Boss of this company keep buying share on market, this stock can buy?
Insider buying back shares of a company is always a good sign for the company, and investors. I mean, who understands better about the company, apart from the boss himself?
As you can see, the key management of BIOHLDG had openly acquired 1.8 million shares. One question investor should ask immediately is – why does the boss acquire shares in the open market?
Backdating to 28th July 2021, BIOHLDG had a MOA with CRAWFORD LABOTARY LIMITED, a company based on SOUTH SUDAN, the company would generate an approximate RM200 million in revenue for the 2-year period.
Is that impressive?
If you were to compare the company’s revenue for FY17, FY18, FY19, FY20, you would notice their revenue are RM54 million, RM69 million, RM62 million and RM36 million respectively. A simple calculation of the RM200 million would translate into RM100 million per annum – which is much higher than the existing revenue, isn’t it?
However, BIOHLDG did not disclose the share of revenue between the two parties. A general assumption would be a 50:50 joint venture between these two parties. Hence, RM50 million per annum, which is still really impressive.
But what is the bottom-line figure? Fortunately, we may refer PECCA’s recent acquisition on a PPE business.
As you can see, the PPE business netted around 15% to 24% margins. So assuming RM50 million a year, the bottom line for BIOHLDG in the MOA should be between RM7.5 million to RM12.0 million. In the 4 FY we discussed, FY18 was the best with RM12.1 million bottom line.
In short, the boss is smart, and he knows the MOA would contribute significantly to his future revenue stream.
I do not want to go in depth on their China contract, as the boss had not been able to travel to China yet. So, the revenue contribution – naturally, will not be significant. A double in both revenue and net profit, it is not wonder why BIOHLDG boss is buying back his own shares.
Interesting case study.