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Wednesday, January 20, 2021

Riverstone - Valuations Turning Attractive; Upgrade to BUY

Upgrade Riverstone (SGX:AP4) to BUY as valuation becomes attractive again after share price correction on vaccine news.

  • Firm ASP and demand trend in FY21F; order visibility extends till December 2021.
  • Mass availability of vaccines will take time; new COVID-19 strain raises risk.
  • Riverstone's FY20F/21F/22F earnings forecast adjusted by -16%/+19%/+4% on revision to ASP assumptions.

Riverstone's Valuations Turning More Attractive

Current Riverstone P/E at -1SD of its 5-year average.

  • We had downgraded Riverstone to HOLD in November 2020 (Riverstone - DBS Research 2020-11-10: Time To Take A Breather) when Riverstone's share price was near S$2. Since then Riverstone's share price has corrected by close to 50%.
  • At current level, P/E valuation for Riverstone is becoming more attractive, trading at 7.3x FY21F earnings, which is near -1SD of its 5-year P/E average.

Bumper dividend expected from Riverstone.

  • Riverstone could declare a bumper dividend on the back of exceptionally high profits driven by strong demand and high ASP in year 2020. Dividend per share could more than double to 5 cents in FY20F, based on 40% payout ratio, as compared to 2.42 cents in FY19.

Firm ASP and Demand Trend; Order Visibility Extends Till December 2021

  • ASP and demand trend have been firm despite the positive developments on the vaccines for COVID-19. The ASP for both healthcare (HC) and cleanroom (CR) gloves has increased by about 10% m-o-m on average since April 2020. The increase in November and December was even steeper at about 15% m-o-m. For January and February 2021, the increase in ASP is about 5% to 10%, based on our channel checks.
  • Going forward, ASP could remain firm, barring any steep increase in raw material prices, as demand is still expected to be strong.
  • Riverstone’s order visibility has further extended to till December 2021, from our last update in November of till June 2021. Prices for HC gloves are negotiated monthly, hence prices are not fixed. For CR, prices are now negotiated every two months or quarterly, vs every six months to a year before the pandemic.

Mass Availability of Vaccines Will Take Time; New COVID-19 Strain Raises Risk

Positive vaccines development negative for “COVID beneficiaries”.

  • The world has cheered the positive vaccines development over the last few months. In contrast, share prices of “COVID beneficiaries” like Riverstone were hammered. Riverstone's share price plummeted from a high of S$2.45 in August 2020 to a low at close to S$1 in December.

Low vaccine acceptance rates; new COVID-19 strain raises risk.

  • While the availability of COVID-19 vaccines is good news, it would still take time for life to return to near normal. Low vaccine acceptance rates or distribution delays due to production or logistical difficulties could delay the return to normalcy. Vaccine acceptance appears significantly lower in the US with only ~47% of people surveyed by the Associated Press planning to get the vaccine and 27% being unsure.
  • The emergence of a new COVID-19 strain in the UK that is “70% more transmittable” also raises the risk of a resurgence in COVID-19 community transmission. Several countries have imposed new lockdown measures arising from the surge in in new COVID virus cases and virus mutation.

Sustainable glove demand post-COVID with hygiene still a key concern.

  • Hence, the demand for gloves is expected to sustain as hygiene will still be a key concern. Even if a COVID-19 vaccine is developed, we do not expect demand to taper off immediately.

Beyond FY21F, cleanroom to provide earnings resiliency for sustainable growth.

  • Riverstone’s CR gloves segment contributes ~25% to 30% to total revenue and ~50% to gross profit. Even if demand for the more volatile HC gloves tapers off, demand for CR gloves should be more stable. The CR glove segment has also experienced growth in demand from the technology and manufacturing industries such as lenses, batteries and semiconductors.
  • As the market leader in the high-end CR glove space, Riverstone is poised to benefit from the diversified income streams which allow the group to ensure earnings resiliency for sustainable growth over the longer term.

Riverstone - Earnings Forecast & Recommendation

Expect ASP in FY21F to rise by an average of 35% y-o-y, vs our flat assumption previously.

  • We have adjusted our ASP assumptions, expecting ASP for both HC and CR in FY20F to increase at an average of 60% y-o-y, vs our previous assumption of +70%.
  • For FY21F, given that demand is still expected to be strong while supply remains tight, and the ASP for January and February are still on a rising trend, we now project ASP to increase 35% y-o-y, vs our previous flat assumption.
  • For FY23F, ASP could decline by 35% y-o-y.

-16%/+19%/+4% earnings forecast adjustment for Riverstone in FY20F/FY21F/FY22F.

  • On the back of the ASP adjustment, coupled with slightly lower margins on higher raw materials, we have adjusted our Riverstone's earnings forecast for FY20F/FY21F/FY22F by - 16%/+19%/+4%.
  • Our target price for Riverstone is still pegged to 12.8x, the average P/E over the last 5 years, in line with our valuation methodology for peers in our coverage. However, we have rolled forward our valuation base to blended FY21F/FY22F earnings to capture the post COVID-19 impact. As such, our new lowered target price offers potential upside of 37%.
  • In terms of share price performance, Riverstone's share price has moved in tandem with peers Hartalega and Kossan Rubber but underperformed Top Glove's share price, Supermax and UG Healthcare's share price.
  • Upgrade Riverstone to BUY.

Source: DBS Research - 11 Jan 2021

Fortress Minerals Ltd. – Ore Production Almost Doubled This Quarter


3Q21 results were better than expectations. Revenue was up 150.9% YoY, PATMI up 477.9% YoY. 9M21 PATMI formed 77.5% of our FY21e forecast.

3Q21 sales volume increased a stellar 93.8% YoY on the back of increased domestic demand for steel.
Maintain BUY with a higher TP of S$0.47, up from S$0.28. We raise FY21e PATMI by 69.2% to capture its 3Q outperformance. Our TP remains pegged to 11x FY21e, the industry average. Catalysts are expected from a 50% jump in production in FY21e and iron ore prices (Platts Iron Ore Index, IODEX 65% Fe CFR North China) remaining above US$110/DMT. The company announced a proposed US$30mn acquisition of Malaysia iron ore and copper producer.





The Positives

+ Continued volume growth. Iron ore concentrate volumes sold increased 93.7% YoY in 3Q21. This translated to revenue growth of 150.9% YoY. Volume and revenue were both lower QoQ due to monsoon disruptions to production that typically occur at year-end.

+ Spike in margins. Gross margins increased from 57.7% to 75.1% in 3Q21. Revenue for the quarter more than doubled, driven by higher prices for high-grade iron ore concentrates. Their ASP was a record US$110.06/DMT as iron ore prices reached a 7-year high. Average unit cost was also lower YoY through increased iron ore production.

+ Operating cash flow increased 7x. 3Q21 operating cash flow of US$11.7mn was 7x the US$1.6mn achieved a year ago. Net cash slightly dipped from US$9.9mn to US$9mn while FCF turned around from -US$328k in 3Q20 to US$10.4mn in 3Q21.

The Negative

– Nil.

Proposed acquisition of Malaysian subsidiary of Monument Mining Ltd

Monument Mining Ltd (MMY CN, Not Rated) is an established Canadian gold producer that operates gold mines. It also acquires, explores and develops other base metals. FML has entered into a conditional sale and purchase (SPA) agreement with the company for the acquisition of the entire Monument Mengapur (MMSB). MMSB owns a 100% stake in the Mengapur copper and iron project in Pahang, Malaysia. Cash consideration is US$30mn. FML will pay a royalty fee of 1.25% of gross revenue from all products produced at Mengapur to Monument Mining.

Other than magnetite, Mengapur contains a significant amount of copper, gold and silver resources. FML will mine only magnetite for the production of its iron ores. Ores containing other materials encountered during mining will be stockpiled for future use.

With this acquisition, FML’s magnetite resources will surge from 7.18mn tonnes from its Bukit Besi mine as of February 2020 to 17.93mn tonnes. Geochemical analysis and metallurgical tests have proven that the Mengapur magnetite is extremely similar to that from the Bukit Besi mine, which has demonstrated to be economical. FML’s Buki Besi mine has been able to yield consistently-high-grade magnetite iron ore concentrates.

Mengapur is strategically located 65km away from the Kuantan port, the main bulk iron ore export port on Malaysia’s East Coast. It is also within close proximity of the two largest steel mills in Malaysia, both of which are FML’s customers.

Mining leases and environmental approvals for open-pit mining have been obtained. With its existing processing plants and other facilities, the Mengapur site is ready for development. It is immediately available for magnetite production after refurbishment.

This is the company’s first proposed acquisition. If executed according to plan, it should help transform FML into a regional player in iron ores, coupled with its efforts to explore and develop iron ore assets across Malaysia. Mengapur should also complement FML’s existing portfolio of advanced iron ore projects.

Outlook

Iron ore prices are expected to taper down in 2021 as supply balances out demand. We expect them to drop from the current US$190/DMT (Platts IODEX 65% Fe CFR North China) to the region of US$110/DMT. This would translate to lower ASPs of US$95/DMT for FML, from US$110.06/DMT in 3Q21. However, FML’s revenue should still increase with higher iron ore volumes sold following its announcement of an offtake agreement in September 2020. Operating expenses are also expected to be stable with the help of improved economies of scale.

Maintain BUY with higher TP of S$0.47 from S$0.28

We maintain BUY with a higher TP of S$0.47, up from S$0.28, after we increase FY21e PATMI by 69.2% to factor in its 3Q21 outperformance. We continue to peg the stock at 11x FY21e PE, the industry average. We expect production to jump 50% in FY21e and iron ore prices (Platts Iron Ore Index, IODEX 65% Fe CFR North China) to remain above US$110/DMT, providing stock catalysts.

Source: Phillip Capital Research - 18 Jan 2021

Tuesday, January 19, 2021

汤之上隆最新预测:2050年全球半导体市场将超万亿美元


芯东西 芯东西头条2021/01/19


芯东西(公众号:aichip001)
作者 | 汤之上隆
编辑 | Panken

编者注:本文作者汤之上隆先生为日本精密加工研究所所长,曾长期在日本制造业的生产第一线从事半导体研发工作,2000年获得京都大学工学博士学位,之后一直从事和半导体行业有关的教学、研究、顾问及新闻工作者等工作,曾撰写《日本“半导体”的失败》、《“电机、半导体”溃败的教训》、《失去的制造业:日本制造业的败北》等著作。

本文是汤之上隆先生近日发表于eetimes.jp上的一篇长文,不仅对十年前全球半导体市场增长预测的数据进行复盘和分析,而且提出新的计算方法,预测到2050年,全球半导体市场规模有望突破万亿美元大关。

全文内容如下:

2020年是被新冠肺炎疫情折磨的一年,汤之上隆希望今年是新冠病毒威胁消失、充满希望的一年……然而这样的想法还没过多久,1月7日,日本首都圈的一都三县就发布了紧急事态宣言,从年初开始就大跌眼镜,令人担心今后。

但在遭受疫情冲击的情况下,全球半导体市场和制造设备市场都持续增长。

受存储半导体产业衰退影响,2019年全球半导体市场规模降至4123亿美元,好在2020年受新冠病毒影响甚微,又恢复至4331亿美元,并有望在2021年创下历史最高纪录,达到4694亿美元,超过2018年存储半导体泡沫时期的4688亿美元。

此外,据国际半导体产业协会(SEMI)在2020年12月10日公布的资料显示,2020年全球半导体制造设备市场规模较2019年的596亿美元增加了16%,创下689亿美元新纪录,预计2021年将达到719亿美元,2022年将达到761亿美元。这大大超出了汤之上隆此前的预期。

▲图1:半导体制造设备市场变化(来源:汤之上隆根据Gartner和WSTS数据绘制)
一、全球半导体市场增长预测:2050年将破万亿大关

虽然在全球范围内,新冠病毒疫情更加严重,但正如前面所述,全球半导体产业的发展势头非常好,对于相关人员来说,这是“不幸中的万幸”。

因此,作为2021年的第一篇文章,汤之上隆想要预测到2050年,全球半导体市场将增长多少。

另外,之所以将时间设定在2050年,是因为据说到2045年,人工智能(AI)超越人类能力的技术奇点将会出现,人们也意识到了这一点。

其实在2011年,汤之上隆就曾预测全球半导体市场将以每年1125亿美元的速度增长,到2050年将达到7500亿美元。然而,2010年全球半导体市场规模为3000亿美元,40年后的2050年将增长至原来的2.5倍,对于这一预测,许多人批评说:“我认为它不会增长这么多。”

▲图2:到2050年的全球半导体市场增长预测(来源:汤之上隆根据Gartner和WSTS数据绘制)

因此,本文首先回顾了在2011年是如何对2050年的增长进行预测的,接下来,在大约十年后的2020年,我们将检验这一预测的结果,并再次尝试预测2050年全球半导体市场规模。

汤之上隆的预测结果是,到2050年,全球半导体市场规模将达到8622亿至1.123万亿美元。

不过,从短期来看,持续的中美高科技战争可能会阻碍全球半导体市场的增长。但对于人类来说,半导体是不可或缺的,汤之上隆坚信,只要人口不断增长,人类文明不断进步,半导体市场就会不断扩大。
二、全球半导体市场发展的三个时代

将时钟的指针拨回2011年左右。2008年9月,雷曼兄弟事件引发了世界金融危机。但是,全球半导体市场呈V型复苏,2010年达到3000亿美元。

当时,汤之上隆划分了三个时代,来了解全球半导体市场的转型。

▲图3:全球半导体市场趋势(资料来源:汤之上隆根据Gartner和WSTS数据绘制)

(1)1995年以前:年增长率为10%-15%的时代。日本、美国和欧洲等发达国家带动了半导体市场的增长。

(2)1995-2000年:随着Windows 95发布,这是一个半导体增长放缓的时代。虽然2000年因IT泡沫而格外突出,但汤之上隆决定将这一年作为奇点而忽略。

(3)2001年以后:半导体市场再次以5-7%的年增长率发展。下图展示了各地区半导体市场的变化,可以看出,日美欧半导体市场已经饱和,而其他亚洲半导体市场却在快速增长。

这一时期,经济开始发展的新兴国家巴西、俄罗斯、印度、中国被称为“金砖四国”。其中,中国的经济发展尤为显著,因此,包括中国在内的亚洲国家引领了全球半导体市场。

▲图4:按地域划分特定的半导体城市场趋势(资料来源:汤之上隆根据Gartner和WSTS数据绘制)

由此,汤之上隆分别估算了发达国家和新兴国家人均一年的半导体消费量。
三、人均一年消耗多少半导体?

首先,汤之上隆估算了发达国家人均一年的半导体消费量。如前文所述,全球半导体市场在1995年一度饱和。如果将2000年的IT泡沫视作一个奇点予以排除的话,1995年~2001年期间,全球半导体市场规模约为1500亿美元/年。

▲图5:世界人口变化(来源:联合国经济社会信息和政策分析局人口部编《联合国世界人口预测2006年修订版》)

从世界人口变化来看,日美欧等发达国家总人口约为10亿人(图5)。这个人口数量自2001年以来几乎没怎么变化(来源:联合国经济社会信息和政策分析局人口部编纂的《联合国世界人口预测2006年修订版》)。

因此,在发达国家,每年约有10亿人消费1500亿美元的半导体。简单计算的话,在发达国家,人均一年的半导体消费为150美元。

▲图6:人均一年消耗多少半导体?(资料来源:资料来源:汤之上隆根据Gartner和WSTS数据绘制)

例如,日本人购买PC、智能手机、数码家电、汽车等电子产品,按人均一年花费150美元(2010年1美元兑换88.8日元,相当于1万3320日元)购买半导体来计算,这一数据体感似乎很吻合。

接下来,汤之上隆计算了新兴国家的人均半导体消费量。从2001年到2010年,全球半导体市场规模增长了1500亿美元,达到约3000亿美元。其中1500亿美元是发达国家10亿人的半导体消费量,新增加的1500亿美元是新兴国家的消费量。

2010年世界人口金字塔的70亿人中,发达国家有约10亿人,新兴国家的中产阶层有约20亿人(如图7右侧所示)。剩下的40亿人是贫困阶层(Bottom of the Pyramid,BOP)。

也就是说,2010年左右,新兴国家的20亿中产阶层消费了1500亿美元的半导体。因此,通过除法运算,新兴国家中产阶层的人均一年半导体消费额为75美元,是发达国家150美元的一半。

▲图7:1995-2010年世界人口变化(来源:联合国经济社会信息与政策分析局人口部编著《联合国世界人口预测2006年修订版》)
四、世界人口金字塔的变迁

联合国预测,到2050年,世界人口总数将达90-100亿人。那时,发达国家和新兴国家的中产阶层有多少人呢?

根据上述内容,2010年以后的10年内,贫困阶层的10亿人将成为中产阶层,新兴国家中产阶层的5亿人将属于发达国家。那么,到2020年,发达国家的中产阶层将达到15亿人,新兴国家的中产阶层将达到25亿人。

也就是说,每10年,发达国家和中产阶层分别增加5亿人。因此,如果持续这样的经济发展,到2050年,发达国家的中产阶级将达到30亿人,新兴国家的中产阶级将达到40亿人(如图8右侧所示)。

▲图8:2010-2050年世界人口变化(来源:联合国经济社会信息和政策分析局人口部编纂《联合国世界人口预测2006年修订版》)
五、没打脸!两种预测方法数据相近

如果每10年发达国家和新兴国家的中产阶层分别增加5亿人,那么全球半导体市场将增加:

5亿人×150美元+5亿人×75美元=1125亿美元。

以每10年1125亿美元的速度增长,全球半导体市场变化如图2所示。据预测,2050年全球半导体市场规模将达7500亿美元,是2010年的2.5倍。

对于这一预测,有人批评说:“我不认为会有那么大的增长。”因此,汤之上隆用了完全不同的方法,来计算2050年的全球半导体市场规模。

▲图9:全球半导体市场和出货量的变化(来源:汤之上隆根据Gartner和WSTS数据绘制)

图9展现了全球半导体市场(亿美元)和出货量(亿个)的变化。根据出货量的曲线斜率,可以计算出,半导体出货量每年增加250亿个。另外,2010年左右所有半导体的平均价格为0.43美元。

因此,全球半导体市场每年平均增加250亿个×0.43美元=107.5亿美元。如果是10年,将达到1075亿美元。

以人均一年消费的半导体量来计算,全球半导体市场规模将在10年内增加1125亿美元。而根据出货数量和平均价格计算,全球半导体市场规模10年内将增加1075亿美元。

两种不同的方法计算了10年的全球半导体市场的增加额大体一致,因此,汤之上隆坚持认为“2050年全球半导体市场规模将达到7500美元的预测”几乎是正确的。
六、2020年全球半导体市场发展超预期

在此,将时钟的指针拨回到现在。

2011年,汤之上隆曾预测说:“全球半导体市场将以每10年1125亿美元的速度增长,到2050年将达到7500亿美元。”因此,他想验证一下自己的预测是否正确。

▲图10:10年前全球半导体市场增长预测的验证(来源:汤之上隆根据WSTS数据绘制)

按汤之上隆的预测,全球半导体市场将从2010年的3000亿美元增加1125亿美元,增长到2020年的4125亿美元。

事实上,据世界半导体贸易统计协会(WSTS)预测,2020年全球半导体市场将达4331.45亿美元。该数值比汤之上隆的预测值高了约5%。

WSTS还推测,2021年全球半导体市场规模将比2020年增加8.4%,超过因存储半导体泡沫而创下历史最高记录的2018年,达到4694.03亿美元。这一预测数值估计比汤之上隆的预测值高出约13.8%。

综上所述,汤之上隆认为他在2011年所做的预测是低估了,全球半导体市场的发展速度超出了他的预期。因此,那些反对汤之上隆在2011年预测数据的批评也完全没有道理。
七、重新预测2050年全球半导体市场规模

按照调查,全球半导体市场增长速度远远超出汤之上隆的预测。因此,他想再次预测一下2050年的全球半导体市场规模。

根据图10半导体出货量的曲线图斜率,可以计算出,半导体出货量以每年310亿个的速度增加。另外,由2020年平均价格为0.461美元,因此可以计算出,全球半导体市场每年平均增长310亿个×0.461美元=143亿美元,10年增长额是其10倍,即1430亿美元。

结果是,全球半导体市场将以每10年1430亿美元的速度增长,预计到2050年将达到8622亿美元。

▲图11:新的2050年全球半导体市场增长预测(来源:汤之上隆根据Gartner和WSTS数据绘制)

这里,可以做出如下预测。

以2011年为例,每年出货量增加250亿个,其平均价格为0.43美元,由此计算,全球半导体市场将在10年内增加1075亿美元。

2020年用同样方法计算的全球半导体市场10年间的增量为1430亿美元,是2010年1075亿美元的约1.33倍。

在这10年间,随着智能手机在世界范围内普及,用于智能手机的半导体出货量也呈现了飞跃性增长。另外,随着大数据时代到来,用于数据中心服务器的半导体市场也大幅增长。这些均与1.33倍的增长有关。

这样的事情在接下来的10年内也会发生吗?实际上,用于5G智能手机、人工智能的半导体出货量正在增加。因此,假设每隔10年,出货个数×出货额的增加部分持续为1.33倍。

据此计算,到2050年,全球半导体市场规模将达到1.123万亿美元,是2020年4331亿美元的2.34倍。

如果奇点在2045年到来,那么5年后,全球半导体市场规模有可能超过1万亿美元。
结语:只要人类文明在进化,全球半导体市场就会成长

根据汤之上隆的预测,三十年后的2050年,全球半导体市场规模将达到8622亿-1.123万亿美元。

但近期中美高科技战争的加剧可能会阻碍全球半导体市场的增长。10年后,半导体的微缩化将会降至1nm以下,乃至可能停止微缩化。此外,随着全球变暖等环境问题日益严重,半导体制造能力的扩大也将变得困难。因此,汤之上隆认为,和10年前一样,他的预测结果可能会受到“我认为不会增长那么多”的批评。

对于这样的批评,汤之上隆想要反驳一下。请再看一次图8。据预测,在世界人口构成中,每10年发达国家和新兴国家的中产阶层将分别增加5亿人,而贫困阶层将逐渐减少。

▲图8:2010-2050年世界人口变化(来源:联合国经济社会信息和政策分析局人口部编纂《联合国世界人口预测2006年修订版》)

是人类文明进步才需要半导体,还是半导体的普及推动了人类文明的进步?汤之上隆也不太清楚,但无论如何,对于人类文明的进步来说,半导体必不可少。除非新冠病毒毁灭人类,否则全球半导体市场就会长期持续增长。

因此,希望大家能够克服这场前所未有的疫情危机,看到30年后的半导体世界。首先要彻底洗手、漱口、戴口罩,避免不必要的外出,最大限度地注意避免感染新冠病毒。

注:原文作者汤之上隆先生主要基于世界人口变化、人均一年半导体消耗量、半导体出货量、平均价格等数据来进行预测,并未将通货膨胀、货币贬值等因素的影响纳入计算考量范围,考虑到这些影响的可能性,三十年后的全球半导体产业规模​或将更加超出预期。​

来源:EE Times Japan

Silkroad Nickel enters into exclusive partnership with Ganfeng Lithium, Ganfeng Lithium to invest US$15 mil

Felicia Tan Published on Mon, Jan 18, 2021 / 6:54 PM GMT+8 / Updated 13 hours ago




Catalist-listed Silkroad Nickel, an established producer of laterite nickel ore based in Morowali, Central Sulawesi, Indonesia, has entered into an exclusive term sheet on Jan 15 with Ganfeng Lithium.

Ganfeng Lithium is one of the world’s largest lithium compound producers and its shares are dual-listed on the Shenzhen Stock Exchange and Hong Kong Stock Exchange.

The term sheet provides for the offtake of future raw materials, the funding for upstream and downstream expansion, and potential strategic partnership initiatives in the electric vehicle (EV) battery space between both companies.

Under the agreement, Ganfeng Lithium will invest in Silkroad Nickel a three-year convertible bond with a principal amount of US$15 million ($19.9 million) which bears interest at a rate of 7% per annum.

Ganfeng Lithium has the right to convert the entire principal amount into new shares amounting to a 25% stake in either FE Resources, Silkroad Nickel’s wholly-owned subsidiary in Singapore, or its Indonesian subsidiary PT Anugrah Tambang Sejahtera.

Ganfeng Lithium has a call option to subscribe for additional new shares in either subsidiary upon conversion of the bond.

The aggregate equity interest in FE Resources or PT Anugrah that Ganfeng acquires through the conversion of the convertible bond shall not exceed 50%, and Ganfeng will enter into a 10-year ore offtake contract with PT Anugrah for the supply of at least one million tonnes per annum.

Indonesia, as one of the world’s largest producers of nickel ore, is on an EV growth trajectory from nickel ore producer to EV producer in the next five years.

According to Silkroad Nickel, the company stands to benefit and capitalise on booming EV trends around the region through the partnership with Ganfeng Lithium.

“We are pleased to announce and embark on this exclusive partnership with Ganfeng Lithium, a world leader in lithium-ion batteries and electric vehicles. As the demand for EV accelerates across the world, Indonesia has emerged as a key player in the global EV ecosystem and we are excited to be part of this exciting supply chain,” says Hong Kah Ing, executive director and CEO of Silkroad Nickel.

“We are particularly pleased to partner with such an established and experienced player like Ganfeng Lithium, with operations across the world and best-in-class technology and experience, and we look forward to an exciting new chapter of growth,” Hong adds.

Shares in Silkroad Nickel closed flat at 43 cents on Jan 18.

https://www.theedgesingapore.com/news/joint-ventures-and-alliances/silkroad-nickel-enters-exclusive-partnership-ganfeng-lithium

Sunday, January 17, 2021

老派 vs 新潮/拿督刘明

上个星期的文章刊出后,有读者留言说我的文章很Old school , 他的意思应该是说我思想陈旧腐朽,举的例子都是陈年旧事。

我查了一下此人的背景,如我所料,是一位年轻朋友。

左传曰:天因著作生才子,人不风流枉少年。

这句话的意思是说:人要在年轻,还是个少年的时期,做一些有意义的事情,而不是一味的受限于礼法。

此“风流”,不是你以为的“风流”,意思更接近于有才华而不拘于礼法的意思。

你看,我们几千年前的老祖宗都懂得少年轻狂,我曾经年轻,我当然也懂。

年轻人喜欢离经叛道,但很多事情不曾也没有机会经历过,却自以为才华横溢,不知不觉就犯了上罗胖所言:“你以为你以为的就是你以为的”陷阱。

而我上一期专栏的思维,就是围绕着“你以为”这个课题,借用历史(若谷歌和微软20 年前发生的事能称为历史的话)和自身经验来阐述这论点,怎么就成了老古董old school 了?

现代人读书不求甚解,遇事不追究原因始末就妄下结论,一句old school 就以偏概全,好不潇洒!

Old school泛滥成灾

Old school 这词什么时候流行甚至泛滥成灾已不可考,但似乎很好用。

我自己偶尔也借来开玩笑,来形容那些思想守旧,抱残守缺之人(很惭愧,原来我本身被人归类而不自知!)

最近有几宗颇大的期货询问,我们整班好朋友被一位年轻人大骂old school , 只因我们当中有人坚持要把某些细节弄清楚,以免将来发生争执。

而我们这群朋友当中,有两位是香港上市公司老板,其他人除了我之外,都不是泛泛之辈,在他眼中,我们竟然都腐朽不堪。

现在是一个凡事讲究速成的时代,人们基本上已经失去了耐心,但为求万无一失,动作稍微慢一点,就被归类为落伍old school 。

其实,这些人眼中鄙视的old school 背后,是我们祖宗千百年遗留下来的智慧财产,它们代表着:原则、信念、经验、诚实、善良,尊师重道等美德。

中华民族若失去了这些文化智慧,我们和那些未开发野蛮民族有何区别?

看看去年发生在香港的暴动事件,年轻人大肆破坏公物、满口污言秽语辱骂師长,就是明证!




被标签为old school 的线下实体商店还是大有可为,以前的o2o (offline to online) 线下到线上变成了online to offline 线上到线下,阿里的盒马鲜生就是一例!

线下实体店还是大有可为

和朋友谈起此事,他愤慨地说:这不是old school 或new school 之争,这是个人修养问题,借old school 这课题,企图掩盖自己情商之不足。

最近我有幸成为国际青年商会(JCI)主办的青年创意大赛(CYEA)的评审,接触了非常多的年轻创业才俊,我发觉一个有趣的现象,那些做事踏实、有工匠精神,态度诚恳的人,成就都非常棒!

我其实私底下也认识一些参赛者,他们都是一群好学不倦,非常努力的年轻人。他们有自己的想法,不好高骛远,最重要的是都彬彬有礼,承继了我们的中华传统美德!

我对主办方说,因为他们,我对马来西亚华裔子弟充满希望,假以时日,他们绝对是国家的优秀栋梁!

我印象非常深刻的是一位20多岁的参赛者,他继承的是一家传统的百年老店,祖父辈经营了近一个世纪的家族企业,只卖一种产品--咖啡乌。

在他努力争取下,公司开始售卖其他种类咖啡,业务蒸蒸日上,公司最近也开了一家咖啡馆,教导咖啡爱好者如何品尝咖啡的美味,发扬咖啡文化!

我好奇的问他:如何说服他还健壮的祖父和父亲,让他放手一搏?

平衡传统和现代

他说他花了几年的时间,一点一滴用行动来证明他的能力,他必须在传统和现代找出平衡。

他从不鄙视祖父辈遗留下来的传统智慧,只是他内心非常清楚,空有传统而不创新,最终还是会被时代洪流淘汰的。

他最后用实力和耐心,克服了重重代沟,让这百年老店赋予新的生命!

其实,动辄标签别人old school ,不止没有任何意义,也显得他自己思想狭隘,理由很简单,因为所有事情都是万变不离其宗。

记得当初网际网络以雷霆万钧之势,迅速吞噬了实体经济的大片江山,很多零售业者都非常担心,电商会不会把他们完全击垮。

结果时间证明,被标签为old school 的线下实体商店还是大有可为,虽然经营方式也许有点不同。

以前的o2o (offline to online) 线下到线上变成了online to offline 线上到线下,阿里的盒马鲜生就是一例!

企业勿陷大数据迷思

上一回马来西亚Lazada 总裁周南和我在同一电视节目亮相时,主持人问他,供应商应该如何面对产品同质化,价格太过透明等问题,他的回答非常有见地。

他说:当你的产品和竞争对手相似度高,陷入价格战的时候,唯一的对策就是让自己与众不同!

产品差异化,是避免自己深陷红海的其中一个策略,这是千古不变的定律,谁敢说它old school ?

在此节目里,我们聊起了大数据。主持人问我对大数据的看法,我说其实中小企业不应该堕入大数据的迷思当中,因为数据是一个冷冰冰的东西,它必须累积了数以千万甚至上亿人的消费模式,才能分析出消费者的需求和习惯,再派上用场。

但这是我们中小企业终其一生都不可能达成的任务,所以,我说与其谈new school 的大数据,不如干脆把时间精神用在有温度的old school, 就是crm (客户管理系统)上,让客户感觉到我们的用心。

自媒体时代的今天,阿珠阿花口齿不清荒腔走板都能直播带货,阿狗阿猫满口脏话鱼虾蟹,也卖得吓吓叫!

但我总觉得这种素质不会长久。

我经常鼓励有近30年传统媒体经验,说起话来字正腔圆的好友黄公雋斌,敢敢出来直播带货,甚至开班授徒,他总是犹豫不决。

他近来帮一家电器公司带货,业务屡创新高,上星期更创出一天卖出1亿4000万的纪录,谁与争锋?

功力深厚的old school 主播vs 肤浅幼稚的网红,且看谁能笑到最后。

别只会批评

New school 利用科技,把圆的世界刷平,我们绝对认同!

但科技背后的old school 智慧,才是让它走的更远的原因。

诺基亚的口号称:科技始于人性!

但它也“死于人性”!

后记:我满口old school,看来还真old school。但假如你自认很new school ,别只会批评,行动起来吧,让全世界看看你如何用new school 改变世界!

退堂!

https://www.enanyang.my/名家专栏/老派-vs-新潮拿督刘明

Saturday, January 16, 2021

Mi Technovation Berhad – A ride with tremendous growth prospect


Author: The1994Investor | Publish date: Fri, 15 Jan 2021, 10:56 PM

Established since 2012, MI is an emerging leader in equipment manufacturing for advanced semiconductor packaging. Their clients comprises of outsourced assembly and testing (“OSAT”) companies and integrated device manufacturers (“IDM”).

In this article, we introduce and discuss the growth prospect of MI, why we are optimistic about the Group, and whether it is worthwhile at its current price.


MI operates via three business units, as follows:

1. Semiconductor Equipment (“SE”) – The bread and butter of the Group

MI is principally involved in the design, development, manufacture and sale of wafer-level chip scale packaging (“WLCSP”) machines as well as providing after sales services and sale of related spare parts and components.

Its flagship products are the MI Series WLCSP sorting machines, which make up more than 90% of its total sales. In addition, four other series, namely, Ai, Li, Vi and Si have also been developed and commercialized. The table below provides brief information of the respective series:


2. Automation & Robotics (“Robotics”)

Under the Robotics segment, MI has three products, namely, Oto Series (specialized in artificial intelligence (“AI”) enabled machines), Kobot Series (a mobile robot), and Engeye Series (an AI product to perform data mining, AI analysis, and decision-making to assists engineers and operations to respond to and prevent the possible excursions).

This is a relatively new segment, started contributing in December 2019. For the first 9 months of 2020, its sales totaled RM3.3m, contributed by the newly launched KOBOT series and OTO series.

3. Semiconductor Materials and Components (“SMC”) – yet to make any contribution

In 2019, MI designed and developed the PH Series, an in-house designed pick & place precision module that has been qualified and is ready for production.

On 8 Oct 2020, the Group inked a Memorandum of Understanding (MoU) with Taiwan-based Accurus Scientific Co (“Accurus”) and its shareholders for the acquisition of 99% equity interest in Accurus. Accurus’ principal activities are manufacturing solder spheres, which are widely used for Advance Packaging in the semiconductor industry.


As at 9MFY2020, MI’s revenue by business units is mainly contributed by SE, 98%, followed by Robotics, 2%. Within the semiconductor industry value chain, MI operates as a semiconductor packaging equipment and material manufacturer.


UPDATE ON MI’S DEVELOPMENT SINCE ITS IPO

During MI’s IPO in June 2018, the Group raised a total of RM190.8m, of which RM140.0m / 73% was allocated for construction of new factories cum office buildings to accommodate for higher production capacity.

From the remaining RM50.8m, RM36.7m was budgeted for working capital requirements, RM6.0m for research & development (“R&D”) and RM8.1m to defray listing expenses. Table below illustrates MI’s utilization of the funds to-date.
Notes:
1 RM55m was for building construction whilst RM10m to purchase Computer Numerical Control (“CNC”) machines. Completed since May 2019, Home 1 currently houses the operation of SE business unit. It has a gross production space of 90,000 sq ft, a 4-fold increase in capacity to 45 machines per month. Management estimates a 50% – 60% utilization rate at end-2020.
2 Completed since January 2020, Home 2 with a production space of 90,000 sq ft house the operation of Robotics business unit. Management estimates a 40% utilization rate by end-2020.
3 On 11 September 2019, MI announced to partially re-allocate funds initially budgeted for construction of Home 2 towards setting up new engineering centers in Taiwan, Korea and China. The Company decided to scale down total floor space area of Home 2 from 250,000 sq ft to 100,000 sq ft, after careful consideration of the market conditions.

These overseas centers will keep MI on top of evolving technology trends and provide them direct exposure to top technology players, as well as access to a deeper pool of talents to develop products and know-how.

As part of the Group’s 10-year business roadmap, these centers are tasked to undertake the development of different series under the SE business unit i.e. Home 1 will focus on Mi Series, Taiwan operations will focus on Vi Series, and Suwon, Korea will focus on Ai Series, etc.

For more information on the Group’s long-term strategy, you may refer to The Breakfast Grille podcast, which was presented by Noelle Lim from BFM featuring the CEO of MI, Mr. Oh Kuang Eng on 5 January 2011.

MI’S KEY STRENGTHS AND ITS GROWTH POTENTIAL IN THE LONG TERM
Significant investment in R&D. As at 31 March 2020, MI’s R&D team comprises 99 personnel. As at FYE2019, MI has been granted 5 patents, 21 patents pending, and a further 2 in the drafting stage. Being an equipment developer cum owner, its superior proprietary technology would act as an effective barrier to entry and shield the Group from the duplication of its designs, systems and methods by potential competitors.
Tremendous growth expected from the Robotics segment. Albeit seeing only a small contribution over the last few quarters, Management sees tremendous growth in this segment for years ahead. Management has recently revised up its target for the capacity utilization rate from 25% to 40% by end-2020. This poses a strong signal to the encouraging demand in the near-term. They estimate production capacity to increase in stages and will be instrumental to its growth plans for the next 3 years.
Tier-1 clientele. MI has been able to secure three Tier-1 OSATs, notably, Advanced Semiconductor Engineering Inc (“ASE”), Amkor, and United Test and Assembly Center Ltd (“UTAC”). Local OSAT customers under their belt includes Inari and Unisem. The Group also has a strong presence amongst the IDMs from US.

As of end-2019, MI has approximately 53 active customers, with its five largest customers accounting for 59.5% of its FY19 revenue. The success in securing and retaining global customers is a testament of its product quality, customer service and proven track record.
Horizontal growth strategy with acquisition of Accurus. Solder spheres are widely used for advance packaging such as Ball Grid Array and wafer level packaging in the semiconductor industry. Besides, Accurus also involves in metal surface treatment, metal forming of aluminum, copper and tin-based solders, as well as electronic parts and components assemblies.

The acquisition provides an opportunity for MI and Accurus to establish business integration for wider product portfolio within the same distribution channel and value chain. This is in line with MI’s business plan to expand into business activities that are complementary to its existing business.

Table below summarizes Accurus’s past 3 years financial results.


The purchase price of RM217m was proposed to be settled via issuance of 74.25m new MI shares at RM3.65 per share. The acquisition was valued at 16.22x PE multiple of Accurus’s FY2019 results (peers valuation range between 21x – 46x). The lower acquisition value (industry mean was 29.4x) may be to consider for the inconsistent PAT margin over the years.
Promising industry outlook. US-based Semiconductor Equipment & Materials International (“SEMI”) forecast the assembly and packaging equipment segment to grow 8% to USD3.4bn in 2021, driven by advanced packaging capacity build-up. It also said the semiconductor test equipment is expected to increase by about 13% in 2021 on the back of 5G demand. In terms of region, SEMI expects China, Taiwan and South Korea to be the top semiconductor manufacturing equipment markets in, making up for 68.7% of the global semiconductor markets.
Surplus capacity is available to ramp up production when demand increases. As of end-2020, Home 1 & 2 utilization rate is estimated at about 60% and 40% respectively. MI has plenty of room for growth in the near term, whenever market demand increases. Furthermore, the Group is already building new manufacturing plants in China and Taiwan to prepare for future growth.

SOLID FINANCIAL PERFORMANCE


Over the past 5 years, MI’s revenue grew at a cumulative average growth rate (“CAGR”) of 16.1% p.a. Growth was steadier in the recent 3 years as demand became stronger and more consistent. The dip in FY2016 results was mainly owing to the cyclical nature of the semiconductor industry. During 2016, orders were lower as customers delay production plans.

Profitability-wise, MI’s gross and net margins were strong and consistent over the years, recording between 38% – 54% and 27% – 39% respectively. Its operating model is proved resilient as they do not sacrifice on margins despite the strong revenue growth. As a measure of efficiency, the Management sets a target for its gross and net margins to be maintained within the range of 40% – 50% and 20% – 30% respectively.

MI is currently enjoying a low tax rate, as its SE unit (Mi Equipment (M) Sdn Bhd) has successfully renewed its pioneer status for a further 5 years, up to 17 January 2024.

Growth over the years were mainly contributed by its SE unit and its top exporting countries are Taiwan, China, Korea and USA etc.
Note: FCF = CFO less ‘Net cash flow from investing activities’

MI generates healthy and consistent cash flow from operations (“CFO”), with an average CFO to Net Income of about 0.6x. The slightly below average CFO to net income ratio was due to the increasing trade receivables in recent years as business grew. Comfort drawn on the fact that most of MI’s clients are top-tiers OSAT and IDM players in the market. The Group has incurred minimal impairment on trade receivables over the years.


KEY RISKS FOR CONSIDERATION
Cyclical nature of the semiconductor industry.
Stiffer competition. The Group could see margin pressure for its machinery in the event there are new entrants or change of packaging equipment in the technology field.
Highly dependent on semiconductor spending. Weak consumer confidence and slowdown in the 5G roll-out would force the fabless companies and integrated circuit fabricators to push back their CAPEX spending.
Sensitive to foreign exchange exposure. MI’s sales are predominantly priced in USD and it has been a beneficiary of the strong USD over 2016 – 2019. Based on a sensitivity analysis, every 10% change in USD will affect the Group’s bottom-line by about RM10.7m or 15% – 20% of our FY20 estimated earnings.
Requires constant R&D for innovation. Failure to keep up with industry R&D could see them being phased out in the technological race.
Fluctuations in material costs. The Group’s cost of sales comprises raw materials, direct labour costs, subcontractor costs and factory overheads. Raw materials account for at least 60% of the total cost of sales. The raw materials consist of i) high speed and precision motors, ii) cameras and lenses, iii) maintenance free grade sliders and bearings, iv) precision fabrication parts for both aluminum and steel tools.
Increased operation cost (completion of Home 1 & 2) may cause margin to depress in the near term, given additional / new sales expected from SE & Robotics segments may not achieve its economies of scale yet.
High market expectations have been priced-in, with its current valuation at about 40x PE on its 1-year forward results (FY2021).

MAJOR SHAREHOLDERS AS AT 9 APRIL 2020

The founder, Mr Oh Kuang Eng controls the Group via a personal stake of 68.8%.

Institutional investors in MI include, Namal Ltd, PMB Shariah, Kenanga, Areca Equitytrust Fund, JPMorgan, Oregon, Ocular Asia Fund etc.

Based on the Top 30 shareholder listing, institutional investors hold a total stake of about 7% in MI only.

PEER COMPARISON

Table below compares MI to its peers within the automated test equipment and / or other technology equipment segment.

Comparisons may / may not be relevant to MI. Nevertheless, we have included them for purpose of reference.


Overall, given MI’s strong profitability, promising demand outlook and in-place capacity for growth, we would value MI within a PE range of 40x – 50x.

At a median of 45x PE, MI’s price/earnings to growth (“PEG”) ratio would be equivalent to 1.0x, on our base-case assumption that FY2021 earnings per share (“EPS”) to grow by 45% (FY2020 PAT estimated to close at RM54.4m). A PEG of 1.0x is deemed reasonable when valuing growth stocks like MI.

According to the Management, its current order visibility is around 8 weeks (2 months), which is considered healthy.

MI’s PE during FY2018 – FY2020 ranged between 14.5x – 38.9x. We applied a higher forward PE to consider for the promising industry outlook, low interest rate environment, and the relatively high valuation priced by the market on the industry.

HOW MUCH IS MI WORTH?Assumptions:
1. FY2021 Revenue assumed to grow between 15% – 25%. For the past 5 years, Mi’s grew at a 5-year CAGR of 16%. Annualizing 9MFY2020 results, Mi is expected to close at RM220m, a 15% growth from FY2019. We expect growth to accelerate in years to come as demand for Mi’s machines should increase as 5G technology and industrial 4.0 commercialized across the globe.
2. GP margin assumed to range between 45% – 50% on the worst – best case scenario. Mi’s 5-year average margin has been 47.1%. Mi has an internal GP margin target of 40% – 50%.
3. Operating cost assumed to increase by 15% / RM6m in FY2021. Past 3 years operating cost grew at a CAGR of 19%, however, the rate of increase declined to 15% in FY2020. We expect the increase in operating cost to reduce as the company expansion in Home 1 & 2 has completed in FY2020.
4. EBIT margin assumed to range between 26% – 33% on the worst – best case scenario. Mi’s 5-year EBIT range was 24% – 39%. 9MFY2020 EBIT margin recorded 23.8%.
5. Interest income from short term investments is expected to reduce from an average of RM3m per year to RM2m given the low interest rate environment and utilization of funds for capital investments purpose.
6. Mi is enjoying a low tax rate as its SE unit (Mi Equipment (M) Sdn Bhd) has successfully renewed its pioneer status for a further 5 years from 18 January 2019 to 17 January 2024. Past 5 years effective tax rate has been lower than 2%.
7. Net margin assumed to range between 27% – 33% on the worst – best case scenario. Mi’s 5-year average net margin was 47.1%, in line with its internal target of 40% – 50%. Mi’s 9MFY2020 net margin achieved only 25% due to an increase in operation cost – post expansion of Home 1 & 2
8. 10% margin of safety was applied to consider the expected decline in net margins in the near term.
9. 20% dividend payout has been the company’s dividend payout ratio over the years, since its listing in 2018.

At the closing price of RM4.16, MI is valued at about 40x PE on assumption that 1-year forward (FYE2021) earnings to achieve RM79.2m – base case assumption (PAT was RM40.8m for the 9MFY2020 results).

Friday, January 15, 2021

AT Glove (0072) - Second glove factory (5th Step)

AT Systematization Bhd dealt with Seacera Porcelain Sdn Bhd to acquire industrial land for RM10.5 million for the construction of a second glove factory.

Industrial land located in Larut & Matang (Taiping) is 72,770 square meters in size.

Deal is expected to be completed within 60 days and will be satisfied in cash, cementing its entry into the glove making business, which started last year to capitalise on the unprecedented global demand for gloves due to the Covid-19 pandemic.

For the journey, it estimated that the Chemor factory will have an estimated capacity of 63,000 pieces per hour by the end of the month.

Second factory will have the same efficiency as its maiden Chemor-plant with almost 800,000 square feet (72,770 square meters) with up to 60 double former lines which translates to 35,000 pieces per hour for each line.

Before the second factory announcement, it was expected to have an output of 2.6 billion pieces per annum. With the second factory, it is estimated to have an output of 18 billion pieces per annum.

With new strains and mutations affecting the global economy, and a general increase in awareness for hygiene and protection, the global demand will likely find a plateau and last for a while to come.

Given the group’s recent CE certification award, he related that the group has been inundated with contract order enquiries.

Against the backdrop of a third wave of the pandemic in Malaysia, the managing director noted that the sector is hampered by disruption in supply from stop/start orders of key production lines.

With further supply disruptions on the horizon, AT will look to take advantage of spot prices in the short term while it builds production capacity to handle the enquiries.

AT Systematization rose one sen or 5.71% to 18.5 sen for a market capitalisation of RM782.38 million.