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Friday, July 31, 2015

曹仁超 - 投資股市致勝心法

1.分析時注重基礎,買賣時利用走勢。
2.面對牛熊市,心態應相應調節。
3.牛市莫估頂,熊市莫猜底。
4.第一次出現裂口性上升時(跳空上漲)不妨買進;反之亦然。
5.牛市將盡時,留意「單日轉向」或單周轉向。
6.選股不選市。
7.別投資熱門行業中的熱門股。
8.別投資純利開始走下坡的行業。
9.買入強勢股,拋棄弱勢股。
10.買績優股,不要買低價股。
11.寧選成長股,不選高息股。
12..股價漲時耐心持有,面對虧損應迅速行動。

Homeritz - 3QFY15 Results

Results

  • Homeritz’s 9MFY15 revenue of RM108.31 (+15% yoy) translated into PATAMI of RM16.91 and accounted for 65% of our full year estimation (versus average of 63% of full year earnings).

Deviations

  • We deem the earnings in line with our expectations as historically, 3Q represents on average 21% of full year earnings (versus 24% of our full year estimation for the current quarter).

Dividends

  • A first interim single tier tax-exempt dividend of 1.5 sen was declared in 3Q (FY14: 1 sen).

Highlights

  • 9MFY08/15 review… The group achieved revenue of RM108.31m, an increase of 15% yoy, mainly due to growth in volume of sales and stronger US$. Its PATAMI improved 12% yoy, from RM15.06 in 9MFY14 to RM16.91 in 9MFY15, despite the absence of its pioneer status tax incentive.
  • 3QFY15 review… Revenue increased 25% yoy. PBT was up 53% yoy to RM9.07 in 3QFY15, from RM5.94 in 3QFY14. The improved performance in 3QFY15 compared to 3QFY4 was attributed to the higher sales volume and strengthening US$.
  • Stronger USD… Based on our ec onomist’s projection, RM would strengthen to average RM3.60-3.70 against US$ by year end. Sensitivity analysis shows that every RM0.10/US$ appreciation will boost FY16 net profit by about 6%.

Risks

  • USD weakness against RM; high raw material prices; high labour costs; unexpected economic downturn; and production or operational risks.

Forecasts

  • Our FY16 net profit forecasts are raised by 6.3% to RM38.06m, to account for higher US$:RM assumption of RM3.60/US$ (vs. RM3.50/US$ previously).

Rating

  • Maintain BUY, TP: RM1.42 (+26% upside)
  • Posi tives: 1) the group would benefit from strong US$; (2) its revenue and PATAMI are expected to grow at CAGR of 9% and 23% respectively from FY14 to FYE16; (3) forecasted FY15 net cash per share of 14.7sen; and (4) still attractive FY15E DY of 3.1%, based on 40% payout ratio.

Valuation

  • We raise our TP from RM1.21 to RM1.42 mainly to reflect: (1) higher US$ assumption of RM3.60/US$ (vs. RM3.50/US$ previously); and (2) higher target P/E of 11x (from 10x previously), gi ven Homeritz’s improving earnings visibility.
Source: Hong Leong Investment Bank Research - 31 Jul 2015

RIVERSTONE: As good as the big boys

DBS Vickers analyst: Paul Yong, CFA (left)
As good as the big boys
» Leading nitrile glove manufacturer for the cleanroom segment, with growing ambitions to grow its healthcare segment
» Plans to double annual capacity to at least 8.2bn pieces from FY14 to FY18
» Earnings to grow at a 26% CAGR over FY14-17F, supported by the planned capacity expansion

The Business 
Dominant player in the Class 10 and Class 100 cleanroom glove segment. Riverstone is a dominant supplier of the niche cleanroom sub-segment of high-tech Class 10 and Class 100 cleanroom gloves, with a global market share of 60%. At the overall cleanroom level, Riverstone is estimated to have healthy gross margins of 38-40%, and commands a decent 6-7% of global market share. 

Beneficiary of global demand growth for healthcare gloves. MARGMA estimates that the global market for healthcare gloves is likely to grow at a rate of 8-12% p.a. on the back of increased awareness of personal protection and safety. As a relatively new entrant in healthcare gloves, Riverstone aims to grow revenue from this segment quickly to drive its earnings. 

Capacity expansion to underpin growth. To support growth in both the cleanroom and healthcare glove segments, Riverstone has announced plans to double its annual capacity to 8.2bn pieces by 2018, from its 2014 capacity. With healthy demand in both segments, Riverstone’s earnings could nearly double from RM71m in FY14 to RM141m by FY17F. 
Stock price
(24 Jul 2015)
$1.68
52-week range$0.90 – $1.735
PE FY15F17.4
Revenue FY15FRM579 m
Net profit FY15FRM100m 
Market capS$617 million
Price/Book FY15F4.0
Dividend yield FY15F2.1%
DBS Vickers data 
The Stock 
Fair value of S$1.73 based on 18x FY15 PE. Larger peers Top Glove, Hartalega, and Kossan Rubber are trading at an average of c. 22x FY15 earnings currently, but given its smaller scale, we believe Riverstone should be valued at 18x FY15F PE.

Although currently looking fairly valued, the stock could rerate to 18x FY16 PE or S$2.11 over the next 12 months as the company continues to grow its earnings.

拟2配1发凭单 岩石汽车冀筹1650万

(吉隆坡30日讯)岩石汽车(SOLID,5242,主板贸服股)建议系列企业活动,包括发行凭单、进行雇员认股计划(ESOS)和扩大法定股本。
文告指出,岩石汽车建议发行高达8250万张可转换凭单,每持有2股普通股,可认购1张凭单。
凭单发售价为每张20仙,行使价是每张50仙;把两者包括在内,每张70仙的凭单,相等于公司每股1.31令吉理论除权价(TERP)的折价46.56%。
为了达到最低认购水平,董事部已获数位大股东或董事认购4496万357张凭单,总值899万2071令吉。
当中包括董事经理郭敏资、执行董事郭敏权、大股东郭素霞(译音)和执行董事郭明棋(译音)。
岩石汽车预计可筹资高达1650万令吉,其中的800万令吉将用来购买汽车零件和制造原料,60万令吉应付员工成本,731万5000令吉缴付营运开销,剩余则支付相关开销。
公司也建议发行相等于缴足资本15%的新股,给合格的员工认购。
届时,法定股本将由2亿股或1亿令吉,扩大至10亿股或5亿令吉。

Thursday, July 30, 2015

Gadang 4Q net profit almost triples on higher property, construction contributions

KUALA LUMPUR (July 30): Gadang Holdings Bhd ( Financial Dashboard)’s net profit in the fourth quarter ended May 31, 2015 (4QFY15) almost tripled to RM24.55 million or 11.35 sen from RM8.59 million or 4.37 sen a year ago, on higher contributions from its property and construction segments.

Its revenue for the quarter was also up 19.22% to RM170.48 million from RM142.99 million in 4QFY14, also primarily due to the same reasons, according to its filing to Bursa Malaysia today.

The engineering and construction company also proposed a first and final single-tier dividend of 5 sen per share for FY15 (FY14: 4 sen per share), subject to shareholders’ approval at the company’s forthcoming annual general meeting (AGM).

For the full year (FY15) Gadang (fundamental: 1.7; valuation: 3) saw its net profit come in at RM58.77 million or 27.16 sen per share, up 35.96% from RM43.23 million or 21.98 sen per share in FY14.

Full year revenue grew 7.92% to RM588.12 million from RM544.95 million in FY14.

Gadang expects its financial year 2016 (FY16) results to be better than its stronger FY15 results, due to positive earnings outlook from its ongoing construction projects and continuous sales by its property division at flagship projects.

These include The Vyne residential project in Salak South, its joint development with Cyberview Sdn Bhd in Cyberjaya and another joint venture development with Capital City Sdn Bhd for an integrated development in Tampoi, Johor Bahru.

Gadang’s shares closed one sen or 0.7% higher at RM1.44 today, with a market capitalisation of RM310.96 million.


(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

勝利者全年盈利有望倍增

2015-07-30 17:19

(吉隆坡30日訊)廚具公司勝利者國際(SIGN,7246,主板消費品組)的2015財政年盈利料有望按年增長100%及派高息,分析員維持正面財測不變。

股價創新高

今日收市,勝利者國際最高漲11仙至3令吉零4仙,今年至今漲破60%;閉市漲4仙至2令吉97仙,改寫上市以來新高。

該公司將在下個月公佈2015財政年第四季業績,達證券預測,受高項目營業額、零售銷售成長及利潤改善支撐,2015財政年盈利將介於3千800萬至4千200萬令吉,按年增長超過100%。

勝利者國際2015財政年9個月盈利已超越2014財政年核心盈利31%,因此其2015財政年表現料可輕鬆超越2014財政年的2千380萬令吉盈利紀錄。

末季料派息至少4仙

根據該公司非官方至少30%派息政策估計,達證券看好有望在第四季至少每股派息4仙,加總第一季中期股息每股4仙,2015財政年週息率料超過2.7%。

截至2015年6月止,該公司訂單企於1億5千萬令吉,佔2016財政年項目營業額預測的60%。

不過,達證券並不擔心,因該公司目前已在競標4億令吉計劃支撐未來盈利成長。

潛在競標計劃當中,達證券預計,碧桂園金海灣廚房工程將很快頒發,因該項於2013年8月推出的發展計劃預定在2016年完成及交屋。

另外,勝利者國際也將競標2014年2月推出的巴特西第二期項目廚房工程,不過該計劃僅於2017至2018年完成,合約料在2016年頒發。

有鑑於此,維持2015至2017財政年財測及3令吉65仙目標價不變,重申“買進”評級,主要是考量產業趨勢改變對該公司影響正面,有利於未來盈利。(星洲日報/財經‧報導:郭曉芳)

建材需求走高‧新志興 SCH 趁勢而上

015-07-30 13:18
  •  
(吉隆坡29日訊)泛婆羅大道工程、捷運二線及輕快鐵三線工程需大量建材需求,核心業務採石工業產品和機械配備供應的新志興(SCH,0161,創業板貿服組)可從中受惠。

艾畢斯研究表示,隨著上述工程浮出台面後,建材原料及設施的需求量同步走高,因此看好該公司機械設備(M&E)營業額可從中受惠。

M&E目前貢獻該公司2015財政年首9個月39%的營業額,同期對比為23%。
該公司目前處於淨現金狀態,分析員預期2015及2016財政年的營業額可提高10.3及18.6%,淨利也相對提高至24.4及22.1%,維持“買進”
評級不變,2016財政年本益比預計為13倍,目標價為34仙。

股價:26仙
總股本:4億1千223萬4千股
市值:1億零718萬零840令吉
30天日均成交量:102萬股
最新季度營業額:1千806萬2千令吉
最新季度盈虧:淨利212萬7千令吉
每股淨資產:15.79仙
本益比:13.7倍
周息率:3.85%
大股東:劉文林(約17.92%)(星洲日報/財經)

Investor: "My high-yield stock picks are ..."

StockCategoryDividend/
share
Price*YieldNotes
AIMS AMPREIT11.68c1.507.8%High Yield
CacheREIT8.58c1.157.5%High Yield
Religare
Business Trust7.56c0.9957.6%Healthcare
CroesusBusiness Trust7.6c0.938.2%
Japanese Retail
Regal ReitREIThk 16.22.177.5%HK Hotels, P/B 50%, Hkd
Valuetronics

Electronics3.5c0.4657.5%Strong B/S, Hkd
Global Invest
Asset Mgt1.5 c0.14910%P/B 70%
Hock Lian SengConstruction4.0c0.439.3%Strong B/S, Deep Value
* Price as at 10July15

Philips LED7.14For Philips, Valuetronics manufactures LED light bulbs and PCBA for their shavers, toothbrushes and hair trimmers.I RECENTLY COMPILED a list of high yield stocks and shared it with some close friends. The stocks in this list, in my view, would provide a solid stream of dividend income for years to come.

Financial position for target non-Reit stocks, such asValuetronics, Hock Lian Seng and Global Investment,are strong.

Hock Lian Seng, a cyclical stock and with sgd173 million cash backing, is too cheap to ignore at this price.

On the REIT/Business Trust picks, Cache and AIMS AMP are niche Industrial Reits which are well managed.

Religare Health Trust should continue to perform well in its healthcare business in India. Based on current INR forex rate, the yield for Religare should be about 8%.

Regal Reit, listed in HKSE and owns a string of mid tier hotels in Hong Kong, is a deep value pick (P/B < 50%) and supported by solid recurrent yield.


In times of volatility and market weakness, I believe investors should raise their exposure to quality high yield stocks. Such a contrarian strategy should help to cushion the impact of falling equity prices and to provide solid income stream.

I have added Soilbuild Business Space Reit to my list. With estimated dividend of 7.5% and material exposure to the Business Park sector, I believe this Reit will stay resilient during market uncertainty.

USD (hence HKD) is appreciating against SGD and this trend may continue into 2016. This should benefit Valuetronics and Global Investments (50% exposure to USD, HKD).

Am vested in my High Yield Stock list.  
Please note to do your own research before committing.
http://www.nextinsight.net/index.php/story-archive-mainmenu-60/927-2015/10147-investor-my-high-yield-stock-picks-are

CIMB Research keeps Reduce for Jaya Tiasa, Hold for Ta Ann

KUALA LUMPUR: CIMB Equities Research is keeping its Reduce call on Jaya Tiasa due to the concern on its weak estate productivity and our Hold call on Ta Ann due to limited share price upside.
It said on Thursday that between these two players, it prefers Ta Ann which will offer a decent dividend yield of 4.7% in FY15.
“Investors who seek greater share price upside should switch to the pure downstream timber players, such as Evergreen Fibreboard (Add) and HeveaBoard (Add),” it said.
CIMB Research said the ringgit has fallen to its 17-year low against the US dollar this week -- down 9% year-to-date and 20% on-year amid weak commodity prices and strengthening of the US dollar against most major currencies.
A weak ringgit will benefit the timber players as timber products are mostly exported and priced in US dollar.
“However, the impact on the share prices of the Sarawak timber players could be muted as a result of weak CPO prices. We maintain Neutral on the sector with Ta Ann as our preferred pick between the two Sarawak timber stocks that we cover,” it said.
According to Japan Lumber Report, the supply of tropical logs has been tight due to the state government’s efforts to fight illegal logging. This has pushed up the FOB prices of Meranti Regular, the benchmark price for Sarawak logs, from US$270-US$295 per square metre in Dec 2014 to US$290-US$295 in July 2015.
Meanwhile, trade data from Japan’s customs shows that the CIF prices of plywood imported from Malaysia averaged at US$572 in May 2014.
“We are keeping our price forecasts for plywood at US$580 and Meranti Regular at US$295 for 2015. The YTD price performances of these timber products in US$ terms broadly meet our expectations.
“However, there is an upside to our projections of Jaya Tiasa and Ta Ann’s timber earnings as we have assumed an exchange rate of RM3.70 to US$1 in our earnings models.
“This is in line with our current house’s view but lower than the spot US$/RM rate of 3.81. Should the current exchange rate persists, we may raise our FY15-17 net profit forecast for Jaya Tiasa by 11%-30% and Ta Ann by 6%-13%,” it said.

OWG rises as much as 6.12% as CIMB Research ups target price

KUALA LUMPUR (July 30): Shares of Only World Group Holdings Bhd (OWG) gained as much as 6.12% or 17 sen in the morning trade to RM2.95 today, after CIMB Research raised its target price for the stock to RM3.66 and remarked that it was positive on OWG’s recent acquisition of 60% in Escaperoom Holdings Sdn Bhd.

As at 2.36pm, OWG has pared some gains and was trading at RM2.91, up 13 sen or 4.68%, with 465,300 shares done. The current price gives it a market capitalisation of RM540.2 million.

The counter is one of the top gainers on Bursa Malaysia today. The stock has risen over three times from 87 sen on Jan 28 to its current price of RM2.91.

To recap, OWG announced it was buying a 60% stake in Escaperoom for RM5.4 million earlier this week. The acquisition comes with a guarantee profit of RM4 million for two financial years ending June 30, 2016 (FY16) and FY17.

In a research note dated July 28, CIMB Research said it has raised FY16-FY17 earnings per share (EPS) forecast by 1% to 2% to include profits from the Escape Room and raised its target price for OWG from RM3.60 to RM3.66.

“We view the acquisition positively as it is cheap and earnings-accretive (acquisition P/E of 4.5 times versus OWG’s FY16 P/E of 22.8 times),” it said.

CIMB Research said the acquisition also opens the doorway to mega expansion opportunities in Genting’s properties, globally.

The research house added that re-rating catalysts are OWG’s successful opening of Komtar by year-end and the announcement of light railway transit (LRT) track from Penang airport to Komtar.

CIMB Research suggests investors to continue to accumulate shares in OWG as the stock remains one of its high-conviction small cap picks, locally.

“We continue to believe that over the next 2 to 3 years, OWG will be a multi-bagger, up to RM8.67 per share (raised by another 67 sen since our last note with the addition of potential earnings from Escape Room’s expansion), with various events and earnings catalysts that will continue to re-rate the stock,” it said.

Meanwhile, in an interview with The Edge TV yesterday, OWG executive director Datin Jean Koh said she believes the share price of the company should be able to be maintained at the current level.

She was of the opinion that the share price rally was mostly based on market sentiment as people are aware of the Komtar project, which is expected to start operating by November, and saw earnings potential from it.

“With the number of attractions and the way we are going to market it, we expect Komtar [project] to contribute in a big way to the group’s earnings,” she added.

Muhibbah Engineering bags RM158.2 million contract

KUALA LUMPUR (July 30): Muhibbah Engineering (M) Bhd ( Financial Dashboard) has bagged a contract worth RM158.2 million for civil, concrete and buildings works for offsite areas of the steam cracker complex for the refinery and petrochemicals integrated development (RAPID) project in Pengerang, Johor.

In a filing with Bursa Malaysia today, Muhibbah Engineering (fundamental: 1.1; valuation: 0.8) said it has accepted the award from Toyo Thai Malaysia Sdn Bhd, a wholly-owned subsidiary of TTCL Public Company Ltd.

The contract is under Package No. 5: engineering, procurement, construction and commissioning (EPCC) of the steam cracker complex for RAPID project.

The construction is scheduled to commence in August 2015 and is expected to be completed by November 2017.

“The contract is expected to contribute positively to the earnings and net assets of Muhibbah group for the current and future financial years,” said Muhibbah.

Muhibbah said TTCL is listed on the Stock Exchange of Thailand and is undertaking part of the EPCC contract under Package No. 5: EPCC of the steam cracker complex for the RAPID project, which was awarded to a consortium of Toyo Engineering Corporation and Toyo Engineering & Construction Sdn Bhd.

As at 2.28pm, Muhibbah was unchanged at RM2.25, giving it a market capitalisation of RM1.05 billion.


(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

MBSB-Muamalat merger, full-fledged Islamic bank on the cards?

PETALING JAYA: Malaysia Building Society Bhd (MBSB), one of the non-conventional banks in the local financial industry, is on track to obtaining a full-fledged Islamic banking licence with plans under way for a merger with Bank Muamalat.
Sources said the plans were being crafted as part of MBSB’s vision to obtain a full-fledged Islamic banking licence.
Currently, the largest shareholder in Bank Muamalat is DRB-Hicom Bhd, which controls 70% of the group, followed by the Government’s investment arm Khazanah Nasional Bhd that has a 30% stake.
When DRB-Hicom took over Bank Muamalat in 2008, Bank Negara had imposed a condition that its stake had to be pared down to 40%. DRB-Hicom had acquired the stake from Bukhary Capital.
In 2011, Khazanah’s managing director Tan Sri Azman Mokhtar said that its stake in Bank Muamalat was a “non-core holding”, which it was seeking to dispose of.
As for MBSB, which is 65%-controlled by the Employees Provident Fund (EPF), a migration to becoming a full-fledged conventional bank is a step it needs to take to increase its competitiveness.
Towards this end, MBSB president and chief executive officer Datuk Ahmad Zaini Othman had said that a corporate exercise was inevitable for the financial institution in an increasingly competitive landscape.
One of MBSB’s setbacks is its inability to tap low-cost funds from the money market that are accessible to conventional banks.
Without being able to tap into low-cost deposits, MBSB finds it difficult to grow its loan base.
Ahmad Zaini had said that for the company to get out of this “no man’s land” and be on a firmer growth towards a financial institution platform, it needed to seriously look into a corporate exercise in the “very near” future.
Sources said if the plan for the merger takes off, EPF’s stake in the merged entity would be down to 40%, while Khazanah and DRB-Hicom’s interest was likely to be trimmed to 20% respectively.
“The rest will be held by the public,” said a source.
A source noted that MBSB’s interest in Bank Muamalat was for the Islamic banking licence.
Bank Muamalat is the country’s second standalone Islamic bank, after Bank Islam Malaysia Bhd, and had total assets of RM22.21bil as of end of last year. MBSB, meanwhile, has total assets of about RM30.97bil.
DRB-Hicom, which has to reduce its interest to 40% from the current 70%, has failed to do so despite having suitors in the past.
It had been reported that among the suitors in the past were Bank Islam’s parent, BIMB Holdings Bhd, and Affin Holdings Bhd.
It is believed that the dilution of its stake in Bank Muamalat has been a prolonged process for DRB-Hicom because it was looking at an exercise that could add value and increase the bank’s penetration into the Islamic financial business.
Pricing was also said to be a key issue, said banking sources.
Bank Muamalat’s pre-tax profit dropped to RM102mil in the nine months of financial year March 2015 as compared to RM130mil in the same period previously.
It has been working quietly to clean up its books over the last few years.
As for MBSB, it has been aggressively providing for its loans for its portfolio to be on par with the standard of conventional banks. This has caused it to set aside higher provisions in the last two quarters.
In its first-quarter profits as of March 31, this year came in 37% lower year-on-year dragged down by provisions for an impairment loss on loans, advances and financing amounting to RM101.32mil.
In the fourth quarter ended Dec 31, 2014, its provisions for loan losses came to RM100.1mil, while the collective impairment for FY14 stood at RM177mil. These impairments were mainly made for its mortgage financing portfolio.
MBSB’s net non-performing loan (NPL) ratio has come down to 4.2% from 5.4% a year ago. It is looking to reduce NPLs to below 3%.
MBSB had been part of a three-way merger with CIMB Group Holdings Bhd and RHB Capital Bhd that was aborted in January.
Since then, Bank Islam and Kuwait Finance House (M) Bhd were said to have been on its radar, but nothing had materialised.
The company had said that it was planning a capital-raising exercise of around RM3bil to ready itself for a merger exercise.
MBSB finished five sen higher to RM1.76 yesterday, while DRB-Hicom ended one sen up to RM1.41.

CDW: Impending turnaround with high dividend yield

Excerpts from analyst's report


renfred_sunsineKGI Fraser analyst: Renfred Tay (left)

We initiate coverage on CDW, a Japanese manufacturer of LCD backlight units (BLU) to a major Japanese LCD manufacturer, with production facilities based in China. 

The company has previously focused its BLU production on gamesets, but is now positioned for a switchover to smartphones.  
 


Transitory disappointment for FY14.
The demand for gamesets is on a downtrend as consumers switch to playing their games on smartphones from traditional handheld gamesets. CDW’s attempt to switch to smartphones hit a snag in 2014 due a supply shortage in light guide panels (LGP) that are 0.3mm or thinner. We are expecting FY14’s performance to be weak as a result.  

Strong comeback in FY15. CDW will be injecting RMB15m (c.US$2.4m) into its key supplier for LGPs to ease its supply bottleneck. This should secure about 24m LGP units (or about 60% of total BLU production in 2013) per year for CDW. Higher BLU ASP is also expected for smartphone BLUs.

Based on our production projection and ASP for FY15F, we are expecting FY15F core profits to rise back to US$9.6m from US$6.7m in FY14F (+42% yoy).  

CDW_dividend2.15

Get paid in USD while you wait. CDW’s USD dividends should also be a major boon for investors, given the expected USD appreciation against SGD. Dividend pay
out has also been increasing since FY09 from 0.5 UScts to 1.2 UScts in FY12 and FY13. CDW has a minimum payout ratio of 40% of net profit and tries to at least match the same payout as the previous year.

Although we expect a weak set of results for FY14, we believe the company will be able to maintain its 1.2 UScts pay out (8+% yield), given its large net cash position, and strong cash flows.  

Attractive valuation. CDW is currently trading at 7.2x FY15F P/E, still very attractive given

CDW2.151) Its impending turnaround with a 47% growth in core net profit in FY15F,

2) its strong balance sheet and cash flows

3) its high dividend yield that is likely to be maintained,

4) dividends paid in USD (USD appreciation vs. SGD since 2012) and

5) net cash of approx. S$0.13 per share vs. share price of S$0.196.

We believe a re
rating of the stock is on the cards as more discover this hidden gem. Our target price for CDW is set at S$0.25 based on 9x FY15F P/E.
http://www.nextinsight.net/index.php/story-archive-mainmenu-60/927-2015/9683-cdw-impending-turnaround-with-high-dividend-yield

CDW: "A Gem Not To Be Missed," says RHB

Excerpts from analysts' report

A Gem Not To Be Missed


JarickSeet11.14RHB Research analysts: Jarick Seet (left) & Terence Wong, CFAWe initiate coverage on CDW with BUY and a DCF-backed TP of SGD0.31 (55% upside). 

CDW produces and supplies high precision components and operates through three segments: i) LCD backlight units, ii) office automation, and iii) LCD parts. 

At 1.8x FY15 ex-cash P/E, we believe CDW, with a high potential dividend yield of 8-9%, is trading at undemanding valuations.

With the shortage of its key component set to be resolved, we expect earnings to recover in FY15.

CDW_cash4.15CDW's cash makes up 76% of its market cap. 


 Earnings recovery ahead on doubling of capacity. CDW recently invested CNY10m in Suzhou Pengfu Photoelectric Technology Co Ltd (Pengfu) to double its production capacity of ultra-thin light guide panels used in its mobile segment to 2m units per month. 

Going forward, Pengfu is obliged to accept orders from and supply to CDW on top priority. We expect this to resolve the supply shortage of light guide panels, which was one of the key reasons for CDW’s weak FY14 performance. With full production by 2Q15, we believe this should help CDW achieve a stronger FY15. 

 Potential high dividend yield of 9% for FY15. With a dividend payout policy of at least 40% of NPAT, CDW paid a total dividend of 1.2 cents (USD) for FY14, which resulted in an attractive dividend yield of 7.8%. The high yield was partly aided by the appreciation of the USD against the SGD. With expectations of an earnings improvement in FY15, we expect CDW to pay out better dividends going forward, translating into a potential 8-9% yield. 

Stock price
(24 Apr 2015)
20 cents
52-week range
13 – 23 cents
PE (ttm)
8.4
Estimated P/E (12/2015)
7.1
Market cap
S$95 million
Price/book
1.0
Dividend yieldRHB data
8.1%
 Net cash = 76% of market cap. CDW’s business is has been cashgenerative over the years and currently 76% of its market cap is made up of net cash, despite paying generous dividends. 

 Initiate coverage with BUY and DCF-backed TP of SGD0.31 (TG: 0%, WACC:12%), representing a 55% upside. Currently, CDW is only trading at 1.8x FY15 ex-cash P/E which we consider low. Going forward, with the supply shortfall, we believe earnings would most likely recover in FY15. We have also found out that CDW has placed over 90% of its cash in more prominent Japanese banks.

 Key Risks. Customer concentration risk (one customer contributed 70% of its FY14 revenue). On-going supply of key components.

Full report here. 

Wednesday, July 29, 2015

Expert on 4 types of CASHFLOW SHENANIGANS

Source: http://www.nextinsight.net/index.php/story-archive-mainmenu-60/927-2015/10159-cash-flow-shenanigans?showall=&limitstart=

This article is republished, with permission, from the latest CFA Singapore quarterly newsletterwhich is produced by NextInsight.

CFRA is the global leader in forensic accounting research. Its Vice President, Jennifer Latz, was in Singapore in June to share her insights with CFA Singapore members on how companies may boost figures of cash flow from operations.
According to Ms Latz, there are four broad categories of cash flow manipulation – fraud, non-GAAP metrics, timing in payment of suppliers and geographical allocation.
Here are a few examples from the discussion by Ms Latz, of how some companies make their cash flow metrics appear prettier.
Cash Balance Fraud
A fraudulent financial statement is the hardest to spot because one relies on the accuracy of numbers to draw conclusions.

Satyam Computer Services was a case of fraud that unfolded in 2009 when its chairman confessed to manipulating accounts by US$1.47 billion.
Investors wondered why US GAAP financials on Satyam accounts for the year ended March 2007 showed a highly unusual item: negative proceeds from sale of fixed assets. Indian accounting standards on the same showed positive proceeds.
It turned out that its senior management prepared materially false bank statements from fiscal year 2003 through September 2008.
During the 2008 Satyam audit, external auditors received conflicting information from two different branches of the same Indian bank – one showed the presence of cash balances of US$176 million, another showed zero.
Unfortunately, the external auditors failed to make direct contact with the banks, choosing to rely exclusively on information provided by the Satyam management.

An investor can fall back on a couple of questions when examining company accounts:
  • Is this really cash that is related to customers, suppliers or employees?
  • Is the increase in cash flow from operations sustainable?
Faking Revenue Quality
Factoring is a big thing for Asian companies that want to improve the appearance of their cash flow metrics. A business can sell business receivables to a financial institution (a factor) at a discount to the outstanding amount stated on the invoice. The debtor would then direct his payment to the new owner of the invoice.
That are two types of factoring: The first is when the invoice ownership is transferred with recourse, giving the factor (purchaser of the receivables) the right to collect the unpaid invoice amount from the transferor (seller) in event of account debtor default. The second is when the invoice ownership is transferred without recourse, which means the factor must bear the loss if the account debtor does not pay the invoice amount.
formulaeHigh quality revenue is marked by predictability, profitability and diversity. The factoring of receivables without recourse can mask revenue growth that ends up with uncollectible receivables. Huge increases in factored receivables will decrease the Days Sales Outstanding (DSO), giving the appearance that the company collects quickly on its credit sales. A low DSO can be due to the derecognition of receivables.
Factoring will also provide an early boost toCash flow from Operations because of earlier cash inflow (from the factor), when there was actually a haircut to the receivables.
Faking Cash Conversion Rate
Here is an example of a company meeting a steep cash conversion target by not paying suppliers.
Elekta, the leading provider of radiotherapy equipment for treatment of cancer and brain disorders, had steep targets for revenue growth and cash conversion.
Cash conversion was 44% during 9MFY2013 versus a full-year target of 70%. During 4QFY2013, it grew revenues by 20% and raised full-year cash conversion to 76%, thereby achieving both full year targets.
However, the time it took to pay suppliers increased to an all-time high (Days Payable was close to 60 days). This was not matched by an increase in inventory. Days Sales of Inventory declined year-on-year.
Typically, when a manufacuring or distribution company is in its growth phase and its payables increase, it is important to check the payables increase against the inventory trend.
If a company discloses the amount of receivables it has factored (as in the case of Alcatel Lucent above), an analyst can adjust the DSO by adding the outstanding balance of sold receivables to the receivables on the balance Alcatel Lucent 2sheet. If the company does not disclose factored receivables, its quantum can be inferred by movements in finance/interest expense. When receivables are factored, a discount is effectively ‘paid’ to the buyer and this discount is recorded as a finance cost by the seller. Rising finance costs may highlight higher factoring levels. Chart: CFRA Research
Accounts Payable Financing
Here is an example of how bank financing on accounts payable can boost cash flow from operations.
Sinopharm, a leading PRC pharmaceutical company had increased its FY2012 borrowings by Rmb 2.2 billion to Rmb 16.1 billion. However, this did not match its cash flow statement, which had the following anomalies.
  • Increased borrowings did not increase its cash flow from financing.
  • On the other hand, it reported a net use of Rmb 2.7 billion of cash from borrowing activities.
  • Trade payables appeared as a Rmb 12.0 billion source of cash.
  • Balance of payables increased only Rmb 7.6 billion during the year, even with M&A activity.
It turned out that Sinopharm had an accounts payable financing program with certain banks whereby the bank repaid accounts payables on behalf of the company with an equivalent sum drawn as borrowings. Such a draw-down of borrowings is a non-cash transaction. The Group lowered its reported cash outflow from operations by not paying its supplier directly.
Only when the company repays its borrowings is there financing cash outflow.
“When the bank paid off the payables, there should have been an entry to reduce cash flow from operations that is net off against cash flow from financing,” said Ms Latz.
Sinopharm’s cash flow presentation of this payable financing program enabled it to report positive cash flow from operations in 1HFY2013 and FY2012. Adjustment to account for use of cash for payables would have resulted in negative cash flow from operations.
Exclusion of Interest Paid
Under US GAAP, interest is classified under cash flow from operations. On the other hand, under IFRS, interest may be classified under cashflow from financing. Since cash flow from operations is boosted if a company classifies interest paid as a financing activity, the analyst who is doing peer comparison needs to check that interest is classified in a similar manner.
In the case of food and industrial raw materials trader, Olam, interest and taxes are excluded from Net Operating Cashflow in its investor presentations.
It also presents an adjusted free cashflow figure which is bumped up by readily marketable inventories.
Hiding Capex in a JV Vehicle
By classifying deferred payment for capex as financing, rather than as use of cash in investing, a company can make its capital expenditure look very healthy.
Intel formed a joint venture with Micron in January 2006 to manufacture NAND flash memory products. The JV was IMFT and production began in early 2006.
As part of the initial capital contribution of US$1.2 billion to IMFT, in exchange for a 49% share stake in IMFT, Intel paid US$615 million in cash and issued US$581 million in non-interest bearing notes.
The table below shows that Intel masked US$615 million of capital expenditure as purchases and investments in non-marketable equity securities.
Intel
CFRA analysis of Intel's cash flow

During 2006, Intel paid the entire balance of US$581 million toward the non-interest bearingnotes,and posted it as a financing activity on the consolidated statement of cash flows.

It is important to look at cash flow from capital contribution to JVs. This can be hidden in cash flow from operations. Ask the management:
  • “Is the cashflow capital expenditure to fund infrastructure or equipment?”
  • “Is it working capital for operations?“
Then, reclassify the financial metrics accordingly.
Capital Leases
The use of capital leases can also make cash flow from investing activities look very healthy and provide an unsustainable boost in cash flow from operations.
Capital leases increase the company’s accounts payables as it needs to make principal payments on the capital investments going forward.