Monday, 18 May 2015

May Exclusive - D&O - Lighting The Future

D&O Green Technologies Berhad (D&O 7204) had been a little known company to which deal with the manufacturing of LEDs and optos related products. D&O through it's subsidiary Dominant Opto Technologies Sdn Bhd which boost a range of LED products from Standard, Medium, High Powered LED and also Multicolor LED had a foothold in the US, Europe, China, Korean and Malaysian market.


With the current global environmental concern that focuses on environmental friendly products, where can this lead to for D&O in the coming days.

Let's have an interesting look at D&O recent price chart.

D&O had saw a good interest at the middle of 2014, where a substantial amount of shares had been transacted at the range of RM 0.34 to RM 0.40. The transaction had been viewed as a primary stage of accumulation basis, based on the solid white candle displayed with a good supported volume. However, the stock had took a long consolidation at the range of RM 0.28. With the consolidation almost look set to ripe up for harvest after 1 year, D&O should be going to see a better participation with greater volume while it travel to penetrate into the previous trading range of RM 0.34 to RM 0.40.


LED - Lighting Up The Future

30 years ago, data was transferred using a 8inch floppy disk, later became 5.25 inch, and subsequently  3.5 inch. Then the came the introduction of Compact Disc, which had subsequently see more development of the disc into DVD and Blurays. The mobile data storage took a revolutionize stance with the introduction of USB Drive and Memory sticks, and the latest is on the Cloud Storage. While this is the story of the changes of storage from the past to current, what about the lighting industry.

From the invention of the filament based electric light bulb (incandescent) by Thomas Edison, then to fluorescent, the next generation light will be the LED (Light Emitting Diode).

LED is in every angle better than incandescent and fluorescent light.


LED
Incandescent
Fluorescent
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
year
329 KWr/yr
3285 KWh/yr
767 KWh/yr
Contain Toxic
(Mercury)
No
No
Yes
RoHS Complaint
Yes
Yes
No
Carbon Emission
451
pounds/yr
4500
pounds/yr
1051 pounds/yr
Sensitivity to low
temperature
No
Some
Yes (Not workable
under -10 degree
Fahrenheit or over
120 degree
Fahrenheit
Sensitivity to
humidity
No
Some
Yes
On/Off Cycling to
life span
No
Some
Yes
Durability
Durable (Can
handle bumps
and knock)
No (Glass or
Filament can
break)
No (Glass can
break easily)
Heat Emitted
3.4 btu’s / hr
85 btu’s / hr
30 btu’s / hr

On light output, comparing a 800 Lumens of light, incandescent light bulb will need 60 watt, fluorescent light will need 13 to 15 watts while LED only takes 6 to 8 watts to produce the same amount of light.

LED had a high flexibility of usage due to it's compact size, making it possible for a lot of applications.


Global Environmental Concern

It had been a global environmental issue on the current global warming due to the increase of carbon dioxide. With the growing population around the world, human are consuming more and more energy, in which largely of the energy is derived from fossil fuel that had been contributing to the alarming global warming issue.

According to analyst, by just replacing conventional lamps into LED in the United States alone will contribute to energy saving of more than 120 gigawatt annually. And that is reducing a stunning 164 billion pounds of carbon emission per year.

With the ongoing global concern on the global warming, the lighting industry will play a big part in reducing the total carbon footprints in the whole world. And with this in line, the LED industry will be the light of the future as more countries are adopting the usage of LED in most of the application in order to play a part in reducing the global warming.


Strong Upstream Development catering for future demands

With the highlighted demands in the LED sector, companies are rushing into tapping the upstream development opportunity such as LED Tester Machine to cater for the huge influx of demand. Amongst them are Pentamaster, Elsoft and MMSV.



The huge orders of the test machine in all these 3 companies had already put a forward signal of the incoming demand in the LED sector in the coming days.


D&O, after restructuring it's company which the disposal of loss making division had put into full focus in Dominant Opto Technologies Sdn Bhd, and shifted the focus to higher margin based products such as general lighting and automotive lighting. The group had also fully acquire their Europe based Dominant Semiconductors Europe GMBH which will be finalized in Q2 2015. D&O will be aiming to break above the RM 500m revenue mark in 2015.


In conclusion, D&O is a company that is full of potential, riding strong along with the booming LED industry. D&O will be an interesting company in the coming days based on
- Company operation restructuring exercise, disposing loss making entity, and fully focus on higher margin based products in the general and automotive lighting industry.
- Global warming issue will continue to push the usage of LED in most of the application from all kind of industry.
- LED versatility had enable it to fit in a lot of application, from car remote control to large billboard lighting.
- LED upstream development industry (LED Test Machine Manufacturer) had shown the signal of the upcoming demand in the LED sector
- D&O strong growing revenue despite the slower economy growth in the Europe before QE. The current QE will further boost the economy activities.
- Influx of more building spaces and ever increasing automobiles on the road will only signal for more demand for general lighting and automotive lighting.

With all the opportunities ahead for D&O, the company can a fast growing pacer in 2015 to 2017, which could potentially see revenue hitting more than RM 1 billion per year, which a long term outlook will see D&O possibly trading at RM 0.70 to RM 0.80 range.

Light Up with D&O ? You decide

Bone's short term TP : RM 0.40

Cheers and have a nice day

Regards,
Bone

Tuesday, 28 April 2015

Minho - Asset Logged

Minho (M) Berhad is established dated back to before the year 1977, when it started of as Syarikat Minho Kilning Sdn Bhd, providing klin drying services. To date, the company had grown up into a fully integrated timber player, providing services such as

- Klin Drying and Chemical Preservative treatment
- Manufacturing, exporting and dealing in moulded timber and it's related product
- Export of processed timber products
- Manufacturing and distribution of industrial paper bags
- Trading in log supply and it's related products
- Log harvesting
- Property development and building construction
- Manufacturing and dealing in furniture components and it's related product
- Land leasing

However, with all the diversified services and product, Minho still derived it's major revenue from the timber trading and manufacturing of processed timber goods.


With the current local market outlook on massive completion of housing projects that will be handling over in 2015 to 2017, and the international market outlook with a stronger USD and the on going European Stimulus program, where can it leads to for Minho?


Minho had been consolidating at the range of RM 1.00, prior before the previous equity shake off that brought the share price tingling at the range of RM 0.80 without any significant volume. While 2014 had been a challenging year, however, Minho still managed to scrap through the year with a total revenue of RM 238 million.

Minho could be poised to challenge towards RM 1.00 in the coming day, anticipated with a better quarterly earning from it's property billing in Klang and the resumption of log harvesting in 1Q 2015 that will be able to boost the revenue further.

Pull Factor from Local Housing Completion
There will be much handover in the housing project from starting from year 2015 to 2017 / 2018. With this in line, there will be a good pull factor for the demand in in house furnishing as well as electrical appliances in the local front.

With a number of the projects that come with fully furnished, this will further add up on the local demand for the furniture and fittings, hence giving the local timber sector a good boost.

Minho being a integrated timber player in the industry, catering for the local and international market, will definitely see benefit from the local demand.


Strong Underlying Assets
Minho business which deal in timber is very cyclical in nature. Various market factor and changing weather can easily put a blow into the financial result. However, Minho's experience in the timber sector definitely did pay out when the group grab hold of the opportunity in diversifying into land banking and subsequently into small property development.

Till date, Minho is greatly boosted with a strong underlying asset of freehold land. Most of it's land is still clinging on the valuation dated back to 2009 and 2010.
Minho currently is sitting on NTA of RM 2.93. However, there are still a good number of revaluation reserved in their belt of freehold land in prime commercial area of Klang, which is near to Port Klang.

Minho had been also paring down it's debt level gradually.

Stronger US and Europe market
While most of the revenue came from the local market, revenue from the US is ranked no.2 while UK no.3. The US market will continue to remain stable, while Minho can start to tap into the European market with the current stimulus program.

A stronger USD against the MYR will also translate to a better forex gain for the group. A stronger contribution from the European market will be able to see Minho ending in a stronger bottom line in 2015.



Minho is an interesting company to be look out upon, largely due to it's strong underlying assets, with NTA bearing approx RM 3.00. The current price of RM 0.90 is a huge 70% discount from it's asset, not counting it's huge revaluation reserves for it's freehold property. 1Q 2015 will also be stronger due to the resumption of log harvesting (no log harvesting income at 4Q 2014). A longer term outlook will see Minho trading at the range of RM 1.20.


Bone's short term TP : RM 1.05

Cheers and have a nice day

Regards,
Bone

Wednesday, 22 April 2015

GPharos - Logging The Limit

Golden Pharos Berhad (Gpharos - 5649), a little known company that is based in Terengganu which is involved in the upstream log harvesting, midstream saw milling, downstream timber processing, manufacturing and distribution of wood based and glass products. However, the core activity that contributes most of the revenue in the group is on the upstream log harvesting, saw milling and klin drying operation.

Situated in the north eastern side of the Peninsula Malaysia, Golden Pharos is largely owned by the state of Terengganu, with a stake of approx 64% being held by Terengganu Incorporated Sdn Bhd.

As of late last year, Malaysia had encountered one of the worst flood in the Malaysian history. With the heavy than expected monsoon rain during the rainy season, Terengganu had experienced a severe flood that had left more than 100,000 homeless, with neighboring state such as Kelantan and Kedah not been spared as well.

The massive flood had caused massive disruption in the economic activities in the northern Peninsula, which includes all kind of harvesting and logging activities. However, with aftermath done by the flood, what is there for Golden Pharos in the coming days ahead?


GPharos had been consolidating at the lower range after a spectacular report from it's 1st Quarter 2014 result, which had saw the company chalking up huge profit after a record log harvest activity for the month of January (2525 hpt), February (4680 hpt) and March 2014 (4625 hpt), bulking up the company EPS to 14.84 cents in a single quarter with a total harvest of 11830 hpt for period. (*HPT refers to Hoppus Tonne)

While log harvesting had been low during the rainy season at the 4th quarter of the year, GPharos log harvesting activity began to pick up in a huge manner for the 1st quarter of 2015 with January taking 1756 hpt, February shooting up to 5695 hpt and March 4345 hpt, totaling 11796 hpt for the 1st Quarter of 2015.


The Aftermath Driver

With the massive flood in the northern Peninsula Malaysia, the coming days will be looking on the reconstruction of the homes and infrastructure.



The condition of the flood speaks for itself through the pictures and video in the media, with massive housing area submerge underwater, and fatal water level that rises to the roof, with some area totally submerged in the water. There are much to do in the reconstruction in the flood hit states. Even state administration offices are not spared in the flood.

GPharos exposure towards the reconstruction and refurbishing phases in the flood hit area at the northern Peninsula of Malaysia due to it's proximity will definitely be a blessing in disguise. In order to back this up further, the Terengganu state owned company had been supplying indoor furnishing to the most of the state government in the north.


Driving a European Boost

After  a series of quantitative easing from the US, the first series of the European Stimulus had finally taken off from 1 March 2015. With 60 billion Euros a month targeted to stimulate the European market until September 2016, things had started to see a better growth in 1 month after the ECB gradual bond buying program.

With the current stronger US economy and a growing European side, things had forged out to be a much better condition for the raw material producing counter, such as Malaysia's logging industry. The mega construction and improving housing activity in the international market favors towards Malaysian Timber products such as sawn timber, MDF and furniture.

The improving international market had been seen through a stronger pick up in the local furniture company that had saw revenue growth hitting ceiling after ceiling.


Latitude, a local furniture manufacturer, is a good proof in reflecting the better state of economy in the international market. Latitude had saw it's extensive growth starting middle of 2014, which saw it's share price climbing up steadily from 90 cents to the current range of RM 6.20 with a dividend of approx 15 cents in between.


A Log and Wood Story

After the strongly hyped up property theme in the 2014, came the furnishing of the property, which brought a strong wood based theme, ranging from furniture to boards and logs.

For Gpharos, it will be more incline towards the upstream wood sector, which is the harvesting of logs. Ever since Myammar putting up a ban towards the export of their logs in April 2014, it had left a very big gap to be filled up by the rest of the South East Asian player since Myammar is rank no.2 for it's timber export in the region.

The large gap had put a double blessing towards neighboring country such as Malaysia. The exit of Myammar in the timber export will directly result to
- Lesser timber supply in export market
- Lesser price war due to reduce player




With round log timber traded in USD, the stronger USD will put act as the 3rd booster in a greater forex gain.


Summary
GPharos will be a superb interesting company to be look out at in the coming days due to
- 1st Quarter 2015 result could bang above 15 to 17 cents in EPS from it's total 11796 hpt harvested log.
- Strong exposure towards the rebuilding of the flooded area due to close proximity in the supply and demand area.
- Strong European stimulus program and a better US economy, driving more international demand.
- Better forex gain from stronger USD.
- Net cash position with approx RM 15 million in cash.
- Laggard in the strong timber theme play.
- Certified by FSC (Forest Stewardship Council), hence able to penetrate into the developed country's market that support environment friendly products.


Log to the limit up? You decide

Bone's TP : RM 0.90

Cheers and have a nice day

Regards,
Bone