It has seen some positive results in its financial performance, with the group’s diversification strategy instead of just relying on providing analytical services in human health and plant science.
The company which has accumulated losses of some rm8 million has added new divisions in pathology lab services and screening services in the 1HFY2014 besides undertaking moderate expansion plans. It also plans to venture into diagnostic services in 2015 to broaden its income.
The company had not been doing well as reflected by its financial results especially the net losses made in the last two financial years.
However it started to return to the black in 4QFY2014 ended June 30 2014 and the latest 1QFY2015 ended Sept 30 2014 with net profit of rm234000 and rm497000 respectively compared with the net losses of rm968000 and rm1.73 million in the previous corresponding periods. For FY2014 its net losses shrank to rm4.3 million from rm9 million previously.
Its official said two consecutive quarters with profits and is expected to continue into the foreseeable future as it recognizes income on the completion of project milestones.
The company was focusing on the R&D works, which was its core capabilities from the proceeds raised from its IPO.
It has planned out a business strategy by capitalizing on opportunities to bring itself back on track. The company that used to solely on analytical services as the main source of revenue is diversifying into pathology lab, screening services and will start diagnostic services into 2015.
Analytical services remains the main contributor to the company’s performance, accounting for 80% to the group’s total revenue. It expects the revenue contribution in 2017 to be analytical 67%, pathology lab (20%), screening 8% and diagnostic 5%.
One of the customers served by MGRC is FELDA Wellness Project, which requires the company to specialize in its agriculture sequencing and analytical works.
Its order book value stood at rm25 million while sales pipeline is rm12 million.
It has completed the disposal of its online job portal business to SEEK for rm1.89 billion and distributed almost all of the proceeds to shareholders via special dividend of rm2.65 per share.
Following the sale, it is now (Dec 2014) a cash company. Under PN17 of the listing requirements, it has formulate plan to regularize its financial condition within 12 months.
There are several possible outcomes. It may start new businesses or acquire existing ones. Or it may sell its remaining assets, and distribute the proceeds to shareholders.
The company’s net assets, 35 sen per share are understated as it has unrealized gain of rm29.75 million on marketable securities (mainly shares of 104 Corp Taiwan) at end Sept 2014 and an 8 storey office building off Jalan Sultan Ismail, KL acquired in 2005 and valued at only rm13.7 million.
It has seen its earnings slipping in recent quarters as it has to grapple with weakening consumer sentiment, higher operating costs and competition from a booming e commerce market. This may weigh down on the company’s growth in 2015.
It had to spend more on marketing to buoy demand even as consumers scaled back on spending during the nine month period. Higher promotional and utility costs could contribute to a contraction in core operating profit, the retailing segment’s operating profit declined 42% to rm57.3 million for 9MFY2014.
Over the next 12 months (Jan 2015 to Dec 2015) the property division will continue to be the main earnings contributor for AEON. This division should experience relatively stable growth but higher operating, marketing and promotion expenses from the retail segment will hamper the overall performance of AEON.
It has two core business – retail and property management. For its retail segment, it operates a chain of department stores and supermarkets under the AEON name, while its property management segment focuses on shopping centre operations and rental income from retailers.
Its key risks include weaker consumer sentiment and the emergence of new competitors on the retail landscape.
It is worth nothing that the ubiquity of e commerce in China has caused stiff cross border competition in the retail segment. Rather than traditional outlets, consumers are more inclined to make purchases online.
Additionally, with the increased adoption and convenience of smartphones and tablets, expect this trend to continue in the coming years from Jan 2015 onwards. The e commerce market is booming globally.
Critics however viewed the challenges faced by AEON from online retailers will not have much impact as e commerce companies in Malaysia are mainly fashion retailers which affect just the part of its retail business.
Its revenue improved in 9MFY2014 driven mainly by netter turnover from the retail segment, a higher revenue from property management with contributions from its new shopping centres and higher rental rates and sales commissions from tenant revamps in some existing malls.
However its long term prospects are boosted by its plan to consistently increase the number of outlets.
It will continue with its plan to open six stores from FY2014 to FY2017. It plans to solidify its presence in the East Coast, starring in Kota Bharu, as well as in Sabah and Sarawak.
Its capex for FY2014 to Fy2015 will be on the high side of rm500 million to rm600 million.
Another long term catalyst could be its expansion into the furniture retail market. It had entered into a 70:30 JV with Thailand’s biggest furniture player Index Living Mall Co Ltd by opening its first home and interior furnishing store in IOI City Mall. It is still uncertain about how it will differentiate itself from IKEA, Courts and Harvey Norman.
DNEX has contributed to the group revenue and the earnings of the parent company, after its account was consolidated with Censof’s from the quarter ended Dec 31 2013
Sales grew by 10.75% and 5.19% quarter on quarter to rm20.59 million and rm21.66 million for the first two quarters of the current financial year ended June 30 and Sept 30 2014.
However Censof slipped into the red in 2QFY2015 with a net loss of rm534000 from a net profit of rm1.13 million in the previous corresponding quarter because of the high cost of funding to acquire DNEX and a weaker performance by the financial management solutions division.
DNEX’s jewel in the crown is the trade facilitation system operated by its 71.25% owned subsidiary Dagang Net Technologies Sdn Bhd. The latter was awarded a five year contract by the government in 2009 to implement NSW. The contract has been extended for two years to Sept 24 2016.
The portal offers a platform to users like exporters and importers so they may close their goods and pay duties electronically, to permit issuing agencies.
DNEX’s contribution will continue to be substantial. It will generates about rm80 million in revenue every year and rm15 to rm20 million in net profit. This unit serves as safety net for Censof while its other ventures bear fruit.
DNEX has also proposed in June 2014 to acquire Petronas licensed oil and gas services supplier OGPC Group for rm203 million.
Then Censof announced a partnership with ABSS to tap into GST ready software for SMEs enterprises. The tie up with them is to take advantage of government funding for SMEs to be GST compliant.
Its in house GST compliant software generally distributed to government agencies, expects a sales spike in the GST segment as the implementation deadline approaches.
As of Dec 2014, it has rm1 million in its orderbook for the GST software systems alone, from its existing clients. Most of its agencies are equipped with the system and what they need now (Dec 2014) is to upgrade it. The fee could range from rm100000 to rm500000 depending on the size of the organization.
Censof serves 80 government agencies but only four are upgrading their systems.
With the US market contributing approximately 93% of its revenue in its financial year eneded 30 2014, the weakening of the ringgit is a boon for the company as it stands to book in higher foreign exchange gains.
Every 1% increase in the USD against the ringgit translates into an additiional rm150000 of its turnover and rm15000 to its profits before tax.
It is also expecting the strongger USD to boost its profit in 2015. Aslo with high demand from the USD now (Dec 2014), it is looking forward to that as a deiver for its sales.
With the company’s products cater for the middle to middle high income households. With the US seeing a resurgence in home purchases, expects demand for the group’s wooden furniture to be well supported.
Latitude Tree has been a beneficairy of a weaker ringgit since the currency began to descend from a high of 2.9625 against the USD on May 8 2013. In FY2014, the company’s net profit rose 126% to rm55 million or 56.6 sen per share while revenue grew 32% to rm652 million.
In FY2013 Latitude posted a net profit of rm24.37 million or 25 sen per share. This was nearly triple the rm9.84 million profit it made in FY2012, the year it was hit by economic woes in the US.
Latitude is currently (Dec 2014) trading at 5.3 times its annualised EPS. Based on FY2014’s EPS of 56.6 sen, it is trading at a historical PER of 6.38 times. Its peers namely SYF Res (10.57 times), Poh Huat (8.3 times) and SWS Capital (40 times).
Its debts has also decrease which will result in lower interest charges. As at 1QFY10`5, its total borrowings were 6.45% lower year on year at rm81.13 million. Its finance cost of rm684000 in the quarter was also 30.28% lower than the previous year.
As at Sept 30 2014 the company had net cash of rm50 million equivalent to rm0.52 per share.
It has a free float of 53.16% as at Oct 31 2014.
Above is the production cost of manufacturer of shale oil. By pull down crude oil price to USD57, the market leave 4 more producers to survive in the market.
If the crude oil price keep remain at low price. The shale oil production will shrink substantially and it is what the OPEC like to see it.
For my point of view, OPEC will keep on pressing down the crude oil price and run for at least one, in order to demolish the market of shale oil.
Hence for those heavy oil consume industry, it is the time for them.
As oil prices continue to slide, industry observers foresee that the selling pressure on Malaysia oil and gas counters will not abating yet.
There could be another round of selling pressure among investors with short to medium term view of up to six months from Dec 2014 especially on financially weaker O&G companies.
The rationale behind this that we have only seen about two months (Nov – Dec 2014) price deterioration of oil, but in terms of business deterioration, it is only starting now (Dec 2014). Financial results going forward will be severe for those exposed to the vagaries of oil price and O&G capex.
This is a naturally high geared industry. The access to funding now (Dec 2014) will be challenging from an equity, bond and loan perspective, even if oil stays at the USD65 level. Even among O&G companies, some will start worrying about counterparty risk.
Investors will need to sit via some large swing in share prices given and the changing nature of the industry and have at least a one year time horizon to see through the down cycle.
The call on oil price which will still determine the sector in the near term has been very unreliable and difficult due to the many moving parts along the O&G chain.
One needs to predict government policy, global supply and demand, financial speculation and currency movements to come to a conclusion on oil price. The fact that 99% of the industry got its forecast wrong on oil price less than six months ago tells you how hard it is to predict the point where oil price will bottom out.
There could be at least another month of selldown in the near term as crude oil has not really found its stabilizing point.
Even if oil price fall to USD40, it will be hard to stay there for long as there will be a lot of supply disruptions at that level and that the market will adjust itself within a year.
DNEX has contributed to the group revenue and the earnings of the parent company, after its account was consolidated with Censof’s from the quarter ended Dec 31 2013.
Sales grew by 10.75% and 5.19% quarter on quarter to rm20.59 million and rm21.66 million for the first two quarters of the current financial year ended June 30 and Sept 30 2014.
However Censof slipped into the red in 2QFY2015 with a net loss of rm534000 from a net profit of rm1.13 million in the previous corresponding quarter because of the high cost of funding to acquire DNEX and a weaker performance by the financial management solutions division.
DNEX’s jewel in the crown is the trade facilitation system operated by its 71.25% owned subsidiary Dagang Net Technologies Sdn Bhd. The latter was awarded a five year contract by the government in 2009 to implement NSW. The contract has been extended for two years to Sept 24 2016.
The portal offers a platform to users like exporters and importers so they may close their goods and pay duties electronically, to permit issuing agencies.
DNEX’s contribution will continue to be substantial. It will generates about rm80 million in revenue every year and rm15 to rm20 million in net profit. This unit serves as safety net for Censof while its other ventures bear fruit.
DNEX has also proposed in June 2014 to acquire Petronas licensed oil and gas services supplier OGPC Group for rm203 million.
Then Censof announced a partnership with ABSS to tap into GST ready software for SMEs enterprises. The tie up with them is to take advantage of government funding for SMEs to be GST compliant.
Its in house GST compliant software generally distributed to government agencies, expects a sales spike in the GST segment as the implementation deadline approaches.
As of Dec 2014, it has rm1 million in its orderbook for the GST software systems alone, from its existing clients. Most of its agencies are equipped with the system and what they need now (Dec 2014) is to upgrade it. The fee could range from rm100000 to rm500000 depending on the size of the organization.
Censof serves 80 government agencies but only four are upgrading their systems.
Its much maligned downstream segment which has a presence in Malaysia and Canada was largely responsible for the earnings downturn. Some rm105.4 million in losses in the segment were attributed to its derivatives exposure linked to forward and futures contracts as well as negative refining margins for palm oil in Malaysia.
A major concern is the nature of the losses, which mainly comprised commodity contracts that were acquired earlier in 2014. The total contractual amount in FGV’s derivatives book nearly doubled from rm1.18 billion as at Dec 2013 to rm2.34 billion as at Sept 30 2014.
In its financial statements, FGV disclosed that its downstream operations registered an unrealized loss on commodity contracts amounting to rm52 million during 3Q, most of which were attributed to its Canadian operations.
Due to its purchases of forward commodities contracts earlier 2014, the subsequent fall in edible oil prices had resulted in large paper losses.
FGV says the losses were related to the purchase of soybean and canola contracts by its wholly owned Canadian subsidiary Twin Rivers technologies ETGO du Quebec which is exposed to volatile price movements of the soybean and canola.
This explains the drastic increase in its derivatives book throughout 2014, Between March 31 and June 30 2014 some rm1.06 billion worth of futures commodities contracts were acquired for this…
FGV reiterates that TRT ETGO intends to take full delivery of the commodities in question and that they are not used for short term trading.
Futures contracts entered into by TRT ETGO are meant solely to secure raw materials for the company’s commercial crush plan and for speculative activities.
The liabilities of rm129 million imply that TRT ETGO had purchased the futures contract at a price much higher than what the underlying commodities are worth now (Dec 2014).
It is worth nothing that all of the commodity derivatives in FGV’s book have a maturity period of less than a year. This means that upon expiration, TRT will receive the soybean and the canola for use in its crushing and refining operations by June 2015.
With the paper losses classified as liabilities in the group’s derivatives book, actual losses will only be recognized after the contracts are settled. This leaves the group vulnerable to further fluctuations in the futures markets. But it could also mean that the paper losses would start to shrink if edible oil commodities begin to trend upwards in 2015.
Negative mark to market values will always be an issue but the reversal of those positions should be considered when the actual physical trades are completed and positions are squared off.
Sources say it will start supplying gaming machines to a casino operator in North Asian country in 2015 with the business expected to bring in additional earnings of about rm345000 per annum over a three year period.
The new contract will add to the immediate momentum seeing that RGB has already posted much stronger results in the nine months ended Sept 30 2014. During that period, its net profit jumped 200% to rm15.53 million from rm5.22 million previously, while revenue was up 50% to rm159 million.
The strong performance was due to the increase in the number of machines sold to new and existing casinos in the region.
RGB has entered into a fixed fee machine leasing agreement with a licensed operator and will deliver the machines by the first quarter of 2015. This refers to the contract that is expected to bring in USD300000 over a period of three years.
If its stellar results for the first nine months of 2014 could sustain or grow, the stock could deemed attractive …
Its EV is at roughly at rm171 million (market value of rm159 million plus net borrowings of rm11.8 million) while its nine month Ebitda as at Sept 30 2014 stood at rm42.65 million, This puts its EV/Ebitda at about four times, which could be lower when the full year Ebitda is taken into account.
An EV/Ebitda of four times means the annual operating cash flow is strong enough to buy out the entire company and pay off its net borrowings in just four years assuming that the cash flow is constant. The method is usually used to value strong cash flow generating businesses.
Nevertheless, its low EV/Ebitda is due to its small size … Unlike established casino operators whose cash flows are among predictable it is a small sized equipment supplier that is subject to higher volatility in its business, hence the greater uncertainty in cash flow, as shown by its ups and downs over the past few years.
It sells, markets and manufactures electronic gaming machines and equipment. It also has machine concession programmes and provides technical support management for its clients.
Beyond the turnaround, RGB is having moderate sustainable growth. It also seems to continue its expansion in the Phillipines via two ways – via expanding the traditional slow machines base and launching the new Bingo game which is popular in that market.
It is trading at a discount which is expected because it is not big in size and is not a casino operator.
It had one time dragged it into massive losses in Cambodia due to the changing in the government policies.
The tide of changed for RGB in 2012 when it returned to the black, registering a net profit of rm6.03 million following efforts to improve yields and cost management. It also started diversifying into other markets and depended less on Cambodia.
For FY2013 it recorded a slight drop in net profit to rm5.97 million from rm6.03 million at year earlier and improved its net gearing ratio to 0.53 times from 0.94 times in 2012.
At present, the company operates mainly in Malaysia, Cambodia, the Philippines and Laos. It excited Macau in 2014. It also ventured into Timor Leste via the acquisition of a 30% stake in Timor Holding Lda for rm680000. THL primarily operates amusement and electronic gaming machines.
It wants to aggressively sell channels and content to regional markets in the near future to reduce its reliance on subscription revenue.
While Astro has been selling local vernacular content overseas, the media group’s two new ventures .. SPARK Asia and a partnership with Mexico’s TV Azteca SAB de CV to produce Asia based telenovelas are its first steps in diversifying into genera based content to appeal to more international viewers.
Astro is still very much reliant on subscription fees. For the first half of its financial year ending Jan 31, 2015 82% of its revenue came from television subscriptions.
However revenue parked under its other segment – comprising licensing income, publications advertizing expenditure, programme sales, revenue from sister company NJOI and movie theatre regenue – more than doubled to rm180 million in 1HFY2015. Its share of group revenue also improved to 6.92% in 1HFY2015 from the previous year’s 4.69%.
The group has also sold some of its channels – such as Astro Ria, Astro Prima and similar channels for local audience to neighbouring countries and is moving into producing various genres that appeal to a wider viewership.
The price paid for SPARK Asia or any other channel by international buyers could translate into pure profit for Astro because all production costs have already been covered by the Malaysian market. Any retransmission cost for international markets will be covered by the subscribers of a particular market.
It is confident that even with rising production costs from increased output, the group can maintain the percentage of its content cost at 32% to 35% of its television revenue. This is because the group’s ARPU has been growing, as it introduces more channels and makes its content available on smart devices.
Also it had increased the fees it charges HD viewers by rm5.00. As 2@Fy2015, its ARPU was rm98.00.
About 90% of its 4.2 million subscribers had swapped their old decoders for the HD ones as at Nov 20 2014. The reinvestment phase is pretty much done because it does not need to swap the old decoders of the remaining 10% of subscribers. There will be natural attrition as and then they upgrade to HD services.
The group might not see big growth in its profit in Fy2016 as that will be the peak amortization year on terms that are unrelated to Astro set top boxes.
Thereafter … 2017 onwards PAT is going to grow very strongly to enable a progressive dividend payout.
An established process equipment fabricator involved mainly in the petrochemical, oleochemical and energy sectors.
It is said to be well insulated from falling oil prices as it produces pressure vessels, heat exchangers and heat recovery steam generators – equipment that will be needed in the ongoing refinery and petrochemical integrated development project in RAPID.
Petronas is unlikely to cut its commitment to RAPID despite the current low oil price.
Its net assets per share stood at rm1.61 in FY2014.
It had been delivering uninterrupted profits and consistently paying dividend of 6.5 sen per share except in FY2011 when it paid three sen per share.
Downstream is not expected to be as badly affected by low crude oil prices as the upstream segment. APB’s fortunes depend on whether it will get contracts from Petronas for the RAPID project. While the group is not directly bidding for any part of the project, it could benefit from subcontracts especially the on the process equipment side.
The stable outlook for the downstream segment, especially in the petrochemical industry, will prop up process equipment manufacturers including APB.
Besides supplying the process equipment to the petrochemical industry, it also operates the oleochemical industry has greatly helped the group ride out of the downturn in fabrication demand in the past few years….
APB’s order book stood at rm70 million as at July 2014 which will last them for at least the next nine months.
It posted a net profit of rm12.2 million, up 17.6% year on year. It is also doing well operationally, It undertook higher margin contracts in the final quarter ended Sept 30 2014. As a result, 4QFy2014 revenue declined 19.5% to rm30.2 million year on year while gross margin rose to 27.8% from 20.4%.
It has a clean balance sheet with no borrowings. Its cash and cash equivalents stood at about rm40 million as at Sept 30 2014.
It has a policy of rewarding shareholders well. It paid dividends of 30.4 sen per share in 2013 or a yield of 13.8% against its IPO price of rm2.20. In July 2014 a bonus of 1 for 2 bonus was declared.
It is famed for its flagship 5233 acre Bandar Sri Senyan township in Seremaban. As end Sept 2014 it has remaining landbank of 1289 acres at BSS including STV with potential GDV of rm5.1 billion. STV, an established industrial park within BSS, has attracted rm3 billion worth of investments from MMCs.
Its other projects in Seremban have estimated GDV of rm1.2 billion on 343.6 acres of land. Down south, it is developing the 637.6 acre Taman Seri Impian in Kluang. It has 294.5 acres left to be developed with GDV of rm957 million. In 2013, it acquired 1.1 acres of land near Putra World Trade Centre in KL and aims to launch apartments with GDV of rm400 million in 3QFY2015.
All in Marix, remaining land bank has potential DGV of rm6.5 billion to last until 2022. As at end Sept 2013, unbilled sales totaled rm410.5 million.
Its net cash fell from rm192 million at end 3QFY2013 to rm0.1 million in 3QFy2014, due to property development cost of rm556 million and its dividend payout.
It is trading at a trailing 12 month PER of 7.8 times and 2 times book value.
It has set a minimum 40% dividend policy payout policy. However its ability to continue to pay high dividends will depend on future profits and cashflows, since its cash position has fallen sharply.
Its revenue from the export market has been increasing. It invest RM13 million in a new multilayer stretch film machine to boost its capacity in anticipation of higher export demand on the back of a recovery in global demand for manufacturing.
For the nine months ended Sept 30, 2014 (9MFY14), BP Plastics saw its export revenue expanding to RM167.1 million from RM132.8 million a year ago, accounting for 78% of the group’s revenue, up from 75.7%.
The group is targeting Asia as its primary market as it believes that it will remain the fastest growing region in the world over the next decade.
BP Plastics’ net profit for 9MFY14 rose 4.8% to RM7.83 million from RM7.47 million a year ago, while revenue increased 22% to RM214.28 million from RM175.64 million in 9MFY13. This was despite weaker third quarter results.
With the softening of polyethylene prices and its group’s continuing efforts on cost-optimisation efforts, it hope to achieve a double-digit growth in top-line and bottom line for FY15 ending Dec 31, barring any unforeseen circumstances.
Plastic packaging companies are seen as beneficiaries of falling crude oil prices — the cost of raw materials such as resin are closely related to that of oil.
The company used to rake in 10% to 11% in pre-tax margins in 2009 and 2010, but such margins have since come down to 5.7% in 2013.
BP Plastics’ net cash position stood at RM36.2 million, with zero borrowings as at Sept 30, 2014.
On plans for the cash, it will be used as investments in technology machines, for working capital, not discounting any future potential mergers and acquisitions opportunities.
The group has a target to distribute a minimum 40% of its profit after tax as dividends, paid out RM9 million in dividends in 2013, equivalent to an 89% payout.
Meanwhile, based on its earnings per share of 5.61 sen in FY13, it trades at a historical price-earnings ratio (PER) of 14.4 times and a current PER of 13.8 times. This compares with its peers Scientex Bhd and Thong Guan Industries Bhd which are trading at current PER of 11.25 times and 7.9 times respectively.
BBPlastics is the top three stretchfilm manufacturers in Malaysia and is one of the key polyethylenefilm manufacturers in Malaysia.
Today disposed the following shares: -
1. Jobstreet - all
2. CBIP - half
To prepare bullet for the next wave.
The OPEC decision on 27 Nov 2014 to maintain the crude oil production ceiling at 30 million barrels a day, implies that oil prices would stay low for a while. OPEC will meet again in June.
For The Malaysian Economy …
If crude oil prices remain at current levels (Nov 2014) in 2015, the upside to inflation from the introduction of GST could be contained.
The implementation of GST is expected to cause a one off inflation hike to about 4% in 2015. However the managed float mechanism would introduce more volatility to the transport component of the CPI, hence indirectly impacting inflation calculations, as fluctuations in crude oil prices will affect fuel prices.
For The Malaysian Government Coffers …
The managed float mechanism would help Malaysia achieve its fiscal deficit target of 3% of GDP for 2015 via the savings it makes on petrol subsidies. It was reported that the saving could be between rm10 billion and rm15 billion in subsidies under a managed float mechanism at Nov 2014 crude oil prices.
It should also be highlighted that Malaysia derives about 30% of its revenue from oil related sources. This means that the government revenue would see a reduction from June 2014.
The last time crude oil fell below USD70 per barrel was in Oct 2008. At the time, it was trading at USD69.60 a barrel. It fell to USD38.37 a barrel in late Dec of that year. After that it took about six months until June 2009 for it to recover to USD68.34 a barrel.
It is believed that under duress, the government would rather slash development spending than other subsidies. The government could also trim those projects that are not a priority.
For Petronas …
Malaysia is best known for its thriving oil and gas industry that is supported by Petronas that spends an average RM60bil per year on capital expenditure. But the spending will be cut by up to 20% from 2015 onwards until the international price of Brent crude has settled down at more than US$80.
Petronas’ contribution to Government coffers in the form of dividends, taxes and oil royalty for next year will dive by 37% to RM43bil, assuming the Brent crude settles at US$75 per barrel;
Petronas will not proceed with contracts to award new marginal oil fields unless oil settles at levels above US$80 per barrel;
Projects in Pengerang that have yet to receive the final investment decision (FID) will be affected by the cut-backs. Projects worth US$27bil that have received FID will not be affected, but Petronas does not have 100% equity in all the projects approved;
The capex crunch is expected to send chills down the spine of the already fragile O&G sector, nearly all depend on Petronas for jobs.
Petronas is also reviewing the feasibility of some of its projects and could shelve projects that are no longer viable and for which Petronas has yet to make its FID.
It also has to review its capex plans for 2015 onwards and have to assess the feasibility of projects. At current oil price levels (Nov 2014), marginal oil fields are no longer feasible for Petronas to get involved in.
Meanwhile, Petronas still needs to keep investing in new technology, in overseas projects and increasing its oil reserves in order to maintain its growth, considering that current production levels decline by some 10% every year, naturally.
At present (Nov 2014), Petronas produces some two million barrels of oil equivalent per day. In five years, if it does not replenish its production, its production will be down to half of what it is now (Nov 2014).
For Marginal Oil Fields Players …
Petronas will not proceed with the awarding of new marginal oil fields unless the price of Brent crude settles above US$80 per barrel.
Although the breakeven for marginal oil fields is US$65 per barrel, they will not look into any such proposals until the global price situation stabilises. It would be comfortable to embark on marginal oil fields only when the price settles down at more than US$80 per barrel.
Marginal oil fields were once a hot topic for the investment community. In fact, these projects were touted as a re-rating catalyst for some listed oil and gas players seeking to venture into the upstream segment.
These oil fields are essentially small and old oil fields belonging to Petronas, for which the oil giant sought to partner with international players together with a local partner, to enter into ‘risk service contracts’ (RSC) that would expose the local players into the world of oil exploration. Under the terms, the joint venture between the local and foreign oil and gas companies are responsible for producing the oil.
For meeting the production targets, the joint venture gets paid. However the RSC contractror does not enjoy any upside from the oil prices nor carry any risk should there be a slide in oil prices.
So far among the companies awarded RSC contracts to develop marginal oil fields are SapuraKencana Petroleum Bhd, Dialog Group Bhd and Petra Energy Bhd.
Petronas had in the past identified more than 100 marginal oil fields to pursue RSCs. It was a strategy to grow its reserves. That was when oil prices were much higher. These contracts were awarded when oil prices were above US$100 per barrel. In today’s (Nov 2014) environment of plunging oil prices, RSCs are hardly viable.
The breakeven production for marginal oil fields is US$65 per barrel. If Brent crude is below this level, it is left to be seen if the operations of the existing fields will continue.
Going forward …the Malaysian O&G industry is going through a consolidation.
The contractors and service providers will have to realign themselves to cope with lower oil prices.
Malaysia is best known for its thriving oil and gas industry that is supported by Petronas that spends an average RM60bil per year on capital expenditure. But the spending will be cut by up to 20% from 2015 onwards until the international price of Brent crude has settled down at more than US$80.
A shrinking pie implies that weaker players might be weeded out.
Also lower valuations present attractive entry for some investments especially if there are synergistic propositions. The biggest hurdle, however, is the issue of ownership and corporate structure.
It makes sense for companies to acquire other O&G companies that have synergies.
It offers a range of shipping, land transportation and warehousing logistics services. The company began operations in 1995. It currently owns a fleet of eight ships and over 200 trucks.
The jewel in CLS’ crown is the Nilai Inland Port which contributes 30% to 40% of revenue, It taps on Nilai’s growing industrial base and provides convenient clearing and bonded warehousing logistics.
Going forward, it plans to expand the Nilai facility and use its expertise to provide complete warehousing and transportation solutions for large corporations.
It trades at a trailing 12 month PER of 8.7 times and a PER of 0.9 times. By comparison, GDEX trades at a trailing 12 month PER of 74.5 times and price to book value of 17.9 times while Tiong Nam Logistics trades at a trailing 12 month PER of 6.2 times and a price to book of 1.1 times but with earnings increasingly driven by cyclical property development.
CSL has seen steadily rising revenue since FY March 2011. In FY2014, revenue increased 17.8% to rm120.6 million while net profit rose 16.7% to rm14.0 million. In FY2012, it cleaned up its balance sheet and posted a net loss of rm16.2 million due to impairments on its ships of rm18.6 million.
Its gearing stood at 3.5% as at 30 June 2014.
There were no dividends in the previous four years prior to Nov 2014 as it invested in new assets to grow its business and diversify away from shipping.
What a fruitful result after a long wait since Jun 2014. From a purchase price RM2.44 @ Jun 2014 until RM2.62 @ August 2014 and closing price RM2.89 at this moment with a cash repayment of RM2.6675. Do not forget there are a few more dividend payout during this period as well.
At this stage, the return is 14.2% within 6 months. I believe there is more to come because their major shareholders are buying back market share actively recently.
After cash repayment, company net asset is still have around RM0.36.
It is an IT player specializing in consultancy, system integration services, IT outsourcing, E bidding and E procurement for the port and logistics industry. The company also provides wireless and satellite based communication solutions business.
Over the last five years, it has seen its revenue double from rm27.2 million to rm58.5 million while net profit rose from rm1 million to rm5.4 million. In 2013, revenue dropped by 3.6% to rm58.5 million but net profit but net profit increased by 8.5% to rm5.4 million. For 1HFy2014, revenue declined 6.6% to rm27.5 million while net profit fell 28.9% to rm2.3 million due to slower billings and higher operating costs.
It has a total order book of rm131 million in mid 2014 which is higher than the combined revenue for 2012 and 2013.
It is modestly geared. Its gearing ratio started to improve since 2011 to 9.8% in 2013. Borrowings were reduced to rm15.7 million in 2013 from rm24.1 million a year ago.
It is currently trading at 1.3 times book value, with a trailing 12 month PER of 20.8 times.
It is trading at a price to book of 0.8 times and trailing 12 month PER of 8.1 times.
Its net cash stood at rm110 million plus some rm68 million in quoted shares at end June 2014.
Its strong balance sheet and recurring income from the power generation business should support its future dividends.
About 69% of its pre tax earnings were derived from power generation. It partially owns and operates a 83MW coal fired heat and power plant in Shaoxing, China as well as a 36MW diesel plant in Tawau, Sabah. The PPAs for these projects are set to expire in 2017 to 2018.
A major re rating catalyst could come from the 256MW Don Sahong hydropower project in Laos. The project estimated to cost rm1.5 billion is slated for completion in 2019. It would replace the loss of income from the above mentioned projects a(if their concessions are not extended) and more …
The resources arm accounted for roughly 14% of pre tax profit in 2013. This encompasses quarrying of limestone, manufacturing and trading of calcium carbonate powder, lime based products and bricks.
It is one of Malaysia’s largest producers of lime products.
It owns investment properties, primarily PJ8 in PJ, worth come rm121 million from which the company earns recurring rental income. It has also diversified into property development.
Earnings and revenue for the company have been at an uneven pace. Except for the FY2013 which posted a net loss of rm32 million, it had posted net profit from FY2010 to FY2015. However its first two quarters of FY2015 earnings had slowed down tremendously.
At rm0.175, it trades at 1.1 times book value of rm0.16 with a 12 month trailing PER of 20.1 times.
It posted a net loss of RM32 million for its financial year ended March 31, 2013 (FY13) after the group decided to exit from its US operations.
The discontinuation of its US subsidiaries contributed a net loss of RM24.2 million for FY13. This comprised of one-off write-off expenses on goodwill of RM4.3 million and bad debts and other assets written-off amounting to RM4.1 million.
In addition, the group has also written off RM13.3 million in relation to its investment in the US subsidiaries. Another RM1.1 million was incurred for legal and professional fees, and compensation costs in relation to the cessation of the US operation.
The group had secured new orders amounting to RM31.1 million of which RM25.2 million was from the hard disk drive (HDD) industry. The new orders boosted its order book for the current financial year ending March 31, 2014 (FY14) to RM69 million, which represents 56% of revenue recorded in FY13.
Of the RM69 million order book, 39% of the orders are from the automotive industry which is expected to provide the group with a more balanced portfolio other than its main staple in HDD. The orders are expected to contribute positively to group's earnings in the next few quarters.
It is a leading manufacturer of compound chocolate confectionery products and layer cakes. For FY April 2013, some 56% of its sales were sold locally and the balance of 44% exported, mostly to the Asia Pacific region.
It has a solid cash rich balance sheet. As at 1QFY2015, net cash stood at rm86.6 million or rm1.08 per share. The company pays consistently high dividends.
From FY2010 to FY2014, its sales grew by a CAGR of 8.4% to rm221 million while pre tax profit grew by a CAGR of 7.8% to rm43.6 million. During the same period, shareholders’ equity increased by a CAGR of only 4.3%, implying a large portion of earnings are returned to shareholders.
The company is majority owned by its MD, Singaporean Liang with a 51% stake followed by ASB with a 20% stake.
The company has been hit by rising cocoa prices which surged over 50% in the last 18 months prior to Nov 2014 and falling demand. For 1QFy2015 sales fell by 10% year on year to rm51.6 million while pre tax profit slumped by 40.5% year on year to rm8.3 million.
It is trading at a 12 month PER of 14.3 times and a price to book of 1.6 times.
It had proposed a 10% private placement exercise on Oct 2014.
It had acquired stakes in several private companies. Among them is the proposed acquisition of a 55% stake in IdealSeed Resources Sdn Bhd, an employment consultancy services for rm2.2 million.
The company profit margins has been erratic over the past years, ending in losses of about rm437000 for FYApril 2014. In 1QFY2015, it has managed to return to the black with a modest net profit of rm89000 on the back of rm3.7 million revenue. Its pioneer status will expire in FY2015.
The company had net cash of rm6 million at end 1QFY2015 after managing to reduce its trade receivables to rm4.9 million from rm7.1 million at end FY2013.
Its client concentration risk given that 80% of its trade receivables are from three customers.
It trades at 3.8 times book value with a 12 month trailing PER of 305 times.
It is a manufacturer of upholstered home furniture – dining chairs, sofas and bed frames – under Original Design and OEM. Almost all of its products are exported to over 40 countries. Key markets are Asia, Australia, Europe and US.
Its revenue growth annually from rm90 million in FYAug 2011 to rm113 million in FY2013 while net profit increased an outsized 40% from rm10.8 million to rm15.1 million during this period. Operating margins has been expanding on economies of scale and increased productivity and efficiency.
For FY2014 the company posted revenue of rm126.8 million boosted by recovery in demand from the eurozone. Net profit was rm20.3 million, a significant 34.3% increased from the previous year.
It also stands to gain from the strengthening in USD as an exporter.
It trades at a trailing 12 month PER of 7.9 times. ROE is high at 24.5%, It has a net cash of rm50 million. That is equivalent to 24.5 sen per share.
It offers good yields. It has a minimum 40% dividend payout policy.
Investors can look forward to increasing dividends in the future, in line with earnings growth.
It appears to be a good candidate for a privatization exercise based on prevailing valuations.
The company is involved in property development. It also does marketing and distribution of building materials. It has completed various residential and commercial properties in Kajang, KL and Penang and is currently (Nov 2014) developing the Bandar Baru Ayer Itam township.
It has not been very aggressive in undertaking new projects. Property development cost had been flattish between rm17 million and rm20 million in the past four years. Meanwhile, revenue has more than halved half since 2010, totaling a mere rm22 million in 2013.
Its profitability has declined from rm4.7 million in 2010 to a net loss of rm4.7 million in 2012 which widened further to rm11.5 million in 2013.
Profits in 1QFy2014 surged to rm46.6 million due to the one off gain on land disposal of rm54.9 million. It fell back into the red in 2QFy2014, with a loss of rm603000 before turning a net profit of rm1.7 million in 3QFy2014. Outlook is uncertain given its erratic earnings record.
Its book value stood at rm1.08 per share. Its assets understated as it holds land bought at low prices. The company has 208 acres of land in Terengannu with a book cost of rm1.6 million or 17.7 sen psf and 2.23 acres in Penang carried at rm4.2 million or rm43.3 psf. Both plots have not been revalued since 1998.
Farlim Holding Sdn Bhd owns a 43.2% stake. To privatize the company would only cost an additional rm43 million.
The firm was not named as the builder for Petroliam Nasional Bhd's (Petronas) planned RM2.7 billion regasification facilities. The fact that MEB did not benefit from the award of the regassification plant in Pengerang, Johor should not be a major concern as the group did not tender for the job. The Pengerang project and the Refinery and Petrochemical Integrated Development (Rapid), which is also located in Pengerang, are two different tender areas.
The drop in Muhibbah's share price was due to "confusion" over the winning party for the regasification facilities contract given out by Petronas. It did not go to Muhibbah, but they did not mention that they were bidding to begin with. They are concentrating on other parts of Pengerang, Johor – the construction of refinery and petrochemical facilities instead.
Sources also say the drop might also be due to a “prominent” fund management company selling its stake across its O&G holdings.
On 14 Nov 2014 Dialog Group Bhd had signed a shareholders’ agreement with Petronas Gas Bhd to undertake the regasification project. The project comprises a a regasification unit and two liquefied natural gas storage tanks.
Management clarified that the group’s tenders in Rapid for more than one refinery subcontract works remain intact. Expect it to land a contract in the short term, worth up to RM500mil. Muhibbah could be in the running for up to about RM1bil worth of projects in Rapid.
MEB is involved in the downstream side of the oil and gas sector, providing infrastructure jobs.
MEB currently boost an orderbook of RM2.3bil of which RM875mil are from construction, RM1.2bil from crane and RM257 from shipyard division
With Petronas license and marine based expertise, it is poised to clinch a sizeable share of contracts at RAPID. Out of the five RAPID packages, it appears to be the strongest contender for civil and fabrication works for Package 3 which was awarded to Techniques Rrunidas SA to build a refinery and steam cracker plant.
Muhibbah is also in the running for three other packages. Assuming a rm500 million win, this would lift its current infra order book to rm1.4 billion. This does not yet include the deepwater jetty worth rm1 billion.
The company improving fundamentals seem to be the direct result of a major change in strategic direction initiated three years ago (2011).
In 2011, it switched from semiconductors to automation solutions for the LED lighting industry from which it now (Nov 2014) derives about 80% of its revenue. Products offer by the group include LED testers and automated handlers, which are essential components of the lighting industry.
The LED industry will be the key earnings driver for the company in the coming years….
The hike in demand will force major LED makers to expand their production capacity which bodes well for automation solution providers such as MMSV. It is believed that Philips Lumileds Lighting Co and OSRAM Licht AG are MMSV’s clients.
It plans to focus on LED manufacturing process with a view to establishing a market in high power LED production.
It has zero borrowings and is light on assets except for a 55000 ft factory in Penang. Its revenue of rm26.68 million for FY2013 was nearly equal to the group’s total assets of rm26.75 million as at Dec 31 2013.
The company has a diversified customer base with the domestic market accounting for 39% of sales in 2013 followed by the US (35%) and Asia (26%).
For 1HFY2014 revenue jumped 40% to rm16.5 million while net profit almost doubled from rm2.1 million to rm4.0 million. However it is also worth nothing that in the same period, trade receivables almost tripled to rm12.6 million outpacing a 1.5 times increase in trade payables to rm5.4 million.
It is trading at 4 times book and a trailing 12 month PER of 14.3 times.
Its cash balance stood at rm3.57 million as at June 30 2014. It may raise funds to realize its ambitions.
It is liked for its strong CAGR of 32% over FY2013 to FY2016, its net cash position and superior margins of above 24% and high ROE of above 28%.
Despite that, the company is still exposed to the LED industry’s environment which can be both cyclical and dependent on economic growth.
It is a Johor based property developer for its vast 1082 acre township development, Taman Universiti in JB.
It is currently (Nov 2014) developing properties in Taman Nusa Sentral at Bandar Nusajaya, Johor. Its projects are more insulated as they are mainly landed projects catering for the local middle income population.
It holds assets which are carried in its books at very low prices. It is trading at 1.01 times book value.
Its landbank includes 295.8 acres in Bandar Nusajaya carried at rm156 million or just rm1.21 psf; 364.8 acres in Daerah Hulu Selangor carried at rm54 million or rm3.41 psf and 550.7 acres in Kulim. Kedah carried at rm27.4 million or rm1.14 psf.
Its balances sheet has shown significant improvement over the years. As of 3QFY2014, net gearing stood at 13% down from 81.4% in FY2010. From Fy2010 to FY2013, total assets increased by a CAGR of 14.2% to rm372 million.
It is trading at 12 month PER of 3.4 times although future earnings will depend on the timing and sales of new launches.
It has yet to finalise the execution of the USD1.18 billion contract to supply one FPSO vessel to HCML after several delays. The contract will be terminated should both parties fail to sign by Nov 272014 unless another extension is agreed upon.
The further delay in the execution of the contract does not paint a positive picture of Armada, whose order book is currently (Nov 2014) at rm31.7 billion.
Hit by declining oil prices till 13 Nov 2014, and the untimely listing in Oct 2014 of its rights shares, its share price has fallen by 43% YTD.
It has a rm18.5 billion in long term FPSO, T&I businesses as well as a strong footing in the Caspian Sea T&I market.
T&I should be anchored by recurring work orders from Petronas and Russia’s Lukoil.
The FPSO segment is its earnings driver, making up 85% of its order book and contributing 60% of its 2015 earnings.
The drop in oil price has had no impact on the group’s existing contracts as they are long term in nature, with pre agreed chartering fees.
Expect the FPSO contracts to provide the group with stable earnings stream up to 2018, regardless of oil price movements.
Weak oil price may prompt oil companies to cut spending on exploration drilling and the development of higher cost projects, expect the impact of FPSO market to be muted, as FPSO is a proven technology for oilfield development.
The company has six FPSO contracts in Africa and Brazil.
Armada Installer will continue to anchor earnings for Bumi’s T&I segment.
Unlike FPSO and T&I businesses, expect the group’s OSV segment especially AHS fleet, to suffer from lower oil prices.
It is looking to dispose seven vessels and redeploy some vessels to the Brazil and Africa markets.
It has yet to secure any contracts for its OFS division. There will be additional setback for Bumi’s OFS segment as oil companies are re evaluating their capex plans due to lower oil prices
The company has cash of rm9 billion proceeds from the group’s rights issue in Aug 2014. The rm50 million in net interest savings should more than offset lower OSV and OFS earnings.
Armada’s share base has increased 100% following the listing of the bonus and rights shares.
The group is a proxy for the global FPSO and Caspian Sea T&I markets. These markets segments are relatively insulated from the current (Nov 2014) oil price weakness.
Its 30% owned associate company has been awarded three licenses by Petronas for floating offshore facilities, mobile offshore facilities and naval architecture and marine engineering. The licenses would be a new sources of income and Yinson can now directly tender for works relating to FPSO vessels, floating storage and offloading vessels and mobile offshore production units for Petronas and other oil and gas companies in Malaysia.
Earlier 2014 the potential license awards were seen as a catalyst for Yinson to participate more in the domestic oil and gas industry. Globally, it is the sixth largest FPSO player in terms of fleet size. It has been active in Vietnam and West Africa but not on the home front as it did not have a Petronas license to bid for jobs.
At rm2.60, its market cap was rm2.71 billion or at a forward PER of 23 times. The rich PER is backed by anticipated earnings growth in the financial year ending Jan 31 2016 and FY2017 after it has realized the full potential of its current fleet of FPSOs.
With oil prices below USD80 per barrel, observers do not see the Petronas licenses doing Yinson much good in the near term. The tumbling crude prices will cause oil companies to cut back on exploration thus reducing the need for FPSOs. Only when new fields are discovered and enter the production phase will there be a need for new deployment of FPSOs.
Moreover the new FPSO contracts will likely have depressed rates because oil companies are expected to squeeze the rates for their IRR.
Also do not expect to see Yinson to secure jobs within Malaysia anytime soon as project rollouts have been delayed or have slowed down amid the low oil prices.
More attractive catalyst for Yinson is its ongoing bids for overseas projects. Catalysts for the group stem from additional FPSO contracts, which the group is currently bidding for in West Africa and SEA.
Nevertheless the Petronas licenses will open up new opportunities for Yinson on the home front. Apart from allowing the company to bid for Petronas jobs, the licenses will also serve as strong credentials for the group.
Lim is the major shareholder of Yinson with a 35.5% stake followed by Tan Sri Mokhzani Mahathir’s Kencana Capital Sdn Bhd with 18.55% and the EPF with 5.83%. The EPF has been trimming its holdings in Yinson in Oct 2014.
Yinson has grown substantially over the past few years and some quarters believe that the group will expand its business in the oil and gas industry further.
The game changing acquisition of Fred Olsen Production in June 2013 marked a turning point for the group.
Currently (Nov 2014), Yinson has an order book of rm7.8 billion which is expected to last it till 2013.
After the acquisition of Fred Olsen, Yinson has grown immensely. In terms of fleet size Yinson is just three vessels behind Bumi Armada. In Malaysia, Bumi Armada is the largest FPSO player with five FPSOs and three under construction, followed by Yinson with four FPSOs and one under construction.
Its MD said Perisai will return to the black as its venture into the highly lucrative drilling business is expected to make up for the near-term earnings slack. Following the launch of its first jack-up rig, it hopes to turn the company around as it starts contributing to the group’s revenue from August 2014.
The company’s first jack-up rig – the Perisai Pacific 101 – had cost RM650mil to build. It is now operational off the coast of Terengganu and is expected to contribute RM20mil in revenue during the current year ending Dec 31, 2014 (FY14). The rig is on a three-year contract worth RM503mil awarded by Petronas Carigali Sdn Bhd in May.
The company will focus on the jack-up drilling segment over the next three years from 2014.
It will take delivery of two additional, high-spec jack-up drilling rigs worth a combined RM1.2bil to bring its fleet size to three jack-up rigs by mid-2016. It has started negotiations with potential clients for jack-up Perisai Pacific 102 (PP102), which is scheduled for delivery in April and May 2015. PP103 is expected to join the fleet in June 2016.
With its second rig, Perisai will widen its reach to the Asean market while maintaining its focus in Malaysia.
At present (Aug 2014), there are 15 jack-up drilling rigs operating in Malaysian waters, of which only two are locally-owned.
Perisai is well-positioned to bag more drilling jobs, as there are more than 10 foreign jack-up drilling rig contracts due for expiry in the next one to two years from Aug 2014. A jack-up drilling rig has a life span of between 25 and 30 years.
On the regional front, it has been reported that over 40 jack-up rig contracts in South-East Asia will expire between mid-2013 and 2015.
Perisai is targeting for its drilling segment to contribute about 60% of revenue within three years from Aug 2014.
Perisai’s quick turnaround will be propelled by the commencement of Perisai Pacific 101 and positive contribution from its floating, production, storage and offloading (FPSO) vessel - Perisai Kamelia.
The new assets are the game changer for Perisai, as the company evolve from a charterer to asset operator.
While upbeat about Perisai’s drilling venture, which will ride on Petroliam Nasional Bhd’s (Petronas) asset localisation policy that favours domestically-flagged vessels, however that there are concerns charter rates for such assets could soften given the new rigs that will enter the market within the next 21 to 24 months from Aug 2014.
That means Perisai may need more time to recoup its investments.
Revenue during the quarter plunged 65% to RM10.87mil from RM31.69mil.
Rubicone and E3 are likely to remain unemployed for the rest of 2014.
Look beyond the anticipated soft FY14 performance caused by the downtime of Rubicone and E3, FY15 and FY16 are set to be substantially stronger years as all the assets to be fully deployed,
Moving forward, Perisai aims to narrow its focus on drilling and production, and expects to exercise a put option to sell its derrick pipe-lay barge in two to three years from Aug 2014.
Rapid expansion in the drilling business is putting some strain on the company’s finances. Perisai’s total borrowings currently (Nov 2014) stand at RM1.1bil, taking its gearing level to 0.91 time. Management guided that its medium-term notes incurred an interest cost of RM5mil year-to-date.
With the purchase of all three jack-up drilling rigs, Perisai’s net gearing will be ballooned.
Perisai did not pay out any dividends in 2013 due to its high capex needs.
It has put down a 20% deposit for the construction Perisai 102 and Perisai 103, with the remaining 80% to be satisfied via external borrowings.
It had issued a S$102mil (RM261.43mil) in principal amount of fixed rate notes due 2016.
The group owns and operates a fleet of eight offshore support vessel (OSV), of which eight are chartered out till August 2015.
Its OSV business provides a steady of income as it expand into the drilling segment.
The company expects to add another one OSV fleet by the end of the third quarter 2014
The OSVs are held under the Intan Group, a 51% owned subsidiary of Perisai
Its intention to list its construction arm by 2QFY2015 and is poised to benefit from the Malaysia’s major infra spending. The company plans to distribute part of the listing proceeds in the form of a special dividend.
It is one of Malaysia’s largest property and construction companies and has a solid track record. It has a total land bank of 3376 acres with potential GDV of rm50 billion. It has a land bank of over 1800 acres in Iskandar Johor, where it is poised to replicate its successful Sunway Resort City concept with a rm30 billion project.
It is trading at a trailing 12 month PER of 3.9 times and just 1.08 times book. Excluding revaluations gains, its normalized PER is 11.8 times.
Singapore's sovereign wealth fund, GIC Pte Ltd, is selling a stake worth more than 400 million ringgit ($120 million) in Sunway Bhd are being priced in a range between 3.20 and 3.30 ringgit each.
Sunway, controlled by Malaysian tycoon Jeffrey Cheah, in September 2014 announced plans to re-list its construction business by the second quarter of 2015, a move would further unclock value and reward Sunway shareholders in the form of cash dividends.
Ajinomoto is valued for its strong brand names, steady earnings and dividends.
Nestle, F&N and DLady are commanding at a premium valuations, with the three stocks trailing 12 month PER of between 21 and 29 times and price to book ratio of between 3.6 times and 22.2 times.
However Ajinomoto trades at under half of these valuations. It is currently trading at just 1.3 times book with trailing 12 month PER of 12.5 times.
Between FY March 2010 and FY2014, revenue increased from rm285 million to rm346 million while net profit rose from rm24 million to rm28 million. In 1QFY2015, revenue decreased slightly to rm86.2 million or 1.8% while net profit fell to rm8.2 million or 1.0%. Potential earnings growth drivers include lower key raw material costs and its new Tumix range of flavor seasoning.
It has a strong balance sheet with net cash holding of rm106.7 million as at 30 June 2014 or rm1.75 per share.
Its intention to list its construction arm by 2QFY2015 and is poised to benefit from the Malaysia’s major infra spending. The company plans to distribute part of the listing proceeds in the form of a special dividend.
It is one of Malaysia’s largest property and construction companies and has a solid track record. It has a total land bank of 3376 acres with potential GDV of rm50 billion. It has a land bank of over 1800 acres in Iskandar Johor, where it is poised to replicate its successful Sunway Resort City concept with a rm30 billion project.
It is trading at a trailing 12 month PER of 3.9 times and just 1.08 times book. Excluding revaluations gains, its normalized PER is 11.8 times.
Singapore's sovereign wealth fund, GIC Pte Ltd, is selling a stake worth more than 400 million ringgit ($120 million) in Sunway Bhd are being priced in a range between 3.20 and 3.30 ringgit each.
Sunway, controlled by Malaysian tycoon Jeffrey Cheah, in September 2014 announced plans to re-list its construction business by the second quarter of 2015, a move would further unclock value and reward Sunway shareholders in the form of cash dividends.
It is a cash rich oil palm plantation company.
It has managed to maintain stable profits margins of about 21% to 23% from 2010 to 2013. Despite a slump in oil palm prices in 2014, the company managed to achieve higher net margins of 19.3% in 1HFY2014 compared to 11.9% in 1HFY2013.
It has a planted land bank of 20768 ha in Pahang of which 16927 are matured. It is majority owned by the Pahang state government, with its biggest shareholder being LKPP with a 25.2% stake.
It is currently trading at 1.05 times book with a trailing 12 month PER of 12 times.
The price to book discount could discount further as the company is expected to undertake an asset revaluation exercise in 2015. The company has a net cash of rm229 million. This is equivalent to tm1.62 per share. As a result, the company pays decent dividends with the latest yield being 3.1%.
Growth drivers for the company include a young tree profile and it had a JV to develop 1416ha of plantation land in Pahang. Only 28% of its trees are old palms, 31% are prime palms, while a significant 41% are young and immature palms.
It remains to be seen if the company may consider boosting liquidity by undertaking corporate exercises.
Latitude: It is one Malaysia’s largest more profitable and attractively priced furniture player. Despite the industry volatile, the company has been consistently profitable since its listing in 2001 and as a result built up a large cash pile.
It manufactures rubber wood furniture with three manufacturing plants in Malaysia, two in Vietnam and one in Thailand. The company exports over 99% of its products, with the US taking over 90% of its sales. With a strong US housing recovery, prospects for Latitude are looking even more positive while the strengthening of the USD against the ringgit will boost revenues.
For FY June 2014 sales surged 32% to rm651 million while pre tax profit doubled to rm72 million. Its cash stood at rm42.6 million or 44 sen per share at end June 2014.
It is currently (30 Oct 2014) trading at a 12 month trailing PER of 6.4 times and a price to book ratio of 1.1 times.
Its sales are mostly on cash terms and as a result, the company has very low receivables. Inventories turnover was at a respectable 5.9 times in 2014.
It is focusing on expanding its profitable Vietnam operations while scaling down its loss making Malaysian production. The company has 100 acres of land in Vietnam, purchased at USD25 per sq m in 2001. Today the land is selling at over USD100 per sq m.
It is a Perak based cement player with a stake in Perak Hanjong Simen as its key asset. Its 35.2% stake in the cement company was sold for rm200 million cash to YTL Cement in 2010 and Gopeng has since turned into a cash rich company with a small plantation and property arms.
It has also diversified into other business such as quarrying, management of water treatment plants and manufacturing and sale of cement. Nonetheless, all of its revenue in 2013 was generated from palm oil.
The company revenue has been declining, from rm17.5 million in 2011 to rm10.2 million in 2013. Net profit in 2013 rose to 37% to rm3.6 million but was largely due to rm4.95 million in fair value gains from investment properties and short term investments.
The main attraction of Gopeng is not is not its plantation or properties assets, or its earnings which are unexciting. Indeed, its total plantation land bank is very small totaling just under 1000 ha and lack economies of scale.
Rather the key attraction is it is very strong cash rich balance sheet – a legacy from the disposal of its cement business – which perks up the potential for future corporate exercises or higher dividends.
As at June 2014, it had net cash of rm110 million as at June 30 2014 or rm0.61 per share. Its net cash is just slightly below current market cap of rm132 million (29 Oct 2014).
The stock is trading at 0.4 times its net asset value of rm1.64 with trailing 12 month PER of 63 times.
It is highly profitable developer that has carved out a reputation for building environmentally friendly green properties which are affordable priced in well located areas.
It is also one of the highest margins among developers, with pre tax margins of above 36% for the last five years.
In 2000, it had ventured into property development with the Ken Damansara project.
Its major ongoing project is the rm1.03 billion Ken Rimba township in Shah Alam, where the company is currently (Oct 2014) completing double storey terrace houses, and is launching condo.
For its future, it is planning a mixed development in JB with estimated GDV of rm1.22 billion. The projects sits on a 22.8 acre plot of land acquired in 2012 for rm56.2 million.
The company also has 19.4 acres of land in Genting, 10 acres in Malacca city centre and 2.5 acres in Batu Ferringhi, Penang.
It expects recurring income of rm15 million per year starting 2015 from the rm120 million Ken TTDI.
It is debt free. It has net cash of rm6.1 million as at end June 2014.
It is currently trading at a PER of 7.7 times and price to book of 0.97 times.
A Penang based developer teamed with Aspen Vision Development Sdn Bhd to ink a purchase and development agreement with PDC for an rm8 billion, mixed development project on 98ha of freehold land in Bandar Cassia, Batu Kawan over the next decade. Ivory owns a 49% stake in the JV company with Aspen Vision.
In addition, the parties sealed a partnership with Ikano Pte Ltd to jointly develop an integrated regional shopping centre there.
It also announced another development in JB, its first project off home teaming with JB Lee Properties Sdn Bhd, the development at Plentong will be spread over 2.84ha to 3.56ha and have a GDV of rm2 billion.
Nevertheless, industry observers say investors could be waiting for the sidelines for the release of salient terms pertaining to the two JV exercises. So far, critical information such as the cost of structure of the projects has not been made publicly available.
Its officials said that more information will be released once details have been made.
As for the Johor project, the execution of the agreement depends on approval from the authorities for land conversion and ascertaining a final land size.
Industry are also concerned about Ivory’s financial muscle for the two mega projects given its current cash hoard of rm35 million as well as total liabilities of rm489 million as at June 30 2014. Its debt to equity ratio decreased to 1.24 times for the period.
The group needs to raise cash from the market in future in view of its stretched gearing.
In addition, its net gearing of 0.7 times as of June 2014 is higher than the 0.5 time industry average.
This also explains why the group favors JVs with other developers for future projects.
It is sitting on a pot of gold. The land which houses sits motor assembly plant in Segambut, KL could fetch up to rm700 million on the open market. Its GDV could exceed rm3 billion. There is talk the company is mulling the development or sale of the land. But this will depend on whether it can move its assembly operations in Segambut to either of its two plants in Serendah and Shah Alam.
The sale would give TChong a boost as it is facing declining sales.
The land has good development potential, it is just 400m from GBH’s land, sold in July 2014 to Keladi for rm34.17 million per hectare.
So will TCMH monetize the land and use the cash to expand its motor assembly business?
Speculation about TCMH moving into property development is not new …
Tan Chong undertook a revaluation of its properties in FY2013. This gives it a total revaluation surplus of rm620 million, equivalent to rm0.95 per share. As the revalued properties include those in Malaysia, Vietnam and Laos, it is not known what the figure was for the Segambut land alone.
The 20ha were revalued at rm459 million or rm22.95 million per hectare from a previous book value of rm80 million.
It was also reported that TCMH plans to overhaul its business model to one which is asset light. Besides, the company is looking at ways to rationalize operating costs.
The asset light business model could involve the elimination of some significant capital assets from the balance sheet.
A rethink of its dealership strategy could also be under consideration.
Currently there are no definite plans. As for TCMH’s assembly operations, expects more collaboration on contract assembly between the company and other car marques. The Segambut assembly plant is being used for contract assembly under commercial agreements between TCMH and automotive players Mitsubishi Motors, Fuji Heavy Industries and Renault SAS.
If TCMH wants to consolidate its Segambut and Serendah plants under one roof, it must get the go ahead from its principal Nissan Motor Co Ltd.
If TCMH wished to consolidate two operations (Segambut and Serendah) it has to abide by its agreement with Nissan Motor.
Relocating operations and freeing up the land to unlock value is common in the motor industry.
Where will TCMH move to? Observers see a better chance of the company relocating operations to its Shah Alam rather than its Serendah plant if it wants to unlock the value of its Segambut land.
Tadmax Resources Bhd hopes to conclude the planned sale of its wholly-owned subsidiary Tadmax Power Sdn Bhd to 1Malaysia Development Bhd (1MDB) for RM317.3 million cash “as soon as possible
Taxmax Power is the owner of approximately 124ha (310 acres) of leasehold land in Pulau Indah in Klang, Selangor. Both Tadmax Resources and 1MDB had entered into a share sale agreement on February 20 2014.
The deal might be concluded by this October 31 2014.
This deal is deemed crucial for Tadmax Resources as it would enable the group to pare borrowings, and strengthen cash reserves for future acquisitions. These potential acquisitions include land bank for property development.
The key focus of Tadmax Resources moving forward was in property development.
For the six months ended June 30, 2014, Tadmax Resources narrowed its net loss to RM8.5 million from a RM26.5 million net loss a year earlier. Revenue came in at RM11.6 million compared with RM124,000 previously.
It has declared an interim dividend of 9.5 sen for the financial year 2014 ended June 30. This is the third interim dividend declared for FY2014, bringing the total to 12 sen per share.
The unusually high dividend declared by YTL Corp raises the question of whether the company which has a presence in water treatment, power generation, cement manufacturing, hotels, and telecommunications, will continue to be a generous in the future.
YTL can afford to pay high dividends if it wants to, given its huge cash hoard and its subsidiaries’ continued earnings growth. The group had rm1.38 billion in cash as at June 30 2014 while its borrowings amounted to rm40.7 billion, including current liabilities of rm8.8 billion.
If they want to, they can sustain the high dividend payout. However there are better ways to utilize the cash to generate future growth for the group.
About 50% of YTL Corp’s net profit came from its utilities business, with YTL Power contributing the bulk of it. The IPP is a cash cow, as it owns PowerSeraya in Singapore and Wessex Water in the UK. It also has a power purchasing agreement in Malaysia.
However YTL Power is facing the possibility of not having any new power generating assets in Malaysia as its PPA is expiring in 2015. The absence of any major capex may prompt YTL Power in which YTL Corp has a 50.63% stake to distribute its huge cash pile as dividends.
YTL Power can declare higher dividends to distribute its cash. It is not an issue for YTL Power’s shareholders if the company does not have any major power plant projects here soon, because most of them are holding the stock to earn dividends.
As at June 30 2014 YTL Power had rm8.96 billion in cash and bank balances. Its short term borrowings stood at rm2.07 billion while its long term borrowings were quite high, at rm21.5 billion.
Even if its PPA is not renewed beyond 2015 and having withdrawn from the Project 4A power plant, YTL Power still has capex commitments. This is because it owns YTL Comm Sdn Bhd, the 4G Internet network provider.
For FY2014 YTL Comm pre tax loss shrank to rm170.4 million from rm277.2 million previously. Revenue doubled to rm832 million from rm464 million a year ago.
YTL Power had already spent rm1.48 billion purchasing property, plants and equipment in FY2014.
Tan Sri Mohd Ibrahim Mohd Zain, a substantial shareholder and director of Brahim’s Holdings Bhd surfaced in the company.
He has acquired a 1.6% stake in the company. He also has a 30% stake in Brahims. Those days he is said to be linked to Setron and Pengkalan as well.
Lee is a substantial shareholder holds a 3.4 million shares or 6.1% stake in Rex. Yee holds 5.6 million or about 10% stake in the company.
Observers thinks that Mohd Ibrahim could just be an investor, as he is in the oil and gas company Deleum Bhd in which he holds a 5.2 million shares or about 3.4% stake
As at end June 2014, it had cash and bank balances of rm15.3 million, rm22.4 million in long term debt ad rm427000 in short term borrowings. The company had rm73.3 million in reserves as at end June 2014 and net assets per share of rm2.15.
Its asset is land. Its 1.3 acre tract in Mak Mandin, Butterworth was last revalued in Nov 2011. It also owns 7.7 acres in Seberang, Prai, also in Penang and two plots measuring 9.5 acres in Pasuraun, Indonesia which had a net book value of rm10 million as at Jan 005 and Sept 2012. It also has 6.9 acres in Jiedong Economic Development Experimental Zone, China valued at rm9.4 million.
The land parcels in Penang – Mak Mandin and Seberang Prai have 29 years and 56 years remaining on their respective leases. One piece of land in Indonesia has more than 100 years remaining on its lease whereas the land in Jiedong has about 32 years remaining on its lease.
In mid Oct 2014, a rm2 company Solaris Cemerlang Sdn Bhd surfaced as a substantial shareholder with a 12.1% stake in Halex, an agricultural chemical manufacturer.
The private company is linked to Datuk Yip Yee Foo.
The company had acquired a block of 12.8 million shares or 12.1% stake in Halex for rm12.5 million or rm0.98 per share from Yeoh Chng Poh who ceased to be a substantial shareholder in Halex.
Sources say the first part of Yip’s comeback plan, which involves Halex buying Kensington Development Sdn Bhd has already taken off. Halex had acquired stakes in Kensington Development for rm22 million and is now looking to buy an additional 50% stake for rm32 million cash.
Kensington Development has several property projects in Sabah and is in the midst of developing 8 Avenue with a GDV of rm148 million. Its total GDV stands at rm596 million which is largely from the development of its 30 acres in Sabah.
Yip was linked to several companies in the 1990s … Cold Storage and LBS Bina.
As at end June 2014 Halex had cash and bank balances of rm14.2 million and deposits almost rm2 million while borrowings were negligible.
Halex also had retained profits of close to rm40 million at end June 2014.
It saw its net profit for the second financial quarter ended Sept 30, 2014 (2QFY15) double to RM25.98 million or 9.84 sen per share from RM12.33 million or 4.67 sen per share a year ago, driven by the strong uptake of its developments in Kuala Lumpur, Johor and Perak.
Revenue for 2QFY15 jumped 38% to RM139.49 million from RM101.25 million a year ago.
On segmental basis, the group’s property development division continued to be the major revenue contributor, the bulk of it contributed by projects in the Klang Valley (45%), Johor (33%), Perak (20%) and Negri Sembilan (2%).
For the six months ended Sept 30, 2014 (1HFY15), Hua Yang’s net profit doubled to RM49.92 million from RM24.65 million in the same period last year, on higher revenue which surged 52% to RM275.96 million from RM181.74 million in 1HFY14.
As at Sept 30, 2014, Hua Yang’s total unbilled sales stood at RM717.86 million.
It also has 543 acres (219.74ha) of undeveloped land-bank, with a total estimated gross development value of RM3.5 billion.
Looking ahead, Hua Yang anticipates further population growth in the northern region and hence, its recent acquisition of four parcels of land worth RM25 million in Ipoh, Perak.
The group also launched three new phases – Ceria 2, D’ecolake, and Lavender 2 – in Bandar Universiti Seri Iskandar in Perak.
In the Klang Valley, Hua Yang launched the final development phase at One South, Zeta Residence. The entire One South project has an estimated total GDV of RM1 billion, which is expected to be completed in 2017.
While multinational consumer food companies listed like Nestle and DLady command premium valuations, there are a number of smaller homegrown companies with good track records and brand names, trading at much lower valuations.
OFI is one such company, offering lower valuations, a cash rich balance sheet and bank equivalent dividend yield. It is a leading snack food and confectionery manufacturer, producing a wide range of snack food products.
The snack food industry is highly competitive and OFI has countered competition by constantly focusing on R&D to create new products. It has also invested in automation to enhance capacity and margins, especially to counter the impact of fluctuating commodity prices.
Its brands have also made a significant impact overseas with exports now (Oct 2014) overtaking local sales. Exports accounted for 52.3% of its total sales in FY2014. Sales to local made up the balance.
Over the last five years, its revenue has increased from rm125.7 million to rm226.9 million while net profit increased fro mrm12.4 million to rm16.2 million. However, its net profit margin is drop from 10% to 7%. (Instead of Nestle net profit margin increase from 9.4% (2009Y) to 11.7% (2013Y))
The company has a strong balance sheet with net cash of rm20.2 million as at end of June 2014. This is equivalent to rm0.34 per share.
A Johor based property developer has attracted consideration attention resulting in the stock becoming one of the top performers in the last quarter.
It is still trading at a trailing 12 month low of PER of 7.64 times and 1.05 times book value, with growing earnings and high margins.
Its developments are mostly based in Johor.
It has also ventured into the Klang Valley and is developing a 496 acre township called Canary Garden in Klang and a luxury condo in the KLCC area.
The company has a land bank of some 2000 acres and has unbilled sales of rm1 billion.
Its revenue surged from rm273 million in 2011 to rm680 million in 2013 while net profit increased from rm81 million to rm182 million the same period. For 1HFY2014 the company reported a 22.4% increase in net profit to rm140 million.
KSL has one of the highest profit margins among property companies with 32.7% chalked up in 1HFY2014.
It had managed to reduce its gearing from 23.12% in FY2011 to only 8% in 213.
Historically the company has not paid out any dividends, as it has been on an expansion path. However the company has slated its intention to have dividend payout.
Its share price has doubled following news of a proposed investment into the company by a Taiwanese party in Sept 2014.
It is primarily involved in the manufacturing and trading of PVC sheeting. The company ventured into solar photovoltaic cell manufacturing business back in 2012. The solar division is gaining more prominence with the risk in demand for solar energy and is likely the reason it is seeking increased interest.
On Sept 2014 Teck Seng entered into an MOU with Taiwan listed Solartech Energy Corp who will invest rm100 million in Tek Seng’s 86.1% owned subsidiary TS Solartech.
TS Solartech had net assets of rm50 million and posted a net loss of rm14.14 million in 2013.
The investment is large relative to TS Solartech’s net assets of rm50 million and Tek Seng’s market cap of rm200 million. However it is unclear what its eventual stake in the solar business will be.
Indeed it should be noted that there have been no new developments announced since then, and the agreement is only an MOU at this stage.
The solar division generated pre tax losses of rm7.7 million in 2012 and rm13.9 million in 2013. Despite these losses, Tek Seng remained profitable with pre tax profit of rm9.63 million in 2012 and rm7.54 million in 2013. In 1HFY2014, Tek Seng’s pre tax profit jumped from rm2.5 million to rm14.4 million with a jumped in revenue to rm123 million.
Tek Seng’s net gearing stood at 55.8% as at end June 2014.
Its share price falling is mainly due to a confluence if factors, including overall market sentiment, expectation of weaker consumer spending as well as selling foreign funds.
It has a high foreign shareholding at about 36% currently (Oct 2014). Oldtown did increase its share buyback in Aug 2014 to Sept 2014 offering some support but it has since stopped.
It has net cash of rm143 million as at end June 2014 which is supportive of a minimum 50% net profit payput policy.
Net profit is likely to remain flattish for 2014 on the back of slower consumer spending, rising costs and competition.
To improve sales, it is re branding different outlets/locations to target different market segments.
It is also looking to overseas markets to boost growth. It had opened an outlet in China and plans to add several more. The first café in Australia is expected in 1H2015 under a new master license agreement. Currently (Oct 2014) there are 237 Oldtown cafes, local and abroad, about half of which is wholly or partially owned.
Meanwhile it is working with key distributors in existing and new markets to expand demand for its instant white coffee products.
I was attended a motivate talk last weekend and this video was sharing during the talk. I feel that it is a quite inspiring video and wish to share with all my blog readers.
Please spend some time to enjoy this video. It is all just about take your 2:30 minutes only.
Who is Christine Ha?
She is the first blind contestant of MasterChef and the winner of its third episode in 2012.
It has been news for the wrong reasons. It announced the abortion of plans to turn the sanitary ware company into an oil and gas player.
It is hope truly lost for GBH?
As it stands, its existing business is not exciting. Revenue has been steady at rm40 million to rm47 million over the last four years though profits have been erratic, registering losses in 2010 and 2012 and profits in 2011 and 2013.
However its main attraction was its 13.93 acre land bank in Mont Kiara, which when sold will turn the company cash rich. The land has been since been proposed to be sold to Keladi for rm192.4 million.
Once the deal goes through, its cash on hand will increase to rm237 million or rm1.28 per share.
It is unclear what other ventures GBH will look to, but with such a large cash and the stock now (15 Oct 2014) falling closer to its net cash value, there will unlikely be a shortage of suitors.
The market continued to stay in its bearish mode. The selling pressure remained as the volume was firm but the index was declining. The KLCI is strongly bearish as the short term 30 day MA has fallen below the long term 200 day MA. The last time this happened was in 2011 where the index fell 16% in two months from the then historical high. So far, the index has fallen only about 5% from the historical high and 16% from the current historical high is roughly at about 1600 points.
Momentum indicators like the RSI and Momentum Oscillator continue to indicate strong bearish momentum similar to the decline in 2011. Furthermore, the KLCI continues to trade below the bottom of band of the Bollinger Bands and this indicates strong bearish momentum.
However expect some technical rebounds because of the market being oversold in the short term…
The next technical support is at 1750 points based on a 50% Fibonacci retracement level of the uptrend that began in early 2013 and a 23.6% Fibonacci retracement from the uptrend that begain in late 2011.
Unless the index is able to climb above 1820 points support turned resistance level, expect the index to remain bearish.
Disclaimer:
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.
