Preamble
As a Malaysian, I am quite familiar with Nirvana Asia ("Nirvana"). If you do drive along the North-South Highway into Kuala Lumpur, you will see Nirvana office at Sungai Besi. Nirvana provides death care services and it has most (>80%) of its operation in Malaysia.
I have been looking into Nirvana since February 2015 and within a short time frame, I have decided to buy 20,000 shares of Nirvana.
I will now share why I invested in Nirvana and how did the stock performed in retrospect.
I will now share why I invested in Nirvana and how did the stock performed in retrospect.
Company Profile
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| Company Description Source: Bloomberg |
Nirvana went for IPO in December 2014. Its prospectus provides a rather comprehensive information on the company. I shall not repeat what the prospectus has to offer and hence please refer to this link for the prospectus.
Summary of Nirvana's IPO
IPO Date: December 2014
IPO Price: HKD 3.00
IPO Exchange: HKSE
IPO Proceeds: Approx. HKD 2.0 billion
Historical Share Price Movement
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| 1-Year Historical Price Chart Source: Bloomberg |
Noted that the share price plunged after issuing at the IPO price of HKD 3.00. Nirvana's CEO Datuk Kong Hon Kong ("KHK") claimed that the issuance was made a slightly bearish environment and he publicly communicated to Nirvana's investors to take this opportunity to accumulate Nirvana shares. (Source: The Star).
Personally, I concurred with Datuk KHK's view that the stock is undervalued given that Nirvana is the largest integrated death care service provider in Asia in terms of contract sales revenue and land bank. The growth potential is substantial with many unexplored Asian countries that demands death care services. Hence, I went on searching for analyst reports.
Analyst Reports
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Source: Bloomberg |
Now there are 3 research reports but back then in February 2015, there were only 2 research reports on Nirvana issued by CIMB and UBS. Both recommended "BUY" with a rather high upside gain (approx 44%) riding on a bullish forecast of revenue growth of at least 17% p.a. from FY2014 onwards.
In retrospect, if we look at Nirvana's recent announcement on its FY2014 financial results, we can see that Nirvana has achieved as per CIMB's forecast.
FY2014 RESULTS HIGHLIGHTS
• Revenue increased by 18.2% compared to last year.
• Adjusted EBITDA increased by 18.2% compared to last year.
• Adjusted profit margin for the year increased to 28.3%.
• Adjusted profit for the year attributable to owners of the Company increased by 28.5% compared to last year.
• Contract sales increased by 13.2% compared to last year.
• A final dividend of HKD 0.05 per ordinary share is recommended.
I could not get hold of those research reports issued by Eva Dimensions and UBS. Hence, I can't commend too much on their calls especially for Eva Dimensions. However, CIMB's research report is readily available.
Please refer to this link for the research report from CIMB.
My Capital Gain
Purchase Price on 10.02.2015: HKD 2.25
Market Value on 14.04.2015: HKD 2.46
Gain per Share: HKD 0.21
% Gain: 9.3%
Period (10.02.2014 - 14.04.2015): Approx. 2 months
I do not foresee myself selling my holdings anytime soon as I still see potential in this share. The fact that Nirvana achieved CIMB analyst's revenue forecast growth is an indication that the share valuation will eventually exceeds HKD 3.00 as forecasted.
Conclusion
Personally, I find Nirvana share attractive and will be holding it as a medium term investment. I have summarised the positive and negative points as follows:
Positive Points +
1) The largest integrated death care service provider in Asia in terms of contract sales revenue and land bank
2) Pioneer in the pre-need market for death care services in Asia
3) Enormous opportunity for growth in Asia given that the culture in Asia emphasizes on death care which demonstrates a last respect for the deceased.
Negative Points -
1) Consistent foreign exchange ("FX") risk as I have to buy it in HKD and hence returns are affected by FX.
2) Malaysian Ringgit has weaken significantly against HKD due to falling oil price. Entry price will be significantly higher now.
3) Competitor risks as this industry has been proven to be earning lucratively. This will depend on how Nirvana can defend its dominating postion in the market.
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