is above the current average of 2.97% for all the stocks in the VectorVest database.

YSG (YSG-Vector): YSG is an indicator which combines DIV, DY and DG into a single value, and allows direct comparison of all dividend-paying stocks in the database. KIWC.SI has a YSG rating of 1.36 which is very good. Stocks with the highest YSG values have the best combinations of Dividend Yield, Safety and Growth. These are the stocks to buy for somewhat above current income and long-term growth.

Price: KIWC.SI closed on Wednesday, July 31, 2013 at $0.32 per share.

Open:KIWC.SI opened trading at a price of $0.33 per share on Wednesday, July 31, 2013.

High: KIWC.SI traded at a High price of $0.33 per share on Wednesday, July 31, 2013.

Low: KIWC.SI traded at a Low price of $0.32 per share on Wednesday, July 31, 2013.

Close: KIWC.SI closed on Wednesday, July 31, 2013 at $0.32 per share. (Close is also called Price in the VectorVest system)

Range: Range reflects the difference between the High and Low prices for the day. KIWC.SI traded with a range of $0.00 per share on Wednesday, July 31, 2013.

$ Change: KIWC.SI unchanged from the prior day's closing Price.

%PRC: KIWC.SI's Price changed 0.00% from the prior day's closing price.

Volume: KIWC.SI traded 420,000 shares on Wednesday, July 31, 2013.

AvgVol: AvgVol is the 50 day moving average of daily volume as computed by VectorVest. KIWC.SI has an AvgVol of 2,274,800 shares traded per day.

%Vol: %Vol reflects the percent change in today's trading volume as compared to the AvgVol. %Vol equals ((Volume - AvgVol) / AvgVol ) * 100. KIWC.SI had a %Vol of -81.54% on Wednesday, July 31, 2013

CI (Comfort Index): CI is an indicator which reflects a stock's ability to resist severe and/or lengthy price declines.KIWC.SI has a CI rating of 1.70, which is excellent on a scale of 0.00 to 2.00. CI is quite different from RS in that it is based solely upon a stock's long-term price history. VectorVest advocates the purchase of high CI stocks.

Sales: KIWC.SI has annual sales of 49,000,000

Sales Growth: Sales Growth is the Sales Growth Rate in percent over the last 12 months. KIWC.SI has a Sales Growth of -25.00% per year. This is very poor. Sales Growth is updated each week for every stock. It is often useful to compare Sales Growth to Earnings Growth to gain an insight into a company's operations.

Sales Per Share (SPS): KIWC.SI has annual sales of $0.14 per share. SPS can be used as a measure of valuation when comparing stocks within an Industry Group.

Price to Sales Ratio (P/S): KIWC.SI has a P/S of 2.24. This ratio is also used as a measure of valuation. Here, too, it is useful when comparing stocks within an Industry Group.

Shares: KIWC.SI has 349,000,000 shares of stock outstanding.

Market Capitalization: KIWC.SI has a Market Capitalization of 111,000,000. Market Capitalization is calculated by multiplying price times shares outstanding.

Technical BUY with +21.2% potential return Last price: S$0.315 Resistance: S$0.40 Support: S$0.295

BUY with a target price of S$0.40 and tight stops placed below S$0.295. The stock has closed above its mid Bollinger band and appears to be trending above its raising 50-day moving average, which could be acting as a support. Its MACD indicator looks poised to from a bullish crossover above its centreline. Watch to see whether its Stochastics indicator could hook up and prices could break above its recent high near S$0.35.