Tuesday, September 30, 2014

GPacket ... Telekom To Play Active Role In P1 !!!

Telekom has completed the investment in wireless network player P1 together with GPacket Bhd and SK Telecom Co Ltd.

Following the completion of its investment, Telekom has emerged as the largest shareholder of P1 with a 55.3% stake with GPacket and SK Telecom holding the remaining 31.1% stake and 13.6% stake.

The three complementary partners will work together to capitalize on a viable mobile opportunity and deliver the next generation of converged communication services via P1.

It essentially enables P1 to crossover to LTE and offer full mobility while providing TM with an LTE ready platform to accelerate and more efficiently make wireless broadband products available to its customers.

In realizing partnership synergies, the partners and TM are currently developing a joint business plan and strategies.

At the same time, the partners are conducting an operational review to further optimize operations for P1’s future business. Product development and commercial plans are also under discussion.

Meanwhile, being a holding company, Telekom has nomination rights for key management positions.

TM will play an active role in the management and direction of P1, via its strong representation at the board level.

On the P1 venture, Telekom has invested rm560 million of which rm350 million has been ploughed into P1 via the subscription of new shares, while another rm210 million has been invested into GPacket via newly issued exchangeable bonds, which may be exchanged for Gpacket’s stakes in P1 in the future.

Monday, September 29, 2014

MUIB (Undervalued) !!!

Tan Sri Khoo Kay Peng’s MUIB has received a well regarded investor just as the group is said to be exploring the divestment of its crown jewel in London to unlock value.

Datuk Dr Yu is listed as one of its top 30 shareholders with 44.63 million shares or a 1.53% stake as at April 28 2014.

Tan Sri Khoo hoelds a 47.67% stake in the company.

Market observers said Yu could have been attracted to the inherent value in the group.

For instance the main appeal of MUIB leis in its chain of hotels in the UK that have not been revalued for many years. Notably its crown jewel the 390 room hotel known as Corus Hotel Hyde Park sits on 21640 sq ft of freehold land, is carried at a NBV of rm257.5 million. MUIB acquired the property in 2001.

It would appear that Khoo is finally looking to sell Corus Hotel Hyde Park. MUIB is said to have appointed a real estate firm to sell the property for rm1.06 billion.

If the sale materializes, the surplus of close to rm800 million could serve to pare down its debts of rm893.5 million as at June 2014 and finally let its profits shine through.

Such hefty borrowings, compared to the group’s total equity of rm762 million resulted in a finance cost of rm52.6 million in the financial year ended Dec 2013 which wiped out a majority of its rm54.9 million operation profit.

Meanwhile a surplus of close to rm800 million could also double MUI’s shareholders equity to rm1.56 billion or rm0.533 a share.

It may be time for Khoo to unlock the value of its assets in MUIB, clean up its books and leave a good legacy.

MUI is also looking to dispose some of its restaurants in the UK.

MUI owns and operates nine hotels and two restaurants in the UK and two hotels in Malaysia, most of which operate under the Corus brand.

Apart from the hospitality industry, MUI controls 94.52% stake of Metrojaya Bhd, 35.17% stake of London listed Laura Ashley Holdings plc (market cap of 19 million pound) and major stakes in MUI Properties, Pan Malaysia Corp Bhd, Pan Malaysia Holdings Bhd, Pan Malaysia Capital Bhd and so on …

On its London assets, property market observers said it would not be difficult for MUI to fetch 200 million pound for Corus Hotel Hyde Park.

MUI’s gearing has decreased over the years, total borrowings dropped from rm1.33 billion in 2009 to rm894 million as at June 2014 as Khoo commits himself to putting his house in order.

For Yu, it is not just MUI that he has shares in as he is also holding shares in MUI’s listed subsidiaries with a 2.41% stake in MUI Properties, 0.19% stake in Pan Malaysia and 5.46% stake in Pan Malaysia Holdings.

Market observers linked Yu’s asset play style of investment in MUI to his investment in Shangri-La Hotels back in 2011 and HLCap.

Ultimately MUI has rich assets but a long overdue sum of rm393 million which has been owed to the group for over 10 years by some parties remains an issue in corporate governance.

In an update in Aug 2014 pertaining to the sum owed MUI said the liquidation of the debtors estates is still ongoing …


Airasia ... Benefit From Lower Crude Oil Prices !!!

Airline stocks are getting a lift from the slump in global crude oil prices as fuel cost represents up to 40% of their operating costs.

Nevertheless, the influence of fluctuation oil prices will also determined by the strength of the USD. As such, the actual impact of lower oil prices in airline companies will only be seen in their next quarterly results.

Industry observers expect the savings in fuel cost would be offset the strengthening USD. After all, operating costs for an airline is affected by a number of factors such as exchange rates and the size of its fleet.

Still expects the airline which typically hedge about 40% of their jet fuel cost, to re examine their hedging positions as oil prices continue to fall.

Industry observers also expect no particular reason for oil prices to rise in the next two to three years from Sept 2014 as US shale oil production increases and the Americans become more independent and less reliant on oil imports.

Most global airlines have reduced their fuel hedging exposures in reaction to the falling price and waning volatility in crude oil market.

Sunday, September 28, 2014

Fiamma ... UnderValue (Revaluation of Landbank) !!!

Distributor of electrical home appliances and healthcare products. The brands are ELBA, Rubine, Tuscani and Haustern.

Besides lucrative profit margins from its trading and services segment… the company owns decent landbank for property development, including a tract near Jalan Yap Kwan Seng.

Its property projects have a combined GDV of rm1 billion and it has retained certain portions of its commercial developments for rental income, thus adding to its cash pile of rm54 million or 37 sen per share. The rental income per year is about rm3 million per year.

Its decent landbank for property development has not been revalued for many years.

It is trading currently (25 Sept 2014) at 7.5 times historical earnings … which observers say is low given its growing cash pile and reasonable dividend yields.

With net cash per share of 37 sen, shareholders were paying around rm2 for a stake in the company’s businesses of home appliance distribution and property developments.

That Fiamma’s property segment is a key growth driver’s evident in its earnings in its financial year ending Sept 30 2014. In the first three quarters, the segment contributed rm53.12 million to revenue or 21% to overall group revenue of rm252.11 million.

Not only does the figure represent a doubling of revenue from rm20.1 million in the same period in the year before but pre tax margins in the segment have also been encouraging.

Fiamma’s property earnings are set to outpace those of the trading and services segment.

The group’s strategic parcels are held at low cost, which means high development margins. Its presence in the property market will likely broaden, given that its has over em1 billion worth of projects at present (Sept 2014).

As the company has held on to its land, some of it for over two decades, a revaluation to reflect current prices (Sept 2014) could translate into a handsome return on investment for the group. This is because it can now (Sept 2014) unlock the value of its landbank, either via a disposal or by launching projects.

Its total assets have grown from rm325 million in FY2009 to RM421 million in FY2013.

With its steady cash flow, Fiamma has paid out dividends.

Its property division could potentially turn Fiamma into a developer to be reckoned with implying that its shares could fetch a much higher valuation if its exposure to the segment is revalyed upwards.

Assuming a modest profit margin of 10% the property segment’s contribution to the bottom line could be worth tens of millions of ringgit if its launches prove to be successful. Given its prime landbank in KL and JB, the company is slated to launch mid to high end apartments with high potential.

However the company’s core businesses are sensitive to economic cycles, particularly consumer sentiment.

Wednesday, September 24, 2014


After injecting more than rm10.6 million into the company in the past one year, Datuk Francis Tan is now planning to give the loss making company up to rm501.8 million in business over the next one year via his privately held palm oil trading business. SAWIT RAYA Sdn Bhd.

The transactions are RPTs simply because Tan the MD of GOcean is a common shareholder of the GOCEAN and SAWIT RAYA.

The RPTs involve GOcean buying some rm250 million worth of palm kernel for crushing as well as rm130 million of crude palm kernel oil, palm kernel expeller, refined palm oil and by products from SAWIT Raya in which Tan holds a 90% stake.

On the other hand, GOCean will be selling back to SAWIT RAYA some rm120 million worth of CPO kernel, palm kernel expeller, refined palm oil and by products. GOcean will also charge SAWIT RAYA some rm1.8 billion in totaling services.

Since it involves GOCean buying some rm380 million worth of products and services from SAWIT RAYA while selling rm122 million in return, GOCean will be a net buyer of some rm258 million worth of produce from SAWIT RAYA.

Should GOCean be able to sell the feedstocks after processing them it purchased from SAWIT RAYA, naturally this would be a new income stream for it.

The transactions are not by any means guaranteed.

Since Tan emerged as a major shareholder, Tan has been seen as a possible white knight for the company.

Some quarters believed that Tan’s ultimate goal is to use GOCean as vehicle for the backdoor listing of SAWIT RAYA.

SAWIT RAYA was initially involved in the transportation of palm oil product and repacking of edible oil for the retail market. In 2007, the company invested in a refining and dry fractional plant in Selangor.

Tan has a strong grip in GOCean given his 15.38% stake. He subscribed for the company’s placement for rm4.46 million or 11 sen per share.

An unsecured loan of rm6.2 million that he had given to the company could be converted into shares at a later stage, extending his holdings to about 25% assuming the shares are issued at 17 sen per share.

Datuk Seri Ng, the second largest shareholder with a 5.38% stake. Ng subscribed to 14.181 million shares in the 30% placement, and he is a director in several companies link to Tan.

Going forward, it remains to be seen what Tan will do with GOceean, but management has indicated that it will focus on palm kernel crushing at the moment.

Tuesday, September 16, 2014

YTLPower ... Will Its Dividend Payout Sustainable !!!

Its latest dividend payment announce on Aug 28 2014 will be the first in almost two years since the group began its rm3 billion foray into the 4G telcos business.

The question is whether the payout is sustainable and if YTLPower could be undervalued given several potential catalysts in the pipeline for its power business.

YTL Corp is in talks with India’s Hyderabad based NSL group to buy a 49% stake in NSL Orissa Power.

YTL Power has been active in securing more plants overseas. Another potential catalyst for YTL Power is the signing of a PPA in Jordan for a 470MW oil shale power project, in which the group has a 30% stake. The Arab’s cabinet has already approved the PPA and it is finally close at being signed after some initial delays due to negotiations on the tariff.

The PPA is for 30 years with an option to extend for another 10 years. The plant is scheduled to begin operations in 2018. Post construction, YTL Power will also have a majority stake in the plant’s operation and maintenance.

Another short term boost for YTL Power is the potential renewal of its expiring PPAs – the 800MW combined cycle gas turbine plant in Paka, Terengganu and the 400MW CGT plant in Pasir Gudang, Johor – to address a potential shortage in power over the next few years from Sept 2014.

Going forward, the primary concern is the sustainability of YTL Power’s dividend payments and the turnaround of its 4G venture.

Observers remain cautious on YES’ losses given the group’s commitment to expand its services to 10000 schools in Malaysia under the 1BestariNet project. There is a likelihood that the breakeven level may not be achievable after YES achieves its targeted subscriber base of one million.

The stock currently (Sept 2014) trades at 12 times FY2015F PER, at the high region of its three year PER range of 10 times to 12 times.

The concern over YES 4G’s performance is not without cause, although the losses have narrowed in the past one year.

Industry observers estimate that YES 4G gas only slightly less than 250000 paying subscribers far below the half a million number it needs to break even.

While the power and telecommunications have taken centre stage in YTL Power, the bulk of the group’s earnings comes from its water and sewerage segment that makes up some 70% of its profit before tax. This stems primarily from its Wessex Water business in the UK which was acquired in 2002.

It is acquisitions like this that showcase YTL Power’s prowess on the international stage …

Saturday, September 13, 2014

Efficient ... SingPost, JPMorgan, Credit Suisse as Shareholder !!!

Although it would have a direct exposure to the GST which will be implemented April 2015, the date storage provider says this not the case.

It is not exploring a direct exposure to GST at the moment. The company expansion plans are geared towards expanding the capacity of existing businesses … business solutions outsourcing and information storage.

Nevertheless it could indirectly benefit from the additional generation of physical and digital documents arising from GST.

At the moment the company is seeking to grow its presence in the information security market as part of an aggressive push towards expansion. It already counts several multinational banks as major clients of its physical and digital data services.

Efficient’s high profiles include Singapore Post Enterprise Pte Ltd had a 20.8% stake in the company as at April 2014. Asset managers from JP Morgan Chase and Credit Suisse also owns stakes of 7.6% and 7.29% respectively.

Efficient’s earnings performance over the past three years prior to 2014 has been mixed since POS Malaysia Bhd increased postal rates by as much as 100% in July 2010, significantly eroding the margins in the company’s mailing operations segment.

For the cumulative period ended June 30 2014 the group posted a net profit of rm3.04 million.

Looking forward, the group intends to double its current revenue by building new facilities for information storage operations which the rm12 million land acquisition will be mostly financed by internally generated funds.

Its cash balances plus deposits stood at rm48.06 million.

Wednesday, September 10, 2014

GHLSYS (Game changer)

The company is a attractive proxy for e payment growth in ASEAN.

There is huge potential for e payment services due to a combination of low debit and credit card penetration, and high cash transactions in the region.

The company’s transaction payment acquisition in 1QFY2014 is a game changer for the company as it would be able to help the company generate two revenue streams from sales and maintenance of POS terminals and from merchant sales.

The company also said to have kicked of its TPA-driven growth by launching its TPA services in Thailand with the Thailand bank.

With its strong fundamentals in place and the synergies with e-pay, GHL is entering a very exciting growth phase and so on its way to becoming an ASEAN champion in the e payment market.

Tuesday, September 9, 2014

Tasco (Secure New Clients)

The logistics solutions provider securing new clients for its contract logistics division, upon the expansion of its warehouse.

These are clients with high inventory turnover, which bodes well for Tasco as it may see sustained earnings momentum over the coming years from Sept 2014.

Its new specs warehouses in Shah Alam is currently (Sept 2014) fully utilized.

The earnings boost of rm12.3 million from rm4.9 million, from its contract logistics in the 1QFY2015 was attributed to new clients secured, which should give a further boost to earnings over the ensuing quarters. Tasco’s new clients have a high turnover inventory business model.

Its outlook remains bright as its business volume has been growing in tandem with regional economic growth. Its earnings have benefited from the strong trade numbers in the 1HFY2014.

Monday, September 8, 2014

WZSatu ... Venture Into O&G!!

It is looking to diversify into the oil and gas sector to pave the way for its long term growth.

The group aims to have more than half of its revenue fro the financial year ending Aug 31 2016 to come from its O&G business.

The group plans to make another O&G asset acquisition in 2015.

In July 2014 it proposed to acquire Misi Setia Oil & Gas Sdn Bhd for rm27 million. It is mainly involved in design, procurement, fabrication and installation and commissioning of skid packages as well as onshore O&G pipeline transmission systems and plant terminal projects.

The company is also expected to get a slice of Petronas’s RAPID project.

Formerly it has been specializing in the manufacturing and trading of precision cold down steel bars used mainly in the office, computer and auto segments.

In Aug 2014 Uzir began acquiring a stake in the group, eventually ending up as the largest shareholder with 52.7 million shares or a 27.7% stake as at Aug 22 2014.

Uzir said he is interested to transform the group and diversify out of its steel business.

Tan Ching Kee the group MD remains one of WZSatu’s major shareholder with a 22.5% stake after paring down his controlling stake. The other shareholder is executive director Datuk William Tan with a 6.14% stake.

It was reported that its net profit will grow at a compound annual growth rate of 67% from FY2014 to FY2016.

Upside risks include the potential acquisition of a new oil and gas business, upside to bauxite reserves, potential rationalizing of steel business and reinvestment into the O&G business with a higher return on investment, and stronger than expected growth from civil engineering.

In July 2014 the group announced some fund raising proposals, including private placement to bumi investors to raise some rm62 million cash for its O&G venture.

Once all proposals have been subscribed to, it hopes to have raise rm133 million by mid Oct 2014.

It also has a 49% stake in SE Satu Sdn Bhd which has an exclusive contract to mine, extract and produce bauxite ore from eight hills in Kuantan, Pahang for three years.

The mined ore is then shipped to China for refining and sale. The ming venture generated about half of the group’s profit in FY2014.

Uzir is the chairman of Kumpulan Unik Bhp Sdn Bhd and Kota SAS Sdn Bhd. He is on the board of Kurnia Setia Sdn Bhd.

Sunday, September 7, 2014

FGV ... Its Cash Is Exhausting !!

Its latest acquisitions could exhaust the remaining rm1.6 billion it had raised from its 2012 IPO. Late Aug 2014, the agri business giant Plantations Ltd as well as a joint venture to purchase a 50% stake in a biodiesel plant that will set it back rm628 million and 71.8 million.

In addition, the London listed APL had USD129.12 million in borrowings as at Dec 2013 which FGV will have to clean up after the purchase.

Presently APL gas a debt to equity ratio of 3.7 times which will raise FGV’s group gearing to 0.4 times from 0.33 times if the acquisition is successful.

At the group level, FGV expects its gearing to return to 2013 levels by end of financial year 2015 ending Dec 31 (FY2015).

FGV is open to fundraising exercises or further borrowings to finance its expansion.

Post acquisition, its net debt could be rm547 million compared with rm559 million in net cash now (Sept 2014).

Given the large capex that the group will need to plant up the remaining landbank of APL and Indonesia, its appetite for acquisitions and current (Sept 2014) low CPO prices, observers are concerned that its gearing level will continue to rise in coming years and impact its dividends payment.

To be sure, APL only began planting in 2009. It has a total landbank of 24622ha in Miri and Bintulu, Sarawak, of which 16300ha have been planted. Development of the remaining hectares would mean a need for heavy capex in the near term.

Due to APL’s young palms and new plantings, the company is still loss making, posting a net loss of USD14.35 million for FY2013 ended Dec 31.

Industry observers are say conventionally the cost to expand milling capacity could be some rm1 million per tone. This would mean a requirement of a further rm60 million in capex.

The optimum age for any plantation is eight years from Sept 2014. Presently (Sept 2014), APL has an average age of 5.2 years. The real production growth will be seen once the palms come of age.

More than half of FGV’s palms are old or very old – over the age of 18 years. APL would improve the group’s average age profile by 0.6 years.

But in the meantime, FGV will be tasked with completing the planting up of the five estates under APL’s name if the deal goes through. It will have another 8300ha to plant under APL and targets new plantings of 3500ha in 2015. But this too will put some strain on FGV’s cash position.

The cost of plantings is roughly some rm15000 per hectare, requiring some rm52.5 million in 2015.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.