Friday, 22 August 2014

SHH - A Leap Above

The global equity market continue to inch higher as the DJIA had challenge above the 17000 mark as of now, sitting at 17048 (+69.60) after the recent FOMC meeting had gave institution a confidence that the Feds will continue to maintain a loose monetary policy that is much needed to continue on the recovery note that the US is having now. Based on the bullish Q2 economy data, the loose monetary policy by maintaining a low interest rate, the global equity market is almost clear of all potholes, except for the geo-political tension in the Gaza, Syria, Iraq and Ukraine that could burst into a more serious note.

With the robust economy data from the West, the local furniture business had been recovering and seeing a growth as well with the rising demand from the West. While most had risen above their net tangible asset, SHH is definitely something that is worth a look at.

Let's have a quick look at the current price movement of SHH.
SHH had been consolidating at the price range of RM 0.95 for a period of approximately 3 months. The consolidation had seemingly seen a saturation in the price range and will be looking to challenge into higher ground in the coming days, especially with a higher anticipation that a better report in the coming FYE 2014 result which will be out soon in the end of August. SHH will be looking to challenge a small resistance at RM 1.00, while breaking above RM 1.10 will mark SHH into a uncharted territory, which might be able to see it testing RM 1.20 to RM 1.50 in the coming days.

SHH - A Booming Front

SHH Resources Holdings Berhad is engaged in the manufacturing of wooden furniture, including the kiln drying and treatment of wood used in the manufacturing process. Most of the wooden furniture that SHH manufacture is exported to the United States.

Furniture company had been encountering a robust growth stage after the recovery of the US economy. Furniture company started to pick up in the end of 2013 with more encouraging order in the 1H of 2014. The furniture craze had been strong and is one of the dominating topic in 2014.

A quick look up on the following furniture or furniture related company.

1.) Latitude Tree Holdings Berhad
NTA: RM 3.05

2. Poh Huat Resources Holdings Berhad
NTA: 1.55
3. Heveaboard BerhadNTA: 2.63
4. Homeritz Corporation Berhad
NTA: RM 0.44
5. Eurosp
NTA 1.07

While most of the company had been trading near/above their NTA valuation (except for Hevea), SHH might be still a comparatively good furniture company that had a great potential in the coming up days ahead. Let's have a quick look at their latest 3Q FYE 2014 result.

Based on the 3Q cumulative outlook, SHH had saw a significant increased in it's revenue, with a 13 cents EPS and a NTA of RM 1.47. SHH had also been displaying a strong steady foothold of cash that had been increasing in quite a drastic manner with decreasing debts. SHH had saw more than 100% of increase in their cash level from 31/12/2012 to 31/03/2014. Currently, SHH is sitting on a cash pile of RM 23million, equivalent of RM 0.46 cash value per share.

SHH better margin had been contributed by it's in-house processing of the timbers and woods, which had been a definite boost for the company operation profits.

Coming up catalyst
SHH had been mainly exporting their products to the US. While their order books had not return into the glorious days before the then 1997 Asian Financial Crisis, the current bullish and robust economy in US had been in an encouraging note as SHH will be looking to see a break through in the coming days after their order had picked up in a drastic manner in the 1H of 2014. According to industry sources, SHH had seen strong order and sitting on a rather huge unbilled sales that will be recognized in the 4Q of 2014. SHH might be looking to see their revenue breaking above RM 30m for 4Q 2014, and registering their FYE 2014 revenue above RM 100m. SHH might be looking to chalk above an EPS of 16 cents for FYE 2014, translate to a value of RM 1.28 per share if traded at a skeptical PER of x8.

I believe SHH will be an interesting company to be invested in based on
- Increasing cash level on the past 6 quarters
- Sitting on RM 23 million cash pile, or RM 0.46 cash per share (Based on 49,997,500 shares)
- Trading at a 35% from it's NTA of RM 1.45, while most of it's peer had traded above or near to their NTA, with Homeritz traded at 80% above it's NTA of RM 0.44
- Encouraging economy from the US as US undergo a bullish state of economy after Feds commitment to keep the interest rate low.
- Strong coming 4Q 2014 with stronger revenue and recognizing unbilled sales done in 1H 2014.
- Undervalued land & properties with properties valuation done back at 1994 to 1996.

SHH will be looking to see challenge above RM 1.00 in a confident manner. A quick short term outlook will place SHH at RM 1.10, while a longer term outlook will see SHH putting a foothold at around RM 1.30 to RM 1.40 in the coming days.

Bone's short term TP: RM 1.10

Cheers and have a nice day


Wednesday, 20 August 2014

BJASSET - The Roar of The Southern Lion

The bullish global economy data that had been released from the West had finally toppled the fear of the traders and investor from the geo-political tension that is happening around the world. Currently, the DJIA is back on track again to challenge the 17000 mark, of which breaking above 17000 will definitely mark a strong come back of the bulls in the equity market once again. 19th August 2014 had mark a strong come back on the foreign fund in the local KLSE equity after chalking up more than 5.1 billion of shares exchanging hand as KLCI ended at 1872, putting up a 10.41 points gained.

Malaysia is still a place that is full of opportunity and chances. While the Penang is as interesting as Kuala Lumpur, Johor, under Sultan Ibrahim is definitely not to be missed at all with robust mega high end development that is brewing in the state.

Putting that up, one of the great attention for 2H of 2014 that should not be missed out will be at Berjaya Waterfront, which is under Berjaya Assets Berhad (BJAsset - 3239)

Let's have a quick look at the latest chart on BJAsset.

BJAsset had recently came into a huge limelight earlier this year after unveiling their plan to replicate another Berjaya Hill in Johor, which is adjacent to their latest acquired Berjaya Waterfront. BJAsset had since then consolidated for a period of approximately 6 months. As the consolidation at the range of RM 0.85 had saw saturation, BJAsset will be looking to soar into the higher ground as they might challenge above RM 1.00 to put them into the uncharted territory. BJAsset had saw an improved participation in volume, which will suggest a greater participation in the coming days which will help breakthrough RM 1.00 in a solid manner.

BJAsset - Rolling the Chips

Berjaya Assets Berhad basically engaged
- gaming and related activities
- property development, property investment and commercial leasing
- recreation theme park and car park operator

BJAsset had recently announced it's FYE 2014 which ends on the 30th June 2014. The revenue for FYE 2014 had increased in a significant manner, with major contribution from the gaming business after recording a lower payout.

Moving forward, BJAsset will be looking to maintain their current market share, and will be looking to tap into new market in the coming days, which will be focused in Johor after the company had spent near to RM 500m in acquiring land and building in the currently known Berjaya Waterfront, a Duty Free Zone in Johor.

At the current price of RM 0.94, BJAsset had been trading at a seemingly huge discount of 50% from it's NTA of RM 1.87. However, the discount might be even larger if it is not for a Year 1994 value recognition in Berjaya Times Square and Menara Berjaya.
Based on the valuation dated 20 years back to 1994, both the assets is valued at RM 2.158 billion. Till date, both the freehold property might be easily ramped up to more than RM 5b in valuation, putting BJAsset in a more sickening state of grossly undervalue. To put it more skeptical at a 100% increase, BJAsset NTA will be easily chalking up at RM 3.80, putting the current price reflecting only 25% of it's true valuation (Or a grossly slash discount of 75%).

To recap back in 2013, BJAsset had seen a strategic partner when Sultan Ibrahim bought up 20% of stakes in Tan Sri Vincent Tan privately held vehicle - Berjaya Times Square Sdn Bhd at the price of RM 250 million. Although the sale is a RM 7.02 million gain in the company level, the group will be registering an exceptional loss of RM 149.15 million after seeing the transaction being transacted less than the value of the building booked in a group level.

BJAsset had started their venture in Johor after acquiring "The Zon" from Darul Metro Sdn Bhd. The group continued their spree by acquiring another 4.89 acre from Atlan Technology Sdn Bhd, while another plot of 4.285 acre of land held by Kelana Megah Sdn Bhd will be looking to set to hit the agreement soon. The huge mega plan in Berjaya Waterfront is to emerge as a huge entertainment resort with a chain of high end restaurant and clubs that will be catering to the middle - high income population that is expected to settle down in Iskandar Malaysia in the coming years. To make things hotter, there are plans for slot machines as well after seeing the bullish crowd that Singapore casino are having, where cost are much higher.

Upcoming Huge Booming Catalyst

Berjaya Asset will be ready to launch their mega entertainment city once they complete their last acquisition land that is held by Kelana Megah Sdn Bhd, which is a 100% owned company by SGX listed Duty Free International, whereby Duty Free International is a 81.15% owned subsidiary of Atlan Holdings Berhad. The previous transaction of Darul Metro Sdn Bhd (owned indirectly through Duty Free International) and Atlan Technology Sdn Bhd is also owned by Atlan Holdings Berhad.

According to sources, Popular Earnings Sdn Bhd, a wholly owned subsidiary of Berjaya Times Square Sdn Bhd might be entering into a joint venture with Atlan Holdings Berhad to develop the 4.285 acre land that will be held by Kelana Megah Sdn Bhd. This will be further back up by the recent 15% private placement in Atlan Holdings Berhad amounting to 38,047,500 shares which will raise approximately RM 170m.

The completion the land deal in Kelana Megah Sdn Bhd will be the final leg of the wait and will spell the start of the one of the most happening entertainment city places in Johor - Berjaya Waterfront.

Berjaya Asset will definitely play a prominent role in in transforming Johor. While casino is currently a no, slot machines are not in the same rank as casino. The entry of slot machine will definitely put a bar higher in other entertainment city in Malaysia (except Genting Highlands).

I believe BJAsset will be a very worthy company to be invested in for the long term based on
- Grossly huge discount of 75% at RM 0.94 based on RNAV of RM 3.80.
- Emergence of strategic influential stakeholder (Sultan Ibrahim) in Berjaya Times Square Sdn Bhd.
- Strong solid business background with huge financial capabilities in undertaking huge projects.
- Exposure in Johor most strategic location with Duty Free Zone.
- Berjaya Waterfront's close proximity to Iskandar and Singapore.
- Upcoming projects development worth more than RM 5billion.
- Berjaya Waterfront to be a huge entertainment city with high end hotel, residences, restaurants and clubs.
- A very high chance possibility of slot machines area to spice up the entertainment city, which is further backed by insider sources.
- High possibility of joint venture with Atlan Holdings Berhad to develop 4.285 acre of land

Berjaya Assets Berhad will be looking to trade into the higher region in the coming days ahead. A short term outlook will definitely see BJAsset shooting above RM 1.00, while a long term outlook will put BJAsset possibly reaching RM 2.00. Based on a 50% discount on RNAV, BJAssets will be worth RM 1.90.

Game in or game out? You decide

Bone's short term TP: RM 1.20 (Potential limit up)


Monday, 18 August 2014

Eastland - Dragon of the East

While most of the global equity market had just reeled off from the peaked during the beginning of August due to geo-political tension rising from Ukraine & Russia, Gaza, Syria and Iraq, the reduction of QE from the Feds, financial vows from Argentina and some European banks, the market shed off very quickly after no bullish catalyst had been seen. However, the market rebounded back on track in a quick manner after a better economical report from the West. On a local outlook, Malaysia 2Q GDP performed better at 6.4%, beating the forecast 5.8% by analyst, marking the bull to stay in the game.

Our local equity market continue to remain challenging and exciting as well, with the government spending big on more huge infrastructure. 2014 had been a great year for most of the properties counter which is involved in Johor, Klang Valley and Penang. However, little known Kelantan might be too underrated to be ignored as it will become one of the most interesting state in the northeast of the Peninsula Malaysia.

Kelantan had recently came into a big spot light after Sara Timur announced it's more than RM 1.2billion project in Kota Baru, dubbed Kota Bharu Sentral at Bandar Baru Tunjong. The development will consist of  commercial units, village and retail malls, a convention hall, a town square, multi-level office blocks, life style apartments and condominium amongst others.

While Sara Timur is one of the major developer that had spear headed into Kelantan, others few prominent names that are following into the run includes:

Symphony Life Berhad - JV with Kelantan State Government to develop Jalan Raja Dewa, a mixed development that will be Beverly Hills of Kota Baru with a GDV of RM 450m.

Ken Holdings Berhad - First Green Development that comprises of condominiums, hotel suites and commercial shop lots in Jalan Hamzah, Section 16 of Kota Baru.

Masmeyer Holdings - Penang based developer focusing Tanjung Tokong high end residential development had 2 projects in Kelantan, a landed property township in Kelantan worth RM500m in GDV and a JV with Koperasi Polis Kelantan with a GDV of RM100m

Bina Puri Holdings Berhad - JV with Sentosa Jaya Development Sdn Bhd for a RM 148.7 million worth development in Kota Baru.

While most of the big names are out there, it had came to my interest in Eastland Equity Berhad, a company with notable land banks in Kelantan, especially in Kota Baru. Let's have a quick look at Eastland Equity Berhad latest share price movement.

Eastland Equity Berhad, previously known as FBO (Furqan Business Organisation Berhad) had been consolidating at the price range of RM 0.45 for approximately 9 months. The consolidation had seen saturation in the level, and a set of fresh volume is looking to bring the share price higher in the coming days. A quick outlook will suggest that the share will challenge a psychological level of RM 0.60 in a short term. Eastland will be anticipated to see a higher volume of participation in the coming days ahead.

Eastland - The Shadows of Tan & Ng

Eastland major operations focus in Property development, Commercial Leasing and Hospitality. In July 2013, Eastland had saw a series of shareholder tussle over a tendency of being take over by certain parties, resulting in the share price hitting a series of limit up and hit a record high at RM 1.32. Let's have a look at the current 2Q FYE 2014 result for Eastland.

While current financial outlook might not look interesting for Eastland, Eastland is still trading below it's NTA of RM 0.75, putting it on a good discount which is mostly sitting on prime land parcel in Kelantan. Let's have a look at Eastland land banks.

Eastland's land bank in Kelantan are hot and prime area in Kota Baru. With the current growing appetite in Kota Baru, Eastland is standing in a good position to capitalized with the growth from the boom, or to make a one off profit from the land sale as well.

However, what could be more interesting will be the appearance of both Tan Wang Tiang and Ng Lui Keng@ Ng Joo Keng in Eastland Equity Berhad through the incorporation of Prestige Pavilion Sdn Bhd (Currently Prestige Pavilion is handed over to Tan Chin Hong and Tan Chin Hao)

Now, who are the 2 of them actually?

Tan Wang Tiang and Ng Lui Keng@ Ng Joo Keng rised to fame during the 2006-2007 privatization of Road Builder (M) Holdings Berhad by IJM. The duo used 3 private held vehicles - Perintis Harmoni Sdn Bhd, Emerald Profile Sdn Bhd and Saujana Tertib Sdn Bhd took 15% stake in RBH. The rest are history. Source - The Star.

Another notable one is Rumpun Positif Sdn Bhd, now a subsidiary of Menang Corporation (M) Berhad. Back then in April 2011, Menang Corporation (M) Berhad acquire 100% equity of Rumpun Positif Sdn Bhd from Tan & Ng. In May 2012, Menang Corporation (M) Berhad bags RM 260million UiTM Shah Alam project, and will received nearly RM 50million annually over 20 years on top of the building of the universities.

Upcoming Catalyst

In 2013, Prime Minister Datuk Seri Najib Tun Razak had announced seven major projects for Kelantan which will be implemented, of which includes.
- Kuala Krai to Kota Baru Highway
- A New Stadium in Kota Baru
- Construction of the biggest Mosque in the state
- 3000 units of people housing project
- Rapid Kota Baru public transport system
- UiTM branch campus that can accomodate 5,000 students
- Resolve water supply problem in Kelantan

Besides that, Kelantan State linked Tunjong Development Corp Sdn Bhd had also RM 6 billion worth of projects in 1,722 acres Sports Town to be dished out/developed which is surrounding Kelantan’s proposed new stadium. Nazri Deraman believed that an East Coast-based company could be the main contender to develop this new township. The company would appar­ently team up with other parties for its major components.e sports town’s components include outdoor and indoor stadiums, a pool, an 18-hole golf course and a theme park. He adds TDC has finalised 21 companies which will be in the 52-acre autocity component of Bandar Baru Tunjong. “The vendors will be for all car marques. Once completed, car show­rooms will be only in Kota Bharu and Bandar Baru Tunjong.” Earthwork and infrastructure work began in early May this year and construction is expected to begin in early 2015.

According to sources, Eastland is on the row to benefit from the Kelantan state projects.

I believe that Eastland's position in Kelantan will be hugely benefited from all the incoming projects that is focusing in Kota Baru. Given it's prime land bank in Kelantan, and also the current one and only 5 star Renaissance Hotel operator. Beside that, the shadow of Tan Wang Tiang & Ng Lui Keng in Prestige Pavilion should be going to unfold soon after a series of huge projects that is planned in Kelantan.

Eastland should be an interesting company to be invested to based on it's current share price at the range of RM 0.45 and packed with the following
- Good exposure in Kelantan booming economy
- Prime land bank in Kelantan which are undervalued (last valuation at 2009)
- Prestige Pavilion, incorporated by Tan & Ng to see a series of action soon.
- Eastland to benefit from the Kelantan State projects
- Trading at the 38% discount from NTA of RM 0.75.

Eastland will be looking to challenge RM 0.60 in a short term outlook. A longer term outlook might position Eastland at the range of RM 0.80 to RM 1.00.

Riding the wave? You decide.
Bone's short term TP: RM 0.60

Cheers and have a nice day.


Monday, 11 August 2014

HTPadu - On a Better Leap

The US market, led by the DJIA had taken a few steps back after hitting a historical high at 17138. The retrace had been sparked off with global tension from Ukraine, Gaza and the latest authorization of air strikes in Iraq from the US Government. Although the market data had been encouraging with positive data being displayed, it is also a signal for the end of the loose monetary policy that is spinning the global economy.

Looking back in our local market, traders and investor in the KLSE market is more selective, with a greater focus in the small cap performing/turnaround company. One of the more significant move is the allocation of RM800 million from Norges Fund to target on Small Cap Equities that is going to be handle by EastSpring Investment Berhad.

One of the more interesting small cap company that is heavily government linked and had caught up to my attention is HeiTech Padu Berhad (HTPadu - 5028). The emergence of PNB as a substantial shareholder on 16 December 2013 had started to give some life changing event in HTPadu. Let's have a quick look at the current share price in HTPadu.

HTPadu had been trading in a low volume consolidation for a period of approximately 5 months. The consolidation had seen saturation and will be seeing a fresh surge of volume in the coming days that will bring the price higher in the coming days. HTPadu will be looking to test it's previous high at RM 0.90 with a greater surge in volume in the coming days.

HTPadu - A New Life Awaits

HTPadu is a Malaysia-based company engaged in the provision of systems integration, network related services, data center management, disaster recovery services and other information technology related services. HTPadu had a track record of successful system roll out, ranging from Unit Trust system for the Mutual Fund, Islamic and Conventional Core Banking system and other. However, things had not been great after a rough water ride, suffering from overblown cost due to delayed in projects, costing a higher implementation cost.

Based on the latest quarterly result, HTPadu had recorded an increase in revenue, however, suffered due to a higher project implementation cost.

However, one of the notable events that had taken place is the come back of it's savior - PNB. PNB had on 16 December 2013 emerge as a substantial stake holder in HTPadu after buying over every single share from AmanahRaya Trustee Berhad as PNB held 27.8795 millions shares, or 27.54%.

The emergence of PNB had started to see HTPadu seeing new projects in their doorstep, with 2 contracts worth RM19.5m from the Ministry of Health to expand the patient management system and related information communication technology (ICT) systems of three government hospitals in Peninsula Malaysia.

On July 2014, HTPadu had landed another RM 27.48 million contract from the Malaysian government for the maintenance and services for MMIMMS application system at the Immigration Department. Moving forward, Heitech will be looking to see more government project, ranging from Defense, Health, Financial and so on.

Possible Near Term Catalyst
One of the most interesting things that can be happening to HTPadu is the owning of a plot of 0.4815 hectares of freehold land in Cyberjaya. The land which was bought at RM 48 per square feet might be easily valued at RM 130 per square feet now in 2014, putting in a possible valuation gain of RM 4m.
Rumor had it in the market that HTPadu will be looking to dispose the parcel of land as they are disposing non care asset to restructure. Should the news of disposal realized, HTPadu will be looking to see a good boost into their balance sheet as it can be used to pare down long terms borrowing and act as a special dividend to all it's shareholder.

Overall, I think the emergence of PNB as a substantial shareholder in HTPadu will definitely be a game changer for the company in the coming days. HTPadu will be a good beneficiary on the government spending in the coming days. Previously, HTPadu had also bagged in a RM258 million contract for the development of Sukhoi SU-30MKM Tactical Operational Flight Trainer for the RMAF. The replacement of the old fleets of plane will be possible to see HTPadu able to benefit again.

I believe HTPadu will be a good company to be invested in at the current level based on:
- Strong political ties with the government, making government contracts easier to win. Malaysia will be seeing a numbers of contracts in providing cloud computing in different sector to be implemented in the coming days.
- Emergence of PNB in HTPadu with a 27% stake had definitely mark a new lease of life in HTPadu.
- HTPadu currently (RM 0.70) is traded at 50% discount from it's NTA of RM 1.41
- Land in Cyberjaya worth more than RM6 million, putting up a valuation reserved of RM 4m. Rumor are talking that the land might be up for disposal after HTPadu is disposing their non core assets to strengthened their balance sheets.
- HTPadu internal management to see FYE 2014 as a turnaround year which will be profitable.

A quick outlook in HTPadu will be seeing HTPadu ready to challenge it's near term resistance at RM 0.90 in the coming days. A strong break out from the point will see HTPadu exploring the uncharted territory.

Bone's Short Term TP: RM 0.90

Cheers and have a nice day.


Friday, 8 August 2014

HANDAL - Hot and Furious

While 2014 enter into the second half of the year, one of the core spotlight industry that should not be missed will be the heavy capital intensive oil and gas industry. The oil and gas industry had been one of the core focus in Malaysia. Oil, gas and energy industry plays a prominent role in the Malaysia economy, contributing to one-fifth of the national GDP over the past decade. The government had included Oil, Gas and Energy as one of the ETP (Economy Transformation Program) that will be generating a GNI of RM131.4 billion and creating 52,300 news job by 2020.

To recap back, Petronas had committed a RM300 billion capex from 2011 to 2015 for both upstream and downstream projects. As of January 2014, Petronas had spent about RM 100 billion of its RM 300 billion budget, leaving a huge chunk of the RM200 billion to be announced in the later part of 2014 and 2015. The huge capex by Petronas had enticed savvy investor such as Tan Sri Quek Leng Chan, Paul Poh, and Tan Sri Chua Ma Yu into the oil and gas industry.

While most of the prominent oil and gas company had been quite well known as of now, it had came to my attention on this little known, however, a huge potential company - Handal Resources Berhad.
With just RM 78m market capital, Handal is considered as one of the cheapest oil and gas player in Malaysia which had a bright prospect in the coming days.

Let's have a quick glance on the share price of Handal.

Handal had been trading at the price range of RM 0.45 to RM 0.50 for quite a period of time. The 9 months consolidation of the share price had started to see some saturation at the price range of RM 0.47, which will spark a set of fresh volume in the coming days to lift the share price above RM 0.50 in the coming days. A technical resistant will see RM 0.55 as the first hurdler, while breaking above will see Handal able to test psychological barrier of RM 0.60 and RM 0.70 in the coming days.

Handal - Drilling with Handrill

Handal Resources Berhad operates in several segments:
- integrated crane service
- fabrication of crane
- workover projects lifting solutions
- supply, fabrication and servicing industrial equipments and tank systems
- supply of telecommunication and broadcasting system and consultants in engineering project support services.

Previously, Handal is more known towards providing crane services in the oil and gas industry, however, it had not been the same after group managing director Mallek Rizal Mohsin had taken necessary steps to put handle from a integrated crane services provider to a marginal oil field player.

While providing crane services had a smaller profit margin, Handal will be looking to see it's coming quarterly performing in a better note after the latest RM16 million project awarded by UMW Petrodril (Malaysia) Sdn Bhd, that is going to contribute positively starting Q2 2014. Handal's current book order will be sitting at RM 260m, of which most are recurring income.

 The sustained high oil prices could fuel exploration and production (E&P) activities as E&P firms are more incentivised to push into deep-water areas.

According to Quest Offshore, from 2009 to 2013, 1,002 hydrocarbon discoveries were made. This represents a 52 per cent increase from what was discovered from 2004 to 2008 (659 discoveries).
As such, the overall higher pace of hydrocarbon discoveries may potentially drive the demand for drillers, offshore support vessels, oilfield services, equipment and parts supplies, fabrication works and maintenance activities.

Upcoming Huge Catalyst
Handal had acquire more than 97% in Handrill Sdn Bhd, a licensed rig operator by Petronas. The acquirement of Handrill is a definite game changer for Handal. At July 2013, Handal had entered into a collaboration agreement (CA) with Australian Listed MEO Australia Ltd in a bid to develop it's expertise in the area of marginal oil field development. The CA is for Handal to leverage of MEO expertise in exploration, appraisal, development and production aspect in order to secure a RSC (Risk Service Contract) from Petronas. More information here.

According to insider sources, the joint venture of Handal and MEO Australia had went smoothly and Handal will be an upcoming winner in the coming RSC announcement by Petronas. This can be further supported by the sudden strong share spike in MEO Australia Ltd on 8th August 2014, which saw the share price booming up 110% with huge active volume in the Australian Exchange.

Handal will be looking to land big in a RSC worth around RM 100m to RM 150m in the coming days. And with their current market capital of RM 78m, Handal is definitely looking for a re-rating in the industry.

Handal will definitely be a good company to be invested in, looking at it's smaller market capitalization at the moment with a huge potential in landing big contracts. Handal will be looking great in the coming days based on
- Cheapest Oil & Gas player in KLSE.
- Strong and favorable management link with Petronas.
- Focus into marginal oil field development that comes with a higher profit margin.
- Huge chance in landing a RM100m to RM 150m worth of RSC with MEO Australia Ltd
- Bullish Oil and Gas industry fueled by the remainder of RM200b Petronas capex.

At the current contract and a future landing of the risk service contract from Petronas, Handal can be easily looking to see it's market capitalization hitting RM200m, translated to RM 1.25 per share (based on 160m outstanding shares) in the coming days. A short term outlook will see Handal challenging RM 0.70, while a longer term outlook will be looking at RM 0.90 to RM 1.00

Riding the wave? You decide.
Bone's short term TP: RM 0.80

Cheers and have a nice day


Wednesday, 6 August 2014

KPSCB - The Rising Sun

The latest market environment had been reeling with a number of mixed feeling. Before the release of the latest job data, we had a series of global event that had certainly rock the global equity market for a bit. From the geo-political tension in Ukraine and Russia, shot down of MH17 and Gaza tension, financial tension that covers Portugal Bank crisis, Argentina debt default, and a market talk on the possibility of Ebola escaping out of Africa had definitely send the bears out partying. However, the latest job data had been evenly strong for the bulls to take back some spot light as well. While DJIA had settled down at the region of 16500, is this a correction in yet another mega bull running up, or a start of the bear rolling down?

While market might be looking undecided, it had came to my attention on a rising sun that had decided to put the gear forward - KPS Consortium Berhad (KPSCB - 9121)

Let's have a quick look at KPSCB latest price movement.

KPSCB had been trending at the range of RM 0.55 for around 6months, marking down a good and healthy consolidation that the share price had encountered. However, the consolidation is saturated, as a set of fresh volume will be looking to bring KPSCB into another greater heights. A strong challenge above the psychological barrier of RM 0.60 will set KPSCB roaming in the uncharted territory, which could possibly look set to put a test at imminent test level such as RM 0.70 and RM 0.80. KPSCB growing volume in the coming days will be looking to soar above 5 millions of shares exchanging hand in a single day.

KPSCB - Laying On a Lower Note
KPS Consortium Berhad operates in six segments:
- paper milling, which include the manufacture of various types of tissue paper and tissue related products;
- paper converting, which include converting of paper into related products and trading in paper related products;
- building materials, which include the distribution and retailing of wooden doors, plywood and related building materials;
- laminating plywood, which include manufacturing and trading in printed laminated plywood;
- investment and management;
- Trading in paper, paper products, stationery and general household products.

KPSCB had been laying in a lowly manner without much attention in the market for quite sometime. The diversified group had on FYE 2013 managed to put up with a revenue of RM493 million, with an EPS of 8.13 cents, raising the NTA of the group to RM 1.38.

While KPSCB headed with a slower start for 1Q 2014, KPSCB will be likely to see a stronger come back in the 2Q 2014 after seeing a general stronger pick up in the second quarter in the overall market. KPSCB is looking to hit a stronger revenue in 1H 2014.

KPSCB had been a real laggard if compared to the other listed company which is operating in the same sector (paper related). Let's have a look at a few of the listed company in KLSE which is involved in the paper industry.

1. MUDA - RM 2.29
Trading at 86.7% of it's NTA of RM 2.64
PER x 16.12 (Based on FYE 2013)

2. ORNA - RM 1.26
Trading at 75.9% of it's NTA of RM 1.66
PER x 11.29 (Based on FYE 2013)

3. PPHB - RM 0.995
Trading at 75.9% of it's NTA of RM 1.31
PER x 10.69 (Based on FYE 2013)

4. Master - RM 0.84
Trading at 77.77% of it's NTA of RM 1.08
PER x 8.83 (Based on FYE 2013)

Based on the above 4 examples, the companies are trading at and average rate of 79% of it's NTA and PER x11.73. Putting KPSCB into the similar ratio will be seeing KPSCB being valued at RM 1.09 (79% of it's NTA at RM 1.39), or RM 0.95 based on EPS of 8.13 valued at PER x 11.73.

While KPSCB had reflected is undervalue being amongst it's peer, it's property portfolio will continue to put KPSCB even more undervalued after holding several freehold prime location land with valuation dated back at 1993 and 1995. The valuation reserve in the 2 plots of land might easily ring anything more than RM 10m, which is worth 6.7 cents a share.

Potential Upcoming Catalyst
KPSCB had been seeing a significant number of shares buy back by Mr Koh Poh Seng. Till date, Mr Koh Poh Seng had accumulated 62,741,525 units of shares, resembling a total of 42.4% of the total shares issued. The stakes are high for KPSCB being a take over target by Koh Poh Seng.

Apparently, industry sources informed that Mr Koh Poh Seng had in mind to take over the company, so to unlock the true value of company that had been laying low. KPSCB is currently being priced at 42% of it's NTA. The latest is being Koh Poh Seng seeking to deal in the Ordinary shares via open market during closed period.

In short, KPSCB will be a good company to be invested in based on:
-  Trading below it's peers' discount on NTA and PER. Currently trading at a discount of 58% from it's NTA.
- Valuation reserved worth more than RM 10m, almost 6.7 cents a share
- Anticipating a better and stronger Q2 2014 to continue to propel earning for FYE 2014.
- Diversified business portfolio with paper milling, paper converting and involvement in the building material.
- Strong gradual buy back from the director - KOH POH SENG

Looking at it, KPSCB will definitely look set to penetrate above RM 0.70 in a short term outlook, while a longer term outlook might be seeing KPSCB being valued at RM 1.00.

Rising on with this Sun? You decide.
Bone's short term TP: RM 0.80

Cheers and regards,

Friday, 1 August 2014

MASTEEL - Smelting Iron Forging Steel

The market will be expected to be more volatile in the month of August. Despite the better economy data that is posted by the US and Euro, major index like Dow Jones had been seeing a series of profit taking as the index crawl below 17000 after setting a record foothold above that zone. Market had been in a mixed feeling at the moment, juggling between the better economy data, loose monetary policy that will continue to spin the economy, and the negative side which covers a tension between US & Euro against the Russian, South America (Argentina) financial woes, and a series of tension at the Gaza Stripe.

While that had been the nature of the market, getting into the a truly discounted stock that comes with a series of potential and upside at a rock bottom price might be a handsome opportunity in this time of period. With this criteria, I would like to highlight Malaysia Steel Works (KL) Bhd (Masteel - 5098) which will be an interesting pick for the 2H of 2014.

Let's have a quick look at the latest share price on Masteel.
Masteel had been consolidating at the range of RM 1.00 for approximately 5 months. The consolidation had saw saturation and a new sets of fresh volume is looking set to bring Masteel into a new level in the coming days. Masteel will be looking to see more participation of the volume in the coming days as it poise to challenge above RM 1.10 in a strong manner, setting a new base for the stock to challenge higher in the coming days.

Masteel - Building An Iron Forge

Masteel is primarily involved in the manufacturing of steel bars, mild steel bars and prime steel billets. Masteel currently has a 550,000 metric tonne (MT) per annum meltshop in Bukit Raja and a 350,000 MT rolling mill in Petaling Jaya, both in Selangor. The group’s second rolling mill, being built adjacent to the meltshop at Bukit Raja, is currently operational, and can boost the group's steel bar production by an additional 200,000 MT. Currently, the second rolling mill had been on an utilization rate of 80% to 90%, underlying the huge demand on the steel sector in Klang Valley.

Masteel FYE 2013 had been started to recover back from the blues, with huge contribution from the robust construction outlook in the Klang Valley which is fueled by KVMRT, LRT extension, Expressway and mixed commercial and residential development. FYE 2013 had earmarked a revenue breakthrough in Masteel after recording RM 1.375 billion in revenue with an EPS of 13.2 cents.

While the overall steel sector had been earlier downgraded due to a higher operational cost due to the increased of electricity tariffs, it had not been the same for Masteel after the management ability to migrate 50% of the additional cost to customer, and put in a higher focus to purchase higher yield scrap for it's production. The display of the strong and solid management had saw Masteel putting in an even stronger earning for 1Q FYE 2014, with 3.29 cents, almost 100% increased compared to the 1Q FYE 2013, which is at 1.63 cents.

According to sources, Masteel will be looking to see revenue for FYE 2014 touching RM 1.4billion, with an estimated EPS of 14 to 15 cents. Should Masteel be valued at PER x10, Masteel could be looking to see it's share price trading at the range of RM 1.40.

To put it spicier, Masteel at RM 1.02 had been trading at a discount of  60% based on NTA of RM 2.53. While most of it's properties asset had not been revalued since 2005, Masteel RNAV could be looking higher than RM2.65, putting the share being traded at an even higher discount.

Masteel exposure in the KVMRT project had bring in even more prospect for the group in the coming days. While 1H 2014 had been seeing strong demand on steel for the construction of the RM 50billion public infrastructure, 2H 2014 will be even stronger as development in the KVMRT continue to take up more steel. Masteel close proximity from the production site which is at Klang and Petaling Jaya to the project site (Klang Valley) is one of the winning factor amongst other steel competitor.

Masteel will continue to be benefited by the robust construction demand in the Klang Valley. Lining up huge projects with huge steel appetite will be
- KVMRT Line 1, Line 2, Line 3
- LRT expansion
- Expressway (WCE, SUKE, DASH, Kidex, DUKE extension)
- Tun Razak Exchange
- Mixed commercial and residential development in Klang Valley

While steel easily made up 10% to 15% of the construction cost, AnnJoo had started to lead the charge for the steel sector, which could be a strong signal for the steel sector to take it's pace.

Potential Upcoming Catalyst - Masteel's Venture Out Of The Box

Masteel had entered into a 60:40 joint venture with KUB under MCN Sdn Bhd (Metropolitan Commuter Network Sdn Bhd) for the feasibility study and construction on the 1st Johor city rail. The venture which was in talk since 2011 might be looking to shed some lights soon. To recap, Masteel is a new comer in the building of rail, hence, a joint venture with KUB to leverage on their expertise is a good combination for Masteel to see the project running forward. The recent solid run up in KUB might be a good indication of the MCN project in Johor, which carries a project value of more than RM 1 billion with 25 station.

I believe Masteel will be an attractive company to be invested into based on it's current attractive price and following pointers:
- Trading at a discount of 60% from it's NTA of RM 2.53
- Good revaluation reserves with more than RM 0.10 of value per shares
- Exposure in the robust construction boom in Klang Valley, featuring KVMRT Line 1.
- More upcoming potential in 2H 2014 to 2018 with KVMRT Line 2, Line 3, LRT Extension, Expressway (WCE, SUKE, DASH, Kidex) and robust mixed commercial and residential development in Klang Valley.
- Masteel to see revenue soaring above RM 1.4billion for FYE 2014, estimating EPS at 14 cents, traded at PER x10 which translate to a value of RM 1.40
- Rising of Steel Trend after a 3 years slump, with AnnJoo starting the lead.
- Masteel and KUB 60:40 joint venture in MCN to be seeing progress update in 2H 2014.

Currently at RM 1.02, Masteel is sitting on a slash discount manner for a stock with good exposure and full of potential in the coming days. Masteel will be looking to challenge RM 1.10 in a strong manner, while a short term outlook will be seeing Masteel locking horns at RM 1.15. A longer term outlook will see Masteel trading above RM 1.30.

Are you gonna melt this steel? You decide.
Bone's Short Term TP: RM 1.20

Cheers and have a nice day.