KAMDAR GROUP BERHAD VALUE EVALUATION

Kamdar is a department store which bring in different concept for the local shopping experience. Aside of conventional products like casual wears, Kamdar also provide varieties of fabric for clothing and decorating uses. This has become a one stop shopping center for most of the housewives (This is where most of the male individuals suffer waiting and giving comments.) As I did evaluations for several garment manufacturer and trader before, I discover that Kamdar present its products in a way that fits middle and lower class needs where everything comes with a very low margin and thus push up the sales volume at the same time providing products with the moderate quality. Compared to other department stores, Kamdar put a very heavy emphasize on selling its fabric which is displayed in a very big portion of its floor space. As there are not much value added process like logo printing, packaging and clothing designing, this enables Kamdar to manage its inventories at lower cost without doubt. In order to expand its distribution network to reach more consumers, the company opened several branches across different states in Malaysia. Therefore, most of Kamdar’s capital expenditure goes to opening these branches for maintaining revenue level.

As purchase of garments and fabrics is a highly seasonal affected, customers flow will only increase when there’s festivals or huge sales promotions. Therefore, business will strive for a certain period and drop to bottom at another time. This causes a major cash flow problem where the company’s cash is stuck with the inventories for a very long time and lower the ability to order up to trend products. Aside of that, operating and maintaining department stores will lead to a very high cost. When stocks are mark up with very low margin, increasing overhead will slice the company’s profit lower. Recently, it is reported that there is substantial amount of unapproved cash withdrawals from its subsidiary where it reflect the company’s internal control is weak. This incident, however doesn’t deteriorate the fact that Kamdar’s ability of generating future earnings and hence it might be opportunities to buy it at fair price.

Although there is positive indication, the company’s operating cash flow is undergoing an extreme fluctuations for the past ten years. For evaluation purpose, I will eliminate 2012 to smoothen the cash flow annual growth rate calculation which is 12.14%. As for returns on assets and equities, it is quite weak and shows inefficiencies for ten years straight. I have no reason to go further after interpreting these basic data. Filtered out of my list.
Stock: KAMDAR Code: 8672