COTTO Looks Promising, but Probably Not Worth It
COTTO came off very strong on the first trade day, but will it be profitable to invest in this share?
SCG Ceramics Public Company Limited or COTTO’s shares were hot on the first trade day. The response was the opposite from the origin of COTTO’s shares that was unheard of. As expected from a subsidiary of renown cement company to always leave a wide gap between the company and general traders.
COTTO was founded from the four subsidiaries of The Siam Cement Public Company Limited or SCC, including Thai-German Ceramic Industry PCL or TGCI, The Siam Ceramic Group Industries Co., Ltd., Sosuco And Group (2008) Co., Ltd. and Gemago Company Limited. Thus, are the foundations of COTTO, a property & construction industry in the construction materials sector.
COTTO’s main business is to produce and supply ceramic tile flooring and wainscot under COTTO, SOSUCO and CAMPANA trademarks, along with Nong Khae Industrial Estate business. COTTO has 5.9 billion paid-up stock with ฿1 par value and 5.9 billion paid-up capital. Debt/equity ratio is 0.4 and ฿1.5 book value.
The revenue in the first half of 2018 from ceramic tile flooring sales is 6 billion baht, which is 10.5% lower from the same period of last year. The revenue comes from 78% domestic sales and 22% export to Asean countries, Japan and Australia. COTTO receives a total of 55 million baht of net profit, which fell from 164 million baht on the same period of last year, as well as their gross margin that decrease from 29% to 27%.
Strategically, the origin of COTTO is considered a very interesting business restructure that increases COTTO’s value. The synergy helps increase potential and competitive power. More importantly, it reduces the production cost of ceramic tile flooring and wainscot.
However, COTTO’s shares coming on strong with increase P/E to 66.06 and less profit in 1H18, causes the share value to be considerably overpriced. Moreover, the liquidity injection also sank to 7%. This will not be worth much for speculation, even though SCC is the parent company.
When comparing COTTO to other companies in the section, a similarity can be found in Siam Global House Public Company Limited or GLOBAL that only has 60-100 million baht in daily trade value. Earlier, there were two other companies, which were Thai Plastic and Chemicals Public Company Limited or TPC and Thai Cane Paper or PCL that has been withdrawn from the stock market.
For the investors that are looking to invest on this segment, Dynasty Ceramic Public Company Limited or DCC looks more attractive and safer. Judging from their 7.1 billion baht in assets, 3.3 billion baht debt and 3.7 billion baht equity with 49% free float.