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Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Monday, January 15, 2018

JAKS (Lower Gearings, Vietnam Power Plant Project)

It is aligning its business portfolio after the loss-making property development venture that was hit hard by the slowdown.

Jaks Resources will focus on construction and its power generation in Vietnam. However, the group did not set a timeline to cease its property development business.

Jaks Resources shareholders have given the greenlight to dispose of four parcels of land measuring 5.99ha within the Sungai Penaga Industrial Park in Subang Jaya for RM167.59 million cash. The land sale will translate into an estimated net gain of RM97.1 million. The proceeds from the exercise will be used mainly to pare down the group's debts by RM100 million and lower its gearing to a "comfortable level" of 0.6 times.

It has one last project, which is the Pacific Star mixed development in Section 13, Petaling Jaya.
jaks chart
Jaks Resources is still working to dispose of its Evolve Concept Mall in Ara Damansara, citing weak market conditions as among the reasons for its difficulty in securing a buyer.

In Vietnam, Jaks Resources is involved in a US$1.87 billion 1,200MW build-operate-transfer (BOT) coal-fired thermal power plant project in Hai Duong, together with integrated power engineering service provider China Power Engineering Consulting Group Co Ltd (CPECC). The joint venture involves Jaks Resources holding 30% share while the remaining 70% is held by CPECC.

Jaks Resources currently (Dec 2017) recognises about 80% of its overall group profit from the construction of the Vietnam power plant, which it expects to be completed and begin operations in 2020.

Apart from its Vietnam venture, Jaks Resources will continue tendering for Malaysia-based construction projects in areas. Jaks Resources is not eyeing transit-oriented projects such as the Mass Rapid Transit Corp (MRT) and Light Rail Transit (LRT) packages.

As of September 2017, the group has an outstanding orderbook of RM850 million for local construction jobs alone. Including the Vietnam IPP, Jaks Resources is committed to RM2.6 billion worth of projects.

Tuesday, January 9, 2018

Bahvest (0098) - A Gold Miner & Fish Breeder.

bahvest

With its strategy to maximize earnings from its fish breeding venture starting to pay off, investors are keeping their fingers crossed that the company’s latest move into gold mining in Tawau, Sabah, will bear fruit.

Minority shareholders are hoping both ventures can help ensure a substantial leap in earnings in the medium term for the company which has been in the red for the past five financial years.

Borneo Aqua’s acquisition of the entire stake in Wullersdorf Resources Sdn Bhd for RM131 mil was completed in January 2017. It enables the Sandakan-based company to diversify into gold mining.

The gold mining operations are at the clearing stage in July 2017. It will take another year before the goldmining operations can begin.

Its top officials did not confirm if the mine can produce up to 10,000 ounces of gold per month when operations reach full capacity, as was previously reported. Neither did he elaborate on the earliest date in which the mine can reach full capacity, and if the area concerned contains almost five tonnes of gold in total, as reported.

A market observer says based on the reported mining numbers, the outlook does look good for the company. Observers estimate the 10,000 ounces would translate to an annual revenue of some RM650 mil. That would be a quantum leap for BorneoAqua, whose revenue is in the range of RM20 mil to RM30 mil a year. If the area does indeed contain five tonnes of gold, this means at full capacity, the mine will be operational for less than two years.

bahvest
However even if mining were to start in 12 months from July 2017, it is already be in FY19 (ending March). The full impact of the earnings contribution will only be felt in FY20. The full impact from the mining operations is also on the assumption the gold is sold immediately upon excavation. If gold is mined and the price is unfavourable, the ore may not be sold immediately. This will lead to lower earnings due to the mining cost.

Borneo Aqua’s venture into gold mining also comes at a time when the price is not too promising.

Borneo Aqua had to endure poor sales since FY14 due to the change in its fish-breeding business strategy. The company decided to rear part of its grouper fish batch to above 6kg before selling, to get a higher revenue from the bigger fish. Given the longer period required to attain the desired weight, it has less fish to sell during the transition period.

It did not elaborate on the average weight of the fish sold previously. Judging by its financial results, the company is climbing out from the trough of its sales decline.

Having recorded a decline of 25% per year in FY14 and FY15, revenue grew by 6% in FY16 to RM18.3 mil followed by a 70% leap in FY17 to RM31 mil. The jump in FY17 revenue was also attributed to the sale of cultured fish in Hong Kong. However, its FY17 net loss widened to RM3.81 mil from RM3.3 mil in the previous year.

The market observer says the growth in revenue means the fish breeding business strategy is working. However, in the medium term the high growth rate will falter. Hopefully, by then, gold mining will kick in.

The selling and distribution expenses fluctuated by between 18% and 35% as a percentage of FY17 revenue.

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