Tuesday, 28 July 2015

ILB - Electrifying Solar

Integrated Logistic Berhad (ILB 5614), which had been involved in logistic solution such as warehousing, freight forwarding and distribution had finally unveiled it's latest corporate planning in venturing into the solar farming industry.

ILB new venture came from a rather quick set up of IL Solar Sdn Bhd, followed by with an full acquisition of EVN Vision Sdn Bhd within 5 business day at a price of RM 2.52 million.

The solar farming industry had been one of the recent hot topic in the market which had saw different player from different industry joining in the bandwagon to create a recurring income for their respective company. However, with more and more company venturing into the solar farming industry, what difference would it makes for ILB and the other solar farming companies which had been operating?

Let's have a quick look at the latest price chart of ILB.

ILB had been seeing massive share buy back from the company after it's approval granted to repurchase to a maximum of 10% outstanding share. Beside the company share buy back, there had been massive open market accumulation from it's director, with the recent being the open market accumulation by Makoto Takahashi.

ILB had been consolidating coming to 1 year after it's highest stint at the range of RM 1.09. The current consolidation, coupled with the share buy back and director open market accumulation could had nothing but a good signal in seeing a saturation of the consolidation effect.

As per mentioned previously in June, ILB short term target of RM 0.90 had been met and maintained, hence ILB could be on it's way to climb further should a convincing solid break occur above the mark of RM 0.90, putting next target to a psychological RM 1.00.

When Cash Meet Solar Electric

It had been a known fact that ILB had generate a good war chest of cash from their sales proceed after dumping off a warehouse in China. However, the cash pile had been sitting in the company balance sheet for quite some time without any solid direction on how the cash pile will be unlocked and transform into a higher yield based instrument.

With ILB being the latest new kid that will venture into the solar farming industry, the biggest difference of ILB against others is that ILB is coming with RM 150 million of cash in it's balance sheet, ready to make the cash working for a greater yield.

Currently, IL Solar Sdn Bhd will be working on a 1MW solar farm through the successful quota allocated to ENV Vision Sdn Bhd. According to SEDA, the maximum capacity for all eligible renewable energy is until 30 MW, hence, putting a bright path for ILB to continue investing in this area.

Going Big into Solar Farming

The director of ILB had the intention to go big into the solar farming with their existing huge war chest of cash.

It is targeted that ILB will be increasing it's capacity with more capital investment into the solar farming projects.

According to analyst familiar with the solar farming industry, the weather of Malaysia will make it possible to harvest 1MW with 1.5 acres (0.6 ha) against a world wide norm of 2 acre. ILB had an intention to go for a 10MW solar farm that is liken to the scale where AmProp is currently having. A 10MW solar farm will cost around RM 100 million, which is not a real problem for ILB.

According to analyst, a 10MW can see a recurring income of approx RM 1.15 million per month from a feed in rate of RM 0.80 per kWh, hence seeing an annual revenue of RM 13.8 million from the feed in program. The gross ROI will be at the range of 13%, which is a very attractive investment return.

Unlike some other new comers that rely on huge bank borrowing to kick start the business, ILB current fiscal position that doesn't require a bank financing aid will further boost the company earning in stronger in a consistent manner.

Others - Completion of new warehouse

ILB operation in Wujiang, China, which had been running at 100% utilization rate for all it's 6 warehouses, will be seeing another additional 3 new warehouses to be ready for operation in 2015. The warehouse, seated at the eastern side of Shanghai is a strategic place for it's close proximity towards the port and the main city.

ILB will be an interesting counter to be look upon, given it's latest corporate investment in the solar farm industry. With huge buy back from the company, open market purchase from directors, ILB had nothing but only to solar up in the coming days.

Bone's TP : RM 1.05
Long term TP : RM 1.20 (maintained)

Cheers and have a nice day


Monday, 27 July 2015

Lfecorp - A Shapadu Driver

LFE Corporation Berhad (Lfecorp - 7170) is an engineering and construction company that had recently hit the limelight when it got roped into PN17 status as shareholder fund fell below the 25% mark. Mired along with previous shoddy director dealing as well as a blow from the property construction in Abu Dhabi, it is almost a game over for Lfecorp, however, not until it caught the attention of Shapadu to appear as a white knight and give a silver lining to the company.

Lfecorp had been going on with a restructuring exercise that will ultimately saw Shapadu emerging as a substantial shareholder, and also a possible asset injection to bring the company forward. The long awaited news had finally came with a joyful response when Bursa Malaysia had on 7th May 2015 granted the approval for the regularization plan to proceed with several conditions.

With the green light from Bursa Malaysia in hand, Lfecorp will be seeing a slew of corporate exercise in the coming days which will includes par value reduction, right issues, private placement as well as debt settlement through issuance of ordinary shares.

Lfecorp restructuring exercise had been in the plan for approximately 2 years. The overview chart had outline a huge buying interest in the 12th September 2013, which saw the share price shooting to a high of RM 0.39 as more than 30million of shares exchange hands.

Consolidating for almost 1.5 years, finally, Lfecorp had unveiled it's regularization plan to bring Lfecorp out of the PN17 through a series of corporate exercise.

Lfecorp had saw strong buying interest in the counter when Bursa had finally grant approval for the regularization plan to proceed, where 28 million of shares exchange hand. The current latest buying interest could signal the coming corporate exercise that Shapadu is going to undertake in Lfecorp. Lfecorp will be looking to break above RM 0.30 in the coming days as volume build up.

Shapadu On Track

The approval will pave way for Shapadu to subscribe 66.67 million of new Lfecorp shares through a private placement exercise. According to Datuk Rosthman Ibrahim, the group had previously indicated that Shapadu had a plan to invest RM 20million in Lfecorp private placement. The amount will work out to a placement of RM 0.30 per share (RM 20 million / 66.67m shares)

Under the approved regularization plan, the restructuring exercise will involved
- Capital reduction in paid up share capital, involving a cancellation of RM 0.70 of the par value of every existing ordinary share of RM 1.00 each in Lfecorp.
- Reduction in share premium account of Lfecorp of up to RM 5,218,125 based on FYE 31 July 2013.
- 42,450,001 new ordinary shares of RM 0.30 through right issues, on the basis of 1 right issue for every 2 ordinary shares of RM 0.30 in Lfecorp
- 66,666,667 new ordinary shares of RM 0.30 through private placement from Shapadu
- 11,197,117 new ordinary shares of RM 0.30 through debt settlement

The exercise will see a total of 120,313,785 new ordinary shares being listed into Lfecorp.

However, under the Bursa Malaysia imposed a moratorium on Shapadu Capital Sdn Bhd and it's ultimate shareholder whereby they will not be allowed to sell, transfer or assign their entire shareholdings in Lfecorp at the date of listing, for 6 months from the date of listing in the bourse.

According to the latest feedback from Shapadu current CEO, Datuk Rosthman Ibrahim, Shapadu Capital Sdn Bhd will continue to pursue with the private placement exercise with compliance towards the condition from Bursa Malaysia.

More plans ahead for Lfecorp

Shapadu will emerge as the substantial shareholder in Lfecorp after the regularization plan. According to Datuk Rosthman Ibrahim, there are a lot of plans ahead for Lfecorp after the regularization plan, which will involve asset injection and award of contracts as well.

Currently, Shapadu had awarded Lfecorp a total contract value worth RM 350 million to build the Shapadu City Village at Putrajaya. Lfecorp will undertake the engineering, procurement and construction of the aspect of the projects.

Shapadu City Village will have a top grade office tower, which will also be housing the new Shapadu headquarters, a new luxury hotel, lifestyle retail outlets and 150 units of high end condominium.

Shapadu will be planning to award other under development projects to Lfecorp after the completion of the share placement.

Behind the scene

Shapadu is mainly involved in oil and gas, property development and other services. However, for the past 3 years, Shapadu had been actively pursuing the oil and gas sector, hence the oil and gas sector form 80% of the group total revenue.

As both of the industry revolve around a high capex nature, and with the current sentiment in the oil and gas sector, it will be a good exercise for Shapadu to spin off it's property arm to leverage with public funding. Furthermore, it had always been the mission for Shapadu to see the company listed in the KLSE. Lfecorp could come handy for them to do a back door listing after acquiring a substantial stake through the private placement.

According to close sources that had been following in the whole exercise, the corporate papers are ready to be executed in the early of August. Lfecorp will be announcing it's coming action for it's regularization planning.

With the new par value of RM 0.30, any arising new ordinary shares issued from private placement or right issues will have a minimal placement price / exercise price of RM 0.30. Lfecorp will need to trade above RM 0.30 to see public take up of the right issues. Sources had it that Lfecorp will be looking to trade at the range of RM 0.45 prior to the exercise.

Lfecorp will be an interesting take at the current price before any announcement on the regularization plan. With Shapadu solid interest in Lfecorp, it will be an interesting journey plan ahead for Lfecorp.

Ride with Shapadu ? You decide

Bone's short term TP : RM 0.40

Cheers and have a nice day


Friday, 24 July 2015

Sycal - Venture Higher

Sycal Ventures Berhad (Sycal - 9717) is a better known construction company that is based in Perak. Recently, Sycal had been benefiting from the robust construction sector which had saw the company order books growing more than RM 500 million with works primarily focused in the state of Perak. While the current construction sector will continue to see demand especially in the infrastructure projects, how will this jive along with Sycal ?

Let's have a quick technical outlook on Sycal.

The recent weakened KLSE market which is due to several local and international factor had not spared Sycal despite it's aggressive growing business. According to the chart, Sycal had been trading on a down trend from April to the middle of July 2015 as per highlighted in the red zone. However, Sycal had finally taken a good stand off from the down trend by breaking above the down trend line on the 16th July, and reaffirm the new start of an uptrend with solid buying seen on the 20th and 23rd July 2015.

On a technical front, Sycal had just begun it's uptrend run, and a break above RM 0.48 will then probably see Sycal continue it's journey towards it's historical high of RM 0.53. A break above RM 0.53 will technically sees Sycal putting RM 0.60 for it's next psychological resistant.

Cycling on a Robust Construction Cycle

Sycal had came back to the black after a restructuring exercise back then, with maiden construction projects from the Pullman Hotel in Bangsar had brought Sycal back to it's path. Currently, Sycal is an aggressive growth construction counter that had more than RM 550 million worth of orders in it's construction segment, generated from in-house projects and external contracts.

The company will continue to put focus on it's construction activities, while venturing to a new joint venture mixed development in Sri Iskandar, Perak. Sycal will also be looking to see it's properties development activities to snap up significant portion of profit contribution in the next 3 to 5 years with on going projects from Cheras, Sitiawan, Taiping and Ipoh and their future launch in it's 5.37 acre of land in Johor.

Growing on Steroids

Sycal is a strong growing company in the next 3 to 5 years, fueled by it's current order book of more than RM 550 million in it's construction arms. Currently, Sycal is deemed as one of the under coverage company that had been in the market.

According to it's audited financial year ending 2014, Sycal audited EPS is actually standing at a stunning 10.93 cents, an additional increased of 3.48 cents from it's unaudited estimate of 7.45 cents for FYE 2014.

Comparing FYE 2014 performance to the previous year, the group profit soared an extensive 100% to RM 35 million, putting total EPS for FYE 2014 to 10.93 cents based on  320.249 million total share issued.

Sycal continue to show it's consistency in the revenue in 1Q 2015 with 7.514 million net profit backed by RM 123.6 million in revenue, scoring 2.18 cents for 1Q EPS.

Although Sycal had a significant of debts, it's aggressive growing nature and positive cash flow is a good sign on prudent management team.

Based on FYE 2014 earning of 10.93 cents, Sycal could be easily be seeing valuation range of RM 0.90 based on fair rated PER x8. Sycal will forecast to deliver an EPS of 10 to 12 cents for FYE 2015.

Sycal will be a growing gem for the 2H of 2015, with current attractive valuation, huge growing potential.
- Construction order book at more than RM 550 million.
- FYE 2014 EPS of 10.93, at PER x8, giving a valuation of approximately RM 0.90
- Property arm to see higher profit contribution in the next 3 to 5 years.

Cycle with Sycal ? You decide

Bone's TP : RM 0.90

Cheers and have a nice day.


Thursday, 23 July 2015

GUH - Revamping Up

GUH Holdings Berhad (GUH - 3247) is a better known company that had been dealing with printed circuit boards (PCB) which is catered for the consumer electrical items such as communication tools, computer and peripherals and consumer electric like airconds and washing machine.

Back then in 1998, GUH, formerly known as Grand Union, had been mired with a string of crisis, which require a restructuring exercise. A business injection consist of the PCB manufacturing was brought into GUH and had been the core operation of the group, inheriting it's previous owner business in the property development, which owes around 500 acre of land in Seremban.

However, due to the continuous challenging environment in the PCB arena, GUH had been diversifying it's revenue with different source of revenue from properties, oil plantation, water and waste management as well as energy sector.

Under the lead of CEO Dato Kenneth H'ng, he would prefer the company to have a diversified stream of income as the PCB business had been very cyclical. However, with the current advance development in the IT segment which saw booming company like Samsung and Apple pushing innovative consumer products, where would GUH be focusing in the coming future?

Technically looking at GUH, GUH had fallen from a peak of RM 1.65 and back to where it was 1.5 years ago, which lingers at the range of RM 1.05. The stock had been consolidating at the range of RM 1.05 for 6 months, which could be attributable to the weaker market sentiment as well as the weaker financial report which is due to the lower contribution from the water and waste management segment. However, GUH could be making it's way back up, trading into the range of RM 1.10 to RM 1.25 in the coming days.

Riding on Growing Demand of PCB

Thanks to the advancement of the IT sector which had been brewing more and more products that will make the demand of PCB continue to soar. Consumer electronics giant such as Apple and Samsung had been a great example in displaying the demand of the public in the fancy innovative gadgets. The increase of the world population had also continue to fire up the demand in the electronic and electrical products.

According to the industry analyst, Lucintel, the global PCB industry is expected to see a CAGR 4% growth from 2015 to 2020. This will be backed by the increase demand in the aerospace and defense products, communication, computer/peripheral and consumer electronics. Advancement in smart phones, touchscreen tablets and laptops are expected to drive the PCB market demand.

For GUH, this would be a great opportunity to finally ramp up it's PCB business again after a couple of challenging year. GUH which emphasize more on quality is currently servicing major consumer electric giants such as Sony, Sharp, JVC and Toshiba. However, GUH coming strategy will align towards consumer hand held devices as it had been the fastest growing market in the past 3 years. Smart phones and tablets are actually a good margin products due to their specification and complex nature of the PCB.

With the already strong USD, GUH will be benefiting from a good forex gain from it's PCB sales. Currently, GUH had secure a monthly order of RM 30 million until 2016, which is a whopping 50% increase from it's previous order of RM 20 million last year.

GUH driving into SSD production?

According to close sources, GUH had been eying on the fast growing SSD market. The SSD market can be worth more than US 10 billion a year when HDD retires from the market. According to statistic, the SSD market already reach more than US 2 billion a year in 2014.

What is SSD and HDD?
SSD stands for Solid State Drive, which is a non mechanical design of NAND flash mounted on PCB and work like a Hard Disk Drive, but will be more durable, faster, consume lesser power, lighter, cost efficient, cooler and quieter.

With the growing need of data, the need for data storage had been zapping up everyday. SSD will be looking to conquer the HDD market in the coming days. This is backed up by the number of new growing SSD manufacturer globally. Currently, there are 72 manufacturer of SSD, while only 5 of them (Hitachi, Samsung, Seagate, Toshiba, Western Digital) manufacture HDD as well. SDD will continue to dominate the data storage segment in the future.

Path to Injecting Power Asset

GUH energy concession in Myammar had already expired in May 2015. According to sources, GUH is looking to acquire a 100MW coal-fired power plant in Cambodia from Leader Universal. Leader Universal had been disposing it's cabling business to SCABLE and the most recent being a 46 acre Seberang Prai land to GUH.

With GUH clean balance sheet and a net cash of RM 130million, together with a shareholder equity of 480million, GUH can easily cough out RM 420 million for the power asset in Cambodia that will come along with a yield of 12% to 13%.

While the property market might be a little stagnant for the time being, GUH had been actively seeking out water and waste management concession deal, whereby it had tendered a total of RM 1.6billion worth of jobs in Malaysia, focusing on the northern and central region.

GUH is positive on the jobs outlook given the track record and expertise in the team.

Fundamental Outlook

GUH 1Q FYE 2015 revenue is slightly lower due to the lower contribution in the water and waste management concession. However, the group still had an order book of more than RM 70million. Currently, the company had a cash position of RM 130 million, translating to RM 0.468 cash worth per share. The company had earlier bought the 46 acre Seberang Prai land from Leader Universal from it's cash balance.

The at the current price of RM 1.05, GUH is trading at 46% discount on it's NTA of RM 1.92.

According to forecast, 2015 will see greater contribution from it's PCB division, especially from a 50% increase from RM 20m to RM 30m monthly order book.

GUH will be a great and interesting company to look out at with the current price. GUH is expected to see more corporate exercise should there be huge asset injection such as power plant.

Bone's TP : RM 1.25

Cheers and have a nice day


Wednesday, 22 July 2015

Pantech - Panning Out In Pengerang

Pantech Group Holdings Berhad (Pantech - 5125) is a no stranger when it comes to the supplies of pipes, valves and fittings that is specially catered for the oil and gas as well as palm oil industry. Started off in 1987 as a partnership company, Pantech saw a huge growth in line with the robust oil and gas industry in Malaysia. On 15th February 2007, Pantech is listed in the KLSE.

Pantech had recently came to the highlight when the company had competitive advantages over the supplies of PVF (pipes, valves and fittings) towards the long waited Rapid Pengerang in Johor. However, with the current headwinds that is on going in the oil and gas industry which is mire up by the lower crude oil price that had fallen close to 40% from USD 80 per barrel to the current range of USD 50 to USD 60, can Pantech weather over this challenge ?

Let's have a short term and long term outlook in the price chart of Pantech.

Based on the wider term outlook in Pantech, it can be seen that Pantech had technically broke off from the long term and mid term downtrend line as per highlighted in the red lines. Pantech started to soar above towards the primary resistant point of RM 0.75. Should Pantech be able to break above RM 0.75 in a convincingly strong manner, Pantech will then penetrate into a new trading range of RM 0.75 to RM 0.90 in the coming days. According to the charts statistic, most of the accumulation for the past 2 years had been done above RM 0.90, putting the current price of RM 0.74 an attractive price for a position.

Outlining the shorter term of the recent 6 months outlook, it can be seen that Pantech had also broken off a short term downtrend line along with a good solid purchase on the 14th July 2015, which saw more than 3 million of shares exchange hand with a solid closing at the range of RM 0.75.

Technically looking, Pantech had broken off a long, medium and short term downtrend line, which could be spelling a new uptrend ride for Pantech in the coming days. This will be backed along with the recent development in the RAPID Pengerang in Johor.

Spark Up with RAPID

Pantech had been deriving most of it's income from the home ground Malaysia, which made up of almost 85% of it's total revenue, while the remaining 15% is shoulder by revenue from Singapore and UK. While the latest oil slump had been definitely a hit towards the whole chain of oil and gas industry, Pantech could count itself lucky for being in the right place and right supplies at the right time.

As the total budget for the Rapid Pengerang had been scale down to RM 89 billion, what could be left for Pantech could be potentially larger than you would expect.

Pantech had already commanded almost 50% of the PVF market share in Malaysia. While the current huge ongoing oil and gas development will be focused in Rapid Pengeran, this will come as a good lift for Pantech as being at the right place, with their manufacturing plant at Pasir Gudang, putting them a step above other competitor in pricing due to closer proximity, which allow a lower price from a cheaper logistic costing.

Analyst estimates that approximately 5% of the total budget of RM 89 billion will be going towards the PVF (pipes, valves and fittings), which means this pie will be seeing approximately RM 4.45 billion in supplies needed. Of the RM 4.45 billion for PVF, with Pantech already dominating market share, now put in a dominating proximity of supply chain, that could put a double boost for Pantech in securing a huge chunk from the big pie. Assuming Pantech will cover 65% of the supplies, that would be a whopping 2.9 billion worth of goods to be supplied. According to Mr Adrian Tan, executive director of Pantech, the margins from PVF can range from 10% to 40% in some of the specified instrument. Reworking back, Pantech could be potentially ready to see RM 290 million in profit from the supply chain of PVF.

Putting Pantech another step ahead could be for it's niche product from Nautic Steel Limited in UK. The wholly owned subsidiary is able to produce a specialized pipes which can withstand the harsh operating environment, which involves high pressure, extreme temperature and corrosive environment.

Pantech closest competitor will be coming from Singapore. However, due to most of the competitor in Singapore are trader, hence they might be lacking of technical expertise. With the stronger SGD against the MYR, it will also make the supplies brought from Singapore becoming even more expensive in terms of MYR, which could not be inline with the current cost cutting measure in the oil and gas industry. This will pave a cleaner path for Pantech in taking an even larger pie.

Fundamental Outlook

Pantech FYE 2015 which had recently ended had saw revenue dropped, mainly due to the lower contribution from the Malaysian revenue. This is due to some contracts award being delayed. However, the recent award of contract to Technip and Fluor, Muhibbah will see more orders kick in. More orders of PVF will be seen in 2015 as 2014 had been mostly concentrating on the ground and earthwork of the Pengerang site.

According to sources, Pantech will be forecasting revenue to hit above RM600 million with EPS at the range of 10 cents to 12 cents in FYE 2016.

As of current, Pantech also will be rewarding shareholder with 0.5 cents dividend and 1 treasury share for every 100 ordinary share held.


Pantech coming outlook will be very interesting. Although the oil and gas industry might not be seeing slow down, Pantech had actually turn this disadvantages to it's advantage as of the details
- Close proximity to the demand site, hence better advantage in pricing due to lower logistic cost
- Weakened MYR against other currency, hence vendor will prefer locally manufactured goods sold in MYR compared to other currency such as SGD and USD which will make supplies purchase more expensive.
- RM 89 billion RAPID Pengerang to continue despite the oil price slump, hence Pantech exposure towards the oil slump is cushioned away with ongoing projects from RAPID Pengerang.
- Pantech being the established player with 50% market share in the PVF supplies in Malaysia
- Revenue forecast above RM 600 million for FYE 2016- Technical reading broken on long, medium and short term downtrend lines.

Pan along with Pantech?

Bone's TP : RM 0.90

Cheers and have a nice day


Monday, 20 July 2015

Hexza - One Hex Higher

Hexza Corporation Berhad (HEXZA 3298) is involved in the manufacturing of formaldehyde based adhesive and resins, premium quality ethanol and organically fermented vinegar. The products such as adhesive and resin are used widely in the manufacturing of plywood, particle boards and fiber boards, while ethanol usage span across pharmaceutical, cosmetic and also the F&B industries as well. Hexza is also involved in property construction and development.

Originally known as Norsechem (M) Sdn Bhd which was incorporated on 25th June 1969, the company was made public on 1979, and changed its name to Hexza Corporation Berhad on 24th July 1986.

The company had been well managed, which is best explained with it's current net cash position in it's balance sheets. However, with the challenging operating environment in the current market situation, what could Hexza do to continue growing it's business and bringing it to a new level.

Hexza had been trading at an average price of RM 0.80 for the past 1 year. A quick look will suggest that the main trading support range for Hexza lies in between RM 0.78 to RM 0.82. According to the charts, Hexza had saw a good amount of accumulation in the month of April, with volume surging above 3 million shares transacted per day as the share price hit above RM 0.90. With the latest low volume consolidation at the range of RM 0.80, Hexza could be looking to see a good break out in price and volume in the coming days which point towards RM 0.90.

Riding On A High Return Lease

On February 2015, Hexza had initiated a Sale & Purchase Agreement with Leaseback arrangement with Tembusu Industries Pte Ltd. Tembusu key personnel, Mr Tin Muang Kyin, is involved in the design and supply of electricity, natural gas, chilled water and other utilities for large manufacturing plants, industrial parks throughout the region. Tembusu keynote projects spans from Singapore, Malaysia and Myammar. Tembusu is also involved in the temporary power solution for the 2013 SEA Games in Myammar.

On a summarized note, the current arrangement will see Hexza inject a capital of USD 6 million (RM 22.8 million @ USD 1 = RM 3.8) to purchase and set up a 8MW heavy fuel oil power generation system in Myammar.

The 8MW heavy fuel oil power generation system will then be leased back to Tembusu at a rate of USD 130,205 per month, or USD 1,562,460 per year for a period of 10 years.

Based on the arrangement, the ROI for Hexza is at a stunning high rate of 26%
USD 1,562,460 / USD 6,000,000 = 26%

Hexza will be looking to recoup all the investment capital in a period of approx 4 years.

The purchase and leaseback agreement will be seeing a gross contribution of 2.96 cents for a financial year for 10 years.
(USD 1,562,460 x 3.8) / 200,380,000 shares 
= 2.96 cents (EPS)

Based on the agreement, Hexza will be starting to see the contribution from the leaseback starting July 2015.

Small Wind Fall from Asset Disposal

Hexza will also be disposing off their lose making manufacturing plant in Klang. Norsechem Resins Sdn Bhd will be disposing the 2.83 hectares land along with building to Crystal Dignity (M) Sdn Bhd for a sum of RM 17 million.

The latest net book value of the land and building is RM 10.4 million, hence putting Hexza for a RM 6.6 million gain on disposal.

The disposal will be looking to enhance the NTA of the company by 3.29 cents.
RM 6,600,000 / 200,380,000 shares = 3.29 cents

The disposal exercise might yield higher should the plant and machinery be successfully disposed as well.

The whole exercise will be looking to streamline the whole company operation in cutting the lose / non contributing asset, while the proceed will be partially used as internal fund generated for the investment of 8MW Heavy Fuel Oil Power Generation System.

Solid Fundamental

Hexza solid fundamental and good dividend policy had to be attributable to the good management of the company executives. Although the company might be seen with having a slow and steadier growth, it had never fail to reward shareholder with dividend for the past 5 years.

The latest declared dividend on 27 Oct 2014 is a single tier 8% (4 cents).

Hexza will be expected to declare a 8% to 10% dividend in the coming October 2015.

Currently, Hexza is sitting on a net cash of RM 64.85 million in it's bunker (RM 0.32 cash per share)

Pulling Demand from Fiberboard Industry

Plywood, particle board and fiberboard had been expecting a surge in demand as of lately. We continue to believe that the demand of the timber industry from the bullish US / Europe market will benefit suppliers related to the manufacturing of the products, such as Hexza for it's adhesive and resins.

As a conclusion, Hexza will be a good company to be lookout upon in the coming term due to its attractive growing prospect.

Hex on it? You decide
Bone's short term TP : RM 1.00

Cheers and have a nice day

Friday, 3 July 2015

OCK - Data Revolutionized

OCK Group Berhad (OCK - 0172), founded by Ooi Chin Khoon in the year 1999 with OCK Setia Engineering Services had expanded to what it is to be today, an established and leading telecommunication service provider in Malaysia and South East Asia. Throughout the journey, OCK had established it's front print in Singapore, Myammar, Indonesia and even China.

 OCK is involved in the construction of the infrastructure back bone for the huge and fast growing data hungry market. The market is so huge that it had propelled smart phone manufacturer - Apple and Samsung, to be one of the top 10 companies in the world, just by selling smart phone devices. The smart phone is so hotly sought after because of it's capabilities to act like a computer in a mobile manner. Huge amount of money are spent to develop applications to enhance the smart phone usage. However, all these will be rendered useless if there is not internet data to connect the user to the world of apps.

With such a big future ahead in this industry, how would OCK capitalize on this opportunity?

Let's have a quick look on OCK latest price chart.

As you would see, OCK had been trading on a consolidation basis in the past 6 months, at the range of RM 0.82 to RM 0.94. OCK had saw it's liquidity improved after a bonus issue in the late November 2014. Currently laying at the lower range of the consolidation zone, OCK could be looking to see a stronger participation amidst an improved sentiment in the KLSE, which could bring it to challenge a psychological barrier of RM 0.90.

On a technical front, OCK can be seen here trading at a tight squeeze of the Bollinger Band. A strong surge that break the upper band of RM 0.87 will mark a start of a good trend in OCK after a 6 months long consolidation. The MA20 and MA50 is also trending towards a making of crossover in the coming days as the gap closed on. With RSI trying to break above the 50% range for 3 times, a good volume could put OCK on a bullish mark, with RSI going towards and above the 70% region. Technically looking at it, all the technical indicator are showing a readiness to turn bullish in the coming days.

OCK - Diary of a "Data Hunger Game"

According to the research of Business Intelligence, the number of device that will be deployed will be seeing a CAGR of 35% growth from 2014 to 2019. We had witness the sale of smartphones from Apple which are growing in an epically tremendous manner. The latest iPhone 6 and 6 plus had saw Apple selling more than 75 million units globally, while Samsung S6 edition which had just officially launched had garner no less than 20 million units as well.

The demand is strong. With human being wanting to get connected with the social world, work, games and news, there is no space to see a slow down in this industry, which will automatically cries out for a stronger network coverage that is able to cater for more data hungry user in the future.

According to CISCO reports, it is estimated that the mobile data traffic will hit a staggering 24.3 Exabytes per month in 2019, putting a 57% CAGR from 2014 to 2019. (1 exabyte = 1 000 000 000 000 000 000 bytes), and 2015 is still considered as a pioneering stage from the big leap.

With all this globally highlighted demand in the market, the only solution to address the coming demand is by
i ) Using higher bandwidth data spectrum
ii) Deploying more platform / tower to increase coverage and support data load

A Game Changing Chapter - From Build and Sell to Build and Lease

Previously, the industry does not favor a Build and Lease model as there isn't a good economy of scale with the 2G and 3G coverage tower. 2G and 3G network bandwidth can travel far, however, slower in sense of data. With the rising up of 4G 4.5G and an upcoming 5G which is still under research from the Korean, there is a rising need of more platform to host the modem to cater for more stable coverage.

With this uprising demand, OCK sees it as a strong game changer as it can build more platform / towers and lease out the sites for a residual recurring income. The great thing about this strong business model is that it can be considered as a super highly defensive stock in the midst of an economy downturn, as it's clients are mobile operators seeking to expand network coverage, hence it's contract are stable with revenue derived from strong sources, putting the less likelihood of a default payment from it's clients.

How attractive is the Build and Lease model?

Assuming a 15 meter tower catering a platform for 6 modems. The engineering, procurement, construction and commissioning of 1 tower might cost around RM 350k to RM 500k, depending on location. Let's take a higher average of RM 400k per tower as the cost of investment.

Leasing out the site to operators, assuming a skeptical 6 modem per tower (1 modem covering 120 degree, x 3 = 360 degree, and 2 layer) at a an average rate of RM 1000 per modem. (Some area can fetch RM 2k to RM 3k, while some area might fetch as low as RM 500) will generate a residual income of RM 6000 per month, RM 72,000 per year.

The business model will see a gross ROI of 18% based on a skeptical calculation of RM 400k investment per tower generating RM6k in leasing income per month. When you start to put this model in Malaysia, Indonesia, China, Singapore and Myammar, that will sum up to an explosive recurring income.

The Build and Lease business model will be liken to transform OCK to a "Telco REITs" in the future.

Strong Growing Fundamental

OCK continued to display strong growth for the past 5 years, outlining the company is at the right direction, right industry and having a right management.

Based on the growth of OCK and the coming opportunity in the market, it is just a starting point for the time being. Currently, OCK had been operating under a Gross Profit Margin around 25% from it's revenue for 4 years.

OCK is another making of Timecom, conquering the mobile data industry.
 (Timecom, from RM 2.7 at the end of Dec 2012 to RM 7.2 in July 2015)


OCK is a very good stock to be held for a long haul. Considering the current growing opportunity in the mobile data industry. With RM 3 billion in budget 2015 allocated to build 2,000 telco tower in rural area, OCK is on a high ride to win a big portion of the contracts which is awarded in phases. OCK is a top stock to be invested based on:
- Local demands with more than 2,000 telco tower to be built under Budget 2015
- Explosive growing market demand for mobile data, which could see more than 10,000 sites to be added in Malaysia alone.
- OCK exposure in international market, such as Indonesia, Myammar, China and Singapore
- OCK to channel more residual income through build and lease model
- OCK investment in renewable solar energy to create more recurring income
- Strong underlying fundamental with strong balance sheet
- OCK to be dubbed the Telco REIT in the future from the recurring income from the leasing model

Tapping into the growing window of OCK right now is the best opportunity. OCK will be banging above RM 1.20 in the days to come, with long term TP at RM 1.50

Tap in with the data fever? You decide
Bone's short term TP : RM 1.00

Cheers and have a nice day