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Update: United Overseas Australia

United Overseas Australia Limited (ASX:UOS) recently came up in my colleague Mike King’s screen for value shares that fulfil Benjamin Graham’s criteria.

It is convenient for UOS shareholders that its 66% owned subsidiary, UOADB, is listed on the Malaysian stock exchange and is required to file quarterly updates. The most recent was on 30 May 2012.

Basically, UOADB once again presented a rock-solid balance sheet, with an impressive pipeline of developments worth about MYR$1.5 billion. Debt levels are minimal, and equity as at 31 March 2012 is about MYR$1,888,000,000.  At current exchange rates, this equity is worth about AUD$600m.

UOS’ 66% holding is therefore worth about AUD$400m, which is roughly its market capitalisation at current prices. On top of this, we estimated that UOS holds at least AUD$250m worth of net assets, together with its 46% stake in UOA REIT worth about $90m. The value of these assets will continue to go up as the Australian dollar continues its decline.

The Foolish bottom line

Share market prices can stay irrational for a long time, but not forever.  Investors should take advantage of such irrational pricing whenever possible. UOS is a good starting point for investors to apply the value investing principles of Ben Graham, Philip Fisher and Warren Buffett.

More reading

Fool contributor Peter Phan owns shares in UOS. Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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