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Thursday, September 11, 2014

Why Fututech? (EPS expected to increase by 100 to 200%)

Source: http://klse.i3investor.com/blogs/undervalue/59718.jsp

I am here to ANSWER a simple question. Why Fututech?

Estimated EPS in 2015/2016/2017

Construction and manufacturing - 13.32sen

Gohtong Jaya - 16sen

Monterez Golf and Country Club - 10sen

Estimated EPS - 39.32sen

Target price:

PE8 - RM3.15

PE10 - RM3.93

Current price - RM1.16

Potential upside - RM1.99 (166% increase) and RM2.77 (238% increase)





Background

At 2011, E&O announced that they sold their 27.71% stake to Egovision Bhd for the total cash consideration of RM8.78million to Egovision Sdn Bhd. After that, It marked the new chapter for Fututech Berhad.

Some information about Fututech:

Market cap: 105million

Share price:RM1.16 (as per 10/9/2014)

Dividend yield: 3.45%

Price earning ratio: 8.71

Total number of shares: 90,737,012

Sector:

1) Construction

2) Manufacturing

3) Property development (latest)

4) Others


Latest quarter result
Quarter 30/9/2013 31/12/2013 31/3/2014 30/6/2014
Revenue 7.044mil 10.551mil 11,457mil 18.611mil
Profit after taxation 2.166mil 2.524mil 2.952mil 4.442mil
EPS 2.39sen 2.78sen 3.25sen 4.90sen


Why choose Fututech?

1. Future development on Gohtong Jaya (Project name: Vista Residence) - Total GDV of RM300million

2. Future development on Monterez Golf & Country Club, Shah Alam - Total GDV of RM200million

3. Net cash company - Cash and bank balances RM30million (RM0.33 per shares) with zero bank borrowing

4. Stable business with high profit margin (External unbilled project: RM130million)



1. Future development on Gohtong Jaya (Project name: Vista Residence) - GDV RM300million

http://ir.chartnexus.com/fututech/news.php

As per The Edge weekly newspaper on 25 Aug 2014, Fututech Berhad is planning for the soft launch for its maiden project which located in Gohtong Jaya, which is located about 9km from Genting Highland.

The project, named Vista Residence will occupy 1.43 acres of leasehold land and comprise a 27-storey tower with 378 serviced apartments and 28 retail lots. Prices start from RM700 psf.

What is the main attraction of Vista Residence?

As everyone know, Genting Malaysia Berhad are planned to build new RM1billion 20th Century Fox World theme park. The theme park is scheduled to open in 2016 and is expected to boost the number of visitor. Gohtong Jaya, which is one of the place that nearby to the cable car station, are set to benefit from the project. As Genting Malaysia Berhad also plans to upgrade the cable car and a shuttle serviice will also be provided, the activity in this area will set to increase.

The target markets for the project are:

1) Investor who are interesting to tap the tourist market

2) Mature group between 40 to 50 years old

3) Corporate client

With the future development of GDV RM300million, assumed that the project are running for 3 years. The profit margin for the property development are stood at around 10% to 20%. Assumed that the profit margin stays at 15%, with each year generating revenue of RM100million, profit will be around RM15million only for the Gohtong Jaya's project, which translated into EPS of 16sen per year for three consecutive years.

Also, as per announcement on 21 Jan 2013, the land only cost RM8million, which is only 2.66% from the total revenue of RM300million. Hence the profit margin will be expected to be more than the normal profit margin of property developer.


2. Future development on Monterez Golf & Country Club, Shah Alam - GDV RM200million

http://ir.chartnexus.com/fututech/news.php#1

Fututech's second project is another high-rise residential development at Monterez Golf and Country Club, Shah Alam, with a gross development value of RM200million and expected to be launched by early next year.

Chief executive officer Evan Loo expecvt to see these new projects contributing to the earnings from 2015 onwards

With the another future development of GDV RM200million, assumed that the project are running for 5 years. The profit margin for the property development are stood at around 10% to 20%. Assumed that the profit margin stays at 15%, with each year generating revenue of RM66million, profit will be around RM10million only for the Monterez Golf and Country Club's project, which translated into EPS of 10sen per year for five consecutive year.

3. Net cash company - Cash and bank balances RM30million (RM0.33 per shares) with zero bank borrowing

As per quarter report on 30 June 2014, the company's cash and bank balances of RM30million which is RM0.33 per shares. Other than that, the company did not have any borrowing from the bank. Hence the company do not have any cash flow problem for the working capital for the two project. Other than that, since 2013, the company have started to reward the shareholder with dividend payment. Currently, the dividend yield stood at 3.67%.

4. Stable business with high profit margin (External unbilled project: RM130million)

http://ir.chartnexus.com/fututech/news.php#1

As per thebusyweekly newspaper report above, the company currently (as per June 2014) have above RM130million project on sector construction, manufacturing, kitchen and lighting.

Using the latest 4 quarter of result, the company profit margin stood at between 23.8% to 30.7%. If we calculate using 20% profit margin, the future profit for construction, manufacturing, kitchen and lighting will be around RM26million.

Buy at your own risk!!

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