Tuesday, 22 September 2015

PUC - Solar Beam

PUC Founder (MSC) Berhad (PUC - 0007) could be a less known company with involved in media advertising, biometrics and e-payment solution provider. However, the transformation of the group direction in focusing towards the renewable energy sector, specifically the solar energy program, might had sparked a series of interest in the public as of lately.

The renewable energy sector is not a new market in Malaysia. Pioneering this sector had players like Cypark, Amprop, while joining the bandwagon had saw company like Fitters and VSolar coming into the picture as well. It is expected that there will be more new player coming into the picture of renewable energy as the market is still full of opportunity in terms of growth and demand.

With PUC joining into the bandwagon, what could be the initiative and counter measure in PUC to propel itself to compete with established player ?

PUC had took a beating from the weaker broad market last month when share price shed 40% to consolidate at the range of RM 0.08. Currently, PUC could stand a good chance in rebounding at least 20% towards the range of RM 0.10 the previous selling was quite overly done. PUC is expected to move upwards, breaking it's MA20 line when corporate exercise takes place. In a skeptical manner, PUC can be foreseeable to trade at the range of RM 0.10 to RM 0.12.

Solar Energy - Same Sector, Different Delivery

When we talked about smartphones, the quickest brand that strike into the consumer mind should be none other than the Apple iPhone and Samsung Galaxy smart phone series. With 2 major established brand in the market, new entry smart phone manufacturer such as OPPO will need to deliver their product in a different manner to the consumer in order to penetrate the market. For this, OPPO positioned it's product with VOOC fast charge which can hold a 2 hour talk time with just 5 minutes of charging.

Now, the next "OPPO" of the solar energy sector could be PUC. How would PUC explore the Solar Energy Sector differently?

A common layman thoughts of the solar energy sector will be starting with the bidding of the quota from SEDA, securing the PPA from Tenaga, building the solar farm and receiving revenue from the FIT program. For PUC Managing Director Mr Cheong Chia Chieh, he would see this in a totally different manner.

Mr Cheong is aiming to build at least 50 MW of capacity in the solar energy. In order to achieve this, PUC had set up a EPCC (Engineering, Procurement, Construction & Commissioning) team which will be able to act as contractor to build the solar farm. The EPCC team will be looking out for individuals who had been allocated with quota, but lacking of technical specialization and finance to build and run the solar farm.

Cheong quipped that if PUC can provide financing of the whole project (Approx RM 8million / 1MW), then PUC can be a truly established solar energy player that can cater to the downstream activities.

Currently, there are easily more than 100MW of quota allocated to individual which are not put into operation because of funding issue. This is a hidden huge market that had been overlook, and PUC will be the pioneer in tackling this hidden market. Instead of waiting for the annual limited allocation by SEDA, PUC can jump into operation once a deal is brokered out with the individual by building and financing the solar farm with the PPA as a collateral.

For Cheong, this is a win-win situation for both parties.

According to close sources, PUC had at least negotiated 35 MW in the waiting list, and that is translatable to a recurring revenue of RM 35 million per year. Sources informed that PUC might be seeking another corporate exercise to raise more fund if the demand is great.

Currently, the bigger player in the solar energy sector will be Cypark (8MW) and Amprop (10MW). Should PUC had a total control of revenue from the 35MW capacity from both direct and indirect channel, PUC will be the largest solar farm operator in Malaysia, which would possibly see a rerating towards the company. A 35 MW solar farm is capable of bringing in recurring revenue of RM 35 million per year, translating to 3.2 cents in EPS per year.

At PER x10, revenue from the 35MW solar energy can value the company at 32 cents. At the current price of 8.5 cents, PUC had a huge capital appreciation opportunity of almost 400%.


PUC will be an interested company to be look upon, given their new direction of business which look into securing long recurring steady revenue. The growing opportunity in the solar energy sector, if capitalized in a proper manner will resemble to a major turnaround opportunity for PUC.

PUC will be a great buy based on :
- Providing One-Stop solution in Solar Energy, capitalizing the downstream activities.
- New Business Model of EPCC with Financing to individual can capitalized revenue from solar farm not owned by PUC.
- PUC will undertake a corporate exercise in raising fund, of which at the current price will be attractive to be invested.
- Possible in becoming the largest solar farm operator in Malaysia.
- 35MW readily available, translating to RM 35 million revenue per year, contributing 3.2 cents in EPS, trading at PER x10 translate to a valuation of RM 0.32. 
- Current price had saw consolidation at the range of RM 0.085. PUC can trade back into the range of RM 0.10 to RM 0.12 on a strong break out on MA20.

Grow along PUC ? You decide
Bone's short term TP : RM 0.125

Cheers and have a nice day.


Monday, 21 September 2015

Bina Puri - Hot Bargain

Bina Puri Holdings Berhad (Bpuri - 5932) is a diverse group with different business activities such as civil and building engineering management, property development, highway concessionaire, quarry operation, mixed concrete manufacturing and construction materials, utilities and hospitality management.

Bina Puri had successfully completed several public infrastructure projects such as roads, bridges, highways, interchanges as well as residential and commercial buildings. Currently, Bina Puri is still active in the local scene, and had been gradually expanding into the foreign market as well.

With more than RM 2 billion of construction work under their belt, Bina Puri had been growing in an extensively fast pace for a company with a market cap of RM 90 million (As of 18 September 2015). How would this reflect in Bina Puri share prices?

Bina Puri's share price had not been spared from the latest equity shake up that had saw most of the company share price sliding down. Bina Puri saw a base support at the range of RM 0.38, of which the consolidation had saw break out on MA20 and trading above RM 0.40 on Friday with reasonable volume.

The latest weak market sentiment had resulted in Bina Puri share price falling to a historically 10 year low to hit below RM 0.40. However, Bina Puri shares are looking to rebound forward in the coming days, in line with their corporate exercise as well as the fundamental of the company.

When Bargains are Bargains

To recap, Bina Puri had placed out a total of 35,528,800 of shares between 8 January 2015 to 14 May 2015 at the issue price of RM 0.50 to RM 0.515 from it's approved placement at 2014.

Following on, Bina Puri had also through it's latest AGM proposed yet another private placement exercise for the year 2015, which had been granted approval by Bursa Malaysia on 30 June 2015, where the placement will be fulfilled within 6 months of the approval by Bursa Malaysia.

With the coming corporate exercise in the belt, Bina Puri minimum placement price will be at it's par value of RM 0.50. The current market price of RM 0.40 is a 20% discount from the minimal private placement price of RM 0.50. With approximately 3 months left for Bina Puri to complete the private placement approved for 2015, the current price stands a good chance for investor to ride on a real good bargain.

To see it sweeter, the current price is lower than the ESOS option that is offered out to the directors at an exercise price of around RM 0.50.

Putting a Serious Note on Construction Projects

Bina Puri had been actively seeking for more local jobs with more than RM 8.63 billion worth of projects tendered. Currently under their belt, Bina Puri had been more than RM 2 billion worth of unbilled jobs, while 2015 had restocked RM 840 million worth of stock, including the latest RM 95 million Civil work for Rapid Steam Cracker Complex in Johor.

Bina Puri had been involved in the previous LRT extension job of the Ampang Line to Putra Heights. According to close sources, Bina Puri will be very likely to see jobs from the LRT 3 line as well as MRT 2, which could worth a combine value of approx RM 150 million to RM 250 million.

In a summary, Bina Puri could be an interesting company to be invested in based on
- Aggressive growth seen from jobs tendered, with more than RM 2 billion of unbilled work.
- Current price being 20% discount from Par Value of RM 0.50.
- 35,528,800 private placement shares placed out at the range of RM 0.50 to RM 0.515 in the 1st half of 2015.
- Director ESOS offered above RM 0.50.
- Chart might turn bullish following a break out on MA20 from a 10 year low price range of RM 0.38.

Riding back to PAR, hop on?
Bone's Short Term TP: RM 0.50

Cheers and have a nice day


Monday, 14 September 2015

Hohup - Hauling Up

Ho Hup Construction Company (HoHup 5169) had been embroiled in a series of land ownership issue as well as financial situation which had land them into a PN17 status back then.

Hohup is then revived with several restructuring which had saw the group jointly developing the prize asset of Bukit Jalil land, and also a new flow of capital through rights and private placements exercise.

However, the recent gradual drop in Hohup due to the current market sentiment might had been a drop too steep that had gone quite beyond their true value.

Hohup had went through several corporate exercise in the past, from a right issues that comes with preference shares and warrants as well as a 10% private placement exercise that had been concluded earlier in January 2015.

The private placement of the share price is fixed at RM 1.12, which is almost a 10% discount to the then current market price at the range of RM 1.25.

Prior to the economical events around the world, Hohup had slide from a peak of 1.50 to the current price range of RM 0.85, which is almost coming to 50% drop in value from the peak.

However as of lately, Hohup share price might had caught up to attention as substantial shareholder had started out with gradual share buy back. The recent price chart activities had signaled out that Hohup might be heading for a new range of buying up soon as the latest 3 days trading had tested on the MA20 line, where a solid break above RM 0.87 again could been marking a new ride for Hohup, with temporary resistance at RM 0.92, then psychological resistance at RM 1.00, and the final at RM 1.12, which is the price of the private placment.

Clinging on Bukit Jalil
Hohup prized asset which is the Bukit Jalil land where Hohup had entered into a JV through Bukit Jalil Development Sdn Bhd with Malton's Pioneer Haven Sdn Bhd to develop the 60 acres of land. Of which the 60 acres, Hohup portion will be 10 acres that comes with a GDV of approx RM 1.1 billion. Hohup will be entitled for 18% of the 50 acre project that will be handle by Malton, which carries a GDV ranging RM 4 billion to RM 4.5 billion.

Of the 10 acres, Hohup had used 5 acres to develop "Aurora Place" that comprises of shop offices, retail floors and small offices, versatile offices. The project had received thunderous response with sold out status. Hohup will be keeping the 18 storey office block in the development for it's recurring income.

Although the property market might be seen softer, the group see it as manageable as they do not have too many launches around to stretch it's cash flow. According to Chief Executive Officer Mr Derek Wong, Hohup earnings are visible given the response at Aurora Place, as well as the 18% entitlement of the GDV from Malton launches.

The group had unbilled sales of almost RM 600m from it's core business - Construction and Property Development.

Mr Derek Wong will be adding more projects into their book diligently. Hohup will be increasing land bank in Johor, Penang, Kota Kinabalu and target to build more hybrid projects like Aurora Place. He also had been looking into construction job in Myammar with an estimation of USD 200 million in GDV.

Attractive Fundamental

Hohup is basically attractive at the current level of price, given their current projects in hand. While the latest 2Q FYE 2015 result had saw a slight decline in the profit compared to the previous quarter, the drop in EPS is mainly caused by the dilution of share from a series of corporate exercise which includes a 10% private placement.

With the current on going projects as well as the 18% entitlement of GDV from Malton, Hohup is looking to project an approx 15 cents in EPS for FYE 2015. Using a softer market approach on property and construction sector. pegging valuation at PER x7, that would be RM 1.05 for Hohup.

The recent open market share buy back from substantial shareholder also will be a good signal for investor to see it as a good chance to buy in at the current price of RM 0.85, which is lower than the private placement of RM 1.12, and lower than projected earning valuation of RM 1.05 based on EPS of 15 cents.

In a short summary, Hohup is attractive with:
- Current price below private placement price of RM 1.12 made in January
- Good response from Aurora Place, unbilled sales at RM 600 million
- Entitlement of 18% from Malton total GDV of RM 4 to RM 4.5 million, totaling approx RM 720million (based on RM 4b GDV)
- Attractive valuation based on fully projected FYE 2015 EPS of 15 cents, valuing RM 1.05 based on PER x7
- Strong buy back from substantial shareholder
- Technical Chart signalling new buying up from break out in MA20 line

Bone's short term TP : RM 0.92
Mid/Long Term TP: RM 1.15

Cheers and have a nice day


Thursday, 10 September 2015

Engtex - Clear Skies Ahead

The Selangor Water Restructuring saga that had plagued the consumer for more than 3 years, however, not until the evening of 8th September 2015 (Tuesday), where the state of Selangor and the Federal Government has inked down the final four agreements, putting a final full stop on the long drawn saga that had caused many inconvenience to the consumer, developer as well as operators.

The 4 agreement, namely the facilities agreement, lease agreement, settlement agreement and rights of use agreement were signed by Air Selangor chief executive officer Suhaimi Kamaralzaman and PAAB chielf executive officer Datuk Ahmad Faizal Abdul Rahman.

With the skies cleared of storm for the water saga, the next focus will be shifted towards the pipe supply, laying and replacement contract. Moving forward without any doubt, Engtex will be one of the highly favored entity that will stand a huge chance in benefiting from the vast opportunity.

Engtex had recently rallied from RM 1.00 to RM 1.30 before hitting the broad weakened market that is caused by the slow down of China economy. Engtex slipped from the peak to reach it's strong support at RM 1.00, which had been consolidating well. With the recent breaking up above the MA20 line with a white bullish hammer, Engtex could be looking to see a new buy up trend, with technical resistant at the range of RM 1.15 to RM 1.20.

Engtex - Eyeing Huge Pie in Pipe Replacement Project

Engtex had been on the hunt for more projects, and had been bidding for numerous projects from supplies to installation of pipes, valves, fittings and plumbing material. All of the projects bring a worth of RM 300 million in value.

The latest pipe supplying contracts had been the Langat 2 Water Treatment Plant project, where Engtex won RM 70 million worth of order from the dished out RM 130 million contracts. There are still RM 100 million worth of contract that had yet to be awarded. Engtex is currently eyeing for the last chunk of the RM 100 million contract from Langat 2, and will be looking to ace out it's competitor due to their readily available resources.

Whilst all these are Engtex current bidding, executive director, Mr Ng Chooi Guan is putting it's eye on the luxurious project in the replacement of 45,000 km of water pipes spanning across the Peninsula and East Malaysia which could worth a hefty RM 20 billion. Most of these aging pipes are laid during the colonial period. These asbestos cement pipes has been known for cancer causing.

The urgency to see the pipe replacement project kicking in as soon as possible is boosted by Selangor Menteri Besar, Azmin Ali, to arrest the problem of NRW (Non Revenue Water - water supply not reaching the consumer due to leakages). Currently, Selangor is facing 35% of NRW, while Malaysia is facing an average of 36% NRW. Comparing globally, Singapore NRW stands at 5%, Japan at 7% and Philippines at 11%. With the reducing water reserves due to increase population and seasonal dry spells, this will further escalate the situation which will in turn benefit Engtex, which had transformed from just a supplier to the current business model which includes value chain services.

Fundamentally Impressive

Engtex contribution came from 3 segments, which is the wholesale and distribution division, manufacturing division and it's property division.

According to it's latest Q2 FYE 2015 result with a cumulative EPS of 9.52 cents, Engtex at RM 1.09 is trading on an attractive PER of x 5.45 (Based on EPS projection 20 cents for FYE 2015), and 68% of it's NTA.

With metal commodity going cheaper, this will also help to improve the overall operational cost with a cheaper input material cost.

The latest price range had also been supported by buy back and accumulation from the company and director.

Engtex will be attractive at the current level again. Despite the current economy sentiment, Engtex main client are the state and federal government which deals largely on government projects, hence Engtex will be more resilient as it does not interact much with the direct consumer market.

Summary on Engtex
- Beneficial on Langat 2 Water Treatment Plant Projects
- Engtex to see more incoming projects with the inking of the final 4 agreement between state of Selangor and the Federal government.
- Huge opportunity in the 45,000km pipe replacement project that carries a value of approx RM 20 billion.
- Solid fundamental at an attractive price of PER x 5.45 (assuming FYE 2015 EPS at 20 cents)
- Lower cost of material from falling metal commodity prices
- Resilient towards the uncertainty of economy as Engtex deal largely on state and federal government projects.
- High NRW level and low water reserve will be highlighting urgency to dish out pipe replacement projects.
- Technical outlook breaking MA20, pointing a new buy up

Ride on with Engtex? Don't wait too long

Bone's TP : (Short Term) RM 1.20
 (Long Term) RM 1.50

Cheers and have a nice day


Wednesday, 9 September 2015

JCY - Striking with the USD

JCY is definitely a no stranger to most of the investor of KLSE. Being one of the leading HDD component manufacturer that supplies 4 key HDD mechanical component (base plates, top cover assembly, actuator and antidiscs) to Western Digital and Seagate, its fortune is not looking to come small amidst the plunging of MYR and the strengthening of USD, forging a double boost on the forex gain.

JCY's Latest Price Chart
JCY had been trading at the range of RM 0.75 before getting hit along by the massive equity sell down after a series of concern from the slowing down of the world 2nd largest economy - China. However, the underlying fundamental and the current opportunity outlook for JCY would be really worth a consideration.

On a technical outlook, JCY had saw good accumulation prior before the release of it's 3rd quarterly result, where it can be spotted that good amount of of accumulation took place in the 20th and 21st of July 2015, along side with another accumulation sighted at 3rd August 2015, which had reasonably good amount of volume to support the bullish candlestick. However, the counter took a beating from the weaker market sentiment, which saw JCY share price sliding down towards the RM 0.65 region. The latest outlook is that JCY had broken the MA20, which could be marking a good indicator for a upward run.

Should the current bullish sentiment remain strong, JCY will penetrate RM 0.70 and test the region of RM 0.75 to RM 0.80.

Content Storage - Growing Strong

Although the storage sector had saw new comer SSD which will be able to operate faster and comes lighter, the cost of production is still relatively high to cater for the demand of the content storage. HDD will still continue to be the main supplier for the growing rising enterprise storage demand.

With the growing appetite in the demand of audio video streaming, this will continue to spur growth in the demand in cloud storage system. Analyst forecast that the global storage will grow 16% CAGR from 2014 to 2019.

One Stop Supplier to Key Manufacturer

JCY had been marketing itself as a 1-stop supplier for HDD manufacturer. Currently, JCY main clients are Western Digital (90%) and Seagate (10%), capturing the 25% in the market share for base plates manufacturing, whilst other component sees a market share from 10% to 28%. According to industry sources, actuator had the highest margin due to detailed and high precision in order to perform faster.

When Good News means Stronger USD

JCY derive almost 100% of their revenue in the form of USD. With approx 50% of the input cost denominated in USD, JCY benefit from a stronger greenback will change the underlining result of the company in a drastic manner. According to 1Q 2015, JCY recorded a forex gain of RM 16.7million when USD rose from RM 3.5 per dollar to RM 3.7 per dollar, making up 33% of the group's net profit.

The latest sharp increase of USD from RM 3.8 a dollar in July to the current RM 4.31 a dollar in September had saw a whopping 13.15% increase. This could potentially see a whopping RM 20 million in forex gain for the business operation in 3rd Quarter of 2015. (Calculation is based on sensitivity analysis provided in annual report that for every 10% increase in the USD/MYR would translate to RM50 million increase in JCY core net profit)

Fundamentally Good and Attractive Valuation

At the current price of RM 0.665, JCY is trading to at PER x10 valuation based on it's cumulative 3 quarter EPS. With the coming final quarter that could be factoring an increase of RM 20 million in it's net profit, JCY could be looking at a total final EPS of 8 to 8.5 cents for FYE 2015, which will value the share at RM 0.80 and above based on PER x10.

Besides on the attractive valuation, JCY dividend policy which pay out at least 50% of net profit will be sounding a great investment that would be paying 7.5% dividend yield at the current level. Putting up at investor appetite of 6%, that will be easily valuing JCY at RM 0.83 cents (Based on projection of 5 cents dividend per year - 1.25 cents each quarter)

JCY currently is in a net cash position, and enjoy a good positive cash flow from operation activities. Whilst some of it's competitor had yet to regain from the flood back then in 2011 at Thailand, it could pave a good opportunity for JCY to see M&A for it's expansion.

In conclusion, at the current price level, JCY is deemed a very attractive company to be looked into given the following summary
- Strong forex benefit from a stronger USD (10% to contribute RM50m in forex gain).
- Demand for enterprise storage continue to grow due to the growing demand in audio video streaming.
- JCY being one stop key supplier for Western Digital (90%) and Seagate (10%).
- JCY enjoy strong positive cash flow from operating activities
- JCY currently sitting in positive net cash position, hence shielding from potential interest rate hike that would cut into profits
- JCY dividend policy of payout on at least 50% of net profits. Current price level suggest an attractive yield of 7.5%.
- Valuation based on PER x 10 on EPS will see JCY at RM 0.80 range. Valuation based on 6% dividend yield from a 5 cents dividend pay out will see JCY valued at RM 0.83

Bone's TP : RM 0.80

Cheers and have a nice day