Friday, 30 May 2014

PENTA - Penetrating Forward

It had been quite a dry month for May as volume subsided overall as both profit taking and cutting loss measure takes in. While many would tend to blame it at the World Cup, or the ritual "Sell in May and Go Away", is there a better answer towards this event? Well, if you to ask me, I would tend to look at May as the month where most of the companies' Q1 financial are coming out, and which is also a time to face the reality after all the prediction from investment banks and private fund managers. Frankly speaking, for me, the best time to trade any stock is when there is no upcoming material news announcement. You wouldn't know what is the financial will turn out even though how prospective a company can be.

While good result doesn't means the stock will go up, a bad result doesn't means the stock will go down either. It had came to my attention on a prospective company that is involved in Semicon industry that will be seeing it's financial turning into the black again soon - Pentamaster.

Penta had been lying on the financial blues for quite sometime. Recently, Penta had saw growing interest in it's market share. A short term consolidation at the price range of RM 0.26 to RM 0.27 will be looking at a greater penetration above RM 0.30 in the coming days as volume seeks a higher mark.

Like the saying of "Every dogs will has it's day", Penta had finally got ready to turn their financial back into the game.

With the growing demand of a smaller phone with speed, quality and tons of function, it is always about getting the component from mini to micro, and from micro to nano.

After spending more than RM6m in the R&D, Pentamaster had finally come out with a machine that had the capabilities of checking 40,000 chips and sensor in an hour. The machine is able to pump 100% extra output compared to the older version, While the unit comes with a higher price tag at around USD200,000 per unit, it is hot sought after machine from giants MNC like Apple and Samsung.

Pentamaster will be seeing a great turnaround in the year 2014 as they start to secure more orders as the global market sees more demand in electronics goods, particularly smart phones and tablets as the leading consumption.

Based on international research house, Gartner Research, it had reported that the global semiconductor industry revenue will see approximately of USD350b revenue in 2014. On a local note, we are seeing more demand in the industry through more orders for semiconductor related machinery. A good example is being displayed by Vitrox and Elsoft

Both Vitrox and Elsoft had been seeing a strong uptrend growth in share price, as well as their revenue. Pentamaster had been relatively resistive, however, it shouldn't be long for Penta to start moving along with the train soon after being laggard for quite some time from the pack of herds.

Beside from the coveted orders that Penta had managed to secure in the 2Q of 2014, Penta is looking to burst their order book for 3Q and 4Q as well from the medical industry. With the sight of global well know medical industry MNC by the name of B. Braun Melsungen AG, Symmetry Medical Inc and St Jude Medical Inc located in the Penang state, Pentamaster will be looking to see the contribution from their medical device to surge from 10% to 25.

I believe that Penta will be having a great year in 2014 based on
- Latest equipment seeing good reception from the market.
- Order book of RM30m secured for 2Q 2014, while looking for another similar order for 3Q 2014.
- Bullish demand and growth on high tech medical device in Penang.
- Bullish demand and growth on Consumer electronics good such as Smart Phone and tablets.
- Penta streamline operation after a series of cost cutting measure, and new product launch with a higher profit margin.
- Major player in the RFID industry, another potential industry with more than USD10b per annum

Penta should be able to garner a strong pace based on their current undervalued price. Compared to it's competitor at Elsoft and Vitrox, Penta is relatively low to see a strong upside in the coming days. Penta should be able to test RM 0.30 easily, a short term outlook can easily see Penta touching above RM 0.35 while a long term outlook would suggest Penta reaching RM 0.50.

Bone's short term TP : RM 0.325

Cheers and have a nice day


Wednesday, 28 May 2014

EUROSP - Towards Limitless

The recent US economy had been raging in a bullish manner as the Feds had injected tons of liquidity in to the financial system from the bond buying program. Although it had been reducing, the Feds are still likely to employ a loose monetary policy in the market to continue enhancing market and business activities.

The recent bullish furniture exports, chalking up more than RM1.6b in value, had saw revival in the long depressed furniture industry after the Asia economy crisis as many of the furniture company had been chalking up huge revenue that had been boosted from huge demand from overseas. Many of the furniture manufacturer had started to see turnaround story in their company. Amongst them had saw Homeritz (5160), Latitude (7006), Poh Huat (7088), Swscap (7186) rallied, while the recent spectacular ones had been SHH Resources (7412) and Golden Pharos (5649), which had hit limit up. While all this had rallied well, one that would definitely catch my great attention will be the next big thing - Eurospan Holdings Berhad (Eurosp - 7094)

Eurospan, being a manufacturer of quality dining sets and wood based product, had been similar to SHH Resources. SHH Resources which had recently been boosted by a 3Q earnings of 7.52 cents, making it to a cumulative 13.04 cents for 3 quarters had saw it's share price hitting the ceiling. What could be so interesting about Eurospan. Let's have a quick view on the recent price.

Eurosp had been in a slow rise without much significant volume, while the company had saw recent director's, Guan Kok Beng open market purchase amounting to 365,000 shares with an average price of RM 0.755. Eurosp had been consolidating off the weak market at the range of RM 0.75 to RM 0.85 as impending for a volume breakout in the coming days once the market volume resume,where most anticipated it to happen in June.

Eurospan is very unique in it's own way as compared to other. With a total shares issued of 44,421,700 shares, Eurospan current market capitalization of RM35.3m had a huge potential in appreciation after understanding their financial position, business orders and land and property assets.

Looking into their land and property will probably blow your mind away.

Based on the valuation at the 1990s, the net book value for the 8 properties had a total of RM14.757m. As of current, Eurosp will have a valuation reserved of easily more than 150% as seeing most of the lands and properties acquired are under Freehold title. A skeptical value of RM30m will be putting it's lands and property asset valuing RM 0.675 per share (based on 44.421m shares). Eurosp will continue to enjoy a growing valuation reserved based on it's strategic location and freehold land held.

As of the latest Q3 result for FYE 2014, Eurosp cash pile had been growing steadily, as the latest quarter show RM18m in cash and short term investment, which is looking at RM 0.405 cash value per share. To make it more interesting, Eurosp had been a debt free company.

While the Guan's family had been a rather shrewd in their business, they had not failed in giving out huge surprises in the past, where they had once unlocked the cash pile in the company after declaring a special dividend of 40 cents per share. Guan's family control the company through TBHL Holdings Sdn Bhd, which held more than 41% of the company shares.

The FYE 2014 for Eurosp will be a great highlight to the company as 4Q had saw huge orders been placed before the implementation of GST that will resort in a higher price in the coming days. According to internal sources, Eurosp had been working hard to meet demand on the exports, which could be seeing revenue shooting above RM20m.

I believe Eurosp will be a great company to be invested in based on
- Strong financial background, debt free company and sitting on a cash value of RM 0.405 per share
- Undervalued land and property assets that could be worth a portfolio of more than RM 30m. Skeptical value of RM 30m will interpret to RM 0.675 per share, putting the company in a strong valuation reserve.
- Huge orders in 4Q FYE 2014 which could be probably see revenue chalking up above RM 20m
- Director's recent acquisition of shares in open market
- Possible event on special dividend for FYE 2014

Looking at the current price of RM 0.79, Eurospan is easily sitting on a value of more than RM 1.08 per share (Cash, land and property), which is a 26% discount from it's value. Prior to the weaker market sentiment, Eurosp will be deemed an attractive target to be accumulated as this company could be able to deliver limit up surprises in the 4th result. A short term outlook will see Eurosp testing RM 0.90, while a longer term outlook will definitely see Eurosp reaching above RM 1.00.

Bone's short term TP: RM 0.90

Cheers and have a nice day


Friday, 23 May 2014

AZRB - Breaking Total Limits

While the overseas market had been seeing some recovery with DJIA again sitting above 16500 (Currently at 16553.32, +21.29), our local market had yet to see back the volume that had been in the market for the past 1 month. However, despite the saying of sell in May and go away, our local market still had it's own gems that you could uncover. As we entered into the middle of the year 2014, what had you achieve in your own goals? Speaking on financially, had you done enough?

As we had a great time partying over Plantation stocks, Properties stocks, Oil and Gas stocks and eve furniture stocks, I believe the Construction stock is one of the sector in the belt now to be focused on as we are anticipating more Government announcement on public infrastructure projects and government projects in the coming months.

One of the gem that I would like to highlight to your attention is a highly government linked public listed company - AZRB (Ahmad Zaki Resources Bhd - 7078)

Let's have a quick glance at the price movement of AZRB

AZRB had recently went through a capital raising exercise which had saw it paring off it's debt level in a huge manner after rights exercise, as more liquidity comes into the company. AZRB had been tackling above RM 0.80 in the middle of April 2014. However, after consolidating for around 1 month, AZRB had been seeing great interest again on 16th May 2014 with more than 35m shares changing hand with an ending price at RM 0.74 had suggested more upside to come in the coming days ahead. AZRB will be looking to see 15m to 20m shares transacted in a day as the stock positioned itself to break above RM 0.75 in the coming days, and to retest on RM 0.80 again.

What is cooking in AZRB

AZRB is primarily involves in providing management services and as contractors of civil and structural construction works. AZRB operates in four segments: construction, which is engaged in civil and structural construction works; trading in oil and gas and other related services, which include dealing in marine fuels, lubricants and petroleum-based products; oil palm plantation, and property development.

AZRB had been a favorable company in getting government projects. Throughout the journey, AZRB notifiable projects includes
- Ampang Hospital
- Sepang Formula 1 Racing Circuit
- Jalan Duta Mosque
- New Interchange for Jalan Duta
- East Coast Expressway

AZRB had completed a total project value worth more than RM 2 billion in the past. Hence, due to it's past record, AZRB will seldom sit in the losing end when talking about big government infrastructure projects.

Currently, AZRB is on a healthy book order that stands above RM 2b, good enough to see the company busy for the next 3 years. Under their belt includes
- Redevelopment of former MAS Building - RM 646m
- KVMRT Line 1, Package V6                    - RM 607m
- IIUM Teaching Hospital, Kuatan              - RM 306m
- Langat 2 water treament plant                  - RM 300m
- UTM student hostel in KL                        - RM 170m
- Airbase RMPF in Subang                         - RM 160m
- East Coast Expressway                             - RM 40m
- Others                                                        - RM 7m
Total remaining project value more than RM 2.2b

While the talks of EKVE (East Klang Valley Expressway) had been for sometime, however, yet to see official announcement on the project. The EKVE which spans for 39.5km long, also dubbed the KLORR (Kuala Lumpur Outer Ring Road) will be connecting Karak Highway and SILK Highway, with interchange at Sungai Pusu, IIUM, Setiawangsa, Ukay Perdana and Hulu Langat.

The EKVE carries a tag of RM 1.55b, a construction that will be looking to be officiate in June 2014, and ground work and preparation to kick in on July 2014.

AZRB will be seeing a 50 years concessionary in the EKVE, putting them into a great position for recurring income in the operational years.

AZRB had recently restructured their financial position via rights issue, reducing significant debt level and will be looking forward to kick start this project in July 2014 after having all the green lights from the government and state to proceed with the project. EKVE will be a significant contributor to AZRB current book order of RM 2.23b, boosting it to RM 3.7b.

At RM 3.7b of project value for a span of 3 years, average revenue per share for the coming 3 years will be seeing RM 2.55 per share per year. A skeptical 10% on nett profit will be seeing EPS at RM 0.255 per year. Trading at skeptical valuation of PER x7, AZRB could be easily spelling above RM 1.75. AZRB stands a high chance on some future coming up projects that will be announcing soon, particularly KVMRT Line 2, where their portion will be estimated at RM 600m to RM 700m. AZRB might also be securing new O&G contract.

I believe AZRB will be a very good company to be invested into based on
- Current healthy book order of RM 2.23b
- Officiating EKVE in June 2014, worth RM 1.55b
- KVMRT Line 2 beneficiaries, estimated package secured worth RM 600m to RM 700m
- Significant reduce in debt level on latest capital raising
- Favorable company for government contract

At the current price of RM 0.71, AZRB is deeply undervalued, unpinned by projects that are worth up to RM 4b (estimated includes EKVE and KVMRT Line 2). AZRB will be looking to challenge above RM 0.75 in the short term outlook, while a longer term out look will see AZRB moving towards RM 1.00 range.

Bone's short term TP: RM 0.78

Cheers and happy trading.


Tuesday, 20 May 2014

3A - Towards a Sweetened Up Season

While the DJIA had came down slightly from their peaking moment, our local KLCI index inch higher for 4 consecutive days, poising a challenge right at 1900 as it sit at 1887.07 (+3.73) today. Market had been always been hard to predict, and that is too resembling the fun side of the game.

From bulls to bears, and bears to bulls, while many believe that the market is already at the peak, had it actually reached it's peak? Back then at 2012 and 2013, I was told that the market had already peaked. So 2014 is overly peaked?

It had came to my interest on Three-A Resources Bhd (3A - 0012) recently, in lieu with their business and their shareholders. Let's have a quick look at 3A latest price chart movement.

3A had saw huge blocks of share changing hand on the 10th January 2014, where nearly 14m of shares changed hand. The share subsequently consolidated at RM 0.90, which had recently saw a saturation in the consolidation, and pending a break out above RM 1.00 in the near term as volume looks likely to soar in the coming days.

3A is engaged in manufacturing and selling of food and beverage ingredients. Their wholly owned subsidiary, San Soon Seng Food Industries Sdn Bhd's products are caramel colors, glucose syrups, soya protein sauces, natural fermented vinegars, distilled vinegars, rice vinegars, caramel powders, hydrolyzed vegetable protein (HVP) powders, soya sauce powders and maltodextrins.

3A and Wilmar
3A latest expansion is the 50-50% joint venture with Wilmar at QingHuangDao, which include setting up a hydrolyzed vegetable protein (HVP) production line with a capacity of 6,000 metric tonnes (MT) per annum. The production is 3 times larger than the capacity of the Malaysia plant.

Currently, the plant in China is yet to see full scale operation due to the time needed for their product to penetrate into the China market. However, 3A substantial shareholder, Wilmar, will be on the path in setting the pace for 3A to penetrate the large China market in the coming days. It is well known for Wilmar intention to penetrate the downstream consumer products in China, and 3A could be the vehicle that Wilmar could be using in the coming days ahead after seeing Wilmar private placement of shares in 3A and following with a 50-50 joint venture in 3A (QingHuangDao) Food Industries Co Ltd production plant. We do not rule out tendency of 3A being privatized by Wilmar following Wilmar's capital injection into the company, and might restructure the whole company business operation to position it to become a global food and beverage ingredient supplier.

3A recent squeeze in their financial result had been burdened off by the yet to performed investment in China. While exports consist of 30% of their sales, most of the revenue generated are from local sales and market demand. 3A had been a dominant market player in the food and beverages ingredient supplying in Malaysia. As cost are rising in 2014, from minimum wage to electricity tariffs and transportation, we expect 3A to be passing their cost to the consumers in 2014.

I believe 3A will be positioned for a better run in the coming days due to.
- Upcoming Hari Raya festive season, a huge spark up in the demands on the ingredients.
- Strong business fundamental involving in F&B ingredients supplying industry.
- Strategic partnership and stakeholder with international giants, Wilmar, in tapping into the large China market.
- 3A is rich in land and properties in Sg Buloh, of which quite a number of them are yet to be revalued since 2003.
- Potential privatization target by Wilmar as a vehicle for downstream consumer products.
- China Joint Venture (3A QingHuangDao Food Industries Co Ltd) to start delivering profits in FYE 2014

A short term outlook will see 3A touching RM 1.00 to RM 1.05, while a longer term outlook suggest 3A to see back it's glorious moment above RM 1.20 once the China plant starts to deliver.

Bone's short term TP: RM 1.05

Cheers and have a nice day


Wednesday, 14 May 2014

Tgoffs - Charging on Northern Waters

It had been a rough water ride for the past 2 weeks after seeing the local market losing on steam as investor put on a cautious outlook on the Malaysian market after some series of global events from the tension of war to upcoming weather change that analyst forecast on a drought to take place in the South East Asia, which could disrupt supplies in food and palm oil. While the western bull had charged up above 16500, currently sitting at 16700, our local bull had been still looking for confirmation.

While market had been moving sideways, our local market will still be bullish in CPO and Oil and Gas in the near term, with the recent attraction being Tanjung Offshore.

What could be so attractive in Tanjung Offshore? Let's have a look at their recent movement.
Tanjung Offshore had hit a high of RM 0.75 back then on November 2013 with large volume hitting out at 40m of shares transacted in a single day. The share price had saw some consolidation for a period of 5 months. Lately, Tanjung Offshore is back in action, and will be looking forward to see it testing RM 0.65 in the coming day with a good interesting amount of volume that can be looking at 10m to 15m shares changing hand.

Tanjung Offshore and the Northern Seas

Previously, Tanjung Offshore had been providing OSV services in the oil and gas industry. However, after slumping in the blues for some time, Tanjung Offshore had finally get back on it's feet and start to revamp their whole business as they dispose off Tanjung Kapal for a cash consideration of RM 220m while they start to focus on oil field services, particularly, oil rigs.

Currently sitting on more than RM110m of cash (translating around RM 0.30 cash per share), Tanjung Offshore had been seen courting with Songa Offshore from Cypress (Listed in Norway Exchange) since last year. Songa Offshore, in which they are owning 2 rigs, will come very handy for Petronas to explore the Northern Sea Waters, which had been proven for their oil reserves.

Songa Offshore which is currently in need of cash for their financing of 4 rigs which they are building, had recently seen a take over exercise from Perestroika AS at NOK 2.50 a share (approx RM 1.375 a share), indicating Songa Offshore paving the way for Tanjung Offshore for a buy out in the coming days.

Eying on the untapped black gold of the North

Norway is one of the European richest nation after huge contribution from their oil and gas industry. Norway is current Europe's largest oil producer, the world's 3rd largest natural gas exporter and is the largest oil producer and exporter in the Western Europe.

In line to continue their growth, Oslo will be opening the highly sought after Barents Sea, which had been frozen since 1980s, as global warming take place, hence paving way for vessels to tap the black gold of the Barents Sea, in which geologist estimates that a reserve of possible more than 4 billion barrels of oil and 1.06 trillion cubic meters of gas. Oslo will be deciding which blocks to be opened in this year.

The Barents Sea had attracted many large oil and gas company into venturing for a spot in the Barents Sea oil field. With Petronas' interest of going into other region to explore new oil field, through Tanjung Offshore, tapping into the proven oil reserve in the North Sea and the upcoming Barents Sea will be one of the fastest way going. In fact, on the back stage, Tanjung Offshore had basically secured the leasing contract to let out the rigs to Petronas once Tanjung Offshore bought over Songa Offshore in the coming days.

I strongly believe that Tanjung Offshore will be a very lucrative company to be invested in the coming days based on
- Upcoming corporate exercise in raising fund for purchase of Songa Offshore.
- Revamping business from the oversupply OSV segment to Oil Field services (Oil Rigs)
- Unofficial contract secured from Petronas in Oil Rig leasing for North Sea exploration.
- Recent private placement being at RM 0.57
- Cash rich company with cash value of RM 0.30 per share

Tanjung Offshore will be appearing as one of the major Oil and Gas player in the coming days after acquiring Songa Offshore. A short term price movement will see Tanjung Offshore testing RM 0.65, while a longer term outlook will suggest Tanjung Offshore breaking above RM 1.00.

Are you decided on the Northern Waves? You make your call.

Bone's short term TP : RM 0.65

Cheers and Happy trading.


Friday, 2 May 2014

Minho - Mining On The Logs

Market had been in a wide roller coaster ride with DJIA staying up above 16500 again (16558), wrestling hard between the bulls and bears at this pivot point. The market is really hard to predict after just seeing the index dropping off a fight from 16500, but just to see the bull able to cling on to the fight to make a come back at this point.

While market had been a tug of war between the bulls and the bears, it had came towards my very attention on a small logging company - Minho.

Let's have a quick look that what can be so interesting in Minho.

Minho might not be very interesting in the past, but not until recently where it had surge from RM 0.75 to RM 1.00 range and consolidated around this region. The consolidation at RM 1.00 region will be seeing a saturation soon and will suggest that Minho will be trying to penetrate above RM 1.15 into a new region in the coming days with a strong volume which had been anticipated above 5m shares transacted a day.

Minho on the Logs

Minho mainly engages in the following business services.
- Custom kiln drying & chemical impregnation services for tropical hardwoods.  
- Manufacturing & export of processed timber products including lamination and finger-jointing; and special finger-jointed KOMO certification for Dutch market .
- Supplying of quality graded rough sawn timber for export which is derived from well-managed and legal forests that have been endorsed by the Programme for the Endorsement of Forest Certification Schemes (PEFC).
- Manufacturing & supplying of industrial grade sack kraft paper bags.
- Logging & Supplying of Logs. 
- Property Developments.

Minho, under the management of Dato' Loo Keng An @ Lee Kim An had been steering the company in a slow and steady manner in making the company sustainable and growing gradually. The company had saw a significant reduce in their net debt position, from a figure of more than RM120m net debt in 2011 to RM90m in 2013, (reduce of RM30m in 2 years) marking a higher level of cash balance and lower borrowings by asset disposal and growing profit, and a stronger USD against MYR (USD 1 = MYR 3.26)

However, the ultimate game changer comes when Minho is look set to see a higher demand in log supply after 1st April 2014, where Myanmar, the 5th largest log producer and 3rd largest exporter in Asia Pacific had put a ban on log exporting, marking a new party for many of the loggers in the neighboring countries. Myanmar logging industries is being valued at a USD 6 billion trade industry.

In line with that, Minho had been seeing greater demand since as purchaser will have to look for alternative in South East Asia (ex Myanmar). It had been reported that Minho had clinched into a few huge supplying contracts for the log that will be seeing their inventory materializing into cash very soon. Minho will be looking set to double to triple up their revenue in the coming quarters.

Currently priced at RM 1.05, with a NTA of RM 2.88, Minho is priced at 63.5% below it's NTA whereby a lot of their asset (lands and properties) had been undervalued. Minho will be easily recording a NTA above RM 3.00 with a share issued of around 109.8m.

I believe Minho will be a very attractive target to be traded and invested based on.

- Myanmar ban on the USD 6 billion logging industry's exporting effective 1st April 2014 due to their shrinking forest.
- Current market price, a huge 63.5% discount at NTA of RM 2.88
- Current stronger USD against MYR, benefiting forex gain.
- Strong and prudent management team, spearheaded by Dato' Loo Keng An.
- Timber season themed play.
- Strong demand on furniture exports after improving economy in the US.
- Company with sizable amount of land.
- Attractive small cap company with around 100m shares issued (109.8m shares issued)

Minho will be looking to challenge above RM 1.20 in the coming days, and might probably looking to challenge RM 1.50 in the longer outlook after displaying a stronger quarter in the coming days.

Are you prepared to log in together? You decide.

Bone's short term TP: RM 1.20

Cheers and have a good day.