So, on Friday 16/10/2020, I decided to divest a number of stocks from my dividend2030 portfolio. In other words, I decided to LOCK IN some profits, and also to free up some capital for reinvestment.
In this post, I would like to bring your attention to PECCA GROUP BERHAD (5271).
A good small cap?
This is a Syariah compliant stock. The parent and its subsidiaries are engaged in manufacturing, distributing and installing leather upholstery for car seat covers and aircraft leather seat covers. It also supplies leather cut pieces.
How I found this stock? Not really a well know name eh. Somewhere in May, I was doing some reading about high dividend yield stocks, and I came across a blog post on a popular internet forum. (I am sorry, I cant find the article in the forum anymore).
The author was claiming there are some small cap companies in Bursa which offer high dividend yields.
That’s when I came to know, that blue chips are not the only good dividend paymasters in Bursa.
There are some smaller (relatively unknown) ones which offer good yields.
Being a conservative investor for this portfolio, Balance Sheet (Statement of financial position) strength is very important for me, compared to growth potential, although for me, the business should at least be profitable, while being a good dividend paymaster.
The author did review a number of good companies, including Jaycorp, Pecca, A-rank, Wellcall and etc.
While I never invested in all the companies recommended. Two companies attracted my attention, Wellcall and Pecca groups. (I have since sold wellcall too, at a very small profit)
Why I invested in Pecca?
So I proceeded to do further analysis. (Note: Be very careful with recommendations from forums, always do your own analysis before investing.)
Few elements attracted my attention,
It is a cash rich company ($ 70 million (+/-) cash), with no loans. So in my opinion its was well positioned to weather the current Covid-19 crisis.
It was also a good dividend pay master since it got listed on 19 April 2016. As at the time of investment, the dividend yield was very attractive between 7% to 8%.
It has been profitable since then too, with the exception of the quarter ending June 2020, due to Covid 19 crisis. (It made a loss).
So I decided to invest in this company, I bought 11,000 shares at an average price of RM 0.92 per share, which came to a total of RM 10,120. This was in May 2020.
29th June 2020 (The turning point)
This is where things got more interesting. I would say, there was a bit of luck involved here.
I am sure you are aware about how investors are crazy about the health care sector now, including gloves, personal protective equipment, vaccines and etc.
This eventually did happen to Pecca.
On 29th June 2020, Pecca made an announcement that one of its subsidiaries will be venturing into PPE business in the healthcare sector, producing face mask, face shields and protective garments.
The market then quickly sprung into action, as at 19th June 2020, the share price was at 0.86 per share (yes It was at a loss), but since then It had been slowly moving upwards for the last 3 months due to market optimism about this venture.
The price then slowly shot up to the range of RM 1.30++, RM 1.40++ and slowly reached RM 1.50++ in October. I was sitting at a healthy unrealised gain of 60%+/- profit, and this is when I knew I had to make a call.
Should I ride the wave hoping for more profit ? face the risk of price plummeting down again? or lock in the profit now?.
My decision and rationale
I sold the shares on Friday, 16th Oct 2020, at the price of RM 1.51, locking in a profit of RM 6,490, which translates to 64% gain.
Now, I am not sure if the prices will surge ahead in the future. If it does, will I regret? No, because I am happy with the gain I have gotten, for this portfolio.
For me, I will definitely include Pecca in my watchlist again, and I will want to monitor their performance in the coming quarters. I will also monitor their future dividend payment.
I am not sure if the current price is good justification for Pecca’s decision to move into PPE business
So I decided to lock in my profit, and keep some cash resources for investment into other undervalued shares, with good dividend potential.
Tenaga Nasional, Jaycorp and Apollo holdings are in my watchlist now. (This is not a buy or sell call)
In the next few days, I will be sharing my next investment profit lock in, Mah-sing. I am sure you have noticed how it has been appearing a lot in the news.
Thank you for reading.