Tuesday, 22 September 2015

PUC - Solar Beam

PUC Founder (MSC) Berhad (PUC - 0007) could be a less known company with involved in media advertising, biometrics and e-payment solution provider. However, the transformation of the group direction in focusing towards the renewable energy sector, specifically the solar energy program, might had sparked a series of interest in the public as of lately.

The renewable energy sector is not a new market in Malaysia. Pioneering this sector had players like Cypark, Amprop, while joining the bandwagon had saw company like Fitters and VSolar coming into the picture as well. It is expected that there will be more new player coming into the picture of renewable energy as the market is still full of opportunity in terms of growth and demand.

With PUC joining into the bandwagon, what could be the initiative and counter measure in PUC to propel itself to compete with established player ?

PUC had took a beating from the weaker broad market last month when share price shed 40% to consolidate at the range of RM 0.08. Currently, PUC could stand a good chance in rebounding at least 20% towards the range of RM 0.10 the previous selling was quite overly done. PUC is expected to move upwards, breaking it's MA20 line when corporate exercise takes place. In a skeptical manner, PUC can be foreseeable to trade at the range of RM 0.10 to RM 0.12.

Solar Energy - Same Sector, Different Delivery

When we talked about smartphones, the quickest brand that strike into the consumer mind should be none other than the Apple iPhone and Samsung Galaxy smart phone series. With 2 major established brand in the market, new entry smart phone manufacturer such as OPPO will need to deliver their product in a different manner to the consumer in order to penetrate the market. For this, OPPO positioned it's product with VOOC fast charge which can hold a 2 hour talk time with just 5 minutes of charging.

Now, the next "OPPO" of the solar energy sector could be PUC. How would PUC explore the Solar Energy Sector differently?

A common layman thoughts of the solar energy sector will be starting with the bidding of the quota from SEDA, securing the PPA from Tenaga, building the solar farm and receiving revenue from the FIT program. For PUC Managing Director Mr Cheong Chia Chieh, he would see this in a totally different manner.

Mr Cheong is aiming to build at least 50 MW of capacity in the solar energy. In order to achieve this, PUC had set up a EPCC (Engineering, Procurement, Construction & Commissioning) team which will be able to act as contractor to build the solar farm. The EPCC team will be looking out for individuals who had been allocated with quota, but lacking of technical specialization and finance to build and run the solar farm.

Cheong quipped that if PUC can provide financing of the whole project (Approx RM 8million / 1MW), then PUC can be a truly established solar energy player that can cater to the downstream activities.

Currently, there are easily more than 100MW of quota allocated to individual which are not put into operation because of funding issue. This is a hidden huge market that had been overlook, and PUC will be the pioneer in tackling this hidden market. Instead of waiting for the annual limited allocation by SEDA, PUC can jump into operation once a deal is brokered out with the individual by building and financing the solar farm with the PPA as a collateral.

For Cheong, this is a win-win situation for both parties.

According to close sources, PUC had at least negotiated 35 MW in the waiting list, and that is translatable to a recurring revenue of RM 35 million per year. Sources informed that PUC might be seeking another corporate exercise to raise more fund if the demand is great.

Currently, the bigger player in the solar energy sector will be Cypark (8MW) and Amprop (10MW). Should PUC had a total control of revenue from the 35MW capacity from both direct and indirect channel, PUC will be the largest solar farm operator in Malaysia, which would possibly see a rerating towards the company. A 35 MW solar farm is capable of bringing in recurring revenue of RM 35 million per year, translating to 3.2 cents in EPS per year.

At PER x10, revenue from the 35MW solar energy can value the company at 32 cents. At the current price of 8.5 cents, PUC had a huge capital appreciation opportunity of almost 400%.


PUC will be an interested company to be look upon, given their new direction of business which look into securing long recurring steady revenue. The growing opportunity in the solar energy sector, if capitalized in a proper manner will resemble to a major turnaround opportunity for PUC.

PUC will be a great buy based on :
- Providing One-Stop solution in Solar Energy, capitalizing the downstream activities.
- New Business Model of EPCC with Financing to individual can capitalized revenue from solar farm not owned by PUC.
- PUC will undertake a corporate exercise in raising fund, of which at the current price will be attractive to be invested.
- Possible in becoming the largest solar farm operator in Malaysia.
- 35MW readily available, translating to RM 35 million revenue per year, contributing 3.2 cents in EPS, trading at PER x10 translate to a valuation of RM 0.32. 
- Current price had saw consolidation at the range of RM 0.085. PUC can trade back into the range of RM 0.10 to RM 0.12 on a strong break out on MA20.

Grow along PUC ? You decide
Bone's short term TP : RM 0.125

Cheers and have a nice day.


Monday, 21 September 2015

Bina Puri - Hot Bargain

Bina Puri Holdings Berhad (Bpuri - 5932) is a diverse group with different business activities such as civil and building engineering management, property development, highway concessionaire, quarry operation, mixed concrete manufacturing and construction materials, utilities and hospitality management.

Bina Puri had successfully completed several public infrastructure projects such as roads, bridges, highways, interchanges as well as residential and commercial buildings. Currently, Bina Puri is still active in the local scene, and had been gradually expanding into the foreign market as well.

With more than RM 2 billion of construction work under their belt, Bina Puri had been growing in an extensively fast pace for a company with a market cap of RM 90 million (As of 18 September 2015). How would this reflect in Bina Puri share prices?

Bina Puri's share price had not been spared from the latest equity shake up that had saw most of the company share price sliding down. Bina Puri saw a base support at the range of RM 0.38, of which the consolidation had saw break out on MA20 and trading above RM 0.40 on Friday with reasonable volume.

The latest weak market sentiment had resulted in Bina Puri share price falling to a historically 10 year low to hit below RM 0.40. However, Bina Puri shares are looking to rebound forward in the coming days, in line with their corporate exercise as well as the fundamental of the company.

When Bargains are Bargains

To recap, Bina Puri had placed out a total of 35,528,800 of shares between 8 January 2015 to 14 May 2015 at the issue price of RM 0.50 to RM 0.515 from it's approved placement at 2014.

Following on, Bina Puri had also through it's latest AGM proposed yet another private placement exercise for the year 2015, which had been granted approval by Bursa Malaysia on 30 June 2015, where the placement will be fulfilled within 6 months of the approval by Bursa Malaysia.

With the coming corporate exercise in the belt, Bina Puri minimum placement price will be at it's par value of RM 0.50. The current market price of RM 0.40 is a 20% discount from the minimal private placement price of RM 0.50. With approximately 3 months left for Bina Puri to complete the private placement approved for 2015, the current price stands a good chance for investor to ride on a real good bargain.

To see it sweeter, the current price is lower than the ESOS option that is offered out to the directors at an exercise price of around RM 0.50.

Putting a Serious Note on Construction Projects

Bina Puri had been actively seeking for more local jobs with more than RM 8.63 billion worth of projects tendered. Currently under their belt, Bina Puri had been more than RM 2 billion worth of unbilled jobs, while 2015 had restocked RM 840 million worth of stock, including the latest RM 95 million Civil work for Rapid Steam Cracker Complex in Johor.

Bina Puri had been involved in the previous LRT extension job of the Ampang Line to Putra Heights. According to close sources, Bina Puri will be very likely to see jobs from the LRT 3 line as well as MRT 2, which could worth a combine value of approx RM 150 million to RM 250 million.

In a summary, Bina Puri could be an interesting company to be invested in based on
- Aggressive growth seen from jobs tendered, with more than RM 2 billion of unbilled work.
- Current price being 20% discount from Par Value of RM 0.50.
- 35,528,800 private placement shares placed out at the range of RM 0.50 to RM 0.515 in the 1st half of 2015.
- Director ESOS offered above RM 0.50.
- Chart might turn bullish following a break out on MA20 from a 10 year low price range of RM 0.38.

Riding back to PAR, hop on?
Bone's Short Term TP: RM 0.50

Cheers and have a nice day


Monday, 14 September 2015

Hohup - Hauling Up

Ho Hup Construction Company (HoHup 5169) had been embroiled in a series of land ownership issue as well as financial situation which had land them into a PN17 status back then.

Hohup is then revived with several restructuring which had saw the group jointly developing the prize asset of Bukit Jalil land, and also a new flow of capital through rights and private placements exercise.

However, the recent gradual drop in Hohup due to the current market sentiment might had been a drop too steep that had gone quite beyond their true value.

Hohup had went through several corporate exercise in the past, from a right issues that comes with preference shares and warrants as well as a 10% private placement exercise that had been concluded earlier in January 2015.

The private placement of the share price is fixed at RM 1.12, which is almost a 10% discount to the then current market price at the range of RM 1.25.

Prior to the economical events around the world, Hohup had slide from a peak of 1.50 to the current price range of RM 0.85, which is almost coming to 50% drop in value from the peak.

However as of lately, Hohup share price might had caught up to attention as substantial shareholder had started out with gradual share buy back. The recent price chart activities had signaled out that Hohup might be heading for a new range of buying up soon as the latest 3 days trading had tested on the MA20 line, where a solid break above RM 0.87 again could been marking a new ride for Hohup, with temporary resistance at RM 0.92, then psychological resistance at RM 1.00, and the final at RM 1.12, which is the price of the private placment.

Clinging on Bukit Jalil
Hohup prized asset which is the Bukit Jalil land where Hohup had entered into a JV through Bukit Jalil Development Sdn Bhd with Malton's Pioneer Haven Sdn Bhd to develop the 60 acres of land. Of which the 60 acres, Hohup portion will be 10 acres that comes with a GDV of approx RM 1.1 billion. Hohup will be entitled for 18% of the 50 acre project that will be handle by Malton, which carries a GDV ranging RM 4 billion to RM 4.5 billion.

Of the 10 acres, Hohup had used 5 acres to develop "Aurora Place" that comprises of shop offices, retail floors and small offices, versatile offices. The project had received thunderous response with sold out status. Hohup will be keeping the 18 storey office block in the development for it's recurring income.

Although the property market might be seen softer, the group see it as manageable as they do not have too many launches around to stretch it's cash flow. According to Chief Executive Officer Mr Derek Wong, Hohup earnings are visible given the response at Aurora Place, as well as the 18% entitlement of the GDV from Malton launches.

The group had unbilled sales of almost RM 600m from it's core business - Construction and Property Development.

Mr Derek Wong will be adding more projects into their book diligently. Hohup will be increasing land bank in Johor, Penang, Kota Kinabalu and target to build more hybrid projects like Aurora Place. He also had been looking into construction job in Myammar with an estimation of USD 200 million in GDV.

Attractive Fundamental

Hohup is basically attractive at the current level of price, given their current projects in hand. While the latest 2Q FYE 2015 result had saw a slight decline in the profit compared to the previous quarter, the drop in EPS is mainly caused by the dilution of share from a series of corporate exercise which includes a 10% private placement.

With the current on going projects as well as the 18% entitlement of GDV from Malton, Hohup is looking to project an approx 15 cents in EPS for FYE 2015. Using a softer market approach on property and construction sector. pegging valuation at PER x7, that would be RM 1.05 for Hohup.

The recent open market share buy back from substantial shareholder also will be a good signal for investor to see it as a good chance to buy in at the current price of RM 0.85, which is lower than the private placement of RM 1.12, and lower than projected earning valuation of RM 1.05 based on EPS of 15 cents.

In a short summary, Hohup is attractive with:
- Current price below private placement price of RM 1.12 made in January
- Good response from Aurora Place, unbilled sales at RM 600 million
- Entitlement of 18% from Malton total GDV of RM 4 to RM 4.5 million, totaling approx RM 720million (based on RM 4b GDV)
- Attractive valuation based on fully projected FYE 2015 EPS of 15 cents, valuing RM 1.05 based on PER x7
- Strong buy back from substantial shareholder
- Technical Chart signalling new buying up from break out in MA20 line

Bone's short term TP : RM 0.92
Mid/Long Term TP: RM 1.15

Cheers and have a nice day