Friday, 20 November 2015

Caring - Golden Vape

Caring Pharmacy Group Berhad (Caring - 5245) is primarily involves in business operation of community retail pharmacy outlet that sells pharmaceutical products from a range of health supplement, scheduled drugs, OTC drugs, personal care products, medical and healthcare devices as well as other mixture of FMCG.

Currently, there is a total of 102 Caring Pharmacy around Malaysia, mostly located at cities and urban areas. While pharmaceutical business can be considered as resilient, new government policy in drugs related products will play a big role in seeing the profitability of pharmacy outlet.

With the latest issue being heated up on vape / e-cigarette, where will be lead for Caring?

Based on the technical outlook of Caring, there had been strong buying in the month of September as Caring climbed back up from a plunge which saw it's share price lingering at RM 1.00 range. Currently, Caring had set a strong footing at the range of RM 2.00, where good consolidation effort is being seen. A strong volume break out in the coming day will be able to see Caring surging forward into uncharted territory, which will probably hit first major resistant at RM 2.50.

When Vape Matters

It had been a hot debate in Malaysia concerning the issue of vaping, especially on the retail of vape products such as vape refill liquid. According to the latest news report, the health ministry had made a solid decision on only allowing registered pharmacist to dispense nicotine laced e-cigarette refills. This decision had been welcomed by the Malaysian Pharmaceutical Society (MPS) as nicotine is categorized as Class C poison and can only be sold by doctor and pharmacist.

According to Datuk Nancy Ho, the president of MPS, the refills would be an addition to nicotine patches and chewing gum, among other nicotine replacement therapies. She added that the vaping program would also provide an opportunity for pharmacist to play an active role in promote healthy lifestyle while at the same time advocating smoking cessation.

Aside from that, it is important that the refill liquid to be controlled and monitored in order to ensure the quality of the products, as well as the permitted dosage of nicotine in the refill liquid. The current market does not have enough quality check points to ensure that the product is good to be consumed. Currently, vape refill liquid can be easily obtained through social sites as well as physical retail shop.

Vape - Too Big A Market To Be Ignored

When we talked about the cigarette market, it is a definite huge market across the world. In Malaysia, BAT market capitalization of RM 16.7 billion is a good sign to reflect how many individual that is addicted to smoking.

An interview with Azlan, an avid vape user, had informed that 1 bottle of refill can last up to 3 to 4 days. But if used heavily, it can finish up as fast as 1.5 to 2 days. A bottle of vape refill liquid can easily cost around RM 25 to RM 35, depends on brands, quality and flavoring.

Let's calculate how big can this vape market be like in Malaysia.

Assuming a normal user that uses 3 day to finish 1 bottle of refill, that will translate to 10 bottle in 1 month. Assuming an average price of RM 30 per bottle of refill, an individual will be looking to spend RM 3,600 in a year just for the vape refill liquid. With easily 1 million vape user in Malaysia now, that is a blasting huge market of RM 3.6 billion just on vape refill liquid alone. If added up on other vape related accessory and machine, this could be easily a RM 4 to RM 4.5 billion market in Malaysia alone.

Caring on High Drive Expansion

According to internal sources, Caring is going on a high expansion drive in order to open more pharmacy at 2016. Due to the new huge market in vape refill liquid, the fastest market penetration is through open more new outlet. According to sources, a new outlet will cost around RM 600k to RM 700k for renovation and supplies, which is considered fairly affordable. Possible option for Caring for fund raising activities will be private placement, right issue, or operate through a franchising program.

The latest substantial shareholder had saw Perbadanan Nasional Berhad (PNB) hauling 12.76% stake in Caring Pharmacy Group Berhad. The emergence of PNB will form a strong foothold for Caring in terms of capital funding for future expansion.

This is just too huge a market for Caring to ignore. With profit margin of vape liquid going to as high as 50%, Caring is positioned to be bag in net profit that could possibly reach RM 500 million to RM 1 billion. The current closest competitor is Guardian Pharmacy.

Let's assume a very skeptical profit of RM 300 million, that will represent a possible earning of RM 1.10 in EPS (based on 271 million share outstanding). Value at PER x10, that is a whopping RM 11 in share price valuation, putting a possible market capitalization of RM 2.38 billion in Caring (approximately 15% of BAT total market capitalization of RM 16.7 billion)

Based on the given prospect of Caring in Malaysia, and the growing user of vape, Caring will just be too good to be ignored. Caring will be very attractive due to the following:
- Health ministry decision on registered pharmacy to dispense nicotine laced product, which include vape refill liquid
- The vape market is a RM 4 to 4.5 billion business opportunity per annum in Malaysia currently
- PNB emerge as Caring substantial shareholder with 12.76%, forming a strong capital backing for future expansion drive
- Caring valuation based on skeptical net profit of RM 300million will see Caring worth RM 11.00 based on valuation of PER x 10 (eps RM 1.10)
- Vape is strong growing market in Malaysia, with CAGR of at least 10%

Vape to the limit of the sky? You really have to decide.

Bone's short term TP : RM 3.50

Cheers and have a nice day


Tuesday, 17 November 2015

D&O - Epic Star Light

D&O Green Technologies Berhad (D&O - 7204) is a Malaysian based company which primary activity involves in the manufacturing of LEDs. With the discontinued operation from Omega Semiconductor Sdn Bhd in 2014, D&O is currently clinging on it's 68.71% owned subsidiary DOMINANT OPTO TECHNOLOGIES SDN BHD as the core revenue generator for the group.

The LED market had been seeing a major consolidation movement recently, with major player in Taiwan consolidating through merger and acquisition in order to reduce the price war that will erode the profitability of the sector which is full of potential in the coming years. Notable merger had seen EPISTAR Corp acquiring Formosa Epitaxy in 2014 and TSMC SSL in 2015, panning out the growing implementation and usage of LED in the market.

Whilst the LED market will continue to grow stronger next year, how would this reflect for D&O?

D&O had saw a significant event when it finally broke above the long term resistant line of RM 0.40 that had been consolidated for almost 2 years with good supported volume. The break out had open up a new window for D&O to travel into new heights in the coming day, with the nearest target being at RM 0.50, and then RM 0.60.

A medium term outlook had also outlined a strong uptrend on D&O. Along with the attempt in the break out of long term resistant at RM 0.40, D&O had saw significant open market transaction which had saw more than 15m shares transacted in a day in 2 occasions. The strong uptrend will continue to follow through with more corporate event which will be announced in the market soon, with RM 0.50 easily achievable in the short term outlook.

LED - The NOW happening sector

Yes, LED is a very happening sector now in the global arena. However, it's excitement had not been able to pour into the local market sentiment, which could probably due to the lack of coverage and limited choices in the listed market entity which is exposed to the booming LED industry. However, due to the continuation of the booming LED market, it is hard to see D&O not going to benefit from the growing market share.

According the Navigant Research, the projected unit shipments of LED lamps and modules will grow to a stunning 4.5 billion units in 2024, which application such as commercial, industrial, residential and outdoor lamps and modules, as well as application in the automotive industry, such as LED backlight.

The benefits of using LED is not unknown of. From power saving, life span, carbon emission, durability, heat emission, sensitivity to hardcore environment, the LED command a 10-0 landslide victory over incandescent and fluorescent lighting.

Life Span
50,000 hrs
1200 hrs
8000 hrs
Watts (based on 60
watt bulb)
6 to 8 watts
60 watts
13 to 15 watts
Kilo-Watts used per
329 KWr/yr
3285 KWh/yr
767 KWh/yr
Contain Toxic
RoHS Complaint
Carbon Emission
1051 pounds/yr
Sensitivity to low
Yes (Not workable
under -10 degree
Fahrenheit or over
120 degree
Sensitivity to
On/Off Cycling to
life span
Durable (Can
handle bumps
and knock)
No (Glass or
Filament can
No (Glass can
break easily)
Heat Emitted
3.4 btu’s / hr
85 btu’s / hr
30 btu’s / hr

Synergy with EPISTAR Corp

EPISTAR is incorporated in Taiwan, and is listed in the Taiwan Stock Exchange. It's principal activities are developing, manufacturing and marketing of high brightness LED as well as other LED application from lighting, back light, display, mobile and automotive application.

With the latest consolidating effort of EPISTAR, it is currently the world largest manufacturer and solution provider in the LED industry. However, the latest expansion had saw EPISTAR subscribing 10% of shares in D&O subsidiary - Dominant Opto Technologies Sdn Bhd. The strategic collaboration with EPISTAR is finalized on 28th September 2015. Source - DOMINANT entered strategic collaboration with EPISTAR.

According to close sources that is familiar with this matter, the strategic collaboration is just a start, and D&O will be going to see more corporate exercise from private placement and to the setting up of new production lines. Sources informed that EPISTAR is looking to invest more than RM 1billion into D&O in order to cater for the growing market demand. The current LED market which stands at USD 18 billion will be looking to rocket up to USD 63 billion in 2020, with grow anticipated by more than 30%.

D&O had indirectly opened up a large channel of distribution through EPISTAR, with EPISTAR owning half of the top 10 worldwide LED packagers, from prominent name such as Nichia, Samsung, Osram Opto, LG Innotek, Seoul Semi, Cree, Lumileds, TG, Sharp and Everlight.

The growing market demand is also highlighted up with German-based Osram leading the move to invest 1 billion Euros (RM 4.68 billion) to build a new LED chip plant in Kulim, which will be the largest and latest 6-inch LED chip production in the world.

Government Policy in LED Application

Any new government policy will create a new opportunity in the market. The latest stint had saw the Indian Government putting up tenders on LED streetlight retrofit projects that will put a 200 million LED light bulb demand in 2016. Developed market such as the US and Europe where carbon emission is a concern will see more implementation from a government, commercial, industrial to residential application, pushing demand higher.


D&O will be an attractive company to be monitored at due to
- EPISTAR, the largest LED player in the world subscribing 10% stake into Dominant Opto Technologies Sdn Bhd, a subsidiary of D&O
- D&O to see more corporate development from capital injection in form of private placement, right issue as well as building of new plant to cater for new demand output from EPISTAR
- D&O 3rd quarter result to see stellar financial result and strong growing revenue
- Global LED market to grow into USD 63 billion in 2020 from the current USD 18 billion in 2015.
- Worldwide government policy in LED application for street lights, industrial as well as commercial usage will send rocketing demand on LED manufacturer.

Looking at the current LED market, there is so much opportunity and window for growth. With the pact of EPISTAR in D&O, D&O can be easily looking to see more corporate exercise and expansion which will see D&O market share growing towards RM 1billion.

Shining bright with D&O ? Don't wait too long
Bone's TP : RM 0.60

Cheers and have a nice day


Monday, 9 November 2015

Dataprep - Genting of China

Dataprep Holdings Berhad (Dataprp - 8338) is primarily involved in the ICT solutions which cover services such as Enterprise Content Mangement System, Cloud Computing, Data Center, Network Integration, IT Security Solutions as well as Payment Solutions and Services. With more than 40 years of experience in handling large scale ICT projects, the current biggest project that Dataprep is involved in will be none other than the Genting Secret Garden at Chong Li in Hebei, China.

The Secret Garden Resort is the brainchild of Datuk Lim Chee Wah since 1990s. The youngest son of the late Tan Sri Lim Goh Tong is looking to bring forth a USD 6 billion mega project which will eventually cover a 100 square kilometer area ranging from ski resort, out door and indoor theme park, 5 stars hotel and golf courses.

Currently, Secret Garden Resort had completed it's phase 1, and will be seeing another 4 phases commencing stage by stage. How would this transform Dataprep in the course of the projects?

Dataprep had saw a long consolidation that from the last highest volume traded day at 21st August 2014 which had saw more than 33 million of share changed hand in the open market. The consolidation had saw saturation recently when Dataprep latest price movement could suggest a break out on the long term down trend line. This would suggest Dataprep could be looking to revisit the resistant line at RM 0.25 in the near term. A breakout on RM 0.25 will then see Dataprep challenging RM 0.30 and beyond.

Game Changer - Genting Secret Garden Resort at China

Although Dataprep had a vast 43 years experience on handling large scale ICT implementation and projects, with major shareholder Datuk Lim Chee Wah on board, it will never go away from the traditional Lim's family business - Holiday, Leisure and Gaming sector.

Dataprep is closely held by Datuk Lim Chee Wah through his wholly owned vehicle, VXL Holdings Sdn Bhd. The recent closed market purchase had saw Datuk Lim Chee Wah owning 60.62% (232, 232, 168 shares) of Dataprep.

With the collaboration of the Chinese Government to bring China tourism industry to another level, Genting Secret Garden Resort is a detailed masterplan spanning 100km square meters massive tourism city that will bolster a new level of ski resort with more integrated facilities such as golf course, recreational area, as well as outdoor snow activities.

Currently, Dataprep is selected as the main ICT project delivery partner that will oversees the whole ICT implementation from Phase 1 to Phase 5 of the USD 6 billion in GDV mega resort. According to the agreement, Dataprep is entitled for 6% of the total value of the ICT contract, which will come in 20 packages. Dataprep will also see recurring income from the maintenance and upgrade after completion and handover, putting a firm cash flow for the company in the future.

Cashing the Slots and Casino

All successful entertainment city will never fail to comes with Gaming which will see high rollers from all around the world to the city. The Secret Garden Resort is housing 5 championship golf courses, a themed park, a 3,000 person capacity convention center, more than 3,000 hotel rooms with chairlifts and gondolas that can carry 18,000 guests a day.

Dataprep had recently announced that the group will diversify into new lines of business such as leisure, property development, gaming and entertainment. (Annual Report 2015). With VXL Capital Limited which is listed in HKSE being privatized in 2014, Dataprep is the only public listed entity that had direct linkage with the development of Genting Secret Garden Resort.

According to close sources familiar with the development of Genting Secret Garden Resort, there are plans for gaming facilities such as slot machines to be operated in the entertainment city, while not ruling out a possibility of casino as well. "If there is no gaming facilities in Genting operated entertainment resort, that is not Genting." quoted the sources that does not wish to be named.

Interestingly, the share price development of Dataprep and local slot machine manufacturer - RGB International Berhad (RGB - 0037) had saw similar interest in volume spikes that reflect on the same period of time

The Genting Secret Garden Resort will be tapping in the 30 million population of Beijing with the new high speed railway line from Beijing to far-western Urumqi, with the first station in Zhangjiakou City, where a 20 minute shuttle ride will be reaching the ski slopes. That means the whole journey will only take just over an hour.

The whole masterplan which is drawn out by Ecosign, Hornberger and Worstell of San Francisco will connect five valleys, three mountain peaks, linking 250 hectares of skiing area and 65 km of trails. The mega resort will also be the host of 2022 Winter Olympics.

Corporate Exercise

With much of the coming future development that we can envisage now, Dataprep currently being the only public listed company that can seek public funding will be undergoing massive corporate exercise in order to fuel the coming projects, which consist of a new business ventures in leisure, property development, gaming and entertainment. In such scenario, Dataprep will be looking to trade above the par value of RM 0.25 which will be the minimal price for any private placement issue.

This new business direction will also going to see Dataprep in a process of replicating another Genting Highlands, however, in a much larger scale in China.


Dataprep is a very interesting company to be vested for the long term based on:
- Technically broken above the long term downtrend line
- 60% owned by Datuk Lim Chee Wah, the brainchild of Genting Secret Garden Resort at China
- Dataprep realign focus to new business ventures on leisure, property development, gaming and entertainment, which is foreseeable to be implemented in Genting Secret Garden Resort at China.
- Dataprep having high correlative movement with local slot machine manufacturer - RGB International Berhad, further reinforcing the motion on the operation of slot machine in the entertainment city.
- Dataprep start to derive more revenue from ICT projects in the USD 6 billion mega entertainment resort city.
- Dataprep to be a future "Genting Highland of China"
- Dataprep being to only public listed entity to have linkage with Genting Secret Garden Resort will see future corporate exercise that will push share price trading above par value of RM 0.25 which is being the minimum price of private placement issues.

Dataprep will be a good company to be hold for a long term. Should Dataprep priced at RM 1.00, the market capitalization is just RM 383 million, which is considered small considering the opportunity and market that Dataprep is currently tapping into.

Roll on with future Genting of China? You Decide
Bone's TP : RM 0.50

Cheers and have a nice day