Tuesday, 28 July 2015

ILB - Electrifying Solar

Integrated Logistic Berhad (ILB 5614), which had been involved in logistic solution such as warehousing, freight forwarding and distribution had finally unveiled it's latest corporate planning in venturing into the solar farming industry.

ILB new venture came from a rather quick set up of IL Solar Sdn Bhd, followed by with an full acquisition of EVN Vision Sdn Bhd within 5 business day at a price of RM 2.52 million.

The solar farming industry had been one of the recent hot topic in the market which had saw different player from different industry joining in the bandwagon to create a recurring income for their respective company. However, with more and more company venturing into the solar farming industry, what difference would it makes for ILB and the other solar farming companies which had been operating?

Let's have a quick look at the latest price chart of ILB.

ILB had been seeing massive share buy back from the company after it's approval granted to repurchase to a maximum of 10% outstanding share. Beside the company share buy back, there had been massive open market accumulation from it's director, with the recent being the open market accumulation by Makoto Takahashi.

ILB had been consolidating coming to 1 year after it's highest stint at the range of RM 1.09. The current consolidation, coupled with the share buy back and director open market accumulation could had nothing but a good signal in seeing a saturation of the consolidation effect.

As per mentioned previously in June, ILB short term target of RM 0.90 had been met and maintained, hence ILB could be on it's way to climb further should a convincing solid break occur above the mark of RM 0.90, putting next target to a psychological RM 1.00.

When Cash Meet Solar Electric

It had been a known fact that ILB had generate a good war chest of cash from their sales proceed after dumping off a warehouse in China. However, the cash pile had been sitting in the company balance sheet for quite some time without any solid direction on how the cash pile will be unlocked and transform into a higher yield based instrument.

With ILB being the latest new kid that will venture into the solar farming industry, the biggest difference of ILB against others is that ILB is coming with RM 150 million of cash in it's balance sheet, ready to make the cash working for a greater yield.

Currently, IL Solar Sdn Bhd will be working on a 1MW solar farm through the successful quota allocated to ENV Vision Sdn Bhd. According to SEDA, the maximum capacity for all eligible renewable energy is until 30 MW, hence, putting a bright path for ILB to continue investing in this area.

Going Big into Solar Farming

The director of ILB had the intention to go big into the solar farming with their existing huge war chest of cash.

It is targeted that ILB will be increasing it's capacity with more capital investment into the solar farming projects.

According to analyst familiar with the solar farming industry, the weather of Malaysia will make it possible to harvest 1MW with 1.5 acres (0.6 ha) against a world wide norm of 2 acre. ILB had an intention to go for a 10MW solar farm that is liken to the scale where AmProp is currently having. A 10MW solar farm will cost around RM 100 million, which is not a real problem for ILB.

According to analyst, a 10MW can see a recurring income of approx RM 1.15 million per month from a feed in rate of RM 0.80 per kWh, hence seeing an annual revenue of RM 13.8 million from the feed in program. The gross ROI will be at the range of 13%, which is a very attractive investment return.

Unlike some other new comers that rely on huge bank borrowing to kick start the business, ILB current fiscal position that doesn't require a bank financing aid will further boost the company earning in stronger in a consistent manner.

Others - Completion of new warehouse

ILB operation in Wujiang, China, which had been running at 100% utilization rate for all it's 6 warehouses, will be seeing another additional 3 new warehouses to be ready for operation in 2015. The warehouse, seated at the eastern side of Shanghai is a strategic place for it's close proximity towards the port and the main city.

ILB will be an interesting counter to be look upon, given it's latest corporate investment in the solar farm industry. With huge buy back from the company, open market purchase from directors, ILB had nothing but only to solar up in the coming days.

Bone's TP : RM 1.05
Long term TP : RM 1.20 (maintained)

Cheers and have a nice day


Monday, 27 July 2015

Lfecorp - A Shapadu Driver

LFE Corporation Berhad (Lfecorp - 7170) is an engineering and construction company that had recently hit the limelight when it got roped into PN17 status as shareholder fund fell below the 25% mark. Mired along with previous shoddy director dealing as well as a blow from the property construction in Abu Dhabi, it is almost a game over for Lfecorp, however, not until it caught the attention of Shapadu to appear as a white knight and give a silver lining to the company.

Lfecorp had been going on with a restructuring exercise that will ultimately saw Shapadu emerging as a substantial shareholder, and also a possible asset injection to bring the company forward. The long awaited news had finally came with a joyful response when Bursa Malaysia had on 7th May 2015 granted the approval for the regularization plan to proceed with several conditions.

With the green light from Bursa Malaysia in hand, Lfecorp will be seeing a slew of corporate exercise in the coming days which will includes par value reduction, right issues, private placement as well as debt settlement through issuance of ordinary shares.

Lfecorp restructuring exercise had been in the plan for approximately 2 years. The overview chart had outline a huge buying interest in the 12th September 2013, which saw the share price shooting to a high of RM 0.39 as more than 30million of shares exchange hands.

Consolidating for almost 1.5 years, finally, Lfecorp had unveiled it's regularization plan to bring Lfecorp out of the PN17 through a series of corporate exercise.

Lfecorp had saw strong buying interest in the counter when Bursa had finally grant approval for the regularization plan to proceed, where 28 million of shares exchange hand. The current latest buying interest could signal the coming corporate exercise that Shapadu is going to undertake in Lfecorp. Lfecorp will be looking to break above RM 0.30 in the coming days as volume build up.

Shapadu On Track

The approval will pave way for Shapadu to subscribe 66.67 million of new Lfecorp shares through a private placement exercise. According to Datuk Rosthman Ibrahim, the group had previously indicated that Shapadu had a plan to invest RM 20million in Lfecorp private placement. The amount will work out to a placement of RM 0.30 per share (RM 20 million / 66.67m shares)

Under the approved regularization plan, the restructuring exercise will involved
- Capital reduction in paid up share capital, involving a cancellation of RM 0.70 of the par value of every existing ordinary share of RM 1.00 each in Lfecorp.
- Reduction in share premium account of Lfecorp of up to RM 5,218,125 based on FYE 31 July 2013.
- 42,450,001 new ordinary shares of RM 0.30 through right issues, on the basis of 1 right issue for every 2 ordinary shares of RM 0.30 in Lfecorp
- 66,666,667 new ordinary shares of RM 0.30 through private placement from Shapadu
- 11,197,117 new ordinary shares of RM 0.30 through debt settlement

The exercise will see a total of 120,313,785 new ordinary shares being listed into Lfecorp.

However, under the Bursa Malaysia imposed a moratorium on Shapadu Capital Sdn Bhd and it's ultimate shareholder whereby they will not be allowed to sell, transfer or assign their entire shareholdings in Lfecorp at the date of listing, for 6 months from the date of listing in the bourse.

According to the latest feedback from Shapadu current CEO, Datuk Rosthman Ibrahim, Shapadu Capital Sdn Bhd will continue to pursue with the private placement exercise with compliance towards the condition from Bursa Malaysia.

More plans ahead for Lfecorp

Shapadu will emerge as the substantial shareholder in Lfecorp after the regularization plan. According to Datuk Rosthman Ibrahim, there are a lot of plans ahead for Lfecorp after the regularization plan, which will involve asset injection and award of contracts as well.

Currently, Shapadu had awarded Lfecorp a total contract value worth RM 350 million to build the Shapadu City Village at Putrajaya. Lfecorp will undertake the engineering, procurement and construction of the aspect of the projects.

Shapadu City Village will have a top grade office tower, which will also be housing the new Shapadu headquarters, a new luxury hotel, lifestyle retail outlets and 150 units of high end condominium.

Shapadu will be planning to award other under development projects to Lfecorp after the completion of the share placement.

Behind the scene

Shapadu is mainly involved in oil and gas, property development and other services. However, for the past 3 years, Shapadu had been actively pursuing the oil and gas sector, hence the oil and gas sector form 80% of the group total revenue.

As both of the industry revolve around a high capex nature, and with the current sentiment in the oil and gas sector, it will be a good exercise for Shapadu to spin off it's property arm to leverage with public funding. Furthermore, it had always been the mission for Shapadu to see the company listed in the KLSE. Lfecorp could come handy for them to do a back door listing after acquiring a substantial stake through the private placement.

According to close sources that had been following in the whole exercise, the corporate papers are ready to be executed in the early of August. Lfecorp will be announcing it's coming action for it's regularization planning.

With the new par value of RM 0.30, any arising new ordinary shares issued from private placement or right issues will have a minimal placement price / exercise price of RM 0.30. Lfecorp will need to trade above RM 0.30 to see public take up of the right issues. Sources had it that Lfecorp will be looking to trade at the range of RM 0.45 prior to the exercise.

Lfecorp will be an interesting take at the current price before any announcement on the regularization plan. With Shapadu solid interest in Lfecorp, it will be an interesting journey plan ahead for Lfecorp.

Ride with Shapadu ? You decide

Bone's short term TP : RM 0.40

Cheers and have a nice day


Friday, 24 July 2015

Sycal - Venture Higher

Sycal Ventures Berhad (Sycal - 9717) is a better known construction company that is based in Perak. Recently, Sycal had been benefiting from the robust construction sector which had saw the company order books growing more than RM 500 million with works primarily focused in the state of Perak. While the current construction sector will continue to see demand especially in the infrastructure projects, how will this jive along with Sycal ?

Let's have a quick technical outlook on Sycal.

The recent weakened KLSE market which is due to several local and international factor had not spared Sycal despite it's aggressive growing business. According to the chart, Sycal had been trading on a down trend from April to the middle of July 2015 as per highlighted in the red zone. However, Sycal had finally taken a good stand off from the down trend by breaking above the down trend line on the 16th July, and reaffirm the new start of an uptrend with solid buying seen on the 20th and 23rd July 2015.

On a technical front, Sycal had just begun it's uptrend run, and a break above RM 0.48 will then probably see Sycal continue it's journey towards it's historical high of RM 0.53. A break above RM 0.53 will technically sees Sycal putting RM 0.60 for it's next psychological resistant.

Cycling on a Robust Construction Cycle

Sycal had came back to the black after a restructuring exercise back then, with maiden construction projects from the Pullman Hotel in Bangsar had brought Sycal back to it's path. Currently, Sycal is an aggressive growth construction counter that had more than RM 550 million worth of orders in it's construction segment, generated from in-house projects and external contracts.

The company will continue to put focus on it's construction activities, while venturing to a new joint venture mixed development in Sri Iskandar, Perak. Sycal will also be looking to see it's properties development activities to snap up significant portion of profit contribution in the next 3 to 5 years with on going projects from Cheras, Sitiawan, Taiping and Ipoh and their future launch in it's 5.37 acre of land in Johor.

Growing on Steroids

Sycal is a strong growing company in the next 3 to 5 years, fueled by it's current order book of more than RM 550 million in it's construction arms. Currently, Sycal is deemed as one of the under coverage company that had been in the market.

According to it's audited financial year ending 2014, Sycal audited EPS is actually standing at a stunning 10.93 cents, an additional increased of 3.48 cents from it's unaudited estimate of 7.45 cents for FYE 2014.

Comparing FYE 2014 performance to the previous year, the group profit soared an extensive 100% to RM 35 million, putting total EPS for FYE 2014 to 10.93 cents based on  320.249 million total share issued.

Sycal continue to show it's consistency in the revenue in 1Q 2015 with 7.514 million net profit backed by RM 123.6 million in revenue, scoring 2.18 cents for 1Q EPS.

Although Sycal had a significant of debts, it's aggressive growing nature and positive cash flow is a good sign on prudent management team.

Based on FYE 2014 earning of 10.93 cents, Sycal could be easily be seeing valuation range of RM 0.90 based on fair rated PER x8. Sycal will forecast to deliver an EPS of 10 to 12 cents for FYE 2015.

Sycal will be a growing gem for the 2H of 2015, with current attractive valuation, huge growing potential.
- Construction order book at more than RM 550 million.
- FYE 2014 EPS of 10.93, at PER x8, giving a valuation of approximately RM 0.90
- Property arm to see higher profit contribution in the next 3 to 5 years.

Cycle with Sycal ? You decide

Bone's TP : RM 0.90

Cheers and have a nice day.