Hey everyone, welcome back to The Money Mumbo Jumbo. I'm Jessica Morgan, and as always, I'm joined by the brilliant Emily Clarke. Today, we're peeling back the layers on Southern Acids—one of those companies that, honestly, I think a lot of people just kind of overlook.Hi everyone! Yeah, Southern Acids is a bit of a mystery, isn't it? Their shares are trading below what some would call their true value, but the market just doesn't seem to care. It's almost like people see "chemical manufacturing" and just... tune out.Totally. And you know, this actually reminds me of a time I stumbled onto a palm oil company in Indonesia—years ago, I think it was 2012? Or maybe 2013. Anyway, it was the same thing: the market just wasn't paying attention, but the assets were there, the cash was there, and it was trading at a discount. Southern Acids feels a lot like that to me.I get what you mean. But with Southern Acids, there are a few things at play. First, the whole chemical sector has been a bit volatile, right? Commodity prices, especially for things like oleochemicals, have been all over the place. That kind of uncertainty can really weigh on valuations.Yeah, and then you add in the external factors—like, CPO prices have been elevated, but the market's still not giving them much credit. I think part of it is just this perception that the business is old-school, or maybe not as exciting as tech or whatever's hot right now.And then there's the shareholding structure. I mean, the free float is tiny. The founding families control, what, over 85% of the company? That means there aren't a lot of shares actually trading hands, which can make it hard for big investors to get involved. But at the same time, doesn't that also create an opportunity for patient investors?Exactly. It's a double-edged sword. On one hand, the limited liquidity can be a risk—if you need to get out, it might be tough. But on the other hand, if the market ever wakes up to the value here, that tight float could mean the shares move up really fast. It's kind of a classic hidden gem scenario, but with all the usual caveats.Yeah, and I think sometimes people just see the concentrated ownership and think, "Well, nothing's ever going to change here." But that's not always true. Sometimes those families are actually really good stewards of the business.Right, and I mean, if you look at the management, they're not just sitting on their hands. But, uh, maybe I'm getting ahead of myself. Emily, do you want to walk us through the numbers a bit?Sure! So, Southern Acids breaks down its earnings by segment, and the numbers are actually pretty solid. For the chemical segment, revenue was about RM284 million, and for the palm oil segment, it was RM383.9 million. That's not small change, especially for a company that's supposedly "boring."Yeah, and they've got a strong cash position too, right? I think their net cash is something like RM175 million, if I'm remembering that correctly. That's a lot of dry powder for a company their size.Exactly. And it's not just cash—they've got some really interesting assets. There's the land holdings, which, honestly, could be worth a lot more than the market is giving them credit for. Plus, they've got chemical manufacturing facilities and some strategic investments, like in UJM Land and Gamuda, that are actually generating dividends for them.And speaking of dividends, they've been pretty consistent. I think they paid out around RM200 million in recent years, which is impressive. Management seems really focused on cash flow and returning value to shareholders, even if the market isn't really noticing.Yeah, and that's not always the case with family-controlled companies. Sometimes they just hoard the cash, but here, they're actually sharing it. I mean, the dividend yield isn't sky-high, but it's steady, and that's worth something, especially in a market like this.Totally. And I think the fact that they're sitting on all this cash and still investing in their core business says a lot about how they're thinking long-term. They're not just milking the business for dividends—they're actually trying to grow it.Right, and that brings us to what management is actually doing with all those resources. Should we talk about that?Yeah, let's get into it. So, management's been pretty active. They're developing assets, looking at new markets, and even considering acquisitions. It's not just business as usual—they're actually trying to move the needle.And a lot of that comes down to who's running the show. Dr. Nick Low Kok Thye, the managing director, and Datuk Lim Kim Long, the executive director—they both have significant stakes and a lot of influence. The Low and Lim families basically steer the ship, and from what I can tell, they're pretty hands-on.Yeah, and I think that's a good thing, mostly. I mean, sometimes family control can be a red flag, but here, it seems like they're actually aligned with shareholders. They're not just sitting back and collecting dividends—they're reinvesting, they're exploring new opportunities, and they're not afraid to make moves when they see value.Exactly. And I think the market might be missing that. There's this perception that nothing ever changes at these tightly held companies, but Southern Acids is actually evolving. They're looking at asset development, maybe even hospital operations, and they're not afraid to spend when it makes sense.Yeah, and I mean, there are risks, right? Commodity prices could turn, or maybe the market just keeps ignoring them. But if management keeps executing, and if they unlock some of that hidden value—especially with those land assets—I think there's real upside here.I agree. It's not a slam dunk, but it's definitely one to watch. Sometimes the best opportunities are the ones hiding in plain sight, you know?Absolutely. Well, that's all we've got for today on Southern Acids. Thanks for tuning in, everyone. Emily, always a pleasure chatting with you.You too, Jessica. And thanks to everyone listening—don't forget to join us next time for more Money Mumbo Jumbo. Take care!

Episodes

Peeling Back the Layers on Southern Acids