Tuesday, 28 April 2015

Minho - Asset Logged

Minho (M) Berhad is established dated back to before the year 1977, when it started of as Syarikat Minho Kilning Sdn Bhd, providing klin drying services. To date, the company had grown up into a fully integrated timber player, providing services such as

- Klin Drying and Chemical Preservative treatment
- Manufacturing, exporting and dealing in moulded timber and it's related product
- Export of processed timber products
- Manufacturing and distribution of industrial paper bags
- Trading in log supply and it's related products
- Log harvesting
- Property development and building construction
- Manufacturing and dealing in furniture components and it's related product
- Land leasing

However, with all the diversified services and product, Minho still derived it's major revenue from the timber trading and manufacturing of processed timber goods.

With the current local market outlook on massive completion of housing projects that will be handling over in 2015 to 2017, and the international market outlook with a stronger USD and the on going European Stimulus program, where can it leads to for Minho?

Minho had been consolidating at the range of RM 1.00, prior before the previous equity shake off that brought the share price tingling at the range of RM 0.80 without any significant volume. While 2014 had been a challenging year, however, Minho still managed to scrap through the year with a total revenue of RM 238 million.

Minho could be poised to challenge towards RM 1.00 in the coming day, anticipated with a better quarterly earning from it's property billing in Klang and the resumption of log harvesting in 1Q 2015 that will be able to boost the revenue further.

Pull Factor from Local Housing Completion
There will be much handover in the housing project from starting from year 2015 to 2017 / 2018. With this in line, there will be a good pull factor for the demand in in house furnishing as well as electrical appliances in the local front.

With a number of the projects that come with fully furnished, this will further add up on the local demand for the furniture and fittings, hence giving the local timber sector a good boost.

Minho being a integrated timber player in the industry, catering for the local and international market, will definitely see benefit from the local demand.

Strong Underlying Assets
Minho business which deal in timber is very cyclical in nature. Various market factor and changing weather can easily put a blow into the financial result. However, Minho's experience in the timber sector definitely did pay out when the group grab hold of the opportunity in diversifying into land banking and subsequently into small property development.

Till date, Minho is greatly boosted with a strong underlying asset of freehold land. Most of it's land is still clinging on the valuation dated back to 2009 and 2010.
Minho currently is sitting on NTA of RM 2.93. However, there are still a good number of revaluation reserved in their belt of freehold land in prime commercial area of Klang, which is near to Port Klang.

Minho had been also paring down it's debt level gradually.

Stronger US and Europe market
While most of the revenue came from the local market, revenue from the US is ranked no.2 while UK no.3. The US market will continue to remain stable, while Minho can start to tap into the European market with the current stimulus program.

A stronger USD against the MYR will also translate to a better forex gain for the group. A stronger contribution from the European market will be able to see Minho ending in a stronger bottom line in 2015.

Minho is an interesting company to be look out upon, largely due to it's strong underlying assets, with NTA bearing approx RM 3.00. The current price of RM 0.90 is a huge 70% discount from it's asset, not counting it's huge revaluation reserves for it's freehold property. 1Q 2015 will also be stronger due to the resumption of log harvesting (no log harvesting income at 4Q 2014). A longer term outlook will see Minho trading at the range of RM 1.20.

Bone's short term TP : RM 1.05

Cheers and have a nice day


Wednesday, 22 April 2015

GPharos - Logging The Limit

Golden Pharos Berhad (Gpharos - 5649), a little known company that is based in Terengganu which is involved in the upstream log harvesting, midstream saw milling, downstream timber processing, manufacturing and distribution of wood based and glass products. However, the core activity that contributes most of the revenue in the group is on the upstream log harvesting, saw milling and klin drying operation.

Situated in the north eastern side of the Peninsula Malaysia, Golden Pharos is largely owned by the state of Terengganu, with a stake of approx 64% being held by Terengganu Incorporated Sdn Bhd.

As of late last year, Malaysia had encountered one of the worst flood in the Malaysian history. With the heavy than expected monsoon rain during the rainy season, Terengganu had experienced a severe flood that had left more than 100,000 homeless, with neighboring state such as Kelantan and Kedah not been spared as well.

The massive flood had caused massive disruption in the economic activities in the northern Peninsula, which includes all kind of harvesting and logging activities. However, with aftermath done by the flood, what is there for Golden Pharos in the coming days ahead?

GPharos had been consolidating at the lower range after a spectacular report from it's 1st Quarter 2014 result, which had saw the company chalking up huge profit after a record log harvest activity for the month of January (2525 hpt), February (4680 hpt) and March 2014 (4625 hpt), bulking up the company EPS to 14.84 cents in a single quarter with a total harvest of 11830 hpt for period. (*HPT refers to Hoppus Tonne)

While log harvesting had been low during the rainy season at the 4th quarter of the year, GPharos log harvesting activity began to pick up in a huge manner for the 1st quarter of 2015 with January taking 1756 hpt, February shooting up to 5695 hpt and March 4345 hpt, totaling 11796 hpt for the 1st Quarter of 2015.

The Aftermath Driver

With the massive flood in the northern Peninsula Malaysia, the coming days will be looking on the reconstruction of the homes and infrastructure.

The condition of the flood speaks for itself through the pictures and video in the media, with massive housing area submerge underwater, and fatal water level that rises to the roof, with some area totally submerged in the water. There are much to do in the reconstruction in the flood hit states. Even state administration offices are not spared in the flood.

GPharos exposure towards the reconstruction and refurbishing phases in the flood hit area at the northern Peninsula of Malaysia due to it's proximity will definitely be a blessing in disguise. In order to back this up further, the Terengganu state owned company had been supplying indoor furnishing to the most of the state government in the north.

Driving a European Boost

After  a series of quantitative easing from the US, the first series of the European Stimulus had finally taken off from 1 March 2015. With 60 billion Euros a month targeted to stimulate the European market until September 2016, things had started to see a better growth in 1 month after the ECB gradual bond buying program.

With the current stronger US economy and a growing European side, things had forged out to be a much better condition for the raw material producing counter, such as Malaysia's logging industry. The mega construction and improving housing activity in the international market favors towards Malaysian Timber products such as sawn timber, MDF and furniture.

The improving international market had been seen through a stronger pick up in the local furniture company that had saw revenue growth hitting ceiling after ceiling.

Latitude, a local furniture manufacturer, is a good proof in reflecting the better state of economy in the international market. Latitude had saw it's extensive growth starting middle of 2014, which saw it's share price climbing up steadily from 90 cents to the current range of RM 6.20 with a dividend of approx 15 cents in between.

A Log and Wood Story

After the strongly hyped up property theme in the 2014, came the furnishing of the property, which brought a strong wood based theme, ranging from furniture to boards and logs.

For Gpharos, it will be more incline towards the upstream wood sector, which is the harvesting of logs. Ever since Myammar putting up a ban towards the export of their logs in April 2014, it had left a very big gap to be filled up by the rest of the South East Asian player since Myammar is rank no.2 for it's timber export in the region.

The large gap had put a double blessing towards neighboring country such as Malaysia. The exit of Myammar in the timber export will directly result to
- Lesser timber supply in export market
- Lesser price war due to reduce player

With round log timber traded in USD, the stronger USD will put act as the 3rd booster in a greater forex gain.

GPharos will be a superb interesting company to be look out at in the coming days due to
- 1st Quarter 2015 result could bang above 15 to 17 cents in EPS from it's total 11796 hpt harvested log.
- Strong exposure towards the rebuilding of the flooded area due to close proximity in the supply and demand area.
- Strong European stimulus program and a better US economy, driving more international demand.
- Better forex gain from stronger USD.
- Net cash position with approx RM 15 million in cash.
- Laggard in the strong timber theme play.
- Certified by FSC (Forest Stewardship Council), hence able to penetrate into the developed country's market that support environment friendly products.

Log to the limit up? You decide

Bone's TP : RM 0.90

Cheers and have a nice day


Tuesday, 14 April 2015

April Special on Kimlun - The Golden Dragon

Kimlun Corporation Berhad is a well known established player in the local construction market. Kimlun came to fame recently with the launch of the KVMRT project, in which Kimlun is one of the core supplier for the pre-cast concrete material for the KVMRT Line 1.

Kimlun is a quite diversified player in the construction scene. Kimlun had exposure in the Singapore MRT line, KVMRT series, LRT extension series, Iskandar Malaysia construction and it's own property launch in Cyberjaya.

With a great journey lying ahead of Kimlun in the coming days, when is the best moment to captivate on the rising journey of Kimlun.

The latest price chart of Kimlun had indicated that the share price had saw a consolidation at the range of RM 1.25 for the past 3 to 4 months. Albeit of the company exposure to high profile construction such as KVMRT Line 1, the counter had saw a lower transacted volume, however, it had not been shy of a gradual buy back in big batches from it's major shareholder, Pang Tin @ Pang Yon Tin through his privately held vehicle, Phin Sdn Bhd.

 Pang Tin @ Pang Yon Tin had been buying back the company shares through his privately owned company in the open market from various price starting from RM 1.60 to a lower range of RM 1.20, while the latest filling shown a 200,000 units purchase at RM 1.24. The privately held vehicle, Phin Sdn Bhd had added approximately 3 million units of since July 2014.

Kimlun - Just too good to be missed?
At the current price of RM 1.26, is Kimlun a good buy for real investor?
According to the price chart of Kimlun, the current price is actually situated at the strongest base line support price in Kimlun's 3 year history, which is at the range of RM 1.25. While there had been no doubts on it's fundamental outlook, Kimlun is a rare breed of construction counter that reward it's shareholder with acceptable dividends ranging from 3 cents to approx 5 cents, despite the high operating cost environment.
 The latest FYE 2014 had saw Kimlun ended it's financial year with a EPS of 15.39 cents, with a dividend of 3.8 cents to be rewarded to it's shareholder in the coming days. NTA increase from RM 1.24 to RM 1.33, and Kimlun debts had been decreasing constantly.

Based on a fair value of PER x10 for FYE 2014 result of EPS 15.39 cents, Kimlun will be easily be valued at RM 1.50.

A Stronger 1Q FYE 2015 result

Kimlun 1st quarter result will be expected to be stronger through it's Construction, Manufacturing & Trading as well as Property arm.

Kimlun construction projects are mainly focused in the region of Johor. The construction projects are mainly awarded by reputable listed developer like UEM Sunrise, UMLand, Country View (CView), SPSetia, IOI Property, MahSing, Keck Seng, Daiman and IJMLand.

In line with the Pre-GST push, we should be seeing a higher revenue from it's construction arm to reduce the exposure of the works and material that will be subjected to the 6% tax.

On it's manufacturing and trading arm, Kimlun will expect a stronger revenue on it's Segmental Box Girdle and Tunnel Lining Segments towards the KVMRT Line 1 project starting from October 2014. This is due to the completion of the ground work / baseline work ( Erection of concrete support pile, tunnel works and etc) which will then after only see the Segmental Box Girdle (SGB) and Tunnel Lining Segments (TLS) being installed in.
 (Segmental Box Girdle)

(Tunnel Lining Segments)

According to sources, Kimlun had fully delivered all the orders for it's Tunnel Lining Segments in 1Q 2015.

Currently, most of the progress in the KVMRT Line 1 will be fixing and installing the Segmental Box Girdle. Kimlun will be expected to see a stronger revenue from the delivery of SGB for the KVMRT Line 1.

On it's property arm, their maiden project at Cyberjaya, dubbed as The Hyve had been completed by more than 50%, and with a take up rate of 80%. The Property arm will expect to contribute higher in the 1Q FYE 2015 through higher billings. The Hyve unbilled sales stand at a good RM 100 million.

Riding on A Southern Boom with A High Speed Rail

Kimlun had been a core supplier for the SGB and TLS in the building of Singapore SMRT. The latest event had seen Kimlun securing SGD 43million in the Singapore's Thomson line SMRT. Kimlun should be participating for the Deep Tunnel Sewerage in Singapore.

While the Lion City had been promising lucrative jobs, the latest approval of the High Speed Rail that will be kicked start in 2016 will see another grand job for Kimlun to participate. Kimlun will be seen as a front runner for the Johor + Singapore portion, given their current involvement in the KVMRT and SMRT, as well as a significant construction player in Johor. The RM 38.4 billion HSR project that connects Kuala Lumpur and Singapore in 90 minutes at a speed of 250km/h will see stops at Putrajaya, Malacca, Negeri Sembilan and Johor.

Current Strong Construction Themed

The construction sector had been bullish in the recent days with the announcement of KVMRT Line 2 and Pan Borneo Highway to kick start the whole theme. The latest being the approval of High Speed Rail which will be adding another RM 38.4 billion worth of contract value into the sector.

In conclusion, Kimlun is just too good to be missed at the current price range, in a quick summary, Kimlun will be an interesting counter to be look at based on:
- Huge open market buying from major shareholder through Phin Sdn Bhd
- Kimlun current price is at the strongest base price range of RM 1.25
- Kimlun value at RM 1.50 based on PER x10 in FYE 2014 eps of 15.39 cents
- Stronger result for 1Q FYE 2015 through a stronger revenue billings from Pre-GST effect
- Segmental Box Girdle to continue contributing higher in the Trading & Manufacturing Arm
- Southern Economic Boom with Singapore and approved High Speed Rail
- Current strong construction theme in KLSE

Burst it on Kimlun? You decide

Bone's short term TP : RM 1.50

Cheers and have a nice day


Friday, 10 April 2015

April Highlight on Tropicana - The Tropical Storm

Tropicana Corporation Berhad is a no stranger property developer in both the local and foreign market. Dijaya Corporation Berhad came to fame when the group penetrate the market with their "Tropicana" brand name with projects such as Tropicana Golf & Country Resort, Tropicana Indah Resort Homes, Tropicana City, Tropicana Sungai Long, Tropicana Bayou, Tropicana Sungai Buloh Commercial Center and Tropicana Danga Bay. Others residential project includes Casa Kiara I & II, Casa Suites, Fortune Park, Arena Mentari, W Hotel & Condominium, Aston Villa and 10 Island Resort.

Formerly known as Dijaya Corporation Berhad, the group is the founded and helm by Tan Sri Dato Danny Tan Chee Sing, which is the younger brother of well known Malaysia tycoon from the Berjaya Group - Tan Sri Vincent Tan.

Tropicana had been coming to the limelight for the past few years for some corporate dealing involving some land sales and asset disposal as well as some land purchases to consolidate and reposition the group's asset and financial position. How would Tropicana be faring in the coming days with the government policy in the property cooling measure as well as the introduction of GST?

Tropicana had been sliding off the mark from May 2014 onwards, beaten off by the various property cooling measure sentiment as well as a good shake off in the equity market during the 4th Quarter of 2014. While the 1st Quarter of 2015 had saw a slower start in the equity market due to the stronger selling from the foreign fund, things got off better when the Feds had decided on prolonging the hike of the interest rate further rather than the anticipated 2nd half of 2015. The equity market got off with a better start with the beginning of the QE from the ECB, which had started to see hot money flowing back to the ASEAN market.

For Tropicana, at the price range of RM 1.05 to RM 1.10, it can be considered as the strongest base line support price range for the counter.

Tropicana should be able to see a technical run up towards the range of RM 1.40 in the short term outlook should Trop challenges above RM 1.20 with a good supported volume.

Tropicana - A Tropical Storm in the Property Sector

Tropicana had build it's brand name over the years with impressive property launches in Malaysia. The name "Tropicana" definitely put an impression of glamor, status, quality and exclusiveness to any person which is well informed in the property market.

To date, Tropicana had in it's development bag which consist of a mixture of residential and mixed commercial development ranging from medium to high end property. The current on going development includes :
- Tropicana Gardens (Kota Damansara)
- Tropicana 218 Macalister (Penang)
- Tropicana Danga Cove (Johor)
- Tropicana Heights (Kajang)
- Tropicana Metropark (Subang Jaya)
- Tropicana Danga Bay (Iskandar, Johor)
- Tropicana Landmark (Sabah)
- Tropicana Avenue (Petaling Jaya)
- Penang World City (Penang)
- Tropicana Cheras (Cheras)
- Tropicana Residences (Jalan Ampang, KLCC)

 (Artist Impression of an overview of a completed Tropicana Gardens in Kota Damansara)

Tropicana property launches is diversified to the Northern, Central and Southern Peninsula Malaysia, as well as East Malaysia.

Property market - Slow Down or Low Down?

While the market had been in talk with the property market slowing down for quite sometime, the signs are actually too vague to tell if the slow down actually hitting the new launches or sub sales market. Lets get down to the real market outlook from a study conducted from a small research company.

Edwin Ng, a 28 years old IT engineer who earns around a take home pay of RM 5k a month had opted to buy a newly launch under construction condominium at a price tag of around RM 600k. Assuming a 90% loan at an interest rate of 4.8% per annum and payable for 35 years, Edwin will be seeing an installment of RM 2656 per month after completion, which will see half of his take home pay going towards the installment. With this huge commitment in line, what is the core reason for Edwin to continue pursuing this purchase?

Edwin had took the whole picture clearer on his decision by giving a simple comparison. With the latest market trend which is on going, buying a new launch property is very easy with a low down payment. Putting it simple, a new condo which is partially renovated or 75% furnished could be fully yours with only RM 5k to RM10k down payment, with the rest going to bank financing. While not all the developer practice such perks for the purchaser, however, he noted that Tropicana packages which comes with low down payment along with other perks and rebates and not too far into the rural area is just what he needs.

Imagine if I had took a subsale purchase around the area which I would want at the same price, the barrier of entry for me is just too high and unaffordable to me. The total cost for a subsales property with a price tag of RM 600k will come with
- 10% payment upon the signing of SPA, which is RM 60k
- Fees for MOT (Memorandum of Transfer / Stamp Duty) which is RM 12k 
- Fees for Sales and Purchase Agreement, which is RM 4650
- Fees for Facility Agreement (Loan Agreement), which is 2700
- Fees for valuation approx RM 1000

The total entry amount needed for a same value purchase in a subsale market will take Edwin roughly RM 80,350, which had not inclusive of Insurance (MLTA/MRTA), possible cash top up should valuation doesn't met the purchasing price, renovation as well as furniture and fittings cost as well. The amount could just balloon to more than RM 120k upfront, compared to a low down payment of RM 5k to RM 10k to secure a unit which is new, while the other cost is taken care by developer or factored into a 35 years loan tenure. The unit which comes renovated and well furnished with a bit of designer taste will also save a bit of hassle into thinking what to buy during handover.

These are the feedback from serious home purchaser who are buying for own stay. Most of the purchaser bear the similar feedback towards the rising living cost and the escalation of prices that put them to compete with time to secure what they need in the future.

It is a whole new property game, quoted Charissa, a 30 year old auditor. By the time you save up RM 120k, you might end up buying somewhere further away from the city, or the amount you need is not enough, or you might be buying an "old" house.

With the trend of younger millennial opting to secure a place to stay as fast as possible, the buying trend is still towards the new launches instead of the subsales market. However, things does got spiced up when good things are exploited when speculation took a note higher. But demand is definitely rising with in a developing country like Malaysia where population is still growing at an commendable rate.

Tropicana package and offering spans towards a rich high end target market, and also offer a chance for the younger millennial a chance to secure their property at prime area with a bit of taste on the luxury side through their low down payment scheme.

Top & Bottom Realignment in Tropicana

Tropicana balance sheet had always been a yellow or red flag in the investor mind. Although the group had an impressive land bank that are situated in prime area, their overwhelming debt level had always keep a handbrake to the investor decision making.

However, with the current on going realignment of their land and assets which includes significant disposal of their land in Tropicana Alam to Ecoworld and their Tropicana City Mall to CMMT Reits.
The disposal of Tropicana City Mall is expected to complete by 3Q 2015, will effectively reduce the the gearing level of the group to 0.52x. The group will continue to dispose small land parcel in 2015, and will look to put it's gearing level below 0.5 to the FYE 2015 balance sheet.

Tropicana currently is sitting on a NTA of RM 2.14 with unbill sales amounting to approximate RM 3 billion from it's highly sought after launches like Tropicana Gardens and Tropicana Bay Residence at Penang World City.

A Stronger Push Before GST Implementation

With GST effectively taking off at 1st April 2015, the property construction segment is hotter than a volcano lava with non stop 24/7 working that tries to push as much as possible during the 4Q 2014 and 1Q of 2015 to reduce the exposure of incomplete progress that will be subjected to the billing of GST.

With a higher billing rate in the overall property sector, we expect to see a stronger 1Q 2015 result that will be going to see most of the result announcement in the month of May 2015, a movement that could take the property sector for a good ride. While some are still consolidating, there are significant property counter which had started to move up.

With an unbilled sales of approximately RM 3 billion in hand, Tropicana definitely had hopped in to join this bandwagon as well.

Tropicana had seen much changes in their effort to rebalance their portfolio and balance sheet. With the strong unbilled sales of approx RM 3 billion with the ongoing easy rosy sales packages for home buyers, at the current price of RM 1.09 which is a discount of almost 50% towards it's NTA of RM 2.14, Tropicana is just about to start a Tropical Storm towards a higher ground.

Ride on the Tropical Storm? You decide

Bone's short term TP: RM 1.40

Cheers and have a nice day


Wednesday, 8 April 2015

KKB - Fast and Furious

KKB had a humble history back then at 1962 as a small engineering firm that is founded by Dato Kho Kak Beng. Back then, KKB is providing steel fabrication works for factory buildings and products. The company continue to grow and started to diversify into other related work within the sector. Today, KKB is offering is expertise in Steel Fabrication, Civil Construction, Hot-Dip Galvanizing, and is also one of the core manufacturer for LP Gas Cylinder, Mild Steel Cement Lined (MSCL) Pipes as well as Steel Pipes Tubular Piles.

KKB had now provided it's services in the public and private sector across Sabah and Sarawak. KKB saw it's peak moment on the booming economic transformation in Sarawak, which is largely contributed by the Samalaju Industrial Park.

However, with the completion of Phase 1 of the Samalaju Industrial Park, where will KKB be heading in the coming days?

KKB had saw it's share price sliding 50% off from a peak of RM 2.80 to the current RM 1.40 range. However, at the current range of RM 1.40, KKB had seen a good solid base of support. The current consolidation at the range of RM 1.40 will be seeing a new growth with the on going economic development that is happening in Sarawak.

KKB will be heading for a good uptrend in the following week should the share price be able to break above RM 1.50 with a good volume. A quick resistant could probably see KKB drawing clashes at RM 1.70, while a medium to longer term outlook should be able to see KKB knocking at RM 2.00.

KKB - A Long Term Affair with Samalaju Industrial Park

KKB had saw it's peak performance in 5 years during the 2013 and 2014 period, which had been largely contributed by the booming economy in Samalaju Industrial Park. KKB involvement in the Samalaju Industrial Park spanning from client from the private as well as public sector.

It's involvement in the Samalaju Industrial Park got intensified when KKB took a step further to be involved in the material supplies for Bakun Hydroelectric Dam, which is designed to cater the power hungry industrial park.

Let's have a quick outlook on the impact of Samalaju Industrial Park towards KKB share price.

KKB had saw an explosive growth under the huge driver of Samalaju Industrial Park, putting almost 100% capital appreciation from it's starting point of around the range of RM 1.40 to RM 1.50.

While the completion of the 1st Phase of Samalaju Industrial Park looks like a departure, the game had actually just started. With the successful launch of the Samalaju Industrial Park Phase 1, now it is time to fuel up the development with a Phase 2 of the Samalaju Industrial Park.

Sarawak Economic Planning Unit had in plan to kick start the Phase 2 of the Samalaju Industrial Park with an allocation of approximately RM 500 million. The core cost of the project includes the site preparation and infrastructure work that will cost approximately RM 330million, water supply system at RM 20million and upgrading of Tanjung Kidurong Road at approx RM 10million. While the phase 1 of SIP had attracted an investment of RM 25 billion from 17 companies, the Phase 2 will not be looking for anything lesser than RM 20 billion. With that in line, new power generator will need to be build as well to cater for the energy thirsty industrial park, putting up the chances of new hydroelectric plant to be built.

Lumping in the whole Phase 2 of SIP, this could be another huge pie with approximately RM 30 billion worth of infrastructure and building project to be worked upon.

Additional Spices - Pan Borneo Highway

Things are not going to slow down in the development of Sarawak with the latest announcement of the approval in the building of the 1663 km Pan Borneo Highway, which cost around RM 27 billion. Sarawak will cover 936km with Sabah taking up 727km.

The project will be built in segment starting with the 40km stretch from Tanjung Datu to Sematan. The next stretch will be the 740km long Semantan to Miri, which will begin construction in the third quarter of 2016. The final portion in Sarawak from Tedungan to Merapok, which is sandwiched between Brunei will see construction in early within 2018 to 2023.
KKB, which had been involved in civil engineering, and a close proxy for sub contracting works from CMSB (Cahya Mata Sarawak Berhad) will definitely be a good beneficiary from all this huge infrastructure development.

All in all, KKB, given at the current price range of RM 1.40, and with so many huge projects lined up, given their proven track record and also huge involvement in the development of Sarawak, notwithstanding the coming up election in the Sarawak State, it is prime time to relook upon KKB

Summarized points
- Huge contender in both public and private sector in the development of the Phase 2 Samalaju Industrial Park
- Huge contender for the RM 27 billion, 1663km Pan Borneo Highway.
- Good network and political ties with the local Sarawak Government.
- Upcoming Sarawak Election, prompting Sarawak counter theme play.
- Net cash company of approx 55 cents a share, and consistently giving handsome dividends for the past 2 years.

Furious on KKB? You decide
Bone's short term TP : RM 1.70

Cheers and have a nice day


Tuesday, 7 April 2015

LFECorp - The Turning Point

Little known LFECorp had recently came to a little bit of limelight after seeing the PN17 beleaguered counter had finally saw a tunnel of light from a savior - Shapadu Corp Sdn Bhd.

Back then, LFECorp had been a well doing company which had joint venture with well known IJM Corp Berhad, Sunway Berhad and Zelan Berhad in the RM 1.32 billion Al Reem job in Abu Dhabi back in 2006. However, things took a sour turn during the 2008 financial crisis, and a former director, Alan Rajendram went further to add salt into the wounds of LFECorp by falsifying financial statement in the company.

While the management work through the trying times in order to keep the company standing, things had got hard when some of the work done
However, LFECorp might be seeing a total turning point when White Knight - Shapadu Corp Sdn Bhd had decided to give the company a breather.

How would the whole deal between LFECorp and Shapadu Corp Sdn Bhd pan out?

Looking at the price chart of LFECorp, the stock hit a relatively high note back then in September 2013 after the release of the quarterly result which had shown a huge positive gain for the quarter. However, the share price continued to be depressed pending the submission of the regularization plan to Bursa Malaysia in order to turn the company around.

As of lately, LFE had saw some active trading with the announcement of the subscription of private placement by Shapadu Corp Sdn Bhd. With the growing interest in the company, LFE could be looking to trade towards it's par value of RM 0.30 as volume continue to pick up in the coming days.

The White Knight - Shapadu Corp Sdn Bhd

Shapadu Corp Sdn Bhd is founded by the late Datuk Shahrani Abdullah. Currently, Shapadu's business had expanded into Oil & Gas division, Property & Construction, Civil Engineering,  Transportation & Logistic, Infrastructure Development, Security and Training services as well.

Shapadu had been looking to hit into the KLSE back then in 2013, with plans to list it's subsidiary Shapadu Energy & Engineering Sdn Bhd (SEEN) in order to raise fund for working capital in it's expansion plan. Previously, the group had listed is container haulage outfit Shapadu Kontena Berhad, which was later sold to Logistik Berhad in 2005.

Currently, Shapadu Corp through it's subsidiary, Shapadu Boulevard Sdn Bhd, had given LFECorp a turning point with the project award amounting to RM 350 million for the engineering, procurement and construction of Shapadu City Village at Putrajaya, Precinct 2, which commenced on 16th December 2014.

Shapadu had gone deeper into the whole picture when they plan to take up the private placement of 66.667 million shares for RM 20 million at 30 cents a share. However, the placement will subject to the approval of Bursa Malaysia in it's regularization plan which had been awaiting for the regulatory body reply since it's submission at 25th July 2014.

LFE had been displaying a better set of results with the latest 3 out of 4 quarters in the positive zone. With the ongoing project in hand, LFE will be able to put another positive quarter forward, which will sees a 3 consecutive positive quarter for LFE as well.

According to familiar sources, LFE should be seeing a green light from the regulatory body for the regularization plan after putting up the latest quarterly result with 3 out of 4 positive, identified cornerstone investor for the private placement and a foreseeable on going concern for the company.

Shapadu Corp, under Datuk Rosthman Ibrahim, intends to finalize and complete the private placement with LFE in the month of May 2015. According to Datuk Rosthman, Shapadu will plan to dish out more project to LFE after the completion of the private placement in May.

Shapadu is a strong and well connected government linked company. With it's top management significance in the ruling party, Shapadu is expected to bag in more deals from the Putrajaya.

In Conclusion, LFE will be an interesting company in the coming days given
- RM 20 million Private Placement subscription at RM 0.30 a share by Shapadu Corp Sdn Bhd to be completed in May 2015.
- Favorable result with 3 out of 4 recent quarter in the black, putting a good outlook for approval chances for regularization plan from Bursa Malaysia.
- Shapadu to dish out more project to LFE prior to completion of share placement.
- LFECorp is a possible RTO target by Shapadu in the long term outlook with possible asset injection, given the motive of Shapadu to be seen listed in the KLSE market.

Turn along with Shapadu? You decide.

Bone's short term TP: RM 0.30

Cheers and have a nice day


Friday, 3 April 2015

Nylex - Robust Time Ahead

Nylex (Malaysia) Berhad is engaged in manufacturing and marketing of Polymer and Industry Chemical products. It's products include geotextiles, prefabricated sub-soil drainage system, rotomolded plastic products, petrochemical and industry chemical products.

Nylex under it's 55% owned subsidiary, Ancom Kimia Sdn Bhd is also a registered member of the MPA (Malaysia Petrochemical Association).

With the current challenging business environment in the world, what could be the silver lining for Nylex for 2015 and the coming years ahead?

During the glorious days, Nylex had been trading at the range of RM 1.60 before 2008 financial crisis which had saw Lehman Brothers got wipe out from the crisis. While Nylex had weathered the days of doom, what is prepared for Nylex in the days ahead ?

Nylex had been consolidating at the range of RM 0.60. However, Nylex should be able to start to see an uptrend moving in the coming days from a strings of benefit due to lower raw material input from a lower crude oil price.

A quick outlook might suggest that Nylex should be able to gain traction and see more volume as Nylex could march it's way towards RM 0.70 as it's first resistant.

Nylex - Better Margins Ahead

Few years back, the petrochemical and industry chemical sector had been seeing challenging moments due to the slower economy in the European region. Although the demand for the petrochemical and industry chemical had been on the rise, big players involved in the game will see the industry continue to be challenging.

However, with the lover looming crude oil prices that had crashed from USD 80 a barrel to lower than USD 50 per barrel, this could be a good silver lining for the whole industry starting 2015. While the market had continue to talk about the over supply and insufficient of warehouse storage for the crude oil, chances of the crude oil dropping further towards the range of  USD 30 could be a possible note of happening, an event that will only see Nylex putting up with even cheaper raw material ahead, and enjoy a better profit margin.

Strengthening Presence in Indonesia

Nylex already had presence in Indonesia through PT Nylex Indonesia. While the unit in Indonesia had been doing greater with increase in revenue, the result is hampered with the forex losses from a weakened Indonesia Rupiah. However, with the completion of the new Surabaya Plant in 1Q 2015, it is established a stronger presence in Indonesia, and the management is expecting a better return on investment in 2015.

Nylex will continue to tap more into the Indonesian market, which is one of the company long term goal to have a stronger presence in Indonesia.

European Stimulus Program

The European Stimulus Program under Mario Draghi will see 60 billion Euro injected into the economy every month until Sep 2016 to stimulate the european economy through bond buying program. ECB had contested that the QE program is had started to boost recovery. Latest data show that a total of 41 billion Euros is being repurchased by March 27, 2015.

Good revaluation reserve

At a NTA of RM 1.55, Nylex still command a good revaluation reserve with properties and asset seeing old valuation as far as 1985.

Nylex could be an interesting company to be look out at for 2015 as a good beneficiary towards the cheaper crude oil. Nylex will probably see a stronger quarter with the start of it's new plant in Surabaya, and better demand from the overseas sales prior to the ECB stimulus program.

t the current price of RM 0.60, Nylex is just trading at 38% from it's NTA of RM 1.55. The company had been paying dividend of at least 2 cents per ordinary share for the past 5 years.

Bone's short term TP : RM 0.70

Cheers and have a nice day