Wednesday, 17 August 2016

Euro - Assembling Up

Euro Holdings Berhad (Euro - 7208) which had caught investor alert during 2014 could be looking into some action soon after it remained on a low profile for more than 10 months after it's bonus issue.

To recap, Euro was primarily dealing with the manufacturing and marketing of furniture and office fittings. However, due to the emergence of new shareholder and director, Dato Sri Choong Yuen Keong, he had bring together with him more than 20 years of property development and construction experience, which is readily to put Euro in becoming a property developer.

While it had been known that Beverly Heights Properties Sdn Bhd is held by Dato Sri Choong Yuen Keong and his brother, Dato Tong Yun Mong, there had been much speculation on the development of the land which will be closely linked with Euro in the future.

With 30 acres of freehold land at the north east side of Penang which include 19 acres from the Pepper Estate, the prime land is overseeing a beautiful sea view from from a high altitude.

Since the prime land is held under Beverly Heights Properties Sdn Bhd, which is not a subsidiary of Euro, we will be looking at what are the possible option of this potential mind blowing project with huge GDV going to benefit Euro in a whole? To give a background, Beverly Heights Properties Sdn Bhd had in 2013 signed a JV with Oxley Holdings Limited (Singapore Developer). The JV will see Oxley holding absolute and exclusive power and right in the development of the land owned by Beverly Heights Properties Sdn Bhd. Oxley will be entitled to 70% while Euro 30%.

According to an experienced analyst who is familiar with such scenario, the highest possible chance for Euro in order to monetize from the development is to see Euro forming a JV with Oxley Star to the development. This will then replicate the form of joint venture structure liken between Ewein, Zenith and BUCG. The trio consist of mixed development project and infrastructural development from underwater sea tunnel to City of Dreams in Penang with different joint venture structure in between the entity. For Euro to be able to ride along the tide of Oxley will be a great opportunity.

However, due to the JV agreement is still being conditional, there are still chances of the agreement being terminated. If this happen, chances of the land being injected into Euro will be very high as Euro can easily raise fund from the public to make acquirement. Should that happen, Euro can either develop it on their own, or JV with local player such as Ecoworld, E&O or SPSetia for the 30 acre of land.

Currently, Euro will focus on it's first maiden foray, a low density development project at Damai Perdana, Cheras. The project named Vista Damai will see 322 units of freehold condominium at 4 acres of land.

Albeit the current weaker sentiment in the property arena, Euro had been lingering at a lowly region of 24 cents for the past 10 months. However, the interesting part of Euro will be it's foreseeable future corporate exercise and potential development.

After reducing it's par value to RM 0.10, it is foreseeable that Euro will be looking to see 1 round of fund raising, either through SIS (share issuance scheme to director) or Private Placement. Take private placement for an example, for a share base of 243 million shares, raising approximately RM 10 million through 10% placement (24.3 million shares) will also interpret to a pricing of RM 0.40 for private placement.

At the current pricing, Euro can be considered attractive. We expect Euro to do a revaluation of it's land and asset in the coming days in order to reflect the true value. Euro would have the potential to revisit back to RM 0.30, considering a considerable accumulation made back in November 2015.

Bone TP : RM 0.30

Tuesday, 9 August 2016

AISB - The Last Of The Mohican

Amalgamated Industrial Steel Berhad (AISB - 2682) is a very low profile steel maker that is based in Shah Alam. Due to the challenging business environment surrounding the steel industry from tight competition to high raw material, AISB had taken several restructuring in manufacturing processes as well as diversification into property development.

Despite being listed for more than 10 years in the KLSE, AISB is not so well known to the world of trader and investor. This is very much due to the inconsistent earning in the steel industry, as well as a tight liquidity of share that is circulating in the market.

However, with most of the steel company starting to make a turnaround from losses to profit, what will this meant for the Shah Alam based AISB ?

AISB to turnaround in 2016

Headed by executive director Mr Ronnie Lim Yew Boon, steps that are taken by AISB is to streamline the steel production from 2 plant into 1 plant. This will enable the group to see a better cost control and overall management of the steel production.

And most importantly, the exercise is to unlock a value of it's 11.5 acre land in Section 15, Shah Alam. The said piece of land is worth RM 61 million just on vacant land alone.

The land is looking to build 12 Semi-D factory and 2 custom made Bungalow Factory. With AISB being one of the arm of Malaysian conglomerate LGB group, their track record, experiences and connection could only boost the confidence in delivering this project. Just recently, Avant Industrial Park had obtain the green light to develop the piece of land.

The other services under the LGB Group is listed entity Taliworks Corporation Berhad. It provides water management, solid and water waste management, highway operation, property development, IT and construction engineering.

Can AISB a repeat of Taliwork ?

Given both of them are under the care of LGB group, what is the potential of AISB in the coming future?
Let's have a look at Taliwork as a reference case.

Given a track of power what LGB can do to Taliworks, AISB could be a good target now

With more than 3 year of inactivity in AISB, the share had finally saw some good participation of volume finally.

Familiar sources are expecting more happening in AISB. After a private placement last year that had completed in May 2015, AISB could be looking to see a potential bonus free warrant in 2017. AISB will also be looking to see better result from their steel operation. After all, most of the company in the steel industry had turned into profit already.

AISB underlying fundamental might not be so attractive at the moment, however, with new focus in unlocking the value of underlying asset could be looking to see more new venture coming in for AISB in the future.

Bone's TP : RM 0.70

Monday, 8 August 2016

How to monetize the boom of Pokemon Go ? Here are 2 opinions from Bonescythe

Pokemon Go had taken the world abuzz with a new gaming style and experience by incorporating the augmented reality into the game play. This game is addictive, and nostalgic for many of the young adult in their late 20s even to early 30s. Well, I had to inform that I am once an avid Pokemon fans too during my childhood.
While the scale of the influence in this game on spurring the economy is still unknown, it forces people to literally get out of their home in order to advance in the game. Player need to head to PokeStop to reload items, walk around to catch wild Pokemon and hatch eggs, go to Pokemon Gym to battle against player. With this being said, it had open up vast opportunity in new business idea that can cater some niche services to this market.

So what are some of the cool business that we might be able to do to monetize this booming moment?

1.) Bicycle Rental Services
If you are doing this business in some recreational area, that will make good sense. If you are doing this in scorching hot city, that will be a joke. However, since there are a huge market of player playing this game, that could put this idea to run again

Walking from Pokestop to Pokestop will definitely be tiring and slow. However, taking a bicycle and ride along will definitely give the game playing feel much more better. After all, Ash Ketchum in the Pokemon series do get his bicycle after some time in the game too.
Some of the cool spot that had a big number of Pokestop will be able to see good demand in bicycle rental service. Places such as KLCC park, Zoo Negara are definitely going to be superb location. To make this user friendly and pick up the demand, bicycle is advisable to be installed with phone and power bank holder. For safety purposes, operator also can provide rental of safety gears for hot places such as SS15 in Subang.

2.) Manufacturing cafe table with USB Charging ports
If you dislike a small scale business like bicycle rental, then this would probably come to your liking to make it a big business. I had to admit that I had this idea for quite sometime in my mind, and had been thinking to pattern and trademark this idea. However, with a pair of hands and legs and limited knowledge in design, I am now sharing this idea out and leave it out to whomever that can see the potential demand of this product and interested in developing it further.

This idea caught me when I frequented cafe and eateries that do provide electric charging port mounted on wall. I believe, many of the port are either too high, or too low, or too far, or spoil. It is basically not practical at all. Imagine most of the USB cable is approx 50 cm long, that will sound quite inconvenient to the user. A table with USB port will make definitely give an good lasting impression to customer, making them likely to come again for whatsoever reason to charge their dying phone. For those cafe that are near to Pokestop, that will be brilliant for customer to sit around, put in a "Lure Module" and activate "Incense", enjoying sip of coffee and catching some Pokemon with friends with their phone powered on the table with ease. Don't you think this is amazing?

Since there is no such product in the whole global market (as of my own current knowledge now), the potential is definitely very huge. If a local furniture listed manufacturer is willing to take up this idea, you can thank me by telling me to invest in your company. Well, on the other hand, if want more creative idea, I do still have some more, and don't mind working it out with serious manufacturer.

Well, above are just my opinion that I think is practical. For a normal layman, bicycle rental services is quite easy to manage. But for big businessman with manufacturing capabilities, why not try something new to test the market out? After all, I am quite convinced that cafes are willing to buy this table and try.

Cheers and have a nice week ahead.

Friday, 5 August 2016

3 months Stock Selection Review

2016 is a very challenging year for business around the world, and the capital market is much more challenging. Some hedge funds are suffering from massive losses due to the volatility struck by growing debt issue, chine economy slow down as well as the lower crude oil prices. As for me, I would definitely agree to this challenging times in 2016.

However, despite the challenges, let's see what will the return of my stock selection for the past 3 months (May, June and July 2016).

While different traders and investors have different set of trading methodology and techniques, I would like to share my trading principal. For me, I will use a "uniform fixed quantity" for all my investment. For example, if I got 4 counters to be invested, I will invest for example 100 lots (10,000 units) for all 4 counter in regardless of the price. This will eliminate the chances of huge losses made by smaller priced investment which are invested in more quantity due to using the ringgit value based approach of buying.

To explain this further, if you evenly split RM 100,000.00 to be invested in a Company A of price RM 1.00 and Company B of RM 0.20, you can purchase 500 lots of Company A shares at RM 1.00 and 2,500 lots of Company B shares. Bear in mind, if Company A goes up 10 cents and Company B goes down 10 cents, you are stand to lose a net RM 20,000. However, using my approach, by investing 100 lots for each of the company, I will be only losing on the brokerage.

Then I will categorized my investment into 3 categories, which are
- Grade A, Fundamental with earning backing (trading at < PER x15)
- Grade B, Fundamental without earning backing
- Grade C, Speculation

For selection that falls under Grade A (fundamental with earning backing), these are the shares that I can hold on to for a longer tenure of time and ride along the wave. Investment decision will be review whenever the quarterly financial result released. For this category, I can aim for 25% to 50% in capital appreciation.
However, in order to protect profit, investment will be liquidated when
- Achieve satisfied profit
- Price chart in stage 5 of Elliot Wave
- Huge negative changes in quarterly result
- Sudden sell down with extraordinary large volume

For selection that falls under Grade B, these are potential share with good background, however earning had not reflected probably due to seasonal, cyclical or economy factor. Can aim for 10% to 20% in capital appreciation, or have a designated profit taking price. Cut loss will be implemented if share fall with great volume.

For selection that falls under Grade C, these are highly speculative shares that had no solid record on earning and are moved based on potential corporate exercise. Profit taking is based on risk appetite, while strict cut loss measure to be implemented whenever huge sell down in large volume are spotted. Cut loss preferably at 10% to 15%.

Let's assume 100 lots bought in to all the selected counter and all liquidated before August for calculation

3rd May 2016, Arank, investment grade A
Buy in 100 lots at RM 0.68
Sell out 100 lots at RM 0.85
Gross profit = RM 1,700

9th May 2016, OKA, investment grade A
Buy in 100 lots at RM 1.08
Sell out 100 lots at RM 1.30
Gross profit = RM 2,200

6th June 2016, Superlon, investment grade A
Buy in 100 lots at RM 2.00
Sell out 100 lots at RM 2.20
Gross profit = RM 2,000

7th June 2016, WZSatu, investment grade B
Buy in 100 lots at RM 1.12
Sell out 100 lots at RM 1.12 (assume liquidated at end of July for calculation)
Gross profit = 0

10th June 2016, NWP, investment grade C
Buy in 100 lots at RM 0.38
Sell out 100 lots at 0.34 (Cut lose at 10%)
Gross loss = (RM 400)

16 June 2016, Fibon, investment grade A
Buy in 100 lots at RM 0.52
Sell out 100 lots at RM 0.60
Gross profit = RM 800

21 June 2016, Aemulus, investment grade C
Buy in 100 lots at RM 0.35
Sell out 100 lots RM 0.32 (10% cut loss)
Gross loss = (RM 300)

29 June 2016, Engtex, investment grade A
Buy in 100 lots at RM 1.15
Sell out 100 lots at RM 1.20
Gross profit = RM 500

12th July 2016, Sycal, investment grade B
Buy in 100 lots at RM 0.37
Sell out 100 lots at RM 0.32 (15% cut loss)
Gross loss = (RM 500)

15th July 2016, Bina Puri, investment grade B
Buy in 100 lots at RM 0.39
Sell out 100 lots at RM 0.435 (sell on news)
Gross profit = RM 450

19th July 2016, Astino, investment grade A
Buy in 100 lots at RM 0.72
Sell out 100 lots at RM RM 0.78 (assume liquidated at end of July for calculation)
Gross profit = RM 600

20th July 2016, Hohup, investment grade A
Buy in 100 lots at RM 0.82
Sell out 100 lots at RM 0.82 (assume liquidated at end of July for calculation)
Gross profit = 0

For the 3 months performance, based on 100 lots on each counter, I will stand to see a gross profit of RM 7,050 trading based on the applied approach and techniques. Total capital employed is within RM 100,000. Hence, the gross ROI for 3 months performance is 7%.

There will be no one definitely best answer in the world of investment, especially in the capital markets. Above is just a sharing of one of my method i used when my risk appetite is towards risk adverse. Stock selection is filtered from technical indicator, fundamental background, possible incoming corporate exercise and familiar sources.

Investment is an interesting adventure to me. With more than 7 years of on hand practical experience, I would say this journey takes a lot of discipline, knowledge, time and commitment. Most importantly, one would need a good forward thinking skills and prediction in order to make your investment flourish.

Should I have the opportunity, I will share on my practical experiences.

Have a good weekend.

Careplus - Ripe to take position

Careplus Group Berhad (Carepls - 0163) could be finally on a ripe moment to see potential M&A activities with bigger boys in the glove industry. It had been a known problem for Careplus in suffering from tight profit margin due to the lacking in economy of scale on their gloves production. However, the seremban based Careplus is still on expansion mode and looking to have 26 production line running in the 2nd half of 2016.

Malaysia being the largest gloves exporter in world dominates 40% of the market share from big established player such as Hartalega, Top Glove, Kossan and Supermax. Smaller player are Careplus, Comfort (Formerly known as IRCB) and Esceram.

With the bigger player continue to make aggressive expansion in order to protect market share, and smaller just surviving player fighting to combat with profit margin issue due to lack of economy of scale, it will be a ripe moment to see further consolidation in the Malaysian glove industry as this will create a synergy within them, benefiting each other.

As for Top Glove, they had been planning for quite some time on  M&A activities as one of their expansion. To recap, Top Glove become where it is today is also attributed to multiple M&A with at least 20 other smaller gloves production company back then. According to Tan Sri Dr Lim Wee Chai, the group had shortlisted 3 local glove maker, and is eyeing to make at least 1 acquisition for the FYE 2016. The media quoted on Top Glove on making noticeable movement on 3rd Quarter 2016. The Star - Top Gloves eyes M&A by August

In FYE 2015, Careplus had raked in a total revenue of RM 190 million, with annual manufacturing capacity at 2.4 billion gloves per year. Top Glove current capacity span around 45 billion pieces per year. However, with the additional 6 lines that is to be added, Careplus is looking to see 3 billion gloves per year, which is almost 7% of what Top Glove produce a year.

The time is very ripe for Top Glove to make the first public move as cards as lay out. Now that Top Glove had successfully listed in SGX, Top Glove can use SGX as a platform for future public fund raising to enhance it's international presence.

Comparison between Esceram and Careplus

There had been news on Top gloves eyeing on Esceram as the group seek to diversified its product into gloves former as well. Esceram manufacture glove formers and examination gloves. For FYE 2015, Esceram total revenue is RM 30 million. Should Top Glove is willing to pay a RM 130 million for Esceram, that will put a steep valuation of 400% on based on it's latest revenue. Currently, Careplus is taking in a total revenue of RM 190 million for FYE 2015 and having a market capitalization of approx RM 137 million. Should all existing 88 million warrant be converted, Careplus will probably be seeing RM 165 million of market capitalization. Based on Esceram scale of valuation, Careplus could be looking at a value of RM 760 million.

According to familiar market sources, Top Glove is very close on putting a deal with Esceram, with offer probably priced between RM 130m to RM 140m. But that will not spell an end for Top Glove M&A activities as Careplus is just a few steps away. Market analyst will probably see Esceram dealing in 2016, and Careplus in 2017. However, the current valuation of Esceram in the market could be fully valued, leaving little space for investor for a huge gain in the M&A activities.

In the other hand, Careplus at the current price will be seeing a greater bargain for now. With director exercising their warrant at the price of RM 0.32, and Careplus being at the lowest price in the year, there space for future capital appreciation is very huge, imagine a future M&A that would carry a price tag of RM 760 million. The M&A for Careplus could probably see Top Glove using the SGX platform in making fund raising activities in the coming days.

After all, the synergy between Careplus and Top Glove will be better off for the 2, with 1 seeking for economies of scale in order to save cost, while the other seeking to maintain market share and expansion activities.

Technically seeing, Careplus is resting on strong support at the range of RM 0.32. The current pricing will be attractive for investor to lock in position to see future capital appreciation in related to future M&A activities.

Bone's TP : RM 0.60