Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Wednesday, January 24, 2018

Apparently Upside Limited !!!

Business Involved …
HuaAn is a producer of metallurgical coke.

It has been listed on the Main Board of Bursa Malaysia for more than 10 years.

Its business is production and sale of metallurgical coke ("Coke"). Coke contributes 79% to the revenue (21% from other by products).

HUAAN business is supported by its 1.8 million tones per annum production plant in Linyi City, Shandong Province, China.

What is Coke? The producer buys coal and process it into COKE. The demand for COKE is from the steel industry as it is an important input in the steelmaking process. The process is called blast furnace.

Financial Highlight

For 3QFY17 ended Sept 2017, it posted a net profit of RM34.147 mil vs. RM10.2m loss last year. EPS is at 3.04sen (vs. negative 0.91 sen in 3QFY16). Reason for the earnings surge is mainly due to better average coke price of RMB2,043 per tonne in 3QFY17 and higher sales volume of 210,000 tonnes.

As at Sept 2017 its cash and short term investment stood at RM22.13 million, total debt stood at RM25.36 million.

In 9M17, HUAAN already make 4.91 sen of EPS. Lets assume a full year FY17 EPS of 6.00 sen (A small 1.09 sen for 4Q17 which should be achievable).

What about FY18? Most conservative scenario = 6.11 sen (assuming only 2% earnings growth in FY18). Bullish scenario = 6.90 sen (assuming 15% earnings growth).

The Company is worth at least 6.75x PE. The 6.75x PE is at 25% discount against ANNJOO and MASTEEL (both trading at historical PE of 9x till 23 Jan 2018/).

Most conservative scenario = 6.25x PE * 6.11 sen = 38 sen

Bullish scenario = 6.25x PE * 6.90 sen = 43 sen.

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.


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.

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.

Friday, January 5, 2018

It is believed to be in line for a major government water project in 2018 which, if successful, might relieve some pressure for the struggling company.

According to a source close to the deal, the company is moving forward in discussions with government officials to clinch a non-revenue water (NRW) related project. Essentially, NRW is treated water that is lost in the distribution process (for example, through theft or leaking pipes) from the plants to consumers and end-users.

Talks between Puncak Niaga and the Ministry of Energy, Green Technology andWater are already at an advanced stage. It is believed the company is bidding for a major NRW project nationwide. The contract could involve several states in the peninsula.

However observers believe it could be tough for Puncak Niaga to land the project due to political factors. The water business is a politically sensitive matter, especially in opposition-led states like Selangor. The fact that this is election year (2018) could be a major stumbling block to get the deal done. If the NRW project involves Selangor, for example, the company’s legal action against the state could make things complicated.

In November 2017, Puncak Niaga filed a RM14 bil lawsuit related to Selangor’s takeover of its water assets in a restructuring exercise. The former concessionaire is citing abuse of power by the state government in the water restructuring which saw Puncak Niaga disposing of its highly-prized subsidiary Syarikat Bekalan Air Selangor (Syabas) in 2015 for RM1.55 bil.
Puncak ... Still Struggling, No Catalsys Ahead

Although it is not known how much the new project might be worth, NRW management can be a lucrative business, especially in states and countries where there are major water supply problems.

For example, Ranhill Holdings Bhd which runs its water concessionaire business in Johor is targeting to grow its NRW business to RM100 mil per annum. In general, the lower the NRW the better it is because it means that water is being more efficiently distributed.

Malaysia’s average NRW in 2014 was about 35% and the government is targeting to lower that figure to 25% by the year 2020. To achieve this, the National Water Services Commission (SPAN) estimates RM13 bil of capital investments in water distribution systems would be needed.

Puncak Niaga has been on a downward spiral in the last two years (Till end Dec 2017), especially since losing its water concessionaire business in Selangor in 2015. It was the company’s major revenue contributor and it has not been able to adequately replace it.

In the subsequent financial year 2016 (FY16) after the Syabas deal, Puncak Niaga posted a net loss of RM258.9 mil. As of the third quarter ended Sept 30 last year, its loss amounted to an estimated RM98 mil, bringing accumulated losses to over RM355 mil since the Syabas sale.

To make things worse, in 2017 the company cut its losses in China where it had several water-related projects and withdrew from the market completely. Its pullout from China was said to be mainly due to regulatory problems and difficulties in dealing with various state agencies there.

Other than its core water business, Puncak Niaga’s attempts to use the proceeds from the Syabas sale as a springboard to become a major oil-and-gas and plantation player have also fallen flat. Its O&G venture has practically stalled due to the crude oil price collapse in the past few years (Till mid June 2017).

Oil prices are still volatile (Till end Dec 2017) and Puncak Niaga suffered big losses in the sector. It remains to be seen whether the oil price rebound (Till Jan 2018) will lead to a reversal of fortunes in this sector for Puncak Niaga.

Although the company has purchased some oil palm land in East Malaysia, its plantation expansion has also suffered a similar fate and has not made any significant impact on the company’s revenue so far (end Dec 2017).

Even if its plantation acquisitions achieve positive revenue, it remains to be seen whether it will be good enough to turn around the company. A lot of the plantation land in Sarawak that it acquired is still vacant and will need time to yield results, so there are question marks as to when it can start contributing to Puncak Niaga’s revenue stream.

In July 2017 the company completed the purchase of Danum Sinar Sdn Bhd, an oil palm plantation company in Sarawak, for RM276.59 mil, a price 38% lower than originally proposed due to revaluation of the land. Danum Sinar has a total of 46,674ha of plantation land in Murum, Sarawak but the bulk of the land (or 33,372.6ha) is unplanted.

In October 2015, Puncak Niaga finally sold its water assets in Selangor – Puncak Niaga (M) Sdn Bhd and Syabas – to state-owned Pengurusan Air Selangor Sdn Bhd for RM1.56 bil after prolonged negotiations that lasted more than seven years.

The sale was a part of a consolidation process driven by the Selangor government, returning control over the water industry from the private concessionaires to the state agencies.

Selangor had privatised its water industry in 1994 with the state government taking charge of water supplywhile it delegated water production and distribution to private concessionaires.

At the moment, Splash remains the only concessionaire in Selangor that has not been taken over by the state. Due to differences in valuation, the two parties are still negotiating and have had several deadline extensions.

Prior to 1994, the Selangor water industry was fully managed by Jabatan Bekalan Air Selangor. After the opposition wrested control of Selangor in 2008, the state government rejected two tariff hikes (37% in 2009 and 25% in 2012) proposed by Syabas and began the drawn-out process of consolidating control of the water assets back into state hands.

Thursday, January 4, 2018

'Like' - MMAG (Ex GDEX CEO & MAXIS VP Running The Show).

MMAG Holdings Berhad (Formerly known as Ingenuity Consolidated Berhad) is a "Total Business ICT Solutions Provider".

There is nothing to shout about except bloodshed in year 2012 when its share price collapsed. Furthermore, ICT biz operate under extremely thin margin environment (look at ECS income statement) and short product life span. Most investors will avoid company operate under such difficult condition.

The Turning Point:

In year 2015, a RTO took place and we see WONG ENG SU, the former Chief Operating Officer of Gdex, together with Jeff Chong, Maxis’ former vice-president of Mobility Products and International Service emerged as substantial shareholders, bought over the share held by former owner, Chin Boon Long & wife Tan Swee Ying. The later has since resigned.

The company name has been change to MMAG and a series of restructuring took place which both Wong & Jeff Chong wishing to turn around the company from a pure ICT focus company to  (1) Last mile delivery, logistic and ware housing specialist and (2) Mobile distributing and Leasing service provider.

It is not difficult to guess since Wong Eng Su has 15 years of experience in GDEX while Jeff Chong has more than 15 year experience in telecommunication industry under Maxis and Digi.

Financial Highlight

Key Observation

1) ICT segment

Continue bleeding and the restructuring still going on under this segment by Jeff Chong.

2) Courier Service Segment

This segment was introduced in Sept 2015 when Wong Eng Su took over MMAG. Total FY 2015 revenue was RM 755k. It has since then grow nearly 400% in a year to RM 3.457 million in just 1 year. The segment is not in profit yet and this is quite common for every new venture during initial stages.

What To Shout About?

(1) MMAG had done a cash call via Rights Issue with free warrant + ICPS. Let see below how much cash they will raise and what are the plan they have? (Maximum Scenario)

Cash in Company: RM10197805;

Max Fund To Be Raised From Rights @ RM0.25: RM36958539

Max Fund To Be Raised From ICPS @ RM0.15: RM30366831

Number of Shares: 455502463

The total share upon completion of the cash call will increased MMAG cash level from RM10.2 mil (Include the special bumiputra issue) to RM77.5 mil. This is equivalent to RM 0.17 per share, not include MMAG-WA & MMAG-PA which will mature in 5 year. This is huge sum of money for business expansion program.

(2) The Business Expansion Plan

Logistic & Courier Segment - Allocation RM 40.4 million.

A 131,132 sf warehouse cum office has been built on a piece of land leased from Acer which is expected to be completed in Nov 2017.

The second part is to expand the courier fleet from 20 fleets to 100 fleets with 15 more new branches nation wide. However, media reported that the company has already grew the fleet from 20 to 70 fleet and staff force has grew from 30 to 220 staffs now.

ICT & Mobile Phone segment - Allocation RM 32.7 mil.

MMAG has plan to be key distributor for mobile phones in Malaysia while maintaining the normal pc/ laptop distributor.

Conclusion …

Its balance sheet is healthy and plus massive cash in flow from cash call.

MMAG is now a courier & logistic focus player.