Thursday, 31 December 2015

Denko - The Force Awakens

Denko Industrial Corporation Berhad (Denko - 8176) is primarily involved in the manufacturing of plastic injection moulding and high precision plastic parts. Aside from it, the group also manufacture packing material and vacuum foam and trades consumer goods.

Denko share price activity had been in a lackluster for the past several years, with not much participation seen from both institution and retail investor. However, the stage start to change as when substantial shareholder Middlemount International Limited had been seen paring down stakes from a total 11m shares held in 2014 to the current of 2.9m shares 2015.

While 2015 had prove to be a challenging year, how would Denko drive along with the stronger USD and the booming demand in the consumer electronic sector?


The price chart had shown that Denko had been seeing active volume in the recent days with 3 occasion in year 2015 where volume traded surpasses 25 million of shares exchange hand in the open market.

According to the chart reading, it had been highlighted that Denko had saw good accumulation from the open market at an average range of RM 0.35, where huge volume are supported by solid bullish candlestick. Denko had been trending along an average price of RM 0.35 and should be looking to break forward upon a saturated consolidation which will penetrate above RM 0.40.

Surpassing the psychological barrier of RM 0.40 will mark a strong uptrend in Denko, putting it's feet towards the uncharted territory.

Going Big on Contract Manufacturing

Consumer electronics will be seen as the main driver in year 2016. The coming up of emerging market in the South East Asia and South America region had opened up huge demand on consumer electronics item, such as smart phones devices. The growing younger generation which had the strongest spending power continue to be the main driver in contributing to the huge growing consumer electronic and electric sector. In order to capitalize this opportunity, Denko had recently expanded it's services to Indonesia after acquiring PT WinSheng Plastic and Tooling Industry. The expansion had been seen strategic to Denko as it can cater to the fast growing consumer electronic market in Indonesia, as well as a better proximity to their existing client in Indonesia.

With a relatively cheaper raw material from cheaper crude oil, and a stronger USD that can haul up good forex gain, this window of opportunity had been a huge turning point to several industries. Amongst them is competitor Geshen which had saw share price putting up steady gains, hitting almost RM 3.00 from a lowly RM 0.60, resembling a 500% capital gain, is 1 of the best example to note.

Similar competitor such as EG had not been left out in the pack as well, with share price gaining more than 100% from a lowly 40 cents.

Interrelated companies such as BCM Electronics Corporation Sdn Bhd, a wholly owned subsidiary of Comcorp, had also put huge influence into the whole performance of the group.

All these companies bear similar traits, such as beneficial of a stronger USD, involved in Contract Manufacturing (Plastic Moulding / PCB / Precision Engineering), Outstanding share of around 100m, and a market capitalization of below RM 100m before strong run up.

Currently, Denko is just sitting at a market capitalization of RM 39 million with 104.46m outstanding shares. Should you miss any of this spectacular run, you will have possibly 1 more chance in Denko.


Raising Fund and Cashing In

Denko is committed to expand it's operation in Indonesia following the incentive from the Indonesian government in luring more electronic and automotive related industry into the nation to boost the economy. Currently, Denko had cashed in their non core asset in Penang, which consist of a leasehold land and building for a sum of RM 7.65 million, recording a gain on disposal amounting RM 5.4 million.

According to known sources, Denko is also planning for a private placement exercise in 2016 in order to raise more fund for expansion in Indonesia. The private placement exercise will see a minimum pricing of RM 0.40, being the par value of the share. The recent disposal made by outgoing substantial shareholder, Middlemount Internation Limited, at a closed market dealing of RM 0.45 a share had raised speculation of a possible pricing of RM 0.45 a share or higher in the private placement. Sources informed that with the current demanding trend in the contract manufacturing involving plastic mould and electronic good, it is very easy to identify investor that would want to be exposed into this booming industry.

Charging into the Consumer's Battery ?

Denko future expansion and diversification might be seeing the manufacturing of batteries. 10 years ago, an ordinary consumer is likely to be using 1 mobile device, which is the mobile phone. However, the fast changing IT and IT equipment had change the landscape of the consumer behavior. Currently, it is very easy to identify an individual with a smart phone, a tablet / pad, and a smart watch and a power bank. While all these devices are great and interesting, it could not be of any use without the power that comes from the battery.

Consumer now had higher preferences in mobile devices that have 70% to 80% of the ability from a laptop/desktop computer. The high demand of battery powering consumer electronic is a big market that still have huge growing opportunity.

Inline with the current operation of Denko, it is very easy for Denko to tap into contract manufacturing for battery components / parts, or even the whole battery.

Emerging new smart phone brands such as OPPO and VIVO had opened up more opportunity in the playing field. While negotiation had been great, familiar sources are seeing Denko tying up with one of the emerging smart phone manufacturer.


Conclusion
Denko is a great company with full of growth and interesting development. At the current price, Denko will be a good mid/long term investment based on
- Denko going big in plastic moulding segment, and will see strong contribution from latest acquired company PT WinSheng Plastic and Tools.
- Benefit from Strong USD and lower raw material prices
- Private placement possible pricing of RM 0.45 (Minimum RM 0.40)
- Non Core Asset disposal of RM 7.65m to boost cash flow, capex and pare down debts
- Tapping into battery segment of the consumer electronics
- Strong trend in Contract Manufacturer in Plastic Mould / Electronic products
- 2016 revenue looking to surge above RM 100 million

Miss the previous? Don't miss with Denko
Bone's short term TP : RM 0.45
Mid/Long term : RM 0.60

Cheers and have a nice day

Regards,
Bone

Tuesday, 29 December 2015

BHS - Harvest Reborn

BHS Industries Berhad (BHS - 7241) is primarily involved in printing business. It prints magazine, school textbooks, general publication, directories, company annual reports as well as brochure and pamphlets.

While the printing industry do not usually have huge catalyst, the emergence of Felda (Federal Land Development Authority) and PMB (Pelaburan Mara Berhad) as majority shareholder had spook investor interest in the coming development of the company. The emergence of Dato Lim Thiam Huat as the Managing Director in BHS with a total of 25.26% controlling stake had made the whole development even interesting.

With all these prominent entries into BHS, what is the golden card that lies beneath BHS?


After several corporate exercise which involves share split and bonus issues, BHS is now sitting at outstanding shares of 419.14 million shares with a paid up capital of RM 104.78 million (Par value RM 0.25).

According to the latest technical outlook, BHS had saw heavy buying with a few occasion seeing more than 10 million share crossed hand in the open market. Earlier, BHS had saw much treasury buy back at the range of RM 0.57 before the Right Issue took place. Currently, BHS had in 6.4% of shares in it's Treasury.

The strong buying momentum in BHS is likely to see a continuation with a temporary target of RM 0.60. The latest corporate development, new business diversification as well as involvement of prominent figure in the back stage is the prime factor for the strong surging power in BHS.


The Harvest of 2016

Harvest Court Industries Berhad is both a groom and doom name for both traders and investor back then in November 2011. Share price of Harvest had shot up from a lowly 8 cents to a peak of RM 2.13 in a short time frame of 1.5 months, putting up a record of approximately 2600% in capital appreciation with the shortest time frame employed, ignoring multiple UMAs that was issued from the Bursa regulator. The strong hype came along when Prime Minister's son, Encik Mohd Nazifuddin had a direct stake in the listed company, putting retailer in a raging mode to snatch up shares of Harvest in the open market in hope of riding along with the flagship company of the prime minister.

One of the brainchild project which is none other than the Pre Conditioning Refiner Chemical Recycled Bleached Mechanism Pulp (PRC RBMP) technology that can uses the palm oil's empty fruit bunches to manufacture pulp and paper. This ground breaking technology that is currently patterned by BHS is one of the core reason for the madly surge in Harvest back then.

While Tun Dr Mahathir and Tun Abdullah Badawi both had saw their flagship company during their reign, BHS will be the closest linked company under the reign of Prime Minister Najib after the failure of 1MDB to mark it's foray into the public.


Pulping Up with Empty Fruit Bunches

This ground breaking technology will transform the Palm Oil industry in turning waste that will emit large amount of greenhouse gases into usable pulp and paper material. The RM 17.8 million production line will be able to see production no lesser than 10,000 metric ton per year. With Malaysia being the 2nd largest Crude Palm Oil producer, this technology will turn palm oil waste into exportable goods that will benefit the nation.

At USD 350 / tonne, 1 production line is capable of reaping USD 3.5 million a year (RM14.7million @ 1 USD = RM 4.2). The cost of investment for the production line will see breakeven and profit making in the 2nd year onwards.

BHS through Nextgreen being the pioneer and sole reseller of the patterned technology will be looking to see much of the recurring revenue flowing in when bigger palm oil player starts to implement the production line into their palm oil mills. Currently, BHS will see steady supplies of empty fruit bunches from a joint collaboration with FGV. Prior to this, Felda holds 11.33% stake in BHS.

According to sources that are familiar with this, Felda is ready to see more expansion that focuses on the usage of palm oil waste, for example, turning palm oil waste into biodegradable plastics, pulping and paper as well as biomass. Felda is ready to provide up to 500 acre of land for joint venture towards the development of palm oil waste usage. This mega planning will see BHS seeing more opportunity in the coming days.


Penetrating into Indonesia Market

BHS will not be stopping in Malaysia with this ground breaking technology. The recent purchase of PT Eagle High Plantation in Indonesia by FGV will mark BHS foray into the largest CPO production country in the world.

If we are talking 10 fully run production line jointly from both Malaysia and Indonesia, this is talking about a recurring income of almost RM 150 million per annum by just turning empty fruit bunches into paper pulp.


BHS will be a truly an exciting company to be monitored and invested into based on
- Ground breaking technology in turning empty fruit bunches to pulp and paper
- Patterned technology and production line in China Malaysia and Indonesia, putting BHS as sole reseller with rights for licensing as well as royalties
- Closely linked with Prime Minister, and high probability of being the flagship company of the Najib reign
- The Harvest of 2016 - Reborn
- Emergence of strong majority shareholder - Felda and PMB
- Strong recurring income from production line of PRC RBMP worth USD 3.5 million / 10000 tonne of pulp
- Expansion to the largest CPO market in the world - Indonesia through FGV


Harvest to the Limit? You decide
Bone's short term TP : RM 1.00

Cheers and have a nice day

Regards,
Bone

Monday, 28 December 2015

December Focus on Seacera - Gold Fences

Seacera Group Berhad (Seacera - 7073) is formerly known for it's tile manufacturing and distribution. Aside from the tiles division, Seacera also had a construction outfit as well as a property division. While Seacera had not been under the investor radar previously due to the lack of catalyst and growth, the emergence of Encik Zulkarnin Bin Arrifin as the Group Managing Director in Seacera in the year of 2011 had brought a new sense of life into the group future direction and expansion.

Encik Zulkarnin had spent a well 3 to 4 years in streamlining the group operation as well as identifying new areas of opportunity for the next phase of expansion for Seacera. Under Encik Zulkarnin, he will be looking to build strong recurring revenue in Seacera in order to see sustainability of growth and expansion. With Seacera leaping into 2016 under the solid leadership of Encik Zulkarnin, the most interesting event will be seeing Encik Zulkarnin unveiling it's ace cards in Seacera in the year of 2016.


Seacera had saw active participation recently with strong rising interest shown in the daily traded volumes. Technical reading had shown strong bullish uptrend with 23rd December trading putting a strong bullish note with white candle closing above the uptrend line with supported volumes, signalling stronger uptrend in the coming days. Seacera had also broken it's psychological resistance of RM 1.00. A strong run ahead will see Seacera putting a notch at RM 1.20 easily.

While traders will prefer a position after retrace and consolidation, Seacera's fresh momentum is not to be doubted should there be any material development that will see Seacera hammering forward without a stop. According to technical reading, Seacera will be poised to hit RM 1.50 in a mid term basis.


When Security means Fencing Up with Seacera

One of the biggest proposal that Seacera had put forward with the government of Malaysia will be the billion valued project for a 506km electric security fencing along the Malaysia-Thai border. The proposal which had been mentioned in 2013 by the Home Minister Dato' Seri Ahmad Zahid had saw urgency as smuggling and human trafficking took the headlines as investigator uncovered trafficking dens.

According to The Star, it had been reported that the government is losing more than RM 7 billion from smuggling activities which includes rice, petrol, diesel, alcoholic beverages, cigarettes, fertilizer, firearms as well as imitation goods. This had to be addressed urgently because as times goes by, the government will continue to lose out even more. Analyst expect the government to lose out around RM 100 billion in the coming 10 years from borders smuggling activities.

Rakyat Post had revealed in 21 December 2015 that Malaysia and Thailand had agree to build the security border fences in a joint effort manner, sharing out the cost.

Seacera, being 1 of the pioneer in the project proposal submission is teaming up with Intelligent Fence's expertise to deliver the project. There are 3 others companies that had submitted their proposal as well. While the gross value of the project is not yet determined, the stretch of 506 km is looking to range around RM 3 to RM 3.5 billion with a maintenance concession of around RM 300 million a year.

According to closed link sources which is familiar to the matter, Seacera is amongst 1 of the shortlisted candidate for the electric security fencing project. However, familiar sources are looking to see the whole 506km electric security fencing project to be split into at least 2 portion. Notwithstanding to that, Seacera will be seen as the core delivery partner in the electric security fencing project.

The electric security fencing project will resemble as one of the core re-rating factor for Seacera, from 1 off construction revenue and recurring revenue from concession agreement. Assuming the Seacera packages worth RM 1.5 billion for a span of 3 years at 15% profit margin, and concession agreement in maintenance worth RM 150 million a year subsequently after completion, this will be seeing Seacera netting in a EPS of 39 cents for 3 years from the construction of the fence. [(1.5 bil x 15%) / 2 years] / 189.6m shares. However, since the electric fence will see high capex, Seacera current outstanding share might be seeing dilution effect from exercise of warrant as well as future private placement exercise.


Seacera Going Niche in Healthcare Sector

Beside the ambitious electric security fencing project, Seacera is tipped off to see a diversification into the healthcare sector in Malaysia. The healthcare industry in Malaysia had been picking up in a face pace with the increased of older generation and advancement of medicine.


The share price performance of IHH and KPJ had outlined the growing health industry in Malaysia which is worth more than RM 10 billion a year.

According to close sources which are familiar in this, Seacera will be focusing on a niche specialized medical equipment. This diversification will see Seacera as a stepping stone to tap into the RM 10 billion healthcare industry in Malaysia.


Conclusion
Seacera will be 1 of the black horse come Year 2016. Under the strategic leadership of En Zulkarnin as the Group Managing Director, it is believe that Seacera will see greater heights in the coming days.

Seacera will be an interesting company to be invested into based on
-  Prime Shortlisted candidate in delivering the electric security fencing project in Malaysia-Thai border worth more than RM 1billion with recurring concession rights to provide steady stream of recurring revenue.
- Seacera diversification into niche market of healthcare industry which is resilient against economy downturn
- Seacera is current trading at 40% from it's NTA of RM 2.72
- Solid management team under En Zulkarnin bring huge transformation into Seacera in present and future

Fence up with Seacera? You decide

Bone's short term TP : RM 1.20
Mid Term TP : RM 1.50

Cheers and have a nice day

Regards,
Bone

Wednesday, 23 December 2015

Century - A Ripe Century

Century Logistic Holdings Berhad (Century - 7117) is principally involved in logistic solution ranging from supply chain solution, international freight forwarding, transportation management & distribution, warehouse management services, oil & gas logistic, procurement logistic and the latest being document management services.

With the ever challenging environment in the logistic industry, it is important for industry player to stay competitive with more value added services, implementation of breaking through technology services, as well as diversifying of services from the crowded arena.

The logistic industry is always considered as high capex industry, especially on warehouse storage space with escalating land prices in strategic location. While the industry is on tight competition, growth still persist in Malaysia as one of the major trade partner for China and US.

Century had been juggling well between growth and a good dividend policy for the shareholder in the past 5 years, paying out more than 50% of the net profit. However, what would it take for Century to capitalize on the coming growth in the logistic industry in Malaysia?


Putting up Century chart will see a good consolidation effort in the past 5 months after a slump in price when Nestle issue a writ of summon to Century for a claim amounting RM 21.6 million. Nonetheless, Century had saw solid foothold consolidating at the range of RM 0.80. The latest event had saw Century broken up on long term resistant line of RM 0.82, which will suggest further upside on the share price towards the range of RM 1.00 with better participation of volume in the coming days.

The successful break out in Century will also mark a new uptrend for the share price, which is highly linked to some corporate dealing in Century.


On Going Business
It is known that Century will be having their multi-tier warehouse storage facility ready in the end of 2017 at the strategic location of Setia Alam, which will boost an additional 600,000 sq ft of warehouse storage space.

The company had also ventured into data management solution that will involves physical and electronic storage for data management.

Currently, Century's revenue is broken down to 60% from total logistic business, 20%  from ship to ship transfer services for fuel and oil while 20% from procurement services for various electronic and electrical items. Century is expecting it's procurement logistic services to take up a larger portion of the revenue with the booming industry in the electronic and electrical sector.

Century also owns 2 facilities (warehouse and office) in Port Klang as well as 4 facilities of warehouse in Port of Tanjung Pelepas with a total storage facility of 1.8m sq ft. Port Tanjung Pelepas is one of the key port in handling oil transfer between ships. Currently, the storage facilities of Century in Port Tanjung Pelepas is around 42% of it's rival - TiongNam.


Emergence of New Shareholder
It had been known that Century had been seeking for new and ambitious major shareholder to bring Century to another level. Datuk Richard Phua who control 26.4% of shares in Century had earlier courted by Felda, however, the deal did not materialized.

According to familiar sources, Century had been approached by established logistic player from China, Korea and Japan who are looking to see a working tie up with Century in order to see better synergy in logistic operation. Century involvement in 3rd party logistic, where the company handles everything from the procurement of raw materials to port and customs clearance, international freight forwarding, inventory management and distribution is the key interest for the foreign logistic company to forge a better working efficiency.

Rumor are looking at biggest Korean logistic company - Pantos Logistic, having great interest in Century. Currently, Pantos Logistic (M) Sdn Bhd is situated in Klang, which had good proximity to Century warehouses. Pantos Logistic had been expanding fast over the year, and it's committed to reach 200 offices (currently approx 180) by 2020.

With the strong underlying fundamental in Century along with strong dividend history, it will be believe that Datuk Richard will not be looking at anything lower than RM 1.00 for his founding stake in Century.

According to close sources, Century will be seeing a steadier dividend ranging from 6 to 7 cents a year when all it's current investment start to reap the fruits (Assuming Century will keep it's 50% net profit as dividend policy). This will be a huge re-rating for the company, and will invite more long term solid investor to the play field. Currently, Century is trading at single digit PE, which explains the price of the share being unattractive. In a full run scenario (operation of multi-tier warehouse and data management services), Century can look to perform towards an EPS of RM 0.12, trading at PER x14 which can  translate to RM 1.68.

Sources informed that Century could be seeing a emergence of new shareholder paying a possible RM 1.20 per share.


Century will be an interesting company to be invested in based on
- Emergence of new shareholder with possible entry price of RM 1.20
- Strong management team in driving the company direction in changing landscape of business
- Century strong dividend policy for the past 5 years
- Investment of Multi-tier warehouse in 2017 to provide steadier recurring revenue
- Growing procurement logistic driven by high input from electronic and electrical industry
- Legal counsel positive on striking out legal suit from Nestle


Bone's mid term TP : RM 1.20

Cheers and have a nice day

Regards,
Bone

Tuesday, 8 December 2015

Ancom - Jack Queen King

Ancom Berhad (Ancom - 4758) is a holding company that had diversified business in the logistic sector, manufacturing of agro-based chemicals as well as media segment that includes online and offline printed media and advertising space.

Ancom had been in the hot talk in 2014 as with corporate direction and major reshuffling of the company in order to cope with the fast changing business environment, especially in the media segment. Significant event had saw Ancom Logistic Berhad (Ancomlb - 0048) disposing off it's logistic division and a par value reduction exercise. At the mean time, it had been sighted that Ancom had saw massive open market buy back from major shareholder, Dato Siew as well as company share buy back, including it's subsidiary Nylex.

Earlier this year, it had been reported that Ancom had been eyeing for new shareholder to unlock the value of Redberry and continue steering it higher in the challenging media segment.

While there had been a lot of news regarding Ancom, what is the whole big picture that is going to happen in Ancom come 2016?


Ancom had saw great interest during the mid of 2014, when the stock hit a high of RM 0.70 with treasury buy back as well as open market purchase by Dato Dr Siew Ka Wei. However, the stock had run to it's dry volume consolidation mode in 2015, lingering at the price range of RM 0.40 to RM 0.50, but with gradual treasury buy back as well as major shareholder Dato Dr Siew open market purchase.

With a good 1 year of consolidation, Ancom could had reached a saturated consolidation stage at the price range of RM 0.40, and will be looking to see a good price break out with good supported volume in the coming days, with a target of RM 0.50 in the instant.


Reshuffling The Deck

With the fast changing pace of the business environment, it is either to keep up with the pace or get relegated out of the game, especially in the fast moving media and advertising market that had been taking a huge change from offline to online.
The media companies in Malaysia is having a tough and challenging time as news consumption had started to shift towards online based, putting a downward spiral for the demand of newspaper. Things get harder when it is hard to monetize the online news, putting a bleak outlook for media groups, causing them to diversify and search for new sources of income.

This phenomena had not spared Ancom, where it's media division, Redberry, contribute significant revenue and profit to the group.

To stay up the fight, Ancom might be looking to follow the footstep of it's rival - The Star and HCK Capital Group Berhad.

In 2011, The Star had sold a six-acre parcel that was previously the group office in Section 13, PJ to Jaks Island Circle Sdn Bhd for RM 135 million and a 13 storey office building with a built up of 270,000 sf known as Star Tower.

As for Tan Sri Clement Hii, the newsman which had worked in several newspaper like The Borneo Post and The Star had also started it's property venture through his HCK Capital featuring Roppongi in Cyberjaya, Setia Alam Educity, Education Enclave, The Duo @ USJ 1, Jazz Residence, G Residences Ara Damansara and HCK Corporate Tower and Damansara Perdana.

For this, Ancom will be replicating the movement of it's rival with several prized land asset in Klang Valley.

The group wide restructuring exercise which had been long anticipated could be looking to see a possible framework as the following diagram.

The disposal of Sinsenmoh Transportation Pte Ltd in Ancomlb as well as a private placement exercise for new business funding had certainly place Ancomlb in spotlights for the highest possible destination for Redberry to go public through a back door listing. According to well known sources, Redberry injection into Ancomlb will also see new substantial shareholder, VGI Global Media. VGI is an established media advertising player in Thailand.

The remainder operation of the chemical and logistic division in Ancom will be most probably injected into Nylex in order to prepare Ancom as a cash rich shell company that will be ready to diversify into the property development segment.

According to close sources, Ancom is looking for a joint development effort for the 3.24 acre of leasehold land in PJ section 13. It is looking to house a mixed commercial and offices development with a GDV of RM 800m to RM 1.5 billion.


Unlocking The Value of Ancom Through Redberry

The listing of Redberry into a new vehicle will definitely help in unlocking the stagnant valuation of assets in Ancom. Currently, Ancom is trading at the value of 31% from it's NTA of RM 1.34, as share price linger at the range of RM 0.40. The sale of Redberry which is looking to be at least RM 100 million will be translating to a cash of RM 0.45 per share ( RM 100m / 219m shares)

This had not counted on the sale of chemical manufacturing division to Nylex as well in order to pave way for Ancom to be a pure property development player.

Ancom had saw massive open market purchase from Dato Dr Siew Ka Wei at the price above RM 0.50, as well as gradual and continuous treasury buy back averaging RM 0.45 to RM 0.50 for the past 1 year.


Conclusion

Ancom will be a very interesting company to be monitored upon after a long awaited corporate exercise which will be looking for a ripe moment come 2016.
- Major group wide business restructuring which involves disposal of business to new entity as well as special dividend payment in 2016
- The sale of Redberry at RM 100m will translate to a cash worth of RM 0.45 for Ancom
- Ancom Berhad to replicate rivals in diversifying into property development
- Ancom trading at 31% of NTA value of RM 1.34
- Dato Dr Siew Ka Wei open market share buy back average RM 0.50 and above.
- Ancom looking for Property JV worth potential RM 1.5billion in prime area of PJ.

Unlock the value together? You decide
Bone's short term TP : RM 0.65

Cheers and have a nice day

Regards,
Bone

Thursday, 3 December 2015

PohKong - The Yeoman's Gold

Poh Kong Holdings Berhad (Pohkong - 5080) had a history back then in 1976 where it had started out with a small outlet in Petaling Jaya, and continuous growing on the rapid business to become the largest and fastest growing jewellery retail chain store in Malaysia.

With the growing concern on the current economy situation, how would a gold manufacturer and trader like Poh Kong do to turn this into a window of opportunity?

Poh Kong had saw great interest during the month of April, with volume going more than 5 million in a several occasion. However, Poh Kong took approx 7 month consolidation at the range of RM 0.50 which could had finally came to a certain point of saturation.

With the steady price outlook, a break above RM 0.52 with a considerable of volume will be able to see Poh Kong break out from a short term resistant line and head for a higher climb towards RM 0.60 region.

Poh Kong had recently saw heavy open market accumulation from Singapore based managed fund - Yeoman Capital as well as major shareholder buy back.


Making of The Gold Rush

During the month of August, September and October, the concern of the collapse of China had spike great fear in the equity market, sending waves of gold rush in both the retail and investment market as buyer search for a tool to preserve the value of their monies. China had been increasing their national gold reserves in 2015, with a record 600,000 ounces of Gold buy in during July 2015.

At the similar period of time, South Korea had targeted to buy in USD 860 million worth of gold bullion for the first time this year.

While the major gold exporter had been crowned by India and China, Malaysia gold suppliers had been exporting about 60 metric tonne of finished gold products in the form or ornaments, which is growing in a slow and steady pace. 80% of the Malaysian export are headed for Dubai from where jewellery is redistributed to the other international market.

While Poh Kong draw most of it's revenue from the local market, the current exchange rate which favor a stronger USD had open up a good opportunity for Poh Kong to continue expanding the export market and penetrate more new market with new products.
 

A Tale of Yeoman Capital

Yeoman Capital Management Pte Ltd had made big stories in the KLSE market under the lead of Yeo Seng Chong and Lim Mee Hwa. The duo had brought Yeoman Capital presence into the limelight of KLSE with their spectacular investment in United U-Li Corporation Berhad (Ulicorp).
According to historical data, Yeoman Capital had started open market buying in Ulicorp at the range of RM 1.00, and the investment had saw rocket profits in 10 months with 300% capital appreciation. Ulicorp had displayed strong quarter result as well as a follow up a private placement exercise in the later stage.

After the stint at Ulicorp, Yeoman current stint is with AJIYA.
Accumulated at the region of RM 2.40, AJIYA is currently traded at RM 4.65 in a short period of 6 months. That is a whopping 90% increase from it's initial accumulation price. Yeoman Capital is still buying up on AJIYA despite after a private placement exercise.

Both Ulicorp and Ajiya had reflected strong growing quarterly result as well as a decent growing dividend to their shareholder.

If you had missed the above 2 mentioned counter, the 3rd one is Poh Kong where Yeoman Capital is still accumulating in the public market, with the latest buying on 27th November 2015 where Yeoman Capital bought in 1,050,000 shares at an average price of RM 0.508 from the open market.


An Undercover Gem

Poh Kong debt level might not passed some of the investor liking. With the latest total debts of RM 225 million (long and short term borrowing) and a cash balance of RM38 million, Poh Kong could look like just another normal company. However, due to the nature of business of the company that is dealing with gold related products, it's inventories can be considered to as close as cash due to the liquidity of the inventories. According to the latest inventories for 31st July FYE 2015, Poh Kong is sitting on RM 551 million worth of raw material, unfinished and finished goods.

Let's take 85% from the total value of inventories which can be converted to cash, that is a whopping RM 468 million of cash equivalent product

Taking that into consideration, Poh Kong could be actually at a net cash position of RM 281 million (RM 468m + RM 38m - RM 225m), which is easily translated to a cash worth of RM 0.685 per share.

Currently, the share is trading at RM 0.52, more than 50% discount from it's NTA of RM 1.12, and 24% discount from it's cash worth per share of RM 0.685.


While the market sentiment is still vulnerable to attacks of mounting of debts, the gold market is the best tool to hedge against any market uncertainty in the coming days.

Poh Kong can be an interesting company to be invested based on
- Rising gold reserve accumulation in countries like South Korea and China
- Strong USD will enhance and motivates gold export activities
- Yeoman Capital open market accumulation
- Major shareholder open market buy back accumulation
- Trading more than 50% discount from NTA of RM 1.12, and 24% discount from cash worth per share of RM 0.685
- Gold is a good hedging tool in market uncertainty
- Poh Kong to record stellar Q1 FYE 2016 financial result due to release in December


Ride on Yeoman Ship? You decide
Bone's TP : RM 0.70

Cheers and have a nice day

Regards,
Bone

Friday, 20 November 2015

Caring - Golden Vape

Caring Pharmacy Group Berhad (Caring - 5245) is primarily involves in business operation of community retail pharmacy outlet that sells pharmaceutical products from a range of health supplement, scheduled drugs, OTC drugs, personal care products, medical and healthcare devices as well as other mixture of FMCG.

Currently, there is a total of 102 Caring Pharmacy around Malaysia, mostly located at cities and urban areas. While pharmaceutical business can be considered as resilient, new government policy in drugs related products will play a big role in seeing the profitability of pharmacy outlet.

With the latest issue being heated up on vape / e-cigarette, where will be lead for Caring?

Based on the technical outlook of Caring, there had been strong buying in the month of September as Caring climbed back up from a plunge which saw it's share price lingering at RM 1.00 range. Currently, Caring had set a strong footing at the range of RM 2.00, where good consolidation effort is being seen. A strong volume break out in the coming day will be able to see Caring surging forward into uncharted territory, which will probably hit first major resistant at RM 2.50.


When Vape Matters

It had been a hot debate in Malaysia concerning the issue of vaping, especially on the retail of vape products such as vape refill liquid. According to the latest news report, the health ministry had made a solid decision on only allowing registered pharmacist to dispense nicotine laced e-cigarette refills. This decision had been welcomed by the Malaysian Pharmaceutical Society (MPS) as nicotine is categorized as Class C poison and can only be sold by doctor and pharmacist.

According to Datuk Nancy Ho, the president of MPS, the refills would be an addition to nicotine patches and chewing gum, among other nicotine replacement therapies. She added that the vaping program would also provide an opportunity for pharmacist to play an active role in promote healthy lifestyle while at the same time advocating smoking cessation.

Aside from that, it is important that the refill liquid to be controlled and monitored in order to ensure the quality of the products, as well as the permitted dosage of nicotine in the refill liquid. The current market does not have enough quality check points to ensure that the product is good to be consumed. Currently, vape refill liquid can be easily obtained through social sites as well as physical retail shop.


Vape - Too Big A Market To Be Ignored

When we talked about the cigarette market, it is a definite huge market across the world. In Malaysia, BAT market capitalization of RM 16.7 billion is a good sign to reflect how many individual that is addicted to smoking.

An interview with Azlan, an avid vape user, had informed that 1 bottle of refill can last up to 3 to 4 days. But if used heavily, it can finish up as fast as 1.5 to 2 days. A bottle of vape refill liquid can easily cost around RM 25 to RM 35, depends on brands, quality and flavoring.

Let's calculate how big can this vape market be like in Malaysia.

Assuming a normal user that uses 3 day to finish 1 bottle of refill, that will translate to 10 bottle in 1 month. Assuming an average price of RM 30 per bottle of refill, an individual will be looking to spend RM 3,600 in a year just for the vape refill liquid. With easily 1 million vape user in Malaysia now, that is a blasting huge market of RM 3.6 billion just on vape refill liquid alone. If added up on other vape related accessory and machine, this could be easily a RM 4 to RM 4.5 billion market in Malaysia alone.


Caring on High Drive Expansion

According to internal sources, Caring is going on a high expansion drive in order to open more pharmacy at 2016. Due to the new huge market in vape refill liquid, the fastest market penetration is through open more new outlet. According to sources, a new outlet will cost around RM 600k to RM 700k for renovation and supplies, which is considered fairly affordable. Possible option for Caring for fund raising activities will be private placement, right issue, or operate through a franchising program.

The latest substantial shareholder had saw Perbadanan Nasional Berhad (PNB) hauling 12.76% stake in Caring Pharmacy Group Berhad. The emergence of PNB will form a strong foothold for Caring in terms of capital funding for future expansion.

This is just too huge a market for Caring to ignore. With profit margin of vape liquid going to as high as 50%, Caring is positioned to be bag in net profit that could possibly reach RM 500 million to RM 1 billion. The current closest competitor is Guardian Pharmacy.

Let's assume a very skeptical profit of RM 300 million, that will represent a possible earning of RM 1.10 in EPS (based on 271 million share outstanding). Value at PER x10, that is a whopping RM 11 in share price valuation, putting a possible market capitalization of RM 2.38 billion in Caring (approximately 15% of BAT total market capitalization of RM 16.7 billion)


Based on the given prospect of Caring in Malaysia, and the growing user of vape, Caring will just be too good to be ignored. Caring will be very attractive due to the following:
- Health ministry decision on registered pharmacy to dispense nicotine laced product, which include vape refill liquid
- The vape market is a RM 4 to 4.5 billion business opportunity per annum in Malaysia currently
- PNB emerge as Caring substantial shareholder with 12.76%, forming a strong capital backing for future expansion drive
- Caring valuation based on skeptical net profit of RM 300million will see Caring worth RM 11.00 based on valuation of PER x 10 (eps RM 1.10)
- Vape is strong growing market in Malaysia, with CAGR of at least 10%


Vape to the limit of the sky? You really have to decide.

Bone's short term TP : RM 3.50


Cheers and have a nice day

Regards,
Bone

Tuesday, 17 November 2015

D&O - Epic Star Light

D&O Green Technologies Berhad (D&O - 7204) is a Malaysian based company which primary activity involves in the manufacturing of LEDs. With the discontinued operation from Omega Semiconductor Sdn Bhd in 2014, D&O is currently clinging on it's 68.71% owned subsidiary DOMINANT OPTO TECHNOLOGIES SDN BHD as the core revenue generator for the group.

The LED market had been seeing a major consolidation movement recently, with major player in Taiwan consolidating through merger and acquisition in order to reduce the price war that will erode the profitability of the sector which is full of potential in the coming years. Notable merger had seen EPISTAR Corp acquiring Formosa Epitaxy in 2014 and TSMC SSL in 2015, panning out the growing implementation and usage of LED in the market.

Whilst the LED market will continue to grow stronger next year, how would this reflect for D&O?

D&O had saw a significant event when it finally broke above the long term resistant line of RM 0.40 that had been consolidated for almost 2 years with good supported volume. The break out had open up a new window for D&O to travel into new heights in the coming day, with the nearest target being at RM 0.50, and then RM 0.60.

A medium term outlook had also outlined a strong uptrend on D&O. Along with the attempt in the break out of long term resistant at RM 0.40, D&O had saw significant open market transaction which had saw more than 15m shares transacted in a day in 2 occasions. The strong uptrend will continue to follow through with more corporate event which will be announced in the market soon, with RM 0.50 easily achievable in the short term outlook.


LED - The NOW happening sector

Yes, LED is a very happening sector now in the global arena. However, it's excitement had not been able to pour into the local market sentiment, which could probably due to the lack of coverage and limited choices in the listed market entity which is exposed to the booming LED industry. However, due to the continuation of the booming LED market, it is hard to see D&O not going to benefit from the growing market share.

According the Navigant Research, the projected unit shipments of LED lamps and modules will grow to a stunning 4.5 billion units in 2024, which application such as commercial, industrial, residential and outdoor lamps and modules, as well as application in the automotive industry, such as LED backlight.

The benefits of using LED is not unknown of. From power saving, life span, carbon emission, durability, heat emission, sensitivity to hardcore environment, the LED command a 10-0 landslide victory over incandescent and fluorescent lighting.


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


Synergy with EPISTAR Corp

EPISTAR is incorporated in Taiwan, and is listed in the Taiwan Stock Exchange. It's principal activities are developing, manufacturing and marketing of high brightness LED as well as other LED application from lighting, back light, display, mobile and automotive application.

With the latest consolidating effort of EPISTAR, it is currently the world largest manufacturer and solution provider in the LED industry. However, the latest expansion had saw EPISTAR subscribing 10% of shares in D&O subsidiary - Dominant Opto Technologies Sdn Bhd. The strategic collaboration with EPISTAR is finalized on 28th September 2015. Source - DOMINANT entered strategic collaboration with EPISTAR.

According to close sources that is familiar with this matter, the strategic collaboration is just a start, and D&O will be going to see more corporate exercise from private placement and to the setting up of new production lines. Sources informed that EPISTAR is looking to invest more than RM 1billion into D&O in order to cater for the growing market demand. The current LED market which stands at USD 18 billion will be looking to rocket up to USD 63 billion in 2020, with grow anticipated by more than 30%.

D&O had indirectly opened up a large channel of distribution through EPISTAR, with EPISTAR owning half of the top 10 worldwide LED packagers, from prominent name such as Nichia, Samsung, Osram Opto, LG Innotek, Seoul Semi, Cree, Lumileds, TG, Sharp and Everlight.

The growing market demand is also highlighted up with German-based Osram leading the move to invest 1 billion Euros (RM 4.68 billion) to build a new LED chip plant in Kulim, which will be the largest and latest 6-inch LED chip production in the world.


Government Policy in LED Application

Any new government policy will create a new opportunity in the market. The latest stint had saw the Indian Government putting up tenders on LED streetlight retrofit projects that will put a 200 million LED light bulb demand in 2016. Developed market such as the US and Europe where carbon emission is a concern will see more implementation from a government, commercial, industrial to residential application, pushing demand higher.



Conclusion

D&O will be an attractive company to be monitored at due to
- EPISTAR, the largest LED player in the world subscribing 10% stake into Dominant Opto Technologies Sdn Bhd, a subsidiary of D&O
- D&O to see more corporate development from capital injection in form of private placement, right issue as well as building of new plant to cater for new demand output from EPISTAR
- D&O 3rd quarter result to see stellar financial result and strong growing revenue
- Global LED market to grow into USD 63 billion in 2020 from the current USD 18 billion in 2015.
- Worldwide government policy in LED application for street lights, industrial as well as commercial usage will send rocketing demand on LED manufacturer.

Looking at the current LED market, there is so much opportunity and window for growth. With the pact of EPISTAR in D&O, D&O can be easily looking to see more corporate exercise and expansion which will see D&O market share growing towards RM 1billion.

Shining bright with D&O ? Don't wait too long
Bone's TP : RM 0.60

Cheers and have a nice day

Regards,
Bone

Monday, 9 November 2015

Dataprep - Genting of China

Dataprep Holdings Berhad (Dataprp - 8338) is primarily involved in the ICT solutions which cover services such as Enterprise Content Mangement System, Cloud Computing, Data Center, Network Integration, IT Security Solutions as well as Payment Solutions and Services. With more than 40 years of experience in handling large scale ICT projects, the current biggest project that Dataprep is involved in will be none other than the Genting Secret Garden at Chong Li in Hebei, China.

The Secret Garden Resort is the brainchild of Datuk Lim Chee Wah since 1990s. The youngest son of the late Tan Sri Lim Goh Tong is looking to bring forth a USD 6 billion mega project which will eventually cover a 100 square kilometer area ranging from ski resort, out door and indoor theme park, 5 stars hotel and golf courses.

Currently, Secret Garden Resort had completed it's phase 1, and will be seeing another 4 phases commencing stage by stage. How would this transform Dataprep in the course of the projects?


Dataprep had saw a long consolidation that from the last highest volume traded day at 21st August 2014 which had saw more than 33 million of share changed hand in the open market. The consolidation had saw saturation recently when Dataprep latest price movement could suggest a break out on the long term down trend line. This would suggest Dataprep could be looking to revisit the resistant line at RM 0.25 in the near term. A breakout on RM 0.25 will then see Dataprep challenging RM 0.30 and beyond.


Game Changer - Genting Secret Garden Resort at China

Although Dataprep had a vast 43 years experience on handling large scale ICT implementation and projects, with major shareholder Datuk Lim Chee Wah on board, it will never go away from the traditional Lim's family business - Holiday, Leisure and Gaming sector.

Dataprep is closely held by Datuk Lim Chee Wah through his wholly owned vehicle, VXL Holdings Sdn Bhd. The recent closed market purchase had saw Datuk Lim Chee Wah owning 60.62% (232, 232, 168 shares) of Dataprep.

With the collaboration of the Chinese Government to bring China tourism industry to another level, Genting Secret Garden Resort is a detailed masterplan spanning 100km square meters massive tourism city that will bolster a new level of ski resort with more integrated facilities such as golf course, recreational area, as well as outdoor snow activities.


Currently, Dataprep is selected as the main ICT project delivery partner that will oversees the whole ICT implementation from Phase 1 to Phase 5 of the USD 6 billion in GDV mega resort. According to the agreement, Dataprep is entitled for 6% of the total value of the ICT contract, which will come in 20 packages. Dataprep will also see recurring income from the maintenance and upgrade after completion and handover, putting a firm cash flow for the company in the future.

Cashing the Slots and Casino

All successful entertainment city will never fail to comes with Gaming which will see high rollers from all around the world to the city. The Secret Garden Resort is housing 5 championship golf courses, a themed park, a 3,000 person capacity convention center, more than 3,000 hotel rooms with chairlifts and gondolas that can carry 18,000 guests a day.

Dataprep had recently announced that the group will diversify into new lines of business such as leisure, property development, gaming and entertainment. (Annual Report 2015). With VXL Capital Limited which is listed in HKSE being privatized in 2014, Dataprep is the only public listed entity that had direct linkage with the development of Genting Secret Garden Resort.

According to close sources familiar with the development of Genting Secret Garden Resort, there are plans for gaming facilities such as slot machines to be operated in the entertainment city, while not ruling out a possibility of casino as well. "If there is no gaming facilities in Genting operated entertainment resort, that is not Genting." quoted the sources that does not wish to be named.

Interestingly, the share price development of Dataprep and local slot machine manufacturer - RGB International Berhad (RGB - 0037) had saw similar interest in volume spikes that reflect on the same period of time

The Genting Secret Garden Resort will be tapping in the 30 million population of Beijing with the new high speed railway line from Beijing to far-western Urumqi, with the first station in Zhangjiakou City, where a 20 minute shuttle ride will be reaching the ski slopes. That means the whole journey will only take just over an hour.

The whole masterplan which is drawn out by Ecosign, Hornberger and Worstell of San Francisco will connect five valleys, three mountain peaks, linking 250 hectares of skiing area and 65 km of trails. The mega resort will also be the host of 2022 Winter Olympics.


Corporate Exercise

With much of the coming future development that we can envisage now, Dataprep currently being the only public listed company that can seek public funding will be undergoing massive corporate exercise in order to fuel the coming projects, which consist of a new business ventures in leisure, property development, gaming and entertainment. In such scenario, Dataprep will be looking to trade above the par value of RM 0.25 which will be the minimal price for any private placement issue.

This new business direction will also going to see Dataprep in a process of replicating another Genting Highlands, however, in a much larger scale in China.


Conclusion

Dataprep is a very interesting company to be vested for the long term based on:
- Technically broken above the long term downtrend line
- 60% owned by Datuk Lim Chee Wah, the brainchild of Genting Secret Garden Resort at China
- Dataprep realign focus to new business ventures on leisure, property development, gaming and entertainment, which is foreseeable to be implemented in Genting Secret Garden Resort at China.
- Dataprep having high correlative movement with local slot machine manufacturer - RGB International Berhad, further reinforcing the motion on the operation of slot machine in the entertainment city.
- Dataprep start to derive more revenue from ICT projects in the USD 6 billion mega entertainment resort city.
- Dataprep to be a future "Genting Highland of China"
- Dataprep being to only public listed entity to have linkage with Genting Secret Garden Resort will see future corporate exercise that will push share price trading above par value of RM 0.25 which is being the minimum price of private placement issues.

Dataprep will be a good company to be hold for a long term. Should Dataprep priced at RM 1.00, the market capitalization is just RM 383 million, which is considered small considering the opportunity and market that Dataprep is currently tapping into.

Roll on with future Genting of China? You Decide
Bone's TP : RM 0.50

Cheers and have a nice day

Regards,
Bone