While markets once again go wild for long-duration assets, quantum, humanoids, and endless AI capex, here’s another cheap net net for you. I call this one Deswell‘s cousin. Most of the same caveats I ranted about in that writeup apply here too. Needless to say, given these caveats, including its country of origin, this stock fits best in a diversified basket of net nets. That is, if you can stomach the significant red flag I’ll discuss in a few minutes.
Let’s begin with some stats:
- 61% upside to NCAV
- 0.4x tangible book
- 4x trailing earnings (3x 5-year average earnings)
- 0.4x EBIT
- 10% dividend yield (30% free cash flow yield)
- Flat (but somewhat volatile) topline and earnings for the past nine years.
Until recently, this stock was cheap and illiquid, with just a couple of thousand of $-volume changing hands each day. Now it’s just cheap. Since late August, I guess someone started accumulating stock as the volume exploded on up days to an average of ~$250k per day. This happened with no news or corporate action. The accumulation continued through most of September. Stuff like this gets my attention. This is a microcap with an already small float (~25% as of the latest report), meaning you gotta accumulate slowly to not move the needle too much.
What I find really interesting, though, is the timing. Some years ago, this company got entangled in a messy related-party deal involving non-payment for a sold subsidiary — money it’s still chasing. That leads me to suspect the recent accumulation may be a curious bet on hidden value. A full recovery from the deal, which is highly unlikely, would dwarf the company’s current market cap, which already sits below NCAV, but just a partial recovery could be enough to shift the dial significantly.
The company’s name is…