Tuesday, 14 April 2015

April Special on Kimlun - The Golden Dragon

Kimlun Corporation Berhad is a well known established player in the local construction market. Kimlun came to fame recently with the launch of the KVMRT project, in which Kimlun is one of the core supplier for the pre-cast concrete material for the KVMRT Line 1.

Kimlun is a quite diversified player in the construction scene. Kimlun had exposure in the Singapore MRT line, KVMRT series, LRT extension series, Iskandar Malaysia construction and it's own property launch in Cyberjaya.

With a great journey lying ahead of Kimlun in the coming days, when is the best moment to captivate on the rising journey of Kimlun.

The latest price chart of Kimlun had indicated that the share price had saw a consolidation at the range of RM 1.25 for the past 3 to 4 months. Albeit of the company exposure to high profile construction such as KVMRT Line 1, the counter had saw a lower transacted volume, however, it had not been shy of a gradual buy back in big batches from it's major shareholder, Pang Tin @ Pang Yon Tin through his privately held vehicle, Phin Sdn Bhd.

 Pang Tin @ Pang Yon Tin had been buying back the company shares through his privately owned company in the open market from various price starting from RM 1.60 to a lower range of RM 1.20, while the latest filling shown a 200,000 units purchase at RM 1.24. The privately held vehicle, Phin Sdn Bhd had added approximately 3 million units of since July 2014.

Kimlun - Just too good to be missed?
At the current price of RM 1.26, is Kimlun a good buy for real investor?
According to the price chart of Kimlun, the current price is actually situated at the strongest base line support price in Kimlun's 3 year history, which is at the range of RM 1.25. While there had been no doubts on it's fundamental outlook, Kimlun is a rare breed of construction counter that reward it's shareholder with acceptable dividends ranging from 3 cents to approx 5 cents, despite the high operating cost environment.
 The latest FYE 2014 had saw Kimlun ended it's financial year with a EPS of 15.39 cents, with a dividend of 3.8 cents to be rewarded to it's shareholder in the coming days. NTA increase from RM 1.24 to RM 1.33, and Kimlun debts had been decreasing constantly.

Based on a fair value of PER x10 for FYE 2014 result of EPS 15.39 cents, Kimlun will be easily be valued at RM 1.50.

A Stronger 1Q FYE 2015 result

Kimlun 1st quarter result will be expected to be stronger through it's Construction, Manufacturing & Trading as well as Property arm.

Kimlun construction projects are mainly focused in the region of Johor. The construction projects are mainly awarded by reputable listed developer like UEM Sunrise, UMLand, Country View (CView), SPSetia, IOI Property, MahSing, Keck Seng, Daiman and IJMLand.

In line with the Pre-GST push, we should be seeing a higher revenue from it's construction arm to reduce the exposure of the works and material that will be subjected to the 6% tax.

On it's manufacturing and trading arm, Kimlun will expect a stronger revenue on it's Segmental Box Girdle and Tunnel Lining Segments towards the KVMRT Line 1 project starting from October 2014. This is due to the completion of the ground work / baseline work ( Erection of concrete support pile, tunnel works and etc) which will then after only see the Segmental Box Girdle (SGB) and Tunnel Lining Segments (TLS) being installed in.
 (Segmental Box Girdle)

(Tunnel Lining Segments)

According to sources, Kimlun had fully delivered all the orders for it's Tunnel Lining Segments in 1Q 2015.

Currently, most of the progress in the KVMRT Line 1 will be fixing and installing the Segmental Box Girdle. Kimlun will be expected to see a stronger revenue from the delivery of SGB for the KVMRT Line 1.

On it's property arm, their maiden project at Cyberjaya, dubbed as The Hyve had been completed by more than 50%, and with a take up rate of 80%. The Property arm will expect to contribute higher in the 1Q FYE 2015 through higher billings. The Hyve unbilled sales stand at a good RM 100 million.

Riding on A Southern Boom with A High Speed Rail

Kimlun had been a core supplier for the SGB and TLS in the building of Singapore SMRT. The latest event had seen Kimlun securing SGD 43million in the Singapore's Thomson line SMRT. Kimlun should be participating for the Deep Tunnel Sewerage in Singapore.

While the Lion City had been promising lucrative jobs, the latest approval of the High Speed Rail that will be kicked start in 2016 will see another grand job for Kimlun to participate. Kimlun will be seen as a front runner for the Johor + Singapore portion, given their current involvement in the KVMRT and SMRT, as well as a significant construction player in Johor. The RM 38.4 billion HSR project that connects Kuala Lumpur and Singapore in 90 minutes at a speed of 250km/h will see stops at Putrajaya, Malacca, Negeri Sembilan and Johor.

Current Strong Construction Themed

The construction sector had been bullish in the recent days with the announcement of KVMRT Line 2 and Pan Borneo Highway to kick start the whole theme. The latest being the approval of High Speed Rail which will be adding another RM 38.4 billion worth of contract value into the sector.

In conclusion, Kimlun is just too good to be missed at the current price range, in a quick summary, Kimlun will be an interesting counter to be look at based on:
- Huge open market buying from major shareholder through Phin Sdn Bhd
- Kimlun current price is at the strongest base price range of RM 1.25
- Kimlun value at RM 1.50 based on PER x10 in FYE 2014 eps of 15.39 cents
- Stronger result for 1Q FYE 2015 through a stronger revenue billings from Pre-GST effect
- Segmental Box Girdle to continue contributing higher in the Trading & Manufacturing Arm
- Southern Economic Boom with Singapore and approved High Speed Rail
- Current strong construction theme in KLSE

Burst it on Kimlun? You decide

Bone's short term TP : RM 1.50

Cheers and have a nice day


Friday, 10 April 2015

April Highlight on Tropicana - The Tropical Storm

Tropicana Corporation Berhad is a no stranger property developer in both the local and foreign market. Dijaya Corporation Berhad came to fame when the group penetrate the market with their "Tropicana" brand name with projects such as Tropicana Golf & Country Resort, Tropicana Indah Resort Homes, Tropicana City, Tropicana Sungai Long, Tropicana Bayou, Tropicana Sungai Buloh Commercial Center and Tropicana Danga Bay. Others residential project includes Casa Kiara I & II, Casa Suites, Fortune Park, Arena Mentari, W Hotel & Condominium, Aston Villa and 10 Island Resort.

Formerly known as Dijaya Corporation Berhad, the group is the founded and helm by Tan Sri Dato Danny Tan Chee Sing, which is the younger brother of well known Malaysia tycoon from the Berjaya Group - Tan Sri Vincent Tan.

Tropicana had been coming to the limelight for the past few years for some corporate dealing involving some land sales and asset disposal as well as some land purchases to consolidate and reposition the group's asset and financial position. How would Tropicana be faring in the coming days with the government policy in the property cooling measure as well as the introduction of GST?

Tropicana had been sliding off the mark from May 2014 onwards, beaten off by the various property cooling measure sentiment as well as a good shake off in the equity market during the 4th Quarter of 2014. While the 1st Quarter of 2015 had saw a slower start in the equity market due to the stronger selling from the foreign fund, things got off better when the Feds had decided on prolonging the hike of the interest rate further rather than the anticipated 2nd half of 2015. The equity market got off with a better start with the beginning of the QE from the ECB, which had started to see hot money flowing back to the ASEAN market.

For Tropicana, at the price range of RM 1.05 to RM 1.10, it can be considered as the strongest base line support price range for the counter.

Tropicana should be able to see a technical run up towards the range of RM 1.40 in the short term outlook should Trop challenges above RM 1.20 with a good supported volume.

Tropicana - A Tropical Storm in the Property Sector

Tropicana had build it's brand name over the years with impressive property launches in Malaysia. The name "Tropicana" definitely put an impression of glamor, status, quality and exclusiveness to any person which is well informed in the property market.

To date, Tropicana had in it's development bag which consist of a mixture of residential and mixed commercial development ranging from medium to high end property. The current on going development includes :
- Tropicana Gardens (Kota Damansara)
- Tropicana 218 Macalister (Penang)
- Tropicana Danga Cove (Johor)
- Tropicana Heights (Kajang)
- Tropicana Metropark (Subang Jaya)
- Tropicana Danga Bay (Iskandar, Johor)
- Tropicana Landmark (Sabah)
- Tropicana Avenue (Petaling Jaya)
- Penang World City (Penang)
- Tropicana Cheras (Cheras)
- Tropicana Residences (Jalan Ampang, KLCC)

 (Artist Impression of an overview of a completed Tropicana Gardens in Kota Damansara)

Tropicana property launches is diversified to the Northern, Central and Southern Peninsula Malaysia, as well as East Malaysia.

Property market - Slow Down or Low Down?

While the market had been in talk with the property market slowing down for quite sometime, the signs are actually too vague to tell if the slow down actually hitting the new launches or sub sales market. Lets get down to the real market outlook from a study conducted from a small research company.

Edwin Ng, a 28 years old IT engineer who earns around a take home pay of RM 5k a month had opted to buy a newly launch under construction condominium at a price tag of around RM 600k. Assuming a 90% loan at an interest rate of 4.8% per annum and payable for 35 years, Edwin will be seeing an installment of RM 2656 per month after completion, which will see half of his take home pay going towards the installment. With this huge commitment in line, what is the core reason for Edwin to continue pursuing this purchase?

Edwin had took the whole picture clearer on his decision by giving a simple comparison. With the latest market trend which is on going, buying a new launch property is very easy with a low down payment. Putting it simple, a new condo which is partially renovated or 75% furnished could be fully yours with only RM 5k to RM10k down payment, with the rest going to bank financing. While not all the developer practice such perks for the purchaser, however, he noted that Tropicana packages which comes with low down payment along with other perks and rebates and not too far into the rural area is just what he needs.

Imagine if I had took a subsale purchase around the area which I would want at the same price, the barrier of entry for me is just too high and unaffordable to me. The total cost for a subsales property with a price tag of RM 600k will come with
- 10% payment upon the signing of SPA, which is RM 60k
- Fees for MOT (Memorandum of Transfer / Stamp Duty) which is RM 12k 
- Fees for Sales and Purchase Agreement, which is RM 4650
- Fees for Facility Agreement (Loan Agreement), which is 2700
- Fees for valuation approx RM 1000

The total entry amount needed for a same value purchase in a subsale market will take Edwin roughly RM 80,350, which had not inclusive of Insurance (MLTA/MRTA), possible cash top up should valuation doesn't met the purchasing price, renovation as well as furniture and fittings cost as well. The amount could just balloon to more than RM 120k upfront, compared to a low down payment of RM 5k to RM 10k to secure a unit which is new, while the other cost is taken care by developer or factored into a 35 years loan tenure. The unit which comes renovated and well furnished with a bit of designer taste will also save a bit of hassle into thinking what to buy during handover.

These are the feedback from serious home purchaser who are buying for own stay. Most of the purchaser bear the similar feedback towards the rising living cost and the escalation of prices that put them to compete with time to secure what they need in the future.

It is a whole new property game, quoted Charissa, a 30 year old auditor. By the time you save up RM 120k, you might end up buying somewhere further away from the city, or the amount you need is not enough, or you might be buying an "old" house.

With the trend of younger millennial opting to secure a place to stay as fast as possible, the buying trend is still towards the new launches instead of the subsales market. However, things does got spiced up when good things are exploited when speculation took a note higher. But demand is definitely rising with in a developing country like Malaysia where population is still growing at an commendable rate.

Tropicana package and offering spans towards a rich high end target market, and also offer a chance for the younger millennial a chance to secure their property at prime area with a bit of taste on the luxury side through their low down payment scheme.

Top & Bottom Realignment in Tropicana

Tropicana balance sheet had always been a yellow or red flag in the investor mind. Although the group had an impressive land bank that are situated in prime area, their overwhelming debt level had always keep a handbrake to the investor decision making.

However, with the current on going realignment of their land and assets which includes significant disposal of their land in Tropicana Alam to Ecoworld and their Tropicana City Mall to CMMT Reits.
The disposal of Tropicana City Mall is expected to complete by 3Q 2015, will effectively reduce the the gearing level of the group to 0.52x. The group will continue to dispose small land parcel in 2015, and will look to put it's gearing level below 0.5 to the FYE 2015 balance sheet.

Tropicana currently is sitting on a NTA of RM 2.14 with unbill sales amounting to approximate RM 3 billion from it's highly sought after launches like Tropicana Gardens and Tropicana Bay Residence at Penang World City.

A Stronger Push Before GST Implementation

With GST effectively taking off at 1st April 2015, the property construction segment is hotter than a volcano lava with non stop 24/7 working that tries to push as much as possible during the 4Q 2014 and 1Q of 2015 to reduce the exposure of incomplete progress that will be subjected to the billing of GST.

With a higher billing rate in the overall property sector, we expect to see a stronger 1Q 2015 result that will be going to see most of the result announcement in the month of May 2015, a movement that could take the property sector for a good ride. While some are still consolidating, there are significant property counter which had started to move up.

With an unbilled sales of approximately RM 3 billion in hand, Tropicana definitely had hopped in to join this bandwagon as well.

Tropicana had seen much changes in their effort to rebalance their portfolio and balance sheet. With the strong unbilled sales of approx RM 3 billion with the ongoing easy rosy sales packages for home buyers, at the current price of RM 1.09 which is a discount of almost 50% towards it's NTA of RM 2.14, Tropicana is just about to start a Tropical Storm towards a higher ground.

Ride on the Tropical Storm? You decide

Bone's short term TP: RM 1.40

Cheers and have a nice day


Wednesday, 8 April 2015

KKB - Fast and Furious

KKB had a humble history back then at 1962 as a small engineering firm that is founded by Dato Kho Kak Beng. Back then, KKB is providing steel fabrication works for factory buildings and products. The company continue to grow and started to diversify into other related work within the sector. Today, KKB is offering is expertise in Steel Fabrication, Civil Construction, Hot-Dip Galvanizing, and is also one of the core manufacturer for LP Gas Cylinder, Mild Steel Cement Lined (MSCL) Pipes as well as Steel Pipes Tubular Piles.

KKB had now provided it's services in the public and private sector across Sabah and Sarawak. KKB saw it's peak moment on the booming economic transformation in Sarawak, which is largely contributed by the Samalaju Industrial Park.

However, with the completion of Phase 1 of the Samalaju Industrial Park, where will KKB be heading in the coming days?

KKB had saw it's share price sliding 50% off from a peak of RM 2.80 to the current RM 1.40 range. However, at the current range of RM 1.40, KKB had seen a good solid base of support. The current consolidation at the range of RM 1.40 will be seeing a new growth with the on going economic development that is happening in Sarawak.

KKB will be heading for a good uptrend in the following week should the share price be able to break above RM 1.50 with a good volume. A quick resistant could probably see KKB drawing clashes at RM 1.70, while a medium to longer term outlook should be able to see KKB knocking at RM 2.00.

KKB - A Long Term Affair with Samalaju Industrial Park

KKB had saw it's peak performance in 5 years during the 2013 and 2014 period, which had been largely contributed by the booming economy in Samalaju Industrial Park. KKB involvement in the Samalaju Industrial Park spanning from client from the private as well as public sector.

It's involvement in the Samalaju Industrial Park got intensified when KKB took a step further to be involved in the material supplies for Bakun Hydroelectric Dam, which is designed to cater the power hungry industrial park.

Let's have a quick outlook on the impact of Samalaju Industrial Park towards KKB share price.

KKB had saw an explosive growth under the huge driver of Samalaju Industrial Park, putting almost 100% capital appreciation from it's starting point of around the range of RM 1.40 to RM 1.50.

While the completion of the 1st Phase of Samalaju Industrial Park looks like a departure, the game had actually just started. With the successful launch of the Samalaju Industrial Park Phase 1, now it is time to fuel up the development with a Phase 2 of the Samalaju Industrial Park.

Sarawak Economic Planning Unit had in plan to kick start the Phase 2 of the Samalaju Industrial Park with an allocation of approximately RM 500 million. The core cost of the project includes the site preparation and infrastructure work that will cost approximately RM 330million, water supply system at RM 20million and upgrading of Tanjung Kidurong Road at approx RM 10million. While the phase 1 of SIP had attracted an investment of RM 25 billion from 17 companies, the Phase 2 will not be looking for anything lesser than RM 20 billion. With that in line, new power generator will need to be build as well to cater for the energy thirsty industrial park, putting up the chances of new hydroelectric plant to be built.

Lumping in the whole Phase 2 of SIP, this could be another huge pie with approximately RM 30 billion worth of infrastructure and building project to be worked upon.

Additional Spices - Pan Borneo Highway

Things are not going to slow down in the development of Sarawak with the latest announcement of the approval in the building of the 1663 km Pan Borneo Highway, which cost around RM 27 billion. Sarawak will cover 936km with Sabah taking up 727km.

The project will be built in segment starting with the 40km stretch from Tanjung Datu to Sematan. The next stretch will be the 740km long Semantan to Miri, which will begin construction in the third quarter of 2016. The final portion in Sarawak from Tedungan to Merapok, which is sandwiched between Brunei will see construction in early within 2018 to 2023.
KKB, which had been involved in civil engineering, and a close proxy for sub contracting works from CMSB (Cahya Mata Sarawak Berhad) will definitely be a good beneficiary from all this huge infrastructure development.

All in all, KKB, given at the current price range of RM 1.40, and with so many huge projects lined up, given their proven track record and also huge involvement in the development of Sarawak, notwithstanding the coming up election in the Sarawak State, it is prime time to relook upon KKB

Summarized points
- Huge contender in both public and private sector in the development of the Phase 2 Samalaju Industrial Park
- Huge contender for the RM 27 billion, 1663km Pan Borneo Highway.
- Good network and political ties with the local Sarawak Government.
- Upcoming Sarawak Election, prompting Sarawak counter theme play.
- Net cash company of approx 55 cents a share, and consistently giving handsome dividends for the past 2 years.

Furious on KKB? You decide
Bone's short term TP : RM 1.70

Cheers and have a nice day