Tuesday, 26 May 2015

MJPerak - A Land of Gems

MajuPerak Holdings Berhad (MJPerak 8141) is a Perak State owned company that had been dealing with property development, property management and with the recent involvement in renewable energy.

MJPerak had been buoyed with inconsistent revenue and profits due to the changing season in the property market in the past. However, the group managed to scrap through the FYE 2014 with a net profit of RM 4 million.

In need of addressing the absence of recurring revenue in the group, and with the challenging time ahead, what would be the next course of action for MJPerak?

With the latest market outlook, let's have a glimpse of the latest chart movement of MJPerak.


MJPerak had saw huge volume buying as of late 2013 and early 2014, putting the share rising above RM 0.60. However, the volume of the counter subsided in a verge for a consolidation purposes for a period of almost 1 year. However, the recent activities could reignite the spark it needs to take MJPerak back to the trading range between RM 0.45 and RM 0.50, fuel with it's latest announcement of a land disposal to the Perak State Agricultural Development Corporation (PSADC).


A Huge Chalking Windfall Profit

MJPerak had announced it's intention in a land disposal to the Perak State Agricultural Development Corporation at the sum of RM 42.5 million to be satisfied in cash. The recap, the land which is held under PT 829, H.S. (D) 4413, Mukim Lenggong, Daerah Hulu Perak, Perak had been bought in by the company at 2011 at the price of just RM 4.4 million. The sale will see a net income of approx RM RM 38.3 million into the group balance sheet after deducting on the administration fees and RPGT.

The revaluation of the said land will be bringing in huge impact to the NTA of the group in the coming quarter. With the huge increase of the land valuation, the group can easily hive up an EPS of up to 20 cents (RM 38.3 million / 184.8 million shares)

MJPerak still had under it's portfolio several commercial building and complexes that had yet to be revalued since 1987. According to the current market valuation, MJPerak NTA can be looking at RM 2.60 per share (as of current outstanding share of 184.8 million shares).


Realigning Towards Recurring Income Projects

MJPerak foray into the renewable energy is not a new thing to the group. It had on 2014 obtained the approval to build and operate a 1MW hydro electric plant in Perak, in which it had started commencing operation in 2015. With the continuous effort in the country to bring in more renewable energy in the growing energy demand, the demand of renewable energy is still there.

MJPerak will continue to expand heavily in the sector in order to create a reliable recurring income in nature for the group in the long run. The renewable energy project will include hydro electric, biomass and solar plant. As of 2014, the group had vested more than RM 10 million into the purchasing and preparation of the solar farm. While the capacity is still unknown, MJPerak could be looking into operating a 1MW to 3MW solar farm soon.


Amprop is a good example of a developer cum solar farm player in the market. Currently, Amprop is operating a 10.25 MW solar farm which had been providing steady recurring income to the group. Is MJPerak share price going to follow suit what had been in Amprop?


Insider accumulation through Conversion of ICPS

MJPerak had been seeing continuous conversion of the ICPS before the announcement of the proposed land sale. The conversion of the ICPS at a premium had put certain attention towards the incoming development of the company in the coming days.

Taking an average of 30 cents as the cost of acquiring the ICPS (MJPerak-PA), at the exercise price of RM 0.70 at the conversion ratio of 10 ICPS : 7 shares, the insider is paying a hefty price of RM 0.528 for a mother share in MJPerak. Assuming a lower cost of acquiring the ICPS at RM 0.25, it will still translate to a price of RM 0.457 paid for each share.

Example of calculation based on ICPS acquired at RM 0.30

[(RM 0.30 x 10) + Exercise Price RM 0.70] / 7
= RM 0.528

The conversion of the ICPS had certainly raised eyebrow of a potential one off special dividend which could be speculated at 5 cents per share to be rewarded to the shareholder after the completion of the RM 42.5 million land sale, which will put MJPerak in a net cash position.

Given at the current market price of around RM 0.40, MJPerak could be an attractive take in the open market.


MJPerak will be an interesting company in the coming days based on
- Good land banking in Perak
- Windfall profit land sale to sought approval in the coming AGM
- Concentration on renewable energy project for the company recurring income
- Huge revaluation reserve in the company investment property portfolio as well as development land. The latest 5000 acres Agricultural Land that is proposed to be disposed could reflect it's valuation increase in the coming quarterly result.
- Trading at more than 80% discount from it's RNAV of RM 2.60
- Insider accumulation of mother share through conversion of ICPS in a considerable premium
- Potential special one off dividend from land sale profit

Maju with MJPerak? You decide.

Bone's Short Term TP: RM 0.60

Cheers and have a nice day

Regards,
Bone

Monday, 18 May 2015

May Exclusive - D&O - Lighting The Future

D&O Green Technologies Berhad (D&O 7204) had been a little known company to which deal with the manufacturing of LEDs and optos related products. D&O through it's subsidiary Dominant Opto Technologies Sdn Bhd which boost a range of LED products from Standard, Medium, High Powered LED and also Multicolor LED had a foothold in the US, Europe, China, Korean and Malaysian market.


With the current global environmental concern that focuses on environmental friendly products, where can this lead to for D&O in the coming days.

Let's have an interesting look at D&O recent price chart.

D&O had saw a good interest at the middle of 2014, where a substantial amount of shares had been transacted at the range of RM 0.34 to RM 0.40. The transaction had been viewed as a primary stage of accumulation basis, based on the solid white candle displayed with a good supported volume. However, the stock had took a long consolidation at the range of RM 0.28. With the consolidation almost look set to ripe up for harvest after 1 year, D&O should be going to see a better participation with greater volume while it travel to penetrate into the previous trading range of RM 0.34 to RM 0.40.


LED - Lighting Up The Future

30 years ago, data was transferred using a 8inch floppy disk, later became 5.25 inch, and subsequently  3.5 inch. Then the came the introduction of Compact Disc, which had subsequently see more development of the disc into DVD and Blurays. The mobile data storage took a revolutionize stance with the introduction of USB Drive and Memory sticks, and the latest is on the Cloud Storage. While this is the story of the changes of storage from the past to current, what about the lighting industry.

From the invention of the filament based electric light bulb (incandescent) by Thomas Edison, then to fluorescent, the next generation light will be the LED (Light Emitting Diode).

LED is in every angle better than incandescent and fluorescent light.


LED
Incandescent
Fluorescent
Life Span
50,000 hrs
1200 hrs
8000 hrs
Watts (based on 60
watt bulb)
6 to 8 watts
60 watts
13 to 15 watts
Kilo-Watts used per
year
329 KWr/yr
3285 KWh/yr
767 KWh/yr
Contain Toxic
(Mercury)
No
No
Yes
RoHS Complaint
Yes
Yes
No
Carbon Emission
451
pounds/yr
4500
pounds/yr
1051 pounds/yr
Sensitivity to low
temperature
No
Some
Yes (Not workable
under -10 degree
Fahrenheit or over
120 degree
Fahrenheit
Sensitivity to
humidity
No
Some
Yes
On/Off Cycling to
life span
No
Some
Yes
Durability
Durable (Can
handle bumps
and knock)
No (Glass or
Filament can
break)
No (Glass can
break easily)
Heat Emitted
3.4 btu’s / hr
85 btu’s / hr
30 btu’s / hr

On light output, comparing a 800 Lumens of light, incandescent light bulb will need 60 watt, fluorescent light will need 13 to 15 watts while LED only takes 6 to 8 watts to produce the same amount of light.

LED had a high flexibility of usage due to it's compact size, making it possible for a lot of applications.


Global Environmental Concern

It had been a global environmental issue on the current global warming due to the increase of carbon dioxide. With the growing population around the world, human are consuming more and more energy, in which largely of the energy is derived from fossil fuel that had been contributing to the alarming global warming issue.

According to analyst, by just replacing conventional lamps into LED in the United States alone will contribute to energy saving of more than 120 gigawatt annually. And that is reducing a stunning 164 billion pounds of carbon emission per year.

With the ongoing global concern on the global warming, the lighting industry will play a big part in reducing the total carbon footprints in the whole world. And with this in line, the LED industry will be the light of the future as more countries are adopting the usage of LED in most of the application in order to play a part in reducing the global warming.


Strong Upstream Development catering for future demands

With the highlighted demands in the LED sector, companies are rushing into tapping the upstream development opportunity such as LED Tester Machine to cater for the huge influx of demand. Amongst them are Pentamaster, Elsoft and MMSV.



The huge orders of the test machine in all these 3 companies had already put a forward signal of the incoming demand in the LED sector in the coming days.


D&O, after restructuring it's company which the disposal of loss making division had put into full focus in Dominant Opto Technologies Sdn Bhd, and shifted the focus to higher margin based products such as general lighting and automotive lighting. The group had also fully acquire their Europe based Dominant Semiconductors Europe GMBH which will be finalized in Q2 2015. D&O will be aiming to break above the RM 500m revenue mark in 2015.


In conclusion, D&O is a company that is full of potential, riding strong along with the booming LED industry. D&O will be an interesting company in the coming days based on
- Company operation restructuring exercise, disposing loss making entity, and fully focus on higher margin based products in the general and automotive lighting industry.
- Global warming issue will continue to push the usage of LED in most of the application from all kind of industry.
- LED versatility had enable it to fit in a lot of application, from car remote control to large billboard lighting.
- LED upstream development industry (LED Test Machine Manufacturer) had shown the signal of the upcoming demand in the LED sector
- D&O strong growing revenue despite the slower economy growth in the Europe before QE. The current QE will further boost the economy activities.
- Influx of more building spaces and ever increasing automobiles on the road will only signal for more demand for general lighting and automotive lighting.

With all the opportunities ahead for D&O, the company can a fast growing pacer in 2015 to 2017, which could potentially see revenue hitting more than RM 1 billion per year, which a long term outlook will see D&O possibly trading at RM 0.70 to RM 0.80 range.

Light Up with D&O ? You decide

Bone's short term TP : RM 0.40

Cheers and have a nice day

Regards,
Bone