Tuesday, 29 November 2016

Just 3 Simple Reasons For You to "Hoot" Gunung

Gunung Capital Berhad (Gunung - 7676) should be a no stranger since my previous introduction in my blog entitled Gunung - Hydro Pumped. But of course, if you still do not know what is the business of Gunung, and future prospect of this company, here is a brief summary for your easy reference.

Basically, Gunung is engaged in land logistic chartering business, which provides buses to national services and several local universities. However, the future long term business will be the largest mini hydro renewable energy player in Peninsula Malaysia, with all the sites in Perak. Gunung will also be the master developer of all mini hydro renewable energy site in Perak through it's 51% effective stake in PHREC (Perak Hydro Renewable Energy Corporation).

Now, I would want to list down to you why you should get your position in Gunung before this counter explode above RM 0.50. Gunung had closed at RM 0.475 on 28th November 2016.

Here is a simple 3 reason for you to hoot Gunung into your portfolio.

Reason 1 - Selling Renewable Energy is liken to IPP
The first reason is there are still many retailer in the public that do not know Gunung had a change of business direction. Even if they know, they could had forgotten about this because this news is much highlighted then during 2013, 2014. Back then, the hype of the news is not backed with earning from the division. However, right now at the end of 2016 and going into 2017, Gunung already invested into the infrastructure, and these mini hydro are going to turn the inertia of the flowing waters that flows from the river stream in Perak into electricity, and then sells it back to TNB through a REPPA (Renewable Energy Power Purchase Agreement), which is then the revenue for Gunung.

While renewable energy do not come in a large scale like coal fire power plant which can generate capacity up to 900MW, Gunung is considered not bad after all, with installed capacity of up to 140 MW (according to Annual Report 2015). For 140MW, we are talking about RM 150 million in annual recurring revenue from PPA, now this is something commendable.

So, if TNB, YTLPower and Malakoff is so sought after by institution because of their defensive nature of revenue through generation of electricity, now Gunung is a company with multiple PPA with 21 years feed in tariff signed, right in front of you. What are you waiting for?

Reason 2 - Dato Syed Abu Hussin Took Position at RM 0.52
The second reason is based on major shareholder and executive chairman, Dato Syed Abu Hussin purchase price of RM 0.12 in Gunung warrant (Gunung-WB), I am definitely looking at him putting in RM 0.40 exercise price per share in the coming future to reap dividend benefits. That would priced his purchase of the mother share at RM 0.52.

With the price now being at RM 0.475, it would definitely be a good buy for a long haul.

Reason 3 - Gunung Break Out from Long Term Downtrend
The third reason is that Gunung had broken away from it's long term downtrend line after 2 years. This is something not to be overlooked as the break out is backed with the commencement of the mini hydro renewable energy.

While the break out can be accommodated by buying from institution, emerging market funds, syndicate or high profile investor, however, you must know that who is behind the break out is not a very important question.

The most important question is, are you inside Gunung during the breakout and uptrend?

While I had laid my 3 simple reason for you to see the future prospect of Gunung, the rest is up to you to decide.

Bone's short term TP: RM 0.60 (Upgrade)

Long term : Hold 10+ years

Thursday, 17 November 2016

OKA is shaken down for a good buy up

OKA Corporation Berhad (OKA - 7140) had been one of the better performing company dealing in precast concrete products in the KLSE despite the global challenges in volatile currency and low crude oil prices.

I had first covered on OKA back on 9th May 2016 (OKA - Topping The Packs). OKA was trading at the range of RM 1.05 then, with a forecast of the company to deliver FYE 2016 with an EPS of 13 cents.

As a result, OKA indeed delivered FYE 2016 with 13.07 cents despite the lower revenue compared to FYE 2015. The share price of OKA peaked out at the range of RM 1.35 for 3 months, with the highest transacted at RM 1.38.

However, the current sell down in equity market could had opened up a new buying opportunity into this stock, especially for investor who had missed the previous run.
Based on the latest known Q1 FYE 2017, OKA continue to deliver it result with a growth in revenue with improvement in the EPS.

Whilst 2017 will be a difficult year, I continue to believe that OKA will be able to withstand such headwinds, underpinned by strong local demand from local infrastructure projects from MRTs to Highways. The latest inclusion of ECRL into the budget continue to underpin demand in precast concrete.

To put a quick recap, OKA is unique from other precast concrete player due to some of it's specialty products that are proven and acceptable in the market. One of it is the "Porous Concrete Pipe" that is vital for the development of highway and railroads.

Beside that, new development of township that is sprouting in Malaysia will also put in demand for such pipes in use. This pipe is essential for land drainage because of it's ability to rapidly remove water by letting the water sipping through it's porous surface.

OKA continue to deliver increasing profit after tax for 5 consecutive years. One of the reason is due to the improving profit margin from due to savings in operation and inventory management.

Technical Outlook

Although OKA might had look bearish after breaking down from it's uptrend support line, the fall is attributable from an ex-date of dividend which at the same time saw major market sell down from the US presidential election.

Can OKA return to it's position at the range of RM 1.30 soon? Should the coming financial quarterly be satisfying and being able to deliver above EPS of 3 cents, OKA will definitely have a strong chance to rebound back to it's glorious form. Of course, based on it's past record, it is safe to assume that OKA can deliver for Q2 FYE 2017.

Given it's total dividend of 5 cents in 2016 and a solid performance, it is quite a good bargain to begin with at the current price range for OKA before it got swoop up by others.

Bone's TP : RM 1.30

Wednesday, 16 November 2016

AYS can be your November's Bargain

AYS Ventures Berhad (AYS - 5021) came from humble beginning, founded by Mr Oh Chiew Ho in 1982 which started as a trader, stockist and distributor of various steel and construction material before expanding into manufacturing of it's own wire products. To date, AYS has evolved into one of the major steel trader and stockist in Malaysia, specializing in structural steel products.

With the recent equity shake up in the global market due to the US presidential election that shocked the world with a Donald Trump victory, some good bargain had emerged in the equity market. For this instance, I would believe that AYS would be one of the qualified counter which is suitable to see good bargain at the current depressed level.

As a matter of fact, AYS had not been an interesting counter for the past 3 years. This can be reflected by it's business operation which is highlighted in the latest annual report, where the company is just able to trend at the range of 2 to 3 cents EPS per annum.

However, the recent price spike in base metal commodity could see AYS turning in the fortune. With just into Q1 of FYE 2017, the company had took in an EPS of 2.82 cents. Albeit the lower revenue compared to the previous correspondence quarter, the group had seen better profit margin albeit lower sales prices in their products. The earning of Q1 2017 is more than what AYS had managed for the whole financial year for FYE 2015 and FYE 2016.

While the market had mixed feeling and reaction towards the steel industry due to glut and slowing down consumption, it is cushion by safe guard tariff that is imposed by the MITI recently. Now, local steel player had protection in cold rolled coil and long HRC steel products.

As a matter of fact, the recent financial quarterly that is reported by Ssteel, generating 4.6 cents in earning from a loss of 12.38 cents on the previous correspondent quarter give comfort on the general steel market performance for their coming result announcement.

Taking into a conservative projection, we can estimate AYS to perform generally stronger for FYE 2017, estimation on a FYE 2017 total EPS of 6 cents, which can bring to valuation of RM 0.60 for AYS at PER x 10.

On a technical basis, it can be seen that the share had been hit down by volatility in equity market. However, at the current price, it is quite an interesting level to take position for the next coming quarterly result that AYS is going to release soon in November.

Should the result be satisfying, AYS can look towards trading above the resistant of RM 0.36.

Bone's Mid Term TP : RM 0.40

Friday, 11 November 2016

Gunung - Hydro Pumped

Gunung Capital Berhad (Gunung - 7676) caught spot light in late 2013 when the company had announces on it's future plan on bringing in renewable energy through hydro electric into it's business portfolio. The company which saw turnaround when Dato Syed Abu Hussin came in with government contracts on land based logistic chartering services that provide services to the National Services.

Gunung had taken a bad shot in 2015 when the government decided to defer it's National Services due to adjustment to the government budget which is widely affected by the slump on global crude oil prices. However, the group had weather out the bad news in a quite diligent manner, managed to scratch through the financial year in a subdue manner.

However, now will be the time to see the harvest in the investment on the renewable energy sector, which is going to generate recurring income from the renewable energy generated from mini hydro electric plant.

Investment into Conso Hydro RE Sdn Bhd

In the 1st Quarter for 2016, Gunung, through it's 90% owned subsidiary, Gunung Hydropower Sdn Bhd, had purchased 50% stake into Conso Light Sdn Bhd for RM 2.5 million cash. Conso Light Sdn Bhd is the holding company with 95% stake in Conso Hydro RE Sdn Bhd, which is involved in developing, maintaining and operating of a 2MW hydro plant at Sungai Geruntum, Kampar, Perak.

Prior to the acquisition, Gunung had an indirect interest of 2.55% in Conso Hydro RE via it's 85% owned Pusaka Hijau Sdn Bhd, which own 60% of Perak Hydro. The investment will see Gunung having an effective stake of 45.3%

The company had secured a FIT (Feed-in-Tariff) approval from the Sustainable Energy Development Authority for it's Sungai Gerundum site with an annual availability of 10,000 MWh.

With the new rate of 26 cents per kWh, this will translate to RM 2.6 million of recurring income from the hydro plant once operation commence in the end of this year.

While the deal look like just another normal paper deal, investor that are familiar with in the renewable energy industry will know that the capital layout for 1MW of renewable energy through solar plant or hydro electric will require a capital layout of RM 10 million. As for Conso Hydro RE Sdn Bhd which carries 2MW mini hydro electric plant, that will require a capital investment of RM 20 million. Hence, a 50% stake will actually relate to a sum equivalent to RM 10 million.

For Gunung Hydro to acquire 50% in Conso Light which is worth RM 10 million in asset (based on Sungai Geruntum mini hydro site) for only RM 2.5 million, that will immediately revert to unrecognized profit of RM 7.5 million.

Aside from the Sungai Geruntum site that is almost ready for commission, Conso Hydro RE Sdn Bhd still have another 2 sites from Sungai Geroh with 1.1MW and Sungai Kundor with 0.5 MW. Both site carry an asset value of around RM 16 million, which had yet to be accounted for as well.
With the completion of all 3 sites, the 50% stake will be carrying hydro plant asset worth RM 18 million.

Do u want to invest in a company that had the way to pay RM 2.5 million cash to acquire asset worth RM 18 million ? You do the decision.

Continuous Share Accumulation from Major Shareholder and Director

Gunung had saw huge accumulation from Gunung major shareholder and director.
The notable individual is Dato Syed Abu Hussin, an executive chairman in the company and a division leader in UMNO, with the latest stint being a off period purchase of 3.3 million of mother share units at RM 0.42, and 2.6 million units of warrant at RM 0.12, which carries an exercise price of RM 0.40 (Translating to a total cost of RM 0.52 to convert into mother share). Currently, Dato Syed Abu Hussin have a total of 22.48% interest in Gunung Capital.

Others individual are Ooi Hock Lai, which gradual purchase for the past 2 years saw his stake increased to 10.27%, executive director Encik Beroz Nikmal with 3.55% and Encik Iskandar Ibrahim through his Aasia-East Capital Sdn Bhd investment vehicle, holding 4.79%.

With all this attractive information available, Gunung is still trading at a lowly 38-40 cents range, in which one of the reason is due to the liquidity and the volume of the company share. However, this will be the most appropriate time for any opportunist investor to lock in their position in Gunung as this stock will be poised to be a star shaker stock in 2017.

Keep watch for the next episode on what is actually brewing inside Gunung that you should not miss as an investor. More to come, don't miss it !

Bone's short term TP : RM 0.50

Monday, 7 November 2016

Insas - Head In for a Northern Ride

Insas Berhad (Insas - 3379) is a diversified group with businesses in technology, property investment holdings, finance, corporate advisory, stock brokering, car rental and logistic. 2 of it's subsidiary which are also public listed are Hohup Construction Berhad (Property and Construction) and Inari Amerton Berhad (Technology).

With the existing state of economy uncertainty, it is vital for investor to seek out for strong fundamental company if they want to stay invested in the market. Beside searching for a company that had resilient business, strong cash backing, one of the most important investing factor that will influence the appreciation of share price the most will be the the company earnings, and the earning per share.

As for Insas, what can we foresee of for it's performance in 2017 ?

Looking at the technical outlook of Insas, it is noticeable that Insas had broken away from a long term down trend line that had been plaguing the counter for more than 1 year. Currently, the share price had saw a solid footing with support at RM 0.70. The counter is seen consolidating at the price range of RM 0.70 to RM 0.75, and will be looking to break above RM 0.75 should a stronger financial quarter prevails. Technically looking, Insas had a tendency of turning uptrend with bullish bias.

Financial Outlook

Despite the challenges poised for FYE 2016, the group had steered through the harsh waves to finish the financial year in a positive note, albeit with a lower revenue and a slightly lower earning per share at 11.64 cents. However, it is good to note that the NTA of the company increased slightly to RM 2.04 per share. To highlight it further, the company cash and cash equivalent as well as financial asset at fair value make up of more than 50% of the company NTA.

While most of the segment had performed well, the biggest drag for the group is from the investment holding and trading segment. This is due to recognition of losses from fair value changes of financial asset. We believe that the financial asset held by the group such as quoted shares in the market had reached a fairly bottom price, hence the losses shall not be look to see a possible repeat for the time being.

One of the notable improvement is the operation profit from the financial services and credit leasing segment, putting up a drastic improvement of more than 100% for the segment alone from a profit of RM 9.6 million to 23 million. The biggest contributor is from Insas Credit & Leasing division.

To support this, RCE Capital Berhad (Rcecap - 9296) which also involves in money lending business had saw booming revenue for the past 2 quarters, which is the back bone reason of the explicit surging of the share price as of lately. Despite the tough market, Rcecap had proven itself with share price appreciated to almost 100% within a 3 months period.

More consolidation in the Semiconductor related technology sector

With the growing reliance of human activities in technology, the semiconductor and related sector will be going to see further consolidation. The advancement in hand held devices and automotive industry continue to see more and more usage of advance chip set in the devices. With self driven car being the hottest development in the technology market now, it had spur big merger and acquisition in the sector. The latest being Qualcomm putting up USD 38.5 billion to acquire NXP semiconductor in order to put up a stronger synergy together.

This will be indeed a good news for Inari Amerton Berhad, which is also in the related field of play. Currently, Inari is having a market capitalization of RM 3.17 billion. Insas 21% stake in Inari will probably valued at RM 650 million.

That will be a jackpot deal for Insas's shareholder if Inari is up for a deal.

On a quick summary, Insas is a rather interesting counter to be monitor at the current level. At the range of RM 0.70, with a strong fundamental background and supported earning, there are strong potential on the counter heading uptrend, supported with a good 1Q FYE 2017 result in the coming days.

Bone's TP : RM 0.90