Wednesday, October 22, 2014

'Danger' - Tek Seng (Agreeemnt Is JUST ONLY MOU, High Net Gearing) !!!

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.

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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.