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.
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.
