Tuesday, 31 March 2015

Syscorp - Just 2 Cool

The market should be starting to talk about the next upcoming political event that is going to happen in Malaysia, which is non other than the Sarawak Election. Sarawak had their last election during the 6th April 2011, and a 5 year tenure will means Sarawak will see election probably before 2016 comes.

There had been many major development and FDI in Sarawak as of lately, with the huge topic focusing on the SCORE and the booming Samalaju Industrial Park. With the already lowered oil price, and the expectation to see an even lower oil price from the oversupply to a situation of not enough of storage capacity coupled with the strong rising USD against MYR, what could be an interesting take with all this factor in line?

With Syscorp in the line, things might be very interesting then. With most of the economical event pointing towards a positive hit on Syscorp, this counter is considered as severely under coverage with huge potential on the upside.

Let's have a quick look at Syscorp latest chart price.


Syscorp had been range bound at RM 0.42 to RM 0.46 prior to the equity sell down that had shaken up the market. The stock had been laying in a consolidation at this range for a period of 3 months, which might suggest to see fresh interest to revisit the counter soon after seeing a volume build up in the overall market of the KLSE as the trade details had identified a positive net buying from the foreign funds. We continue to view more foreign player to channel fund back to Asean developing country after a possible year end rate hike from the Federal Reserve and the ongoing stimulus from the ECB.

Should there be a firm build up in volume that challenges above RM 0.50, Syscorp could be seeing it's rising tide in the coming days after consolidating for a period of time. Short term outlook could poised to see RM 0.55 to RM 0.60.


Syscorp - Hitting a Better Note from a Lower Crude

Syscorp had been a good beneficial from the growing economy of Sarawak. What makes Syscorp different from other freight forwarding company is because on it's diversified involvement in the shipping industry which include - domestic and international freight forwarding, ship building and maintenance, and involvement in the Middle East shipping as well.

While Syscorp had been always weathering tough and rough times in a prudent manner, 2015 should be the starting point for Syscorp to finally see a better position.


While the freight forwarding division could be a challenging year due to lower freight rates as well due to massive challenges, the whole situation might still had a silver lining after with the plunging effect of crude oil.

With 297 vessel, marine oil make up of 35 to 40% of the operational cost. However, due to the cheaper marine oil which had dropped from USD 650 per tonne to approx USD 450 per tonne, it will contribute to 5% saving to the total operational cost.

Crude prices will be projected to plunge into another low once storage capacity start to overflow. Analyst expect Marine Oil to possible dip into USD 300 per tonne, this could result in another 2 to 3% saving in the total operational cost.


On Samalaju Exposure

Samalaju had been expanding in a very quick manner. Not long after the multi billion ringgit investment from Press Metal in the aluminium smelting plant that had started it's operation, now Press Metal is seeking to invest another RM 2 billion in it's Phase 3 expansion growth to drive up production capacity, bringing the total investment to RM 5.5 billion. The energy intensive industrial park had been consuming so much of energy that it had saw one of the smelter plant of Press Metal seeing power outage.

Pioneering along with Press Metal in the Samalaju Industrial Park are Japanese firm Tokuyama which own a polycrystalline plant and OM Material Sarawak (a JV with 25% stake from CMSB) with on the Ferro-Alloy production.

Press Metal alone will be looking to contribute 766,000 ton of exportable goods per annum. Tokuyama which had just started commercial production from it's polycrystalline plant will going to add more exportable goods into the Samalaju port.

Samalaju will be expected to handle up to 6 million tonne of cargo in it's full operation capacity in the first year.

With the great volume in hand, Syscorp exposure in the Sarawak shipping business will see more freight service from the greater volume, and also more ship repair and maintenance work to be done due to the increase volume.


The exit of Hubline


With the challenging freight forwarding business in the global and local front, this had eventually lead to the consolidation of business. Earlier, Swee Joo Berhad was defeated by stiff competition, and Syscorp bought over it's ship to beef up it's business. Now, with Hubline exiting the freight forwarding business in Sarawak, things had definitely became sweeter for Syscorp now after seeing a lesser competition. Syscorp endurance had finally paid off in a very good season - Higher Volume at a lower cost from crude.

The sweetener is so sweet that the stronger USD against MYR had also put Syscorp into an even favorable position after seeing a considerable amount of freight charges that are denominated in USD. Based on the 2014 annual report, the a 5% stronger USD will be seeing a forex gain of RM 5million. With USD appreciated almost 12% against the MYR, the substantial amount of Forex Gain in Syscorp could be impactful towards the financial quarterly.


In conclusion, Syscorp is really sitting at a very interesting price at the moment. The counter which is currently not under investment bank coverage will soon see greater pick up once funds start to enter.

Syscorp will see great year ahead due to
- Already lowered Crude prices which could be lower, benefiting operation cost
- Huge Samalaju exposure, and huge freight export market totaling 6 million tonnage a year
- Exit of Hubline in freight business, lesser competition. (Leaving only Harbour-Link Berhad and MTT Shipping Sdn Bhd in Sarawak presence)
- Stronger USD chalking up higher forex gain
- Syscorp to see higher international freight towards Japan and China, with the 2 being intensive Alumnium importer.


Grow with Syscorp? You decide

Bone's short term TP: RM 0.60
Cheers and have a nice day

Regards,
Bone

Friday, 27 March 2015

Perdana - A Diamond Eye

Perdana Petroleum Berhad (7108) is a non stranger in the oil and gas sector. Perdana is quite diversified in the in it's oil and gas service offering, which caters to the greenfield and brownfield oil and gas segments. Perdana current asset fleet can be largely categorized under Anchor Handling Tug Supply (AHTS) and Accommodation marine vessels.

Perdana AHTS market is largely driven by drilling activities, however, it can also be utilized for supply runs for development and production phases. The accommodation vessel are mainly utilized for maintenance and hook up commission works (HUC) which are typically for the brownfield segments.

With the current sentiment on the crude oil that had slumped more than 40% towards a region of USD 50 per barrel, how could Perdana benefit from the current situation?

Let's have a glance at the latest price chart of Perdana.


The chart had highlighted the accumulation process through the period which had saw good amount of volume being transacted at the range of RM 1.80 prior before the sell down that is caused by the slump in crude oil. Prior to the plunge, Perdana had finally found a consolidation zone at the lower price range of RM 1.00 to RM 1.25, which had also seen large open market mop up of shares by major shareholder, Dayang Enterprise Berhad.

The latest uptrend had been strong with solid white candle with strong and reasonable of volume to support that the fact of Dayang is still mopping up the shares in Perdana.

The latest reported purchase by Dayang had raised it's stakes to 30% in Perdana after purchasing more than 11 million of shares through the open market in 3 consecutive days, putting up hot speculation on further corporate exercise between the both company.

Perdana - Hot Shots for Dayang

Perdana had started to become the hot darling for Dayang back then at 2013 when Dayang had a strong exposure for the Pan Malaysia contract which could see contracts value summing up to RM 7 to 10 billion. With the contract on the line, Dayang had started to charter vessel from Perdana as Dayang is lacking of vessel for the brownfield development. The latest brownfield contract worth RM 280million that is secured by Dayang is to provide a major modification work for the Bardegg-2 and Baronia Enhance Oil Recovery development project.

Dayang had also been eying for 2 HUC prospect from the Sarawak & Sabah Shell and Petronas Carigali Hook Up & Commission works, which could be announce next year. In addition, Dayang is also venturing into the EPCC segment of the value chain. 

Currently, Dayang orderbook stands healthy at RM 4billion which could last Dayang to 2018. While Dayang had been capturing much contract from the Pan Malaysia basin, one of the rising concern in Dayang is the availability of vessel to be commissioned for the work. With Perdana on the line with 19 young fleet vessel (average age 4.8 years), Dayang will come handy in fully utilizing them in time to come. Currently, Perdana is building it's 18th and 19th vessels, both 500-men workbarges, which will be slated to complete in 1Q 2016 and 2Q 2016.

Both the 500 men vessel are slated to commence for work for the 2 HUC that Dayang had been waiting to be announced in 2016.

Perdana had always been eyed as a privatization target by Dayang since 2013. Considering the current long term contract from Perdana and exposure to brownfield and maintenance services, Perdana bottom line will not be affected too much by the low crude oil price sentiment, however, there are still chances of contract being renegotiated with a lower price. Since the oil slump that brought down the share price of Perdana, the privatization exercise from Dayang might come even faster than expected.

According to close sources, Dayang is looking to offer approx RM 1.60 per share for Perdana after triggering the MGO, a deal which will be handled by a well known investment bank in Switzerland. The privatization exercise which could take approximately 3 to 6 mths will then pace everything good for Dayang to enter 2016 with a better control. Currently, Dayang just needed another 23 million of shares in it's hand to trigger the 33% MGO mark.


In conclusion, Perdana might be an interesting target for the near term given
- Major Shareholder huge open market purchase
- On the verge of privatization exercise by Dayang with potential RM 1.60 a share.
- Vessel are operational with long term contracts, hence a limited downside from the risk on the fluctuating oil price
- Exposure to brownfield EOR (Enhance Oil Recovery) and maintenance contract
- Current MiddleEast tension which could see a revival in oil price for the short term outlook


Ride on with Perdana? You decide

Bone's short term TP : RM 1.60
(Potential suspension / limit up counter due to corporate announcement)

Regards,
Bone

Thursday, 26 March 2015

Canone - Cannon Up

Can-One Berhad (5105) had been involved in the F&B industry with general cans, manufacturing and processing of food and dairy trading.

Can-One had been a hit in the market back then when the tussle between Can-One management and KianJoo took the heat to the court over shareholding issues. However, the issue resolved and Can-One held 32.9% of share in KianJoo, officially seeing KianJoo an associate company of Can-One.

As of lately, KianJoo had saw a take over offer amounting to RM 1.466 billion, or RM 3.30 per share in KianJoo. With Can-One having 32.9% in KianJoo, how will things be moving forward in Can-One in the coming days?


CanOne had been trading at the range of RM 2.60 after a rebound from the previous sell down. Apparently, CanOne had been moving in a good uptrend as highlighted between the blue lines. According to the reading, the consolidation in the uptrend movement could had came to a point where CanOne will be prepare to channel higher in the coming days.

A good break out above RM 2.65 with substantial amount of volume will be seeing CanOne trending it's way towards the psychological barrier of RM 3.00 in the coming days.


CanOne - Cannon up?

CanOne had been an aggressive growing company which had saw it's revenue putting up more than double compared to the revenue in 2009. Their NTA had also grew intensively from RM 1.15 a share which is 5 years ago to the current RM 3.42 as of FYE 2014.


While needless to say much about this stock, CanOne is a good growing company that is involved in a evergreen industry which will be seeing more and more demand in time to come as the population of the world continue to grow, putting up more demand for food.

Although 2015 will be a challenging year, the increase in demand for food will be going to contribute to the operating efficiency of the production line.

As for it's investment in KianJoo, Bursa Malaysia had given KianJoo and Aspire to set things out before 31 March 2015, which is the last known extension that Bursa Malaysia had given to KianJoo. Should the deal print out, CanOne could be on it's way to receive a cash proceed of not less than RM 482 million from the sale of their 32.9% shareholding in KianJoo from the proposed disposal which entitled shareholder of not less than RM 3.30 in cash being return to shareholder via proposed capital reduction and repayment exercise in accordance with Section 64 of the Companies Act, 1965.


According to some sources, the deal between KianJoo and Aspire should be able to iron out, which will be seeing KianJoo shares at RM 3.30.


CanOne will be a very interesting stock to be look out for the coming week as seeing it's subsidiary oncoming corporate development. Should the deal could not materialize, CanOne will still be a very attractive and undervalued company should we valued CanOne at PER x8 from FYE 2014 EPS of RM 0.4185, translating to RM 3.35.

The current price of RM 2.6 is also a 24% discount from the NTA of RM 3.42. CanOne also had a considerable amount of revaluation reserved from it's property and land which is mostly at year 2011 valuation.


Cannon with Canone? You decide.
Bone's short term TP : RM 3.00

Cheers and have a nice day

Regards,
Bone