Favorite Links

Tuesday, March 31, 2015

KNM Group Berhad - “Sawadee Kap”


  • The recent venture into Thail and’s renewable energy ethanol market comprises 2 phases. Phase 1 with capacity of 200k litres/day is expected to be completed in 4Q15 and fully operation in FY16. Phase 2 will have similar capacity and needs 12 months to construct. Equity investment for Phase 1 is about RM89m and estimated payback period of <5 years.
  • The outlook for ethanol market is favourable given the rising ASP (Price of THB 27/litres versus cash cost of THB 15- 16/litres) with government policy to promote the usage of bioethanol. Supply of main raw material, Cassava, should not be an issue given its 49% stake in Impress Farming which is involved in trading and supply of cassava.


  • We are positive about this new venture as it is inline with company’s aim to transform from project based earnings to more recurring income. With an assumption of i ) ASP of THB 25/litres (vs. current price of THB 27/litres, ii) Cost of THB 2.3 kg for cassava, iii) utilisation of 80%, iv) 7% financing rate and v) 72% effective stake, we estimate Phase 1 has potential to contribute additional ~RM22m (or add 17%) to bottomline in FY16 (Ref Fig 1). Potential Phase 2 will double the capacity with capex estimation of 50% of Phase 1. Inclusion of Phase 1 will boost our TP to RM1.03 (+17%).
  • The propose construction of a bio-ethanol plant (~95% completed) is in line with Thail and’s Alternati ve Energy Development Plan (AEDP-2012-2021) to boot ethanol usage to 3m litres/day by 2015 and 9m litres/day by 2021.
  • Recent fall in crude oil price has caused concern on the demand for bio-ethanol. Our study shows that E10 95 remain trading at 16% discount to Gasoline 95 since June 14, albeit E85 discount has narrowed from 31% to 10% (Ref Fig 3&4). We believe the majority of bio-ethanol consumption remains E10 95 (~70% of total ethanol usage). According to Department of Energy in Thailand, bio-ethanol consumption has increased by average 16% YoY in Jan 15 and Feb 15 despite crude oil price fell > 40% since June 14.
  • The recent JV with Korea-based Hansol (40:60) will be bidding for some biomass projects in Malaysia. The cont ract size is ranging from RM100m to RM300m. We understand there are numerous tenders for biomass projects.
  • With the RAPID project proceeding, we expect to see continuous contract newsflow. We understand that KNM has a good chance to secure subcont ractor jobs from some refinery package in the near term. Together with UK Peterborough biomass project, we expect to see significant contribution of income from recurring renewable energy division in the future (Ref Fig 2)


  • i) Announcement of more RAPID contract win(s); ii) Financial closing of EnergyPark Peterborough; iii) Additional contribution from Renewable Energy business in Thailand.


  • Fluctuation in oil price; Project execution ability; Delay in contracts award.


  • We maintained our BUY call with unchanged target price of RM0.88 based on unchanged 11x FY16 P/E. Our TP have not factored in value from EnergyPark Peterborough and Thailand’ renewable energy business yet. KNM-OR could be cheaper entry due to 1 free warrant for 2 rights (Ref Fig 5).
Source: Hong Leong Investment Bank Research - 31 Mar 2015

Oil & Gas - Offshore Support: The sun is setting for now

We initiate coverage on Singapore's O&G Rig/OSV owners (Offshore Support) with an UNDERWEIGHT rating: Pacific Radiance (HOLD), Nam Cheong (SELL) and Ezion (HOLD). We estimate they may still have 10-30% more downside to reach valuations comparable to global peers. International rig and OSV operators (Transocean, Seadrill, Ensco, Tidewater, Hornbeck) elsewhere are trading at 50% avg discount to their book values (even after massive write-downs in recent quarters) compared to SG companies' 20% discount (without any write-downs so far).

Earnings unreliable for now
Valuation using earnings for rig/OSV owners is a little tricky due to the risks of order cancellations and dayrate renegotiations in this current environment. Our base case assumes low oil prices to persist this year leading to more capex cuts by upstream companies. This in turn could lead to contract renegotiations or in some instances, contract cancellations (Saudi Aramco and Pemex, both NOCs and deemed resilient in downturns, are cutting costs and cancelling contracts).
Difference in consensus estimates is as wide as the Pacific Ocean
The two top consensus calls in mid-cap energy sector – Ezion and Pacific Radiance – have earnings estimates that range as wide as 50% for FY15 and FY16, according to Bloomberg data. This basically shows the difficulty in trying to estimate earnings when volatility in oil prices is causing uncertainty for companies’ operations and expansion plans. Nevertheless, we still used earnings multiple for the three companies in this sector report because we expect these companies to remain profitable.
O&G companies may have 10-30% more downside
Casting earnings based valuations aside and utilising P/B ratios of international rig and OSV operators, we see Singaporean Rig/OSV owners having 10-30% more downside to reach valuations that are comparable to their global peers that are trading at 40-60% discount to their book values, in spite of the massive write-downs these global companies have taken in past quarters.
Asset values as a floor guide
We see the 10-30% downside values as providing a floor in this oil industry down cycle. Companies with higher net gearing levels (net debt to equity ratio) could face even higher downside risks if they have to take write-downs on assets. Listed companies utilise high levels of borrowings to fund their asset purchases (except CH Offshore) and hence magnify their risks when cash flows come under pressure upon contract cancellations. The net gearing of Singapore O&G asset owners ranges from 50% (Pacific Radiance) to 250% (Vallianz). We believe those with net debt higher than 100% (e.g. Ezion, Swiber, Vallianz, Swissco, Marco Polo, Ezra) could face severe headwinds as we see lower dayrates affect the companies in 2H15. (Read Report)

Source : KGI Fraser Research

Crescendo's 4Q net profit boosted by change in sales mix

KUALA LUMPUR (Mar 31): Crescendo Corp Bhd posted a 16.9% increase in net profit for its fourth financial quarter ended Jan 31, 2015 to RM34.6 million or 15.2 sen a share, mainly contributed by a change in sales mix with higher proportion of sales of high margin industrial properties.

The group's revenue for the quarter increased by a marginal 0.8% to RM75.3 million, from RM74.6 million previously, said Crescendo in a Bursa Malaysia filing this evening.

For the financial year ended Jan 31, 2015, Crescendo posted a 1% decrease in net profit to RM119.9 million, from RM121.1 million a year before. Revenue has declined 13.5% to RM268.5 million, from RM310.4 million, caused by lower sales in industrial properties and concrete products.

"In FY16, the group will continue to focus on the development of industrial, residential and commercial properties with the expectation of challenging market conditions. The unrecognised revenue from the total committed property sales as at Jan 31, 2015 and new sales committed after Jan 31, 2015 is RM78 million," said Crescendo of its prospects, adding that it expects its performance to remain satisfactory for FY16.

Crescendo closed unchanged at RM2.49, with a market capitalisation of RM566.4 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.)

Cypark 1Q net profit up 10.4% to RM8.53 mil

KUALA LUMPUR (Mar 31): Integrated environmental engineering and technology provider Cypark Resources Bhd posted a net profit of RM8.53 million in the first quarter ended Jan 31,2015 (1QFY15) up 10.4% compared to RM7.73 million a year ago, on higher revenue generated from landscaping and infrastructure projects.

This translated into an earnings per share (EPS) of 4.34 sen, higher than 4.32 sen in 1QFY14.

Revenue rose 16.4% to RM59.92 million, compared to RM51.46 million a year earlier, its filing to Bursa Malaysia today showed.

Meanwhile, according to separate press statement, Cypark said its revenue for the landscaping and infrastructure division saw a robust increase of 90.5% or RM10.0 million to RM21.1 million in 1QFY15, compared to RM11.1 million in 1QFY14.

Meanwhile, revenue for its renewable energy division was up 14% to RM8.5 million in 1QFY15, from RM7.5 million in 1QFY14, as the export of green energy had increased as a result of the newly-added capacity to its renewable energy plant.

“With the recently-announced plans by the Ministry of Energy, Green Technology and Water (KeTTHA) to raise the contribution of green technology to the economy, society and environment in the 11th Malaysia Plan, and Malaysia’s aim to be the Asean green technology hub with the implementation of the National Green Technology Policy, Cypark intends to tap into this progressive business potential as part of our growth strategy to continue the expansion of our renewable energy business,” said Cyparks group chief executive officer Datuk Daud Ahmad.

Based on the renewable energy industry outlook and the company’s strategic business model transformation plans, Cypark said the business and performance of the group is expected to be robust and strong for coming year.

Cypark closed at RM1.79 today, down 1 sen or 0.56%, with a market capitalisation of RM360.38 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.)

Monday, March 30, 2015

周顯 炒road show股穩陣

炒road show股穩陣




內地做road show效果最佳


其實,炒投資推介會概念,是「炒road show」的一個變種。很多股票去外國去做road show,在這段期間,股價通常會做得好好睇睇,因為如果一邊做road show,股價一邊大跌,咁邊有人買,road show只會愈做愈衰,不如不做。

所以,通常一隻做緊road show的股票,都係一路做,一路慢慢咁升,以吸引人去買。其實,在香港做的road show,只是小兒科,上次我參加過一個,跟住日,都係升一兩成之嘛,因為香港人炒股票是很保守的。如果是在大陸搞,D大陸佬係講乜都信隻,台上嘉賓亂吹一通,星期一只要股價有異動(按﹕這些推介會通常安排在星期六),大陸佬就會搏命去掃貨,驚死執輸,那些升一倍兩倍的股票,就是這樣炒起的。這就是「非理性亢奮」。

[周顯 投資二三事]


2015-03-29 19:26








Sunday, March 29, 2015

如何讓你的人生也能開始順暢運轉 - 許 耀仁 Paxton

這是我幫【財富金鑰】一書寫的出版序兼譯者序,裡面有我當初是怎麼跟「財富金鑰系統(The Master Key System)」結緣的,以及在我的生命歷程中的一些領悟,相信也會對你有幫助,請看:

「這個還有另外一套類似的,叫做The Master Key System,你可以去找找看。」








那時,我想起從馬來西亞帶回了一片DVD,標籤上面寫的是「The Secret」。










就在那時,我那位外國朋友的聲音突然在腦中響起說:「這個還有另外一套類似的,叫做The Master Key System,你可以去找找看。」





  • 可以由簡入繁、由淺入深,讓學生能按部就班打穩基礎。
  • 每週只要專注於搞懂當週內容、熟練當週的實作練習,所以學生不會資訊超載而不知從何著手。
  • 進度是一週一週進行,這也強迫學生必須依照進度來,沒有「只挑自己喜歡的去做」的機會,可以真正打好必要的基礎。











  • 依序每週只研讀當週的內容
  • 每天至少研讀一次當週課文
  • 每天至少做當週課文裡的實作練習15~30分鐘





Saturday, March 28, 2015

How to season and caring a Cast Iron Wok 怎样開鍋和養鍋 (生鐵鍋)

How to season and caring a Cast Iron Wok 怎样開鍋和養鍋 (生鐵鍋)

When Anne left a comment in my recent Otak-otak Kuey Teow Mee post that she love my wok that didn't sticking when stir fried this noodles. Then remind me that I have yet to post how to season a Cast Iron Wok. I have used this iron wok few months already and love to use it especially for stir fry.

This is the back of the wok which is enamel coated

I followed the way which taught by the shop owner.
First wash and scrub with this type of vegetable fibre brush.

Then fill the wok with water and boil it for a while.

You can season the wok the usual way of using pork fat. But I was taught to use this method, using a bunch of Chinese chives. Add in cooking oil, cook and stir the Chinese chives over the whole wok.

\Once the chives has cooked, wash the wok with just water (no soap or cleaning solution) and scrub with vegetable fibre brush. 

Then dry the empty wok over low heat (rub water with towel at the upper ring which heat can't reach) .
And now this wok is ready to use !!
So every time once you have finished cooking, immediately wash it with brush (only water but no soap), then dry the wok immediately to avoid rust !

Here is an example of the non-stick result after fried rice

The wok was not sticking at all.

Now I understand why those Tai Chow stalls ( hawker stalls) 's food has wok hei (smoky taste), one of the reason is their cast iron wok using for long period, the wok surface accumulate a layer of oil. When heat it up and it created smoke. So sometime when I stir fry vegetables using this wok, we can taste smoky taste too ^_^ . Anyway, you have to take extra steps to take care this wok, make sure wash it with water (no soap) immediately after cooked, then dry the wok before storing. My advise not to use this wok to cook strong taste foods example like curry (the taste will retain on the oil surface) or long hours braising foods. Instead this wok is perfect for stir fry or deep fry.

Reference:  refer to here

Econpile on AmResearch's Buy list

KUALA LUMPUR: AmResearch is maintaining a “Buy” call on Econpile Holdings Bhd with an unchanged target price of RM1.40 per share based on 15 times price-to-earnings ratio of financial year 2015 forecast (FY15F). 
It said on Friday since Econpile’s listing in June last year, the group bagged its seventh major piling job, with the latest from Flora Development Sdn Bhd worth RM54.5mil for a service apartment-cum-office development in Bandar Puteri Puchong. 
“The project is part of the 72 acre IOI Rio City mixed development project with a gross development value of RM6bil,” it added. 
AmResearch said year-to-date, from this contract the group has secured RM348mil worth of new jobs for FY15F ending June. 
The research house expects the group’s outstanding order book to be RM530mil that would keep the group busy through out FY15 and FY16. 
“This project is expected to be completed by September 2016,” it said. 
AmResearch said the group has been securing property related jobs with higher margins compared to infrastructure jobs. 
Gross margin for property jobs in the first half was 19% compared to 4% gross margin of infrastructure job. 
“We expect margins to improve further as the group book in higher progress billings from its property jobs,” AmResearch said. 
However, the group completed two KVMRT1 packages in February that yielded lower margins, as it was a greenfield project. 
The group’s net margin expanded to 10.2% in the second quarter of FY15 compared to 8.9% in the first quarter.  The group’s margins are in line with its estimated net margin of 10.2% in FY15F from 7.4% in the corresponding period a year ago. 
Furthermore, property related jobs contributed to 90% of the group’s total revenue with the remainder from KVMRT1 jobs for the first half FY15.
AmResearch is maintaining its new order book assumption of RM400mil for FY15F with a tender book of RM1bil. 
It believes the group will have more capacity to bid for property-related jobs after the KVMRT2 packages is completed. 

AirAsia X positive of turnaround

SEPANG: Long-haul low-cost carrier AirAsia X Bhd is optimistic of making a turnaround this year with the implementation of  a capacity management and restructuring exercise.

Group Chief Executive Officer Datuk Kamarudin Meranun said the company had seen a positive trend in February and March in terms of base fares and off-take. 

"The capacity management is not to scale down, but on how to realign the company to put in on the right projection, after a challenging last year due to  three aviation incidents.

"In the first quarter, we are doing a lot more cost-saving integration by looking at whatever routes we can add on, as well as charter flights.

"This is an interim measure until we can develop more commercially viable routes," he told reporters here after AirAsia X's extraordinary general meeting (EGM) on Friday.

Last year, AirAsia X recorded a higher pre-tax loss of RM605.18mi, compared with a pre-tax loss of RM212.06 million recorded in 2013. 

AirAsia X attributed the pre-tax loss to higher operating expenses of RM3.32 billion for 2014, up 33.9 per cent year-on-year. 

Meanwhile, AirAsia X non-executive chairman Tan Sri Rafidah Aziz hoped that the proposed National Aviation Council (NAV) would embark on a pan-Asean framework for the aviation industry as Malaysia takes over the Asean chairmanship this year.

"The NAV is for Malaysia, but we think it is timely to use this platform to see if we can formulate parameters to grow the Asean aviation industry," she said.

She added that the NAV should be an independent body with not more than six members comprising of experts in the aviation industry and not related to any airline operator.

Last year, Prime Minister Datuk Seri Najib Tun Razak announced the establishment of the NAV to coordinate all policies related to the aviation industry.

It includes issues arising between Malaysia Airlines, AirAsia Bhd, and airports' operator, Malaysia Airports Holdings Bhd.- Bernama

CAB Cakaran upbeat on biomass power generation

GEORGE TOWN: Poultry company CAB Cakaran Corp Bhd is targeting its new biomass power generation business to generate 10% of its turnover in two years.
Group managing director Chris Chuah said the biomass power generation facility would be able to produce about 300 tonnes of biomass waste daily.
“The amount could be utilised to produce more than a megawatt of power. We have yet to determine the cost of investment. The project should commence at end of the year,” he said after the company AGM yesterday.
Chuah said the group was now looking in the northern region for a 30 acre to set up the facility.
CAB recently inked a memorandum of understanding (MoU) with New Chemical Trading Co Ltd from Japan and Seri Kedah Corp Sdn Bhd to venture into the biomass project.
It will incinerate chicken droppings for the biomass project and also produce fertiliser as a by-product.
Under this MoU, New Chemical Trading and Seri Kedah would set up a joint-venture company for the licensing of specific technology and know-how related to biomass power generation.
On its plans to acquire a 169-acre broiler farm in Johor, Chuah said the acquisition exercise would be completed in mid-2015.
“The broiler farm, which already has the Agri-Food and Veterinary Authority certification, has the capacity to breed 2.2 birds per cycle. Each cycle is between 30 and 40 days. We are targeting the Singapore market, which is expected to absorb 1 million birds per month.
“The farm is also able to produce 5 million day-old-chicks per month,” Chuah said.
Chuah said the acquisition of the Singapore-based poultry slaughtering house, Tong Huat Poultry Processing Factory, would be completed end of next month.
“Tong Huat is expected to generate S$32mil (RM86mil) to S$35mil per annum in revenue and a net profit of S$2mil to S$2.5mil,” Chuah said.

Ringgit lift for Hovid

Forex advantage, favourable industry dynamics to drive drugmaker
THE weakening of the ringgit and favourable industry dynamics emerging in the pharmaceutical industry could be a catalyst to drive future growth for Hovid Bhd.
The generic drugmaker and dietary supplement manufacturer says the appreciation of the US dollar would benefit the company given that it derives about 55% of its sales from overseas markets.
“The development on the currency front is positive for us and in the last one year we have already made some forex gains. Given that a substantial portion of our sales are derived from overseas, we will benefit from this,” Hovid’s managing director David Ho tells StarBizWeek in an interview.
“The dynamics of our company is also such that we are also shielded from these currency changes. We have to import our raw materials in US dollars and are able to export again to balance the effect when we pay more in ringgit for raw materials,” Ho adds.
With the currency winds blowing in its favour, Ho expects the company to maintain the growth that it recorded in its first half into its second half of the financial year 2015 ending June 30 (FY15).
“We are hoping to continue the growth trend as seen in the first half of about 15-20% growth in profits and revenues over the previous year. The catalyst would be in the new plant which has not really kicked into the earnings year,” he says.
For its first half of FY15 Hovid saw a commendable rise of 26% in its net profit to RM10.38mil on the back of revenues also rising by 14.4% to RM97.1mil.
Profits growth outpaced its topline due to the higher foreign exchange gain arising from the stronger dollar, the company said earlier.
At its current share price, the company is trading at a price to earnings ratio (PER) of 16.23 times and a forward PER of 14.83 times.
Despite its lengthy presence on Bursa Malaysia, only RHB Research and CIMB Research cover the stock with an equivalent of a “market weight” rating on the stock and a target price of 44 sen.
New plant, new earnings
Meanwhile, the completion of its new tablet and capsule production facility in the latter part of this year will double the capacity of its existing production facility once the two phases of this plant are completed.
“In terms of revenue we would be more bullish on FY16 and the plant will contribute to about an additional RM3-4mil a month for the first year of operations. This figure can go up to RM5-6mil after a year after one or two years of operations once we can get more products registered in Australia and Europe,” Ho says.
He notes that these estimated figures also largely depend on new registrations as the company would need to get its products first approved for use in its export destinations.
“The plant was built to immediately cater to the existing backlog in orders now. We had some constraints in capacity in our old plant as well.
“We plan the new plant in two phases, phase one will be running by June 2015 while phase two should be running by early 2016,” Hovid’s chief financial officer Andrew Goh says.
“Phase one will increase the tablet and capsule (drugs) facility by about 30% upon full utilisation, if phase two is also included it will double our existing capacity for tablet and capusule and this includes many other products,” he adds.
In addition to this plant, the company would also see the completion of a centralised warehouse that will consolidate all its other smaller warehouses some of which are sitting on rented spaces into this more efficient warehouse.
“This will be completed by the end of 2015 or early 2016 and its operations will be more automated as it is computer driven with very few people working. This helps us reduce handling costs in the longer run and a better inventory management,” Ho says.
The new warehouse will have a capacity of 5,000 pallette locations that would be located in proximity to its present production facility.
Hovid is also investing into a research and development (R&D) centre in Penang to allow the company to conduct more clinical studies.
“This will allow the expedition of the launch of new products.
“We will continue our partnership with University Science Malaysia (USM) in this new R&D centre,” Ho says.
Other than producing generic drugs and dietary supplements under its own Hovid brandname, the company also does contract manufacturing for other drugmakers.
“More than 95% of our revenue is derived from our own Hovid branded products. And we also license some of our own products to the multinational (MNC) drugmakers such as Merck, Sanofi and Abbott. This demonstrates the innovation and know-how involved in our products,” Goh says.
Hovid licenses its products to the MNC’s on condition that it also manufactures it for them under their brandname.
The company, which was first established in the 1940s, initially started selling its standalone Chinese herbal product, the Ho Yan Hor herbal tea that is widely available in local stores and pharmacies.
Today, the company’s manufacturing portfolio includes almost 400 different types of products that are exported to more than 45 countries around the world.
Opportunities in expired patents
Moving forward, Ho says he sees opportunities in the RM422bil of prescription and pharmaceutical drug patents that are set to expire in the next 10 years.
“There is a huge market opportunity here for us as these patents expire but bear in mind that developing the generic also takes time as long as two to three years after the patent expires. It is not such as straightforward matter,” Ho says.
Pertaining to this matter, Ho says he hopes Malaysia’s patenting process can be reviewed as the industry’s competitiveness to eventually be able to produce the generic version of a patented drug hinges highly on this process.
Citing the example of a patented drug called Viagra, originally designed by US-based Pfizer which patents had already expired overseas but has not yet expired in Malaysia.
“Say if a company files in the year 2000 but the patent is only approved in 2007 - so the clock starts ticking from 2007 not the year 2000. The additional seven years incurred is because we were late to approve the patent,” Ho says.
“This is why we hope the Government can review the patenting process to ensure the country is competitive because if the process is delayed, then the generic version that will be manufactured here will also be delayed.
“And the missed opportunity makes us lose our competitive advantage as other countries can manufacture the generic drug earlier,” he adds.

The cash-rich companies of Bursa

CASH-RICH companies are always something worth keeping an eye on for investors seeking value.
To cater to their needs, there are a handful of companies on Bursa Malaysia which are in enviable net cash positions and should be able to withstand any shocks to the market.
Topping this coveted list is Genting group which, after stripping out all of its borrowings and debts, has a whopping RM13bil in its coffers.
Its RM13bil cash position is certainly admirable but the revelation is also somewhat surprising, given that the group that is involved in leisure, hospitality, plantation and property all over the world, has been in expansion mode.
Controlled by billionaire Tan Sri Lim Kok Thay, the second son of the late tycoon Tan Lim Goh Tong, the Genting group recently snapped up business opportunities in New York and Jeju island in South Korea.
In New York, it managed, via a private vehicle of Kok Thay’s to outbid its opponents, winning a bid from the New York Gaming Facility Location Board to build the Montreign Resort Casino in the Catskills and Hudson region of New York .
On the holiday island of Jeju, Genting via its Singapore unit stamped its Resorts World brand name recently with its February ground-breaking ceremony for Resorts World Jeju - the US$1.8bil integrated resort it is building together with Chinese developer Landing International Development.
As a stock however, Genting’s share price performance is hardly reflective of its cash-rich status.
Year-to-date, the stock is down 0.3% to RM8.83 ,compared to the broader market which has gained 3.5%.
Genting’s dividend yield - a measure of how much a company pays out to its shareholders in relation to its share price, is also relatively low at less than 1%, based on what they paid out in the last financial year and its current share price of RM8.83.
“High cash levels but low dividend yields - this is the typical complaint about them which explains the lower valuations accorded to the Genting stock,” says Fortress Capital fund manager Thomas Yong.
Seven out of 22 analysts surveyed by Bloomberg have a “buy” call on the stock, with an 12-month target price of RM9.88.
Not borrowing enough
Generally, Yong, who helps manage more than RM900mil in funds, prefers companies with lower cash levels and a healthy gearing level, provided the borrowings are used for good acquisitions resulting in better return on equity and assets.
“Most of the time, companies with high levels of cash and zero borrowings mean that they are not borrowing enough to maximise returns on shareholders’ funds.”
He doesn’t deny that the ones with healthy coffers are defensive in nature, especially in times of crisis.
“But how often does that (crisis) happen, once every 10 years?”
Coming in at second place on the net-cash list is integrated chemicals producer Petronas Chemicals Group Bhd with a total of RM9.8bil. According to industry sources, the group which was listed in 2010, has been conserving its cash as it has the intention to buy over some of the assets that will be built by its parent company Petroliam Nasional Bhd (Petronas) at the Pengerang Integrated Complex in Johor. The company has a dividend yield of about 3%.
Notably, another subsidiary of Petronas, Petronas Dagangan Bhd, which is its marketing arm, is also one of the companies at the top of the list with total net cash of RM1.3bil.
Meanwhile, another family-owned conglomerate, Oriental Holdings Bhd, also makes the cut with its cash amounting to RM2.26bil, a healthy amount which has been at this level - for at least a few years.
The group founded by the late Tan Sri Loh Boon Siew aka Mr Honda has interests across sectors covering automotive, palm oil, real estate, hospitality, plastics manufacturing, building materials and healthcare.
It is famed for being the distributor of Honda vehicles in Malaysia and Singapore.
The main grouse of analysts that cover Oriental, is not surprisingly the fact that it has not used its cash to generate exciting enough returns for shareholders.
Oriental recently saw third-generation descendant, Datuk Loh Kian Chong, the 38-year-old grandson of Boon Siew, take over the role of chairman and executive director of the group.
Although Oriental has been paying out dividends to its shareholders annually, the gross payout rates have been on a declining trend from 10% in 2009 to 7% in 2013.
Surprisingly, plantation group Felda Global Ventures Holdings Bhd (FGV) which has been on a trail of acquisitions since its IPO in 2012, snapping up plantations from Sabah to Indonesia, is also among the companies with the most cash on Bursa Malaysia.
The government-linked company’s acquisitions have been criticised and labelled as pricey and there is concern now whether or not it will be able to extract the needed synergy from its previous acquisitions to improve its overall outlook amid declining crude palm oil prices.
Notably, FGV is left with its cash hoard of RM1.51bil after its initial public offering exercise which managed to raise proceeds of RM4.5bil.
Also on the list, low-profile Keck Seng (M) Bhd with its interest in palm oil cultivation, property and resort segments and primarily retail group Parkson Holdings Bhd which trail closely behind FGV, sitting on slightly over RM1bil each.
Cash is king?
Fund managers basically agree that a balance between borrowings and cash is the best when it comes to choosing investments.
While some tend to take more risk by focusing on companies which borrow more than they have in cash, others prefer companies with net-cash positions.
“If they have free cash flow it’s nice to receive dividends but I would say in Malaysia we would prefer our companies to have some cash to weather an unexpected storm,” Aberdeen Asset Management managing director Gerald Ambrose says.
Danny Wong, fund manager at Areca Capital, takes a bit more risk.
“As we switch companies based on our outlook on the market, we don’t really hold cash companies in good times,” Wong says.
“Cash is king only when one knows how to use it, letting it be idle is useless.”
Ambrose doesn’t like share buy-backs, which cash-rich companies sometimes undertake to reduce the supply of their shares in the market so that the value of their stock can increase.
“It leads to a misalignment of incentives, especially when you have a greedy management and it does not really make sense to be buying back your own shares especially at crazy high valuations. That’s what they’re doing in the US.”
Share buy-backs are sometimes also done when there is a threat of a company being taken over. In this case, the management will mop up their own shares from the market to avoid that from occurring.

Friday, March 27, 2015

百乐园获准雪邦购地 潜在发展总值11亿


Hovid’s new tablet, capsule plant to start mid-2015

KUALA LUMPUR: Hovid’s new tablet and capsule plant is set to start operating by mid-2015  which will remove the capacity constraints.
CIMB Equities Research said on Thursday the new plant may raise Hovid’s depreciation charges by about RM1mil annually, which is slightly higher than its expectation.
“This leads us to reduce our FY15-17 earnings forecasts by 2%-3%, which results in a marginally lower sum-of-parts based target price of 43 sen. The stock remains a Hold. We prefer Pharmaniaga for its higher dividend yields,” it said. 
The research house said during a meeting with Hovid management, there were no major surprises from the meeting apart from the slightly higher-than-expected depreciation charges of the new plant.
“Other key takeaways were 1) the first phase of its new tablet and capsule plant is on track to commence operations by mid-2015, 2) it may take four to five months to ramp up production, and 3) the second phase of the same plant is expected to start up by early-2016.
“The first phase will raise its existing tablet and capsule capacity by 30% while the second phase will raise capacity by 70%. Although the new plant may have excess capacity in the near term, Hovid plans to increase its tender business to fill up the idle capacity,” it said.
Tablet and capsule products currently account for roughly 60% of Hovid’s revenue. In the past few years, capacity constraints have been one of the key factors holding back Hovid’s revenue growth.
With the completion of the new plant, Hovid should return to a stronger growth path, said CIMB Research.

Econpile order book hits RM500m with IOI Rio City job

KUALA LUMPUR: Econpile Holdings Bhd’s order book has exceeded RM500m, which will be recognised until 2016, with the new RM54.5mil contract to undertake the sub-structure for IOI Rio City in Puchong, Selangor.

The piling and foundation specialist said on Thursday the contract, awarded by Flora Development Sdn Bhd, was to undertake the piling and related works for the IOI Rio City mixed development.

The contract is part of the IOI Rio City integrated development in Bandar Puteri Puchong which has an estimated gross development value of RM6bil over 72 acres.

Econpile executive director and group CEO Raymond Pang said with this new contract, the group’s total order book to date exceeds RM500mil.

“The unabated growth pace in the property development sector in Klang Valley points to the anticipated sustained demand for high-value developments in strategic locations, including the suburbs to the city centre.

“We believe that this market growth would be even more pronounced in the future due to an ever-growing population and increasing urbanisation,” he said. 

Pang said expects the real estate sector, comprising the building of both residential and commercial space, will continue to be active.