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Saturday, November 22, 2014

Why Zelan (2283)? (Target price RM0.72 to RM0.90)

Source: http://klse.i3investor.com/blogs/undervalue/63542.jsp

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



Estimated EPS in 2015 (total share 844,895,000)

a) Meena Plaza - EPS 4.3sen (Profit RM37mil -10% profit margin)

b) Pengerang, Johor - EPS 2sen (Profit RM16.5mil - 10% profit margin)

c) Drawbridge in K. Terengganu City Centre - EPS1.1sen (Profit RM9.6mil - 10% profit margin)

d) International Islamic University Malaysia in Gambang, Pahang - EPS1.5sen (Profit RM13mil - 10% profit margin)

Total EPS in 2015 (estimated) - 9sen

Target price:

PE8 - RM0.72

PE10 - RM0.90

Current price - RM0.355

Potential upside - RM0.365 (103% increase) and RM0.545 (154% increase)

1) Multiple project on hand (estimating RM1.2billion unbilled project set to be utilised in 30 months)

a) AED515,490,023.94 (equivalents RM463mil) to for Meena Plaza Mixed Use Development Project, Abu Dhabi. United Arab Emirate (1 Oct 2014 to 31 Dec 2015) - 15months

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1594825

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1728185

b) RM248,499,647.93 for The Provision of Basic Design, Detail Engineering, Procurement, Construction & Commissioning of Material off loading facilities jetty at Tanjung Setapa for Rapid Project at Pengerang, Johor - Package 20B1 - 18months

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1693765

c) RM248,728,660.00 for The Proposed Construction and Completion of the Drawbridge Connecting Muara North and Muara South in Kuala Terengganu City Centre for The East Coast Economic Region Development Council - 13 August 2014 to 14 March 2017 - 135weeks

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1698185

d) RM391.6mil for Development of the Centre for Foundation Studies (Phase 3) of International Islamic University Malaysia (“IIUM”) in Gambang, Pahang - Jan 2013 to 15 Jan 2016 - 36months

Annual Report 2014 - page 11

e) Rm215.2million The second subcontract package at Tanjung Bin is the design and construction of cooling water intake, cooling water filtration and pump station and offshore water discharge culvert - to be completed in 31 October 2014

Annual Report 2014 - page 11

f) RM307,374,703.00 for Concession for the Development of Integrated Transport Terminal at Gombak, Selangor - extended the completion date to 13 September 2015

http://announcements.bursamalaysia.com/EDMS/edmswebh.nsf/all/B8B49D9D9E7EFD3F482579D2005DE262/$File/ZB%20-%20GITT.pdf

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1731701



2) Strong Cash Flow

Refer to the quarterly report as per 30 June 2014, the cash and bank balances stood at RM70mil and borrowing stood at RM158mil. As per announcment on 2 Sept 2014, Zelan have received AED121,638,624.07 (equivalents to RM109mil) from Meena Holdings LLC, the owner of Meena Plaza Mixed Use Development Project.

http://www.bursamalaysia.com/market/listed-companies/company-announcements/1728185

Hence the cash and bank balances for Zelan will increase from RM70mil to RM179mil!! (equivalents to RM0.21 per shares)





3) Experienced Managing Director

Encik Adnan bin Mohammad, aged 54, a Malaysian, was appointed to the Board as Managing Director on 17 March 2014.
His last position was the Managing Director of Faber Group Berhad in April 2007 until January 2014 before his present appointment in Zelan Berhad.

Since the appointment of Encik Adnan Bin Mohammad, a lot of new projects have been signed by Encik Adnan and the company balances sheet have been improved significantly.

Here are some of the contribution from Encik Adnan:

a) RM248,499,647.93 for The Provision of Basic Design, Detail Engineering, Procurement, Construction & Commissioning of Material off loading facilities jetty at Tanjung Setapa for Rapid Project at Pengerang, Johor - Package 20B1 - 18months

b) RM248,728,660.00 for The Proposed Construction and Completion of the Drawbridge Connecting Muara North and Muara South in Kuala Terengganu City Centre for The East Coast Economic Region Development Council - 13 August 2014 to 14 March 2017 - 135weeks

c) Chased and successfully received the debtor payment of AED121,638,624.07 from Meena Holdings LLC which have been dragging for such a long time

d) Development of Integrated Transport Terminal at Gombak, Selangor - extended the completion date to 13 September 2014 to avoid paying compensation for failure of project.

e) Able to turn around the financial position of Zelan from loss to profit.

f) Able to recover RM9.7million from Indonesia project

g) Focusing more local projects rather than oversea projects. Other than the project from Dubai, all remaining project will focus on local. Hence debts recoverly risk have been reduce significantly due to most of the projects received from governments.

h) Cash in bank improved significantly from RM24.6mil (as per 31 Mar 2014) to RM179mil (estimated as per 30 Sep 2014) while bank borrowing increase from RM124mil (as per 31 Mar 2014) to RM158mil only (as per 30 June 2014)

Correct me if I am wrong. Trade at your own risk!!

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