CourtAsia - A Fallen Stock?

A few years back, I wrote a short post on why I will give CourtAsia IPO a miss because of their previous track record of being listed in the stock exchange and was taken private when the stock price hit rock bottom.The IPO went ahead at 77 cents per share without my participation of course since I am just small fry anyway.BTW, Alibaba B-to-B business was also previously listed in HKEx and taken private by Jack Ma when the share price flounder. So, we have to use judgement on a case by case basis and not to simply generalise.

For a while there was euphoria surrounding the stock and management quickly took advantage of the environment to raise a lot of debt to finance their expansion into Malaysia and particularly Indonesia.In fact more than $300m debt was raised which is more than the current market cap of around $200m.I have to say that the courts management has been very good in utilising others people money to finance their growth expansion from debt and equity (through IPO).

However, over the last one and half years, it is clear that the company business has fallen on very hard times. The recent quarter net profit was a just a meagre $1.7m inclusive of a $3m restructuring charge.The stock price has halve to 40 cents from the IPO price of 77 cents. I wonder what the cornerstone investors were thinking when they back the IPO?

Currently it would seem to be a good entry point if you just look at the NAV value of around 50 cents. It seems offer  safety margin that most value investors like to have when they invest in a stock.However, I am still not persuaded because I am of the opinion that if the expansion in Indonesia run into hiccup, then the writeup off would be substantial and NAV will plunge.So far, court operating track record has not been good other than their  Singapore business where they can optimise the compact physical environment.  But even that, the Singapore business also seems to be running into significant problems looking at how sales plunge for like-and-like stores in the recent quarter.