It offers investors an exposure to the robust growth in mobile devices and the increasing use of LED in consumer products.
The Penang based technology player designs and develops automated test equipment for companies to inspect LEDs. LEDs are a component in PCB used mainly in the semiconductor, consumer products, optoelectronic and automotive industries.
It had completed its transfer to the Main Market. The MSC status company has also successfully renewed its pioneer status and will enjoy tax exemption for the next 10 years until 2025.
Its underlying business has been doing very well. Revenue grew at a CAGR of over 41.4% between 2010 and 2014 to rm45.14 million. Net profit grew by an outsized 50.4% annually over the same period to rm19.78 million.
Elsoft runs a lean ship, with just 61 staff, translating into a high productivity of rm740000 of revenue per employee.
Moving forward, it plans to expand its customer base and produce LED testing equipment for medical devices which it expects to boost revenue by 20%.
Meanwhile its associate company Lesoshoppe is seeking to list on ACE market, to fund the expansion of its trading equipment business in Thailand, Indonesia and the Philippines.
It has a strong balance sheet with double digit ROE and is in net cash position of rm32.3 million. This is supportive of its minimum 40% dividend payout policy.
It has been rewarding shareholders with more, paying 50 to 73% annual earnings in 2011 to 2013.
It is trading at a trailing 12 month trailing PER of 15.7 times.
Currently (March 2015) it derives more than 80% of its turnover from syllabus-based publications.
It is looking to complement its revenue stream for its financial year ending August 2015 (FY15) with its new products which were launched late Feb 2015.
It will focus on its dynamic learning division, and will include those that incorporate technological advancements with conventional learning methods, such as interactive bookmarks.
It will increase [revenue] growth from digital products in FY15.
Its new products include an electronic tablet designed especially for teacher training colleges.
In October 2014, Sasbadi acquired all the rights, title and interest in the New products to complement Sasbadi’s FY15 revenue publishing list of Penerbitan Multimedia Sdn Bhd (PMSB) relating to learning and educational materials, which included 240 titles on teacher training as well as the PMSB trademark for RM1 million.
The group is also anticipating revenue contribution from its licence and service agreement (LSA) with Indonesian company PT Penerbit Erlangga.
The LSA, inked in October 2014 between the group’s wholly-owned subsidiary Sasbadi Online Sdn Bhd and Penerbit Erlangga, will generate US$300,000 (RM 1.11 million) in one-off non-refundable income for Sasbadi Online in FY15. The LSA allows Penerbit Erlangga to use Sasbadi’s interactive online learning system i-Learn.
They (Penerbit Erlangga) are using [Sasbadi’s] i-Learn as a platform for their contents, which will be based on the Indonesian syllabus. Once they launch their products in March 2015 it will be entitled to 8% royalty from products sold using our i-Learn platform.
The group also ventured into the the Malaysian Higher School Certificate (STPM) market in 2013 when it signed an IP Rights Assignment Agreement for RM5.5 million with Pearson Malaysia Sdn Bhd, which gave it access to the publication of STPM material.
Sasbadi’s focus as an education solutions provider is to look at publishing activity as contents development rather than mere book publishing.
The group will be acquiring a Chinese-based syllabus publisher catering to Chinese medium schools in the country.
The group has set aside RM10.5 million out of its RM25.2 million initial public offering (IPO) proceeds for the acquisition of publishing businesses.
There are also plans to utilise RM1 million of its IPO proceeds for the establishment of two applied learning centres to provide training and education to young children.
Sasbadi reported a net profit of RM12.25 million on the back of RM79.51 million revenue for its FY ended August 2014. Its net profit in FY14 was 3.94% lower than a year earlier, mainly due to RM1.33 million listing expenses incurred.
For its first quarter ended November 2014 (1QFY15), Sasbadi reported a net profit of RM1.65 million on revenue of RM16.32 million.
With these new developments, Sasbadi hopes to have a more even revenue contribution for the four quarters, thus eliminating the seasonality of its business.
Its first quarter of financial year 2015 results were broadly in line with expectations even .
Observers expect upcoming quarters to be much stronger, driven by strong unbilled sales which stand at rm3.06 billion currently (March 2015).
It sold rm440 million worth of properties in 1QFY2015.
It is targeting to sell rm3 billion worth of properties in FY2015 and rm4 billion in Fy2016.
In Feb 2015, it completed the acquisition of land bank from EcoWorld Sdn Bhd for rm3.8 billion
It had completed its rights issue in March 2015. The only outstanding component of the restructuring exercise now (March 2015) is the 20$ private placement which should be completed in 2QFY2015.
With the restructuring finally almost completed, its management can fully focus on operational issues and drive the company to greater heights.
It should play catch up given that it is embarking on a value unlocking plan to list its construction arm, the Sunway Construction Group.
Although property and property relayed earnings made up 58% of financial year 2014 net earnings, Sunway now (March 2015) has a different angles as it offers investors an alternative for exposure to the construction sector.
The construction segment contributed about rm120 million or 20% of profit after tax and minority interest in FY2014, an earnings base that is almost equivalent to that of WCT Holdings Bhd.
SCG is one of the largest construction companies in Malaysia and by revenue size, it will be the largest listed pure play construction company upon listing.
Its construction order book currently (March 2015) stands at rm3 billion or which 53% comprises external jobs, 37% in house works and 10% precast contracts.
It also has exposure to the MRT1 and LRT jobs, which are among the key infra developments that the government has decided to maintain in the revised Budget 2015.
With these exposures, Sunway is in a better position to bid for more MRT2 jobs going forward.
A new airline called Flymojo will be launched.
Mixed reports are indicating that Flymojo will either be a “value” airline or a “full service” airline, targeting the intra Asean market.
Flymojo signed a letter of intent with Bombardier to purchase 20 CS100 aircraft with an option for another 20. No timeline for the firming up of orders or delivery schedule was revealed.
It is understood that Flymojo is expected to be launched in October 2015 and commence flights in 1Q16.
The CS100 aircraft is a slightly smaller aircraft compared to the A320 that Airasia, and B738s that Malindo and Malaysia Airlines are operating.
Maximum seating on a single class configuration goes up to 125 seats versus the A320’s 180 seats, while flight range is a bit shorter at 2,950 nautical miles versus the A320’s 3,300 nautical miles.
Unlike Malindo Air, which is based in KLIA/Subang, Flymojo is using Senai (which entails much smaller connectivity and feeder traffic from long-haul) as its main hub and Kota Kinabalu as a secondary hub (which gives access to North East Asian traffic).
Industry observer do not expect the share price to perform despite (from 18 March 2015) low oil prices due to the oversupply of airlines in Malaysia.
While the airline is marketing itself as a premium airline, Malaysian aviation is already oversupplied and it will inevitably compete with AirAsia. As a result of this negative surprise, industry observers no longer expect AirAsia’s share price to perform despite low oil prices.
However some do not see Flymojo being in direct competition with Airasia which operates mainly out of KLIA, except perhaps for the highly profitable KUL-BKI route.
After complete delivery of all 20 aircraft (likely to be spread over three to four years), estimate Flymojo to account for just 19% of Airasia Malaysia’s current capacity.
Separately, foreign shareholding at Airasia has retreated from the previous high of 60% (in December 2014) to 58% (at end-Feb 2015).
It has proposed to acquire ABL Group, which owns a combined 72% stake in Impress Ethanol and 49% stake in Impress Farming, for US$24 million (RM89.04 million). The acquisition will enable KNM to participate in the Thai renewable energy sector which required constructing and operating a bio-ethanol plant. This will provide recurring income for KNM in the long term.
Net gearing is only 0.27 times and this is expected to improve further after the completion of KNM’s one-for-five rights issue in April 2015. To note, the proposed rights issue will be fully underwritten by its major shareholders and investment banks, which provides room for expansion.
This venture is viewed positively as this will help the company transform from project-based earnings to more recurring income.
Together with the UK Peterborough biomass project, expect to see significant contribution of income from the recurring renewable energy division in the future.
The proposed construction of a bio-ethanol plant is in line with Thailand’s alternative energy devel-opment plan (AEDP 2012-2021) to target 25% of renewable energy in total energy consumption by 2021 with nine million litres per day of ethanol from about 2.6 million litres per day in 2013.
The main feedstock for bio-ethanol is sugarcane and cassava. There are currently 21 bio-ethanol plants in Thailand with a capacity of 4.8 million litres per day.
The declining global oil price should not markedly affect its business given its focus on the down-stream. With the Petroliam Nasional Bhd RAPID project proceeding, expect to see continuous contract news flow. KNM has a good chance to secure subcontractor jobs from some refinery packages in the near term.
Its management reassured that the EnergyPark Peterborough project remains on track with some ground and minor construction works started. It expects to commence contribution in financial year 2017 (FY17).
Its catalysts include the announcement of more Rapid contract wins, financial closing of EnergyPark Peterborough and stronger quarterly earnings due to lower finance cost.
The risks are fluctuations in oil prices, project execution ability and delay in the award of contracts.
Although weaker consumer spending and the falling ringgit will affect earnings, HaiO should be able to maintain higher than market average yields on the back of its strong balance sheet. It is also trading at comparatively undemanding valuations.
The company sells a wide range of Traditional Chinese Medicines – it has exclusive rights to import over 200 Chinese medicated tonic, tea and precious herbs products from China – and healthcare products mainly via MLM as well as wholesale and retail. MLM accounted for roughly 60% of revenue in FYApril2014.
Outlook for the local MLM industry is expected to be challenging in view of rising cost of living and weaker consumer sentiment, which will result in lower spending. Cost of imported products will also increase with the weaker ringgit. For 1HFy2015, Haio’s revenue and net profit declined by 10.6% and 30.6% year on year to rm107.5 million and rm13.4 million respectively.
Moving forward, HaiO intends to launch more affordable small ticket items to boost sales, carry out more sales and promotion activities, and recruit new members to expand its market reach.
Positively HaiO has a solid balance sheet. It has marginal borrowings and net cash of rm104.3 million or equivalent to about rm0.535 per share.
The company has a minimum 50% dividend payout policy.
It has been buying back its shares since 2003 – treasury shares now (March 2015) stand at about 3.5% of total shares issued.
It is trading at a trailing 12 month PER of 13.4 times and 1.88 times book value. By comparison Amway and Zhulian are trading at historical PER of around 19 to 20 times.
Its net margin and ROE for FY2014 were 15.9% and 16.3% respectively.
It has been awarded the distributorship of the MiPad in Malaysia by Xiaomi Inc early March 2015, is hoping to ride the popularity of China’s No 1 consumer electronics brand, which in just five years, has risen to become the world’s number 3 smartphone player.
ECS has been distributing smartphones and tablets since 2012 and is always looking for new brands and products to represent.
With the appointment of ECS ICT, local IT and mobile device resellers will now be able to sell the MiPad.
Whole ECS ICT is the only distributor of Xiaomi products in Malaysia now (March 2015), there is no mention in the contract that it is the sole or exclusive distributor. Hence it has to perform well in distributing the MiPad before it expects Xiaomi to award it the distributorship of more products.
In the second half of 2015, ECS plans to bring in wearable gadgets and accessories.
ECS has more than 5000 resellers in its nationwide channel network, comprising retailers, system integrators and corporate dealers. The group distributes smartphones from Lenovo, ASUS and BenQ. It has close to 40 renowned brands in its ICT distribution portfolio and distributes a wide range of products, including notebooks, PC, tablet, printers, software and servers from more than 30 principals.
ECS has a healthy balance sheet with zero borrowings and net cash of rm90 million as at Dec 312 2014. It also has a policy to pay at least 30% of its net profit as dividends.
In the financial year ended Dec 31 2014, it set a new revenue record of rm1.6 billion, up 20% from rm1.3 billion a year ago due to strong smartphones sales. Net profit grew from rm26.9 million to rm29.4 million.
It had snapped up several parcels of land totaling rm151 million, has dismissed concerns its gearing is high amidst the gloomy property market outlook.
It had in Jan 2015 announced the acquisition of two parcels in Bukit Mertajam, Penang for rm31 million, It had reportedly its maiden venture into the Penang mainland property market.
It had also entered into a conditional agreement with Nation Holdings Sdn Bhd to acquire 3.24ha of leasehold land in Selayang for rm120 million. It is said to be setting its sight on Sabah.
Its enthusiasm for expansion is concerned by many due to its high gearing of about 0.5 times. The company’s total debt to equity ratio of 64% against LBS Bina’s 40%, Hunza Properties Bhd’s 43% and SelDredging’s 79%.
Huayang believes sales from its project launches will fuel profit growth and improve operational cashflow. This will pare down borrowings in the medium term.
The acquisition increases its gross development value only marginally. This may allay market’s concerns in the short term but the apprehension remains whether affordable housing developers can continue to acquire new land parcels.
It is a developer primarily focusing on affordable housing.
With the prices of construction work and materials locked in by Huayang and unit pricing not expected to increase given the company is a developer of affordable housing, profit margin is expected to be maintained. As prices are locked, its primarily focuses on improving sales of its various projects.
Its stock price downside is buffered by high dividend yield. However when its gearing is high, the management might forgo high payout.
If the property sector weathers the ongoing period of tight lending standards now (March 205), Huayang may emerge as one of the favourite picks for property sector.
Despite seeing a CAGR of 53% in its net profit over the past three years, it is still hungry for expansion.
It is involved in felt and non woven parts manufacturer. It is OEM of resonated felt and non woven fabrics for motor vehicles and hygiene applications.
Felt is a textile used mainly for heat and sound insulation inside vehicles and air conditioners. Its customers convert it into a jacket of sorts and wrap it around the compressor so the noise is reduced. The purpose is similar for felt installed in cars.
It is riding in the sectors its products are used in - automobile and property markets. This provides the company with high consistent margins and growing sales.
Its products are used in automobiles, as noise dampeners in compressors of air conditioners and as insulation for buildings, including in roofs, partitions, walls and flooring. It is trying to penetrate the China market.
Between 2008 and 2013, it saw consistent sales growth. In 2013, it posted 148% rise in net profit to rm6.5 million despite smaller 17% increase in revenue to rm68.6 million. Over the years the company has been able to maintain double digit operating margins with its net margin in 2013 approaching the 10% mark.
It might not have to wait long if its talks with an automotive parts distributor in Thailand go well. A partnership could be formed by 2HFY2015. The Thai venture’s contribution to revenue would be minimum in the initial years. Its products to its customers are their raw materials.
The company’s ability to maintain healthy is promising, backed by strong demand growth in the automobile and property markets in its existing markets. Expansion into new markets, such as China will underpin its future growth.
It has a strong balance sheet with a low 3.72% gearing.
It is ready to strengthen its presence in Indonesia with the addition of a production line there in 2015.
Last year (Nov 2014) it is in talks with an Australian company that will become the sole supplier for Ford’s assembly in Bangkok.
The new ventures will require Oceancash to spend an additional rm10 million in FY2015. With a cash balance of rm12.87 million as at June 2014, its borrowings for its capex for 2015 will amount to rm4 million at most which will only bump up its net gearing to 0.02 times. It had total borrowings of rm14.18 million as at June 30 2014.
The company exports to Thailand, Taiwan, Indonesia and the Phillipines.
If its talks with the Australian company are successful, it will move one of its production lines in Malaysia to Thailand.
The felt has better margins than its non woven segment. Non woven products are used in diapers, sanitary napkins, wet wipes and surgical masks and gowns.
At rm0.33 it is trading at a 12 month trailing PER of 14.98 times and 1.27 times book.
Its executive director of hose maker Wellcall Holdings Bhd, Chew Chee Chek has stepped down due to health reasons. He was appointed to the board on April 17, 2006. Chew has a direct stake comprising of 21.618 million shares or 6.5% in Wellcall.
An industrial rubber hoses used across a broad swath of the economy … for air and water, welding and gas, oil and fuel, automotive, shipbuilding as well as F&B sectors.
Wellcall is Malaysia’s largest exporter of industrial hoses.
The world’s largest industrial hose maker has gained from a weaker ringgit against the USD because it does not hedge on forex.
It makes rubber hoses for six major applications – air and water, oil and fuel, welding and gas, shipbuilding, automobiles as well as food and beverage.
Due to ringgit volatility it generally does not stock up its inventory and order beyond two months.
It sees to be commissioned new manufacturing plant to be a timely move as it will further address higher demand from the US, especially with its economic recovery.
It is in full swing preparing for the commissioning of Factory 3 for July or Aug 2015. It will be used to cater mainly for the US market.
It may take two to three years to fill up its new capacity.
Earnings grew steadily for the past four years. In FY Sept 2013, WellCall saw lower revenue – as customers held back purchases in anticipation of lower prices – but still managed to grow profits due to lower rubber costs. In FY2014 both sales and net profit rose – by 11.3% to rm146.4 million and 19.1% to rm29.4 million. Net margin increased from 11% in FY2011 to over 20% in FY2014.
The current (March 2015) regime of low commodity prices and weak ringgit bodes well for WellCall. Almost 91% of the company’s sales are exported, to all over the world.
The company is sitting on net cash of rm41 million.
It has a 50% dividend payout policy.
Its share price succumbed to selling pressure despite the Johor based property develop having achieved a record high profit for the financial year ended Dec 31 2014.
It posted a net profit of rm340 million or rm0.8056 per share in FY2014 an 87% increase compared with FY2013.
The selling was partly because of the group’s earnings have come in below market expectation due to slower billing recognition from property sales. Excluding a property revaluation gain of rm88.2 million, the group’s core profit would be rm252 million.
KSL has a massive landbank in Iskandar Malaysia that it acquired long before the boom. The group also enjoys stable recurring rental income from its shopping mall and hotel in JB.
Rental income grew to rm72.08 million in FY2014 from rm64.28 million a year ago. Its rental earnings are indeed higher than that of some of the listed real estate investments trusts.
In addition KSL has achieved an average profit margin of 34% thanks to low land costs.
Its low land costs provide greater flexibility in pricing, which helps KSL cater for the affordable market segment while maintaining decent margins. Furthermore, its growing property investment income helps provide earnings security should the broader property market remain soft.
KSL’s property’s assets are severely undervalued by rm1.55 billion. A revaluation of the group’s assets could yield an additional valuation of rm2.05 billion which would translate into a book value of rm3.90 per share.
KSL has started rewarding its shareholders with dividends.
Loss making property developer is banking on four development projects in the Klang Valley in the first half of 2015 to return to profitability in its current financial year ending Dec (FY2015).
It is now (Feb 2015) negotiating with a few companies and land owners to jointly develop several residential and commercial developments in the Klang Valley.
Its ED is Datuk Donald Lim Siang Chai who is also the deputy finance minister between 2010 and 2013.
It is looking at Puchong and Balakong and some terraced house projects.
Its cash and cash equivalents stood at rm25 million as at end 2014, does not have any land bank in the country at the moment and is talking to several land owners to acquire some parcels.
Lim also headed three public listed companies before Jiankun – Lim Kim Hau Holdings, Rahman Hydraulic Tin Bhd and PJI Holdings Bhd – expects Jiankun to turn around in FY2015.
Jiankun has been suffering losses since 201 on the back of falling revenue. It bucked the losing trend in FY2013 with a net profit of rm4.64 million which was largely due to a revaluation gain of rm11.09 million from its investment properties. For the cumulative nine months ended Sept 2014, it lost rm1.64 million.
The group had carried out a restructuring exercise at end 2014 to cut losses and clean up its balance sheet to obtain financing for the group to move forward.
Lim holds a 9.23% stake in the company as at Feb 17 2015.
Jiankun is actually the namesake of Chinese property development firm Jiankun Intl China Ltd, which holds about 3% equity stake in the company which it intends to increase soon.
For shareholders, it has so far been a bumpy ride.
While low cost model has worked for Airasia’s short haul flights, investors might be spooked by AAX’s inability to return to profitability thus far (Dec 2014).
The fall in jet fuel prices will be good for AAX’s bottom line, but it will be not sufficient to return the carrier to the black (Fy2015) due to the competitive operating environment. AAX is likely to pass on a significant portion of the fuel cost savings to consumers.
If crude oil trades lower than USD71 per barrel, AAX will be able to survive. But the question is what happens when prices are back to normal USD100 and above per barrel.
When times are tough, AAX might not have what it takes to weather the storm as seen in its financials for FY2013 and Fy2014. That is when times are tough it would be predictable that all in the market would lower their fares. When that happens, AAX will lose its competitive edge completely because there is not much of a price gap left.
When it comes to such price competition, many consumers do not mind paying a small premium for the comforts of a full service carrier when flying long distance.
Another challenge for AAX so far (Feb 2015) has been loss making routes. It had discontinued its flights to Adelaide and Nagoya that were incurring losses to the group. It also slashed the frequency of flights to Sydney, Perth and Melbourne late 2014.
In this low price environment, AAX’s short term strategy is to survive, recapitalize and conserve capital.
Its balance sheet is not looking good as it used to be. Its cash and bank balances almost halved to rm125 million as at end Dec 2014 from rm263 million at end FY2013. Meanwhile its trade payables soared 63% to rm656 million from rm347 million in the same period.
Still AAX has managed to scale back total borrowings to rm1.58 billion compared with rm2 billion as at end FY2013. Of this rm1.07 billion consists of long term borrowings, while the remaining rm513.2 million is short term.
It is worth nothing, a whopping 95% of the total borrowings comprised the USD denominated debt, with the rest in ringgit.
It has also proposed a cash call on Jan 30 2015 for a rights issue with free warrants. This could raise rm395 million that the carrier intends to use for working capital and to service its loans.
Airasia executive chairman and co founder Datuk Kamarudin Meranun steps in as group CEO of AAX.
He will spearhead the development of AAX group and alongside Benyamin will lead the reorganization and turnaround exercise to strengthen the airline’s balance sheet and to maximize profitability.
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.
