Monday, 31 July 2017

Good opportunity is nothing without action. This opportunity can make you a hero if you believe in it

Talk about DRB-Hicom selling off 49.9% stake to Geely of China, I would assume that this event might still appear fresh in our mind, and also resemble one of the hot market topic in the street. Back then, if you are still in the market, you would know that Proton Holdings Berhad is still listed in the KLSE 5 to 6 years ago. That was not until DRB privatized Proton at a price of RM 5.50 a share, which cost them a huge RM 1.29 billion bomb.

Today, I would like to teach you how to look at the event of the privatization of Proton by DRB back then from November 2011 onward.

Pointing on the privatization of Proton by DRB, I would say that many of us see this as just another corporate exercise of merger and acquisition between companies in order to create synergy, but fail to interpret the happening of the event in order to turn them into trading / investing advantages. Of course, everyone is not born smart into this world and knowing everything. The universe just doesn't work this way. As for the capital market, I have to tell you that the ability to predict and interpret based on given facts from media along with market participation plays an important role in good decision making to make money out of the market.

One of the main point that you need to know is that major corporate exercise that involves core asset disposal doesn't happen frequently in a company. Such an event, you can either do it out right and complete it 1 time, or play around the news for a few times before concluding the sales. Both are pointing towards 1 same objective - disposal of the asset, but different method yield a different manner. One good example will be Gpacket. If you are very found of Gpacket, you would know that Gpacket had been in the news for at least 3 years before the real deal is concluded at TM. That is at least is share price had been speculated for at least a few rounds, which is good if you know how to play the game.

For the case of Proton, the same will apply. But since this is an almost 6 years ago event, let me bring you back to see what happened. I will teach you how to look at event such as this.

As you can see, the media first toyed on the news that Proton is heading for a management buy out by firms such as Naza, Sime or Drb in the market at November 2011. Proton had surged from a lowly price range of RM 2.60 to a high of RM 3.50 before denial of such news came to subdue the price surge.

However, the news subsequently become more solid as time is running out and Khazanah looks set to divest all of the 42.7% stake. Market returned in speculating the front runner, and Proton share price continue surging to almost RM 5.00 in December 2011.

To cut the story short, DRB is the concluded winner at RM 5.50 a share for a General Offer for all Proton minorities shareholder after buying all of Khazanah stake.

As you can see, one of the major characteristic is that Proton share price did not falter much despite the news of denial. Subsequently, the news continue to brew with more interest and it's share price went higher.

So, if we implement the historical lesson of Proton into Nationwide, you might be interested to see that Nationwide may bear the same traits with Proton. 

According to the movement of share price, Nationwide consolidated at a higher price range, and volume consolidated, forming a mirroring triangle. This is despite the news that Century and Nationwide issue a denial.

What do I see here ?

From my perspective, Nationwide could be at it's stage 1, just like how Proton begins. What we know is that Century will be having their multi-storey warehouse ready by 1H of 2018. However, plans are intact for Century to start parcel delivery as soon as 4Q 2017. If you tell me how to get this fleet as fast as possible, the most possible answer will only lies at Nationwide.

At the current scenario, Century is lacking of a fleet of transport to penetrate into the parcel delivery industry. On the other hand, Nationwide is lacking of a strategic partnership that can provide them with consistent supply of delivery order and better management process in order to fine tune the operation.

The logistic sector had been firming up with M&A, and the possibilities of Century teaming up with Nationwide is just as good as synergy formula of 2+2 = 5.

End note, I had shown you how Proton had moved up with it's M&A with DRB in 2011. Now, it is your choice to either be part of the show, or just to see the show. This could be your last chance before Nationwide will shoot up higher as news firm up later. As mentioned previous, I had bet my name and reputation into Nationwide to have a M&A exercise very soon. Now, time will only tell how it will goes.

Thursday, 27 July 2017

Small doesn't means weak. This company can pack a powerful punch.

The current equity market had been riding on tough wave with diminishing volume after a long bull run since the start of the year 2017. Industry involving with export, semiconductor and construction had been enjoying a good season as valuation continue to soar.

Selection of stock continue to be a challenge. As for me, I always like to poach on stock that are still sleeping, or had consolidated for a long time and had a good number of reason to see the stock to rise in the future. For this reason, I like to keep an look out on stock that have corporate exercise such as diversification, M&A or potential coming bonus issue.

Malaysia being a leading emerging market country in the South East Asia region had saw property and construction sector enjoying a good boom for the past 4 years. As a result of this, a lot of company are diversifying into the property development sector. One of the reason for this action is to unlock the underlying asset value (land value) through development purposes.

In fact, as of lately, Boon Koon had also made movement to diversify into property development. Another example is Kobay Technology from Penang which had also diversify into property development.

Now, I am interested to present to you this smallish company which is going on the same path like some other had done, diversifying into property development and unlocking the value of the land asset that they are holding from the past. This company is Sanbumi Holdings Berhad (Sanbumi - 9113).

To recap back, Sanbumi had made public on it's intention to diversify into the property sector back on July 2015. It's foray into the property development will be seeing a mixed development project at the prime area of Jalan Alma, Bukit Mertajam.

Location wise, it is not too bad as it is situated in between of the 2 bridges linking to Georgetown.

The project will be developed by Sanbumi Sawmill Sdn. Bhd. (subsidiary of Sambumi Holdings Berhad). The location is strategically located on a 1.62 acres land along Jalan Rozhan, about 1km away from AEON Mall and Tesco Stores.

According to known sources, the project is slated for a 42-storey commercial tower, offering a mix of shop offices and serviced residence. There will be two residential towers with 260 units in each tower:
  • Level 1: Retail shops (18 units)
  • Level 2: Shop offices (16 units)
  • Level 3-8: Multi-level car parking
  • Level 9: Facilities floor
  • Level 10-42: Serviced residence

This will be Sanbumi first maiden project in its foray into the property development. The GDV is estimated to be at RM 350 million at the current market price.

You may wonder why this company caught my interest.

Here is how I will see it in my own angle. According to the latest financial report, Sanbumi do not have much debt, and they have a strong cash holding after the fund raising exercise from private placement. This development will be able to see great profit due to the absence of the cost of acquiring land at the current market value. Assuming a development cost of RM 250 million for a span of 5 years, that will be able to see a gross profit of RM 20 million a year for the next 5 years into Sanbumi income statement. Of course, all these are assumption from my own view, and you should go and do your own study in it.

According to related sources, Sanbumi had already obtain the approval for the construction. Prior to that, their project also had good response from expression of interest from interested purchaser.

The technical reading of Sanbumi had also express substantial interest in the development of the company in diversifying into property development. As you can see from the chart, Sanbumi had been consolidating in a good manner at the range of RM 0.26.

I believe that on upon the official launching of it's first maiden property development project, Sanbumi share price will see good interest pouring in. If you see that happening, locking in a position now will be better than chasing for a position later.

As the saying goes, chance sometimes, only come once. Will this be a good chance? You decide on it.

Wednesday, 19 July 2017

This Pekan Company can really fry up when time's come

"Market theme" is a proven key factor that will influence the share market. When "market theme" start to play in, companies that falls within that theme will see heavy trading interest, or in direct - speculation. Usually, this kind of market theme movement will disregard the underlying company fundamental and past financial records.

For example, if FCPO contract suddenly shot up to more than RM 3000, the next thing you will see is that plantation company will be speculated upwards. Or when the media hype up the news of USD getting stronger against the local MYR, then you will see certain sector like the furniture and gloves sector being speculated upwards.

There is no right or wrong is such speculation. However, one of the main concern is - whether you are in it before the market theme kicks in, or you are only starting to go into it when the market theme already kicked in. Of course, both will yield very different sets of result, and the early birds, for this case, always get the best money.

Earlier this year, there are lots of market theme. Starting from Lim Kang Hoo theme (IWCITY and Ekovest), Jack Ma theme, packaging and logistic theme, then e-commerce, then banking and so on. All these are good if you can forecast it coming, and the main thing moving forward is to forecast which theme is coming next.

As for this, allow me to tell you that our nation will be having the next big event - 14th General Election. Since we did not really experience the election frenzy yet, I think it will be a good to look out for potential targets now.

This time around, I will like to point at some hot election seats. Since we are saying hot hot seats, then Pekan seat should be hot enough, right ? So what is happening over at Pekan ?

Lately, there was a company by the name of Merge Energy Berhad (Merge) which was awarded a RM 158 million construction project in Pekan in March.

Subsequently, Merge went on rampaging upwards as per shown in the chart.

Now, I think this company which is also involved in intensive project in Pekan should not be missed, especially when it is still at it's low level now. Of course, this company is BHS Industries Berhad (BHS - 7241)

As you can see, the technical chart highlights that BHS is currently resting at it's long term support line, which is at the range of RM 0.40. Moreover, it had also started to broke away from it's mid-term down trend line, highlighted in red color. Technically speaking, BHS can be viewed as bullish biased, with good upward potential as volume kicks in.

So what does BHS got to do with election ?

Firstly, BHS is planning a mega township in Pekan, dubbed as GTP (Green Technology Park), whereby energy supplied is created from renewable energy, which used biomass energy from waste products of palm oil plantation, such as empty fruit bunches. Secondly, this GTP will also be housing several factory such as paper mill, corrugated box manufacturing as well as tissue paper and box. The total GDV will be more approx RM 2 billion.

While the above plans are parts of the diversification plan, the original business of BHS is actually printing and publishing. Now with the new printing factory ready, BHS is expecting to kick in more revenue.
Excerpt taken from the 3rd quarter financial result of BHS also highlight that the group will be expect to deliver higher sales in the 4th quarter.

As for me, I caught interest in the line highlighted in green where it says - "the government print order which were absent in previous 2 years have now been revived and tenders were called."

I will interpret it as because the general election is drawing very near, hence the demand of print media will rise. Aside from the electronic media, the need of printing such as political magazine, leaflet, and other print media is still an important source for spread of information. For this, I can be expecting millions being poured into it, which will be very beneficial for BHS.

Now BHS can be still considered as a sleeping giant, consolidating at the range of RM 0.40. Will it get awaken by a in the later stage by some election theme speculation ? I don't know, but if it does, make sure you are in it before the big run.

Thursday, 6 July 2017

Gdex is a successful story, but missing this company will be your successful sorry!

In life, when you want to be respected, it is not given just like this, you have to earn it. However, it is the process of earning it - many quit halfway, and thus, did not get the respect from others.

For the same comparison and applying this to the share market, I have to tell you that everyone that started to venture into the share market do not become an instant market genius in a short period of time, and the same had to be applied to me as well.

Many see me as a big master sifu in the Malaysian share market, but is that really who I am ?

There are 3 kind of sifu. The first kind is very simple, and can be defined as - When you are right, you are sifu, when you are wrong, then you will instantly become another piece of seafood. The fine line of become sifu and seafood, is just a thread away.

The second kind of sifu is made after having track record of a long term consistent result. This is more of a real sifu, which can juggle with facts, and very patiently prey on the target. This kind of sifu usually eyes upon fundamental stock only, hence cutting off the large excitement of sitting the roller coaster of the market, and the feeling of switching stock in a frequent manner.

The third kind of sifu is a more complex kind of sifu. Beside having the traits of the second kind of sifu, he will also dabble in non fundamental stock and turnaround stock, and can uncover real gems from dirt. The important element to be this kind of sifu is by having a strong sense of prediction of the particular company, both in corporate action, and also share price movement.

As for me - I am Bonescythe, and I will let you choose which kind of sifu I am. I am totally alright to be called seafood, at least I know very well that if I am a seafood, I will by far taste better than many other seafood that is in the cooking pot. Hahaha

But if I am your highly respect sifu, today, I have to tell you that I am going to put my respectable name in the ring once again, and make a gamble on my name in this one corporate event that is happening in KLSE.

As you know, one of the latest most happening event in the Malaysian market have to be in the logistic/warehousing arena. In fact, the battle had just began to tense up lately as heavyweight player continue to get arm up in order to secure and increase their market share.

For this reason, CJ Korea had came all the way from Korea, and hitch on Century Logistic Holdings Berhad by purchasing 31.44% of controlling stake in Century at a price tag of RM 175 million for it's expansion in the South East Asia region. RM 175 million might sound big to you, but that could just be a pie for CJ Korea.

One of the attractive reason is that Century are having the strategic infrastructure to sync on with CJ Korea objectives. That is the strategic multi storey warehouse from Century, and the intention of CJ Korea to expand into parcel delivery in Malaysia.

So, the latest new is that Century is planning to acquire a mid size logistic firm with parcel delivery with presence in major town. Wow, this is a big big news, and missing it could be very expensive.

To put it in a more objective manner, there will be 2 main question here. The first question is which is the most potential target ? And secondly, how much will CJ Korea / Century be willing to splash in for that.

For that, I am willing to put my name to bet on this - Century will be heading for Nationwide Express Holdings Berhad (Natwide - 9806). For instant, Gdex will be out of the list, because Gdex is being cornered by bunch of Alibaba related investor, and the valuation is too high now, which is probably trading at PER x 150, x10 the NTA value. There will be no other better candidate other than Natwide. Natwide also met most of the important requirement by Century, which is having presence in most of the major town.

Now, how much is Century willing to fork out for Nationwide ?

According to the latest event in the logistic arena, Tasco Berhad had bought Gold Cold Transport Sdn Bhd for RM 186 million. Now that is quite a huge sum I can tell you. And for this, I can surely tell you that the money that Century is going to fork out will be definitely in the hundreds of million.

Now, here comes my prediction.

In my opinion, I think Century will not be privatizing Natwide, however, the deal will be good enough to see a mandatory take over offer being offered to all the minority shareholder. This is because the best possible stake sell out will be BHR Enterprise Sdn Bhd, with 54.78% stake in Natwide. The is very similar to what CJ Korea did when they came into Century, which is to take a controlling stake in the company without needing to privatize it. Therefore, there is a very high chance that this technique will be repeated in Natwide.

Now the tricky part is to know how much Century offer to BHR Enterprise Sdn Bhd until it is so sweet not to reject the deal. Honestly, I had no idea, but I can come out with the best possible scenario for comparison based on revenue and market capitalization with Gdex.

As you can see, Gdex is currently having a quarterly revenue of approximate RM 60 million, while Natwide is running at RM 20 million, which is one third of the revenue size. If we use this simple comparison, Natwide should command a market capitalization of RM 1 billion, right? As you can see, Gdex earning is so tiny, hence trading at a PER x 150 is almost as good as nothing. If Century director is able to overhaul Natwide's  whole operation, and putting it back into the black, Natwide is just as good as a Gdex in making, just smaller by two third in Gdex revenue scale.

After seeing the potential, so I will put it simple. Let's say Century will be throwing RM 100 million for 54.78% stake, ok ? Too high ? Ok, we discount 30% from RM 100 million, we talk about RM 70 million for 54.78% stake (65,863,090 shares), this will work out at around RM 1.06 per share, so let's discount another 6%, and make it a RM 1.00 offer. Now fair and good? Discount and discount many times already.

Since the purchase involve more than 33%, then it will be mandatory to offer a take over exercise to all at the same price, RM 1.00. But, if Gdex can be hype up until PER x 150, why would Century want to privatize Natwide ? Might as well let it float like a Cadillac and put up a good fight with Gdex.

If that comes true, RM 1.00 take over offer will see the share price becoming RM 2.00 based on my theory.

Wow, amazing amazing amazing. I must be dreaming in deep blue sea.

I remember the time when I recommended Rex at RM 1.83, some naysayer come cursing me and as me to go fxxx myself when the share when to RM 2.00 and fell down. Today Rex is standing at RM 2.30, with an occasion hitting RM 2.38 ! Now, I am taking this opportunity to send back those word you gave me.. Go xxxx youself. And for those who ask me to xxxx myself at Natwide when I first mentioned at 30th June in a forum, you gotta watch and see who will have the last laugh!!!