Monday, 26 January 2015

Sernkou - A New Alignment

With the current economic headline focused on the ECB decision to inject more than 1.1 trillion euros (usd 68 billion) into the financial system through a buying of private and public securities amounting to as much as 60 billion euros a month that will start in March 2015 and run until September 2016. The stimulus which aim to spin more economic activities within the European region from the threat of deflation will certainly looking to have a spill over effect over Asia manufacturing country.

One of the rising industry that can be looked into will never be shy of the furniture industry, which had been picking up spot light since last year when the US QE3 started to pick up the economy and also the recent stronger USD against MYR had been adding another boost to the industry which had been traded in USD denomination.

Of the whole pack of listed furniture company in KLSE, Sernkou Resources Berhad would be an interesting take after the company had started to pick up recently, reflecting a continuous 4 quarter positive result.

Let's have a quick look at Sernkou

Sernkou had been trading in a resilient manner in the past 6 mths, and Sernkou had been able to put up a great display during the Oct-Dec 2014 market sell down period, standing firm at the 40 cents region. Currently, a quick outlook might see Sernkou resistance at the range of RM 0.43, in which a break out above this zone with a convincing volume will bring Sernkou trading towards the new uncharted territory. A quick outlook will be seeing Sernkou testing at RM 0.50.

Sernkou - Packing Forward

Sernkou had been plying in the blues for a quite a moment, however, not until recently which saw the restructuring of the group under Low Peng Sian @ Chua Peng Sian and Koh Kun Chuan. The group had been trimming for a better operation as well as looking to diversify into other sector as well.

The recent bullish run in the furniture sector had been lead by sector leaders comprises of Latitude, Pohuat and Homeritz, where all the 3 had saw a more than 50% gain in their share prices.

1. Latitude

2. Pohuat

3. Homeritz

With a more bullish outlook to be seen in the European counterparts as well as a stronger outlook in the USD, the furniture sector is not set to rest for the time being as the rest of the packs starts to pick up their paces, which includes Sernkou.

At the mean time, Sernkou will also be venturing into construction sector as well as plantation sector in the coming days. Currently, Sernkou will aim to complete the diversification into construction sector through the acquiring of B Cor Geotechnics Sdn Bhd by 1st half of 2015 with a cash consideration of RM 1.2million. B Cor Geotechnics Sdn Bhd which carries a Grade G7 contractor license for General Building Works, General Public Engineering Works and Piling Works. The construction sector in Malaysia will continue to see demand from both public and private sector.

Coming up Catalyst

Sernkou will be looking to see a private placement to be issued this year after the approval in the AGM for a share placement of not more than 10% of the paid up shares. The private placement objectives will be most likely looking at
- Paring down debts
- Fund Raising for new business acquisition / start up

With the current Par Value at RM 0.50, the private placement exercise will be required to be more than RM 0.50 in order to be performed. As of last Friday, Sernkou last traded at RM 0.43.

While Sernkou current financial might not be able to translate to a valuation of more than RM 0.50, it's interesting land asset and properties will be a very good take.

With oldest valuation dated back then to 1995 while most of them at the year 2001, Sernkou is sitting on a huge revaluation reserved that could easily propel the company NTA to more than RM 1.00, which would be a good move in 2015 to revalue all land and assets before GST that will be kicking in in 1st April 2015.

I believe Sernkou will be an interesting counter to look upon as the new management had a lot of things in plan for the company, in which will automatically sees a lot of coming in corporate exercises that will make the counter an interesting topic.

Sernkou quick term outlook will definitely sees the share price pegging at the range of RM 0.50, also a price to compliment the private placement which should not be lower than the par value of RM 0.50. A medium - longer term outlook might be seeing Sernkou putting up a base at the range of RM 0.60.

Bone's short term TP: RM 0.55

Cheers and have a nice day


Monday, 12 January 2015

Bright - A Brighter Front

Bright had been playing an important role in the packaging of FMCG, featuring goods from tobacco, liquor, confectionery and pharmaceutical.

Bright client base include Philip Morris, BAT, Nestle, P&G, Unilever, GlaxoSmithKline and Kraft.
Bright had been in the spotlight back at 2013 with a high profile boardroom dispute that resulted in a  replacement of 4 directors in a hostile take over.

The recent major shareholder that had appeared in the limelight had feature Wong SK Holdings Sdn Bhd, which is jointly owned by Dato Ricky Wong and Madam Teh Sew Wan, acquiring huge stake from the open market and through direct business transaction that will be looking to trigger MGO.

While the current outlook of the broad market had been brought down by volatile sentiment which is hit by the declining crude prices, Bright Packaging Berhad could be worth an outlook with coming possible corporate exercise.

Let's have a quick look at Bright Packaging Industry Bhd (Bright - 9938)

Bright had been trading at a range of RM 0.65 to RM 0.70 before the shake up. With a 10% Private Placement that had been issued at the price of RM 0.60, the current open market buying from Dato Ricky Wong Shee Kai to a stake of 32.98%, just 0.02% below the line of MGO, what could be happening in the coming days?

Bright - On a Brighter MGO Process?

The latest balance sheet had been reflected a stronger net cash position that Bright is sitting on, which is amounting to a total of RM 29.45 million with no long term debt in the belt. With that amount, that will be looking at 22.7 net cash worth per share. The company assets had also been recently revalued, hence boosting the NTA to RM 0.76 per share. Currently, Bright is trading at the range of RM 0.50.

The open market purchase and direct business dealing from Wong SK Holdings Sdn Bhd had been quite amusing as of late. In contrast, the looks of Asia Media Berhad, which is founded by Dato Ricky, had not been able to perform, with the share looking to trade at near to worthless.

The prospect and outlook of Amedia is definitely not as bright and steady as what Bright Packaging Industry Berhad can offer to Dato Ricky Wong.

According to some sources, Dato Ricky Wong had been planning to take over Bright for some time to make it his new major listed vehicle. However, it had not been an easy way when the counter is not liquid and had been seeing a lot of sleeping holders. With a high profile management shake up that covers the business headline for almost 6 months, the share price had rocketed strongly above after a one time special dividend announcement. Wong SK Holdings Sdn Bhd had been then slowly accumulating on Bright's share from time to time, with this round putting him a second time near towards the MGO line of 33%.

The past 6 months prices, the highest price is RM 0.685 and the 6 months average is at the range of  RM 0.60. Should the take over price be offered at RM 0.65, it will cost Dato Ricky Wong a sum of RM 56.5 million, however, with almost RM 30 million in cash, it will be looking at RM 26.5 million to acquire a steady business which is almost resistant to economy crisis due to it's services to the FMCG and pharmaceutical sector.

To use RM 26.5 million to buy a business without debts, along side with the assets and steady client base, it will definitely be a good deal for Dato Wong after his ailing Amedia had not been able to perform for the past couple of years.

Will Dato Wong trigger the MGO and make an offer soon?

Bearing aside those possible corporate news, Bright is definitely a good company with good prospect to be invested in due to it's business nature that had been supporting the crucial FMCG products and Pharmaceutical goods. Bright will be a good target to be acquire on any cheap sale or dips, after all, the company is sitting on a RM 29.5 million cash, and will be expanding the production line in order to support more orders in the coming days ahead.

Ride the MGO ? You decide.

Bone's short term TP : RM 0.65

Cheers and have a nice day