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Wednesday, September 30, 2015

ViTrox Corp - Flattish 3Q15


  • As guided, 3Q15 revenue is expected to be rather flat with 3.3% yoy growth reaching RM40.8m. While ABI is forecasted to deliver strong performance, this will largely eroded be by the sluggishness of MVS-T.
  • Bullish ABI estimate is mainly contributed by: a. Orders from Mexican EMS with 4 AOI and 4 AXI orders; b. Potential orders from Penang EMS with 1 AXI and 7 AOI; c. Orders of 5 AXI, 4 AOI and 6 V810 SI and SII upgrade from another Penang EMS; d. New account wins from Europe, Japan and Malaysia; and e. Various ODM in China and Taiwan buying 1 or more AXI.
  • MVS-T demand continues to be weak mainly due to sufficient installed capacity and lack of end-user demand visibility. As such, 3Q15 sales expected to be between RM3.5-5.0m, implying a yoy decline ranging from 55.8% to 69.0%.
  • Channel check reveals that ViTrox’s main MVS-S client, SRM is also expecting a rather flat FY15 but expecting a more challenging FY16 coupled with very limited order visibility.
  • Pioneer status was renewed for 10 years until 2024 but only expects to enjoy the full tax exemptions in FY16 once all products have complied with the new requirements. Although this was granted in June, 2Q15 was fully provisioned with 26% effective tax rate. Upon regulator’s approval, it is likely that June’s tax will be reversed in 2H15, which is estimated to be circa RM1m on top of FY15E PAT.
  • Book-to-bill ratio dipped marginally below parity in May and June but rebounded firmly in July and August with 1.02 and 1.06, respectively.
  • YTD global semiconductor equipment spending is flat (see Figure #1) and expected to be so for the rest of 2015. Some major players have announced CAPEX reductions, including TSMC by USD2bn and Intel by USD1bn in view of efficiency improvements rather than cut back in expansions. However, this will be cushioned by higher investments by Sony into image sensor and Samsung into its new plant in Pyeongtaek.


  • FOREX, downturn in semiconductor demand and equipment spending, patent infringement and technology imitation.


  • Unchanged.


HOLD , TP: RM2.95
  • undisputed 3D-AOI and AXI technology leader, great potential in winning more market share in the advent of global semiconductor growth.
  • MVS-S sales is dependent on single customer, majority of sales are non-recurring, highly competitive 2D-AOI market and prone to rapid advances in technology.


Reiterate HOLD with unchanged TP of RM2.95. Our TP is pegged to unchanged 1SD above 5-year historical average P/E multiple or 16.0x of FY16 EPS (see Figure #3).
Source: Hong Leong Investment Bank Research - 30 Sep 2015

Teo Seng Capital - Egg prices stage a rebound BUY

- We maintain BUY on Teo Seng Capital (TSC) with an unchanged fair value of RM2.70/share. This is based on an unchanged fully-diluted PE of 13x FY15F EPS.

- From our recent discussions with management, we learnt that egg prices have gradually rebounded from 28 sen/egg in 2QFY15 to 34 sen/egg over 3QFY15. Note that the latter was the average egg price in 4QFY14 and 1QFY15 and is the highest historically.

- The upward trend in egg prices is positive for TSC. Although we had earlier anticipated prices to tick up in tandem with increased domestic demand during the festive periods (eg. Hari Raya), we did not expect the quantum to be as large. The supply backlog has also eased, thanks to higher exports to Hong Kong.

- Egg prices had declined by 24% QoQ back in 2QFY15 due to seasonally low demand (i.e. absence of festivities and the fasting month in June/July) and to a smaller extent, the impact of GST on overall consumer sentiment.

- Interestingly, we also understand that the price of its egg exports to Singapore (~30% of total production) is presently as high as 38 sen/egg. This is unusual given that the price differential between the domestic and Singapore market is typically between 1-2 sen/egg. The wider spread is mainly attributable to the current weakness of the RM vis-à-vis the SGD (YTD: -31%).

- We make no changes to our FY15F-FY17F earnings estimates unchanged for now. The rebound in egg prices alongside the timely addition of two new farms in July and November (+25% capacity from 3.1mil eggs per day) bode well for TSC’s 2HFY15 earnings.

- Post its recent order-driven sell-down, TSC’s share price has been on an upward trend, rising 31% in the past month. The stock is currently trading at an attractive fully-diluted forward PE of only 7x. This is a steep 53% discount to the average PE of 15x for the consumer companies under our coverage.

Source: AmeSecurities Research - 30 Sep 2015

[转贴] 【小型股亮点系列 4 】 8个"亮点"让你轻松了解合约流GKENT(3204)的魅力! - Harryt30

【小型股亮点系列 4 】


1. GKENT今天公布了业绩,最新一季的EPS 2.80, 比去年同个季度上涨了40%,税后盈利847.3万马币。

2.以现在RM1.54的股价计算,现在PE为13.67, ROE 11.19。虽然笔者觉得有点小高,但是其亮丽的前景弥补了这一点。

3.这家公司是Net cash 公司,现金扣除了债务后大约有9,500万现金。而且在半年多的时间内,债务从之前的5,800万减少到了4,800万。

4.公司今天公布派发2仙的股息,全年股息大约3.5%, DPS/EPS大约是45%以上,是一家大方派息的公司。

5.此外,公司的Profit Margin已经连续进步3年,从之前的7.1%到今时今日的10.6%,相信未来还会继续有所进步。

6.9月7号以及他们的Joint Venture MRCB一起获得了90亿的LRT建筑合约,而GKENT获得45亿合约。此外,隔天9月8号也获得了香港的 water meter合约,总值USD 7.17 mil。这也是GKENT历史上获得最大的water meter合约。所以相信未来的前景会很不错。

7. 公司的管理层对未来的展望正面,在获得了LRT以及外国的合约之后。公司能力以及信誉必定会受到外界的肯定,而且在未来也会开始贡献盈利。


GKENT手握58亿订单以及香港的water meter合约,股息也相当诱人。最近已经吸引了许多投资者的目光,市值大约RM 463 mil, 是小型股里的优质股之一。


Sharix Consulting

Cover Story: Logistics counters worth a second look - digitaledge Weekly

By Yen Ne Foo / digitaledge Weekly | September 29, 2015 : 6:00 PM MYT

This article first appeared in digitaledge Weekly, on September 14 - 20, 2015.

GIVEN the volatility in equities this year, the market has more often than not disappointed investors. Yet, some analysts say the counters in the logistics and transport sector could offer investors plenty of food for thought.

Soong Wei Siang, a Kenanga Research analyst who tracks stocks in the industry, argues that the charm of those in the business of shipping, freight and land transport would appeal to investors in today’s weak market environment due to the resilience of their earnings.

In a May 18 report, Soong writes that factors such as e-commerce growth in the local market, the industry’s fast-moving consumer goods-oriented customer mix, potential revaluation of logistics companies’ vast assets like landbank and the growing trend of logistics outsourcing warrant a rerating of the sector.

When contacted, Soong tells digitaledge Weekly, “We believe that the logistics theme has been overlooked by investors for some time but there is deep value in the sector. We believe that logistics counters should feature in the portfolios of investors, given their resilient earnings.”

Kenanga Research’s top picks in logistics stocks are a quartet comprising Century Logistics Bhd (fundamental: 1.90; valuation: 2.40), TASCO Bhd (fundamental: 1.80; valuation 1.40), Xin Hwa Bhd (fundamental: NA; valuation: NA) and Harbour-Link Group Bhd (fundamental: 1.70; valuation: 1.80).

“We like Century Logistics and TASCO. Both companies have visible earnings growth, expansion plans and a dividend-paying philosophy. Century Logistics’ valuations are cheaper than its peers’. It also has a good dividend payout policy of 50% of its net profit. We expect Century Logistics to have a dividend yield of 4% to 5%,” says Soong.

“TASCO has a dividend yield of about 2% but it is backed by its Japanese owner NYK. TASCO can leverage NYK’s vast distribution network and be more involved regionally going forward.”

Meanwhile, Harbour-Link, a comprehensive logistics provider in Sabah and Sarawak, can capitalise on government-backed economic initiatives like the Sarawak Corridor of Renewable Energy. Kenanga Research is projecting a net profit growth of 53.3% and 22.9% for FY2015 and FY2016 respectively, supported by its logistics division.

Commenting on Xin Hwa, Soong says, “The company is a smaller logistics play. Its operations are restricted to land transport, but operating on a smaller scale allows it to enjoy higher-than-average margins. If it develops into a more integrated logistics player, its earnings base will widen significantly.”

Despite good reasons for investors to look at logistics, some analysts warn that the sector, which has traditionally been sensitive to external trade factors, has certain downside risks.

RHB Research analyst Ahmad Maghfur Usman, who has “buy” calls on TASCO and Freight Management Holdings Bhd (fundamental: 1.40; valuation: 1.80), says the current economic landscape of slower global growth and weakening external trade numbers for Malaysia are a “substantial” threat to the earnings of logistics companies.

“TASCO and Freight Management will still be profitable but there are risks. Plus, we cannot predict how long the slower global growth and weak economic environment will last. The bright side, of course, is that economic conditions will recover eventually,” he says.

Similarly, Chris Eng, vice-president of Etiqa Insurance and Takaful’s investment management division, who has the same stock picks, says he does not have compelling “buy” calls on Freight Management and TASCO but nevertheless believes they are good bets for longer-term capital appreciation.

“TASCO handles a lot of the warehousing needs of online retailers like Zalora and Lazada. As more people turn to online shopping, it should be positive for TASCO’s earnings. As for Freight Management, it is a fundamentally stable and well-managed company. We believe there is potential for capital appreciation over the longer term. As long as external trade numbers are healthy, it will do well,” he says.

Furthermore, investments in capacity expansion made by both TASCO and Freight Management suggest that the longer-term growth prospects remain intact. TASCO has plans to spend RM120 million to RM150 million on building a four-storey warehouse to elevate storage capacity by 45%. Meanwhile, Freight Management is looking to expand its trucking fleet in Penang where demand is strong.

As Malaysia experiences an increase in e-commerce activity, Ahmad Maghfur says GD Express Carrier Bhd (GDEX) is his top stock pick in the logistics sector. The stock is expected to book the strongest earnings growth among its peers under RHB Research’s coverage.

“GDEX (fundamental: 3; valuation: 0.70) has seen very strong earnings growth with profit up 40% to RM9.2 million in the fourth quarter of financial year 2015. We believe there is still room to grow with earnings mainly driven by stronger e-commerce activity,” he explains.


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. for more details on a company’s financial dashboard.

Tuesday, September 29, 2015

[转贴] 印馬聯手護盤‧棕油價可回升2400

2015-09-29 17:00



















2015-09-28 17:12

















江宗仁 經濟難V彈 股市好極有限




聯儲局貨幣政策趨正常 歐日成大贏家






[江宗仁 還看今朝]

Monday, September 28, 2015

Ho Hup wins RM21.6m subcontract for soil improvement work at RAPID

KUALA LUMPUR (Sept 28): Ho Hup Construction Company Bhd ( Valuation: 1.50, Fundamental: 1.70) has clinched a RM21.6 million subcontract for soil improvement work at the Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor.

In a filing with Bursa Malaysia, Ho Hup said today that the company was awarded the contract by Sinopec Engineering Group (Malaysia) Sdn Bhd (SEGM), the main contractor of PRPC Refinery and Cracker Sdn Bhd, via a letter of award dated Sept 23, 2015.

SEGM is a subsidiary of Sinopec Group, the leading oil refining, petrochemical and chemical engineering group based in China.

Ho Hup said the job is expected to commence next month and will be completed over four months.

The company said the contract is in the best interest of the company after considering the potential financial contribution to the earnings of the company, amongst others.

Ho Hup also said that the award of the contract will not have material impact on the issued and paid-up capital, substantial shareholders’ shareholding, earnings per share and net assets per share of the company.

“This maiden contract in Petronas’ RAPID project will put the group in a good and competitive position for other infrastructure and construction projects we have tendered for in Pengerang, Johor,” said Ho Hup chief executive Derek Wong Kit Leong in a separate statement.

Ho Hup shares closed one sen or 1.11% lower at 89 sen, with a market capitalisation of RM307.13 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.)

Insider Asia’s Stock Of The Day: TEOSENG (28/09/2015)

This article first appeared in The Edge Financial Daily, on September 23, 2015.
TEO Seng (Fundamental: 1.5/3, Valuation: 1.9/3) is predominantly involved in layer farming — rearing chickens to produce eggs. With current production of 3 million eggs per day, it is one of the largest egg producer in the country. The company has its own in-house feed mill and also manufactures animal health products. 
We like Teo Seng as a well-managed company, with higher than industry average profit margin (trailing 12-month net margin of 13.1%) and lower than average gearing of 29.7%. It is also fairly inexpensive, trading at trailing 12-month P/E and EV/EBITDA of 7.96 and 5.48 times, respectively. 
Whilst demand for eggs is fairly resilient — and should grow steadily — earnings are affected by fluctuating egg prices and costs for feed stock, mainly corn and soybean meal, which are denominated in US dollar. 
Teo Seng’s share price rallied in 1Q2015, buoyed by higher egg prices and lower feed costs. But its shares then slumped to the current RM1.42, down 35.75% from a peak of RM2.21. This follows weak 2Q2015 earnings results where a sharp fall in egg prices — Grade “A” dropped from 37 cents to 29 cents — saw earnings drop 58.44% q-q to RM7.3 million.
Positively, egg prices are on the rebound and we expect better performance in 2H2015. This could be the catalyst for a fresh rally. Teo Seng has hedged about one year’s supply of animal feed in 2Q2015; thus, impact from recent weakening of ringgit will be minimal. It also exports about 27.75% of the revenue to Singapore and should benefit from the stronger Singapore dollar.
The company is expanding capacity, which should underpin longer-term growth. Dividends, however, may be cut back this year, in view of the higher capex. Teo Seng has a dividend policy to pay out 20-50% of annual net profits. We estimate dividends at roughly 5 sen per share — after taking into account the 1-for-2 bonus issue in January. That will earn shareholders a fairly decent yield of 3.52%.
Teo Seng Capital Bhd
Insider Asia’s Stock Of The Day: TEOSENG (28/09/2015)

MIKROMB (0112) - Moving Technology - PinKooL


Mikro MSC Berhad

Mikro opened its doors in 1997, since then it has built a reputation as a provider of high-quality, competitively priced equipment.

Mikro produces analogue, digital and numerical electrical distribution equipment.

Mikro's products are used as an important component of a building's integrated electrical system. They are designed to monitor and prevent damage to electrical equipment by isolating and tripping a circuit breaker when an electrical fault is detected, in the process allowing unaffected parts of the electrical system to continue to operate.

The versatility of our products makes them ideal for use in schools, hospitals, hotels, shopping complexes, banks and industrial plants and other mid-sized to large buildings.

Mikro is accredited with ISO 9001:2008 certification on quality management systems. The ISO 9001:2008 is an assurance of our ability to consistently provide products that meet their customer and applicable regulatory requirements. It also ensure their ability to enhance customer satisfaction through the effective application of the system, including processes for continual improvement of the system and the assurance of conformity to customer and applicable regulatory requirements.

Mikro has pushed technological boundaries to offer customers the latest in product quality and precision.
Analogue Protective Relays
Analogue Protective Relays use analogue electronic circuits and components in the shape of discrete semiconductor components such as diodes, transistors, or ICs. These are then assembled together on a printed circuit board (PCB) to create the final product.
Digital Protective Relays
Digital Protective Relays use a digital logic IC or microprocessor as the main component to control the essential functions and features. Minimal analogue electronic circuits are used to interface the digital logic part of the relay to the physical world. These analogue and digital circuitries are integrated on a PCB to form the relay. Digital microprocessor relays enable us to implement advanced features using specialist software.
Numerical Protective Relays
Numerical Protective Relays are similar to Digital Protective Relays but posses significantly advanced sensory programmes. This enables them to undertake more complex, precise and detailed analysis of input signals prior to issuing an action.
Mikro's microprocessors use 16 bit microcontroller, DSP (Digital Signal Processor) engines. Signals are processed by digital means which improves reliability while overcoming the shortfalls of analogue circuits.
Surface Mount Technology or SMT, allows for a smaller form factor which improves production efficiency and yield (due to automation) and is responsible for improved noise immunity performance.
At Mikro use 2 industrial standard software packages. 1) Altium, for printed circuit board design. 2) Autocad, for mechanical design. Computer aided design and manufacturing complements the end product by giving Mikro rapid prototyping and simulation, improved precision and tolerance and better documentation.
Switch Mode Power Supply
Customers can operate Mikro's relays under different electrical networks (US/Japan 110Volts, Malaysia, Europe, 230Volts). Their power supply units also promote higher efficiency and are lighter weight.

To perform effectively, all relays must be immune to EMC noise. Mikro's products are sensitive enough to detect small signals while remaining immune to nuisance tripping.
Mikro's products continue to develop a reputation for durability, quality and reliability in the workplace. This reputation has resulted in increased customer demand and the expansion of international export market. They now serve customers across 3 continents, covering the following countries:
  • China
  • India
  • Vietnam
  • Singapore
  • Hong Kong
  • Pakistan
  • Indonesia
  • Thailand
  • Iran
  • Peru
  • Sri Lanka
  • Bangladesh
  • Myanmar
  • Fiji
Good Points to share:-
  1. Mikro has delivered steady  earnings growth. It has maintained high double-digit net margins, ranging 14%-21% in past 6 years. Domestic sales accounted for some 72% of sales, with the balance from export.
  2. The company has a debt free balance sheet and net cash of RM 8.4mil (about 9% of its market capitalization)
  3. Mikro proposed to acquire a freehold industrial land in Klang, together with attached building for RM 11.7mil. The company intends to consolidate its entire operations under one roof.
  4. Its products are used in numerous high-profile developments, including the KLIA2 & Tropicana Medical Centre and MRT stations in Spore & Doha International Airport in Qatar.
Mikromb is small, relatively unknown company listed on the ACE market with Market Cap of just RM 91mil and its business is category as "exciting", can keep it into your watchlist and closely monitor it. 


All posts and documents submitted in this blog are solely for open discussion and education purposes only. All recommendations and opinion provided are solely for your consideration only and you should exercise your own judgment in forming your own investment decision(s). Please also be informed that equity investment is risky and we recommend you to conduct sufficient searches for information in addition to referring our recommendations and/or opinion herein, prior to making an investment decision.

You should take full responsibility of your investment decision(s) and we accept no liability whatsoever for any direct or consequential loss arising from any use of our recommendations and/or opinion provided herein or any solicitations of an offer to buy or sell any securities. Comments and opinions forwarded/provided by members/followers of this blog do not belong to the Admin and we take no responsibility of such.

RGB 最坏的时期已经过了?


RGB 最坏的时期已经过去了?















RGB有2个主要的业务:(1)Sales&Marketing,简称(SSM)销售和市场营销(2)Technical Support&Management,简称(TSM)技术支持和管理。



从2012财政年至今,公司开始恢复赚钱了,2013财政年也开始派发股息,但不是很多,所以我向管理层提出意见,公司应该要提高派发股息率,可以用净盈利的30-40%来派发股息,他说目前会先把债务还清,至于股息会逐渐的提高股息策略,也答应会考虑我提出的意见,公司积极地每年把债务减少,从2012年总负债128.32m减少至2015年6月的50m,而且公司还有72.16m的现金,现金减去负债还有22.14m现金在手,当负债降低,那每年利息开支也很明显的减少,这是公司从2010年至2015年的利息开支(Finance Costs),2010年=10.64m,2011年=9.57m,2012年=9.38m,2013年=8.22m,2014年=7m,2015年(半年)=2.56m,以此推算,3年后有可能会还清所有债务,现金可能推高至1亿令吉。




可参考上次于3/9/15的分析。 (只供参考,若有买卖,盈亏自负)

【小型股亮点系列 3 】- 9个"亮点"让你轻松了解冷门股MAGNI(7087) -美女的魅力! - Harryt30


1. 《美女》最新一季的EPS 14.35, 比去年同个季度上涨了54%,税后盈利1,557.3万马币。


3.此外,《美女》的ROE - 股東權益報酬率高达19.96%,这在马来西亚众多公司里是非常优秀的。

4.《美女》是一家Net Cash - 净现金的公司,手上完全没有借贷。所以最新一季宣布了2送1红股好消息,股价在9月10号的时候突破历史新高RM4.64, 股价也曾经一度冲上RM4.80.

5.公司建议派发3仙股息以及7仙特别股息,全年预计将会由15仙的Dividend. 以现在的股价计算,Dividend Yield大约是3.3%。

6.此外,公司的Profit Margin已经连续进步5年,从2012年的5.7%到今时今日的8%,相信未来还会继续有所进步。


8. 《美女》过去3个季度平局的EPS为15仙左, 只要它可以继续保持这种趋势的话。3个月后的每股盈利有望继续走高。




Sharix Consulting

[转贴] 颠覆刻板“华尔街风格” 末日博士麦嘉华不跟风

末日博士麦嘉华(Marc Faber)并非因为观点悲观而得名,事实上,他没有一项投资理论是属于悲观的。
今年9月初,麦嘉华受邀在2015年世界资本市场峰会(World Capital MarketsSymposium2015)上演讲。事后他接受本地媒体访问,《南洋商报》是唯一受邀进行访问的中文媒体。
“末日博士”的封号,来自于1998年出版的《末日博士:驾驭千禧风暴———麦嘉华从金融危机获利的路径》(Dr Doom Riding The Millennial Storm)。
反向思考 忌人云亦云
屋价家债太高 消费能力萎缩
麦嘉华24岁,就取得经济学博士学位。除了是著名的经济学家和企业家,也是著作等身,其中《TOMORROW'S GOLD》曾蝉联亚马逊(Amazon)最佳销售榜数周冠军,更被翻译成多国语言。
而定期出版的报告“Gloom、Boom&Doom Report”,也颇受投资者关注。这个报告为投资者“提供”全球非一般的投资机会,受到投资机构、公司或是高净值人士的订阅。
投资房产 勿过度举债
眼光独到 艺术品邮票免税易携带
政府过度参与经济 不利大马长线向好


事业:1970-1978年:White Weld&Company Limited(纽约、苏黎士、香港)
1978-1990年:香港Drexel Burnham Lambert董事经理
1990年:创立麦嘉华公司(MARC FABER)担任投资顾问和基金激励



随大市疲弱下跌 勇达凭单估价低可买入

2015-09-28 15:02 

Mikro MSC jumps 10% on undervaluation

KUALA LUMPUR (Sept 28): Mikro MSC Bhd ( Valuation: 2.10, Fundamental: 3.00)'s shares rose as much as 3.5 sen to 38 sen as shares of the electricity-transmission product manufacturer were deemed undervalued in price-earnings ratio (PER) terms.

At 12.30pm, Mikro cut gains at 36.5 sen with some five million shares changing hands. At 36.5 sen, Mikro trades at a PER of 12.29 times against the sector average of 52.43 times, according to Bloomberg data.

Year-to-date, Mikro shares had gained 55%, significantly outperforming the FBM KLCI's 9% decline.

Insider Asia, the report which appears in The Edge Financial Daily, said Mikro had a strong balance sheet.

According to Insider Asia, Mikro is a debt-free entity. As at end-June, Mikro had net cash of RM8.4 million, constituting about 9% of its market capitalisation.

(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.)

次季营业额市占59% 金沙超越云顶新加坡

(吉隆坡25日讯)云顶新加坡的圣淘沙名胜世界(RWS),第二季营业额大幅流失给对手滨海湾金沙(Marina Bay Sands),显示竞争环境日益激烈。

Parkson’s timely move

THE proposal by Parkson group of companies to streamline its retail business in the region under Parkson Retail Group Ltd could not have come at a better time.
The challenging regional landscape and slowing economy of China are among reasons for Malaysia-listed Parkson Holdings Bhd to divest its interest in Singapore-listed Parkson Retail Asia Ltd (PRA) to Parkson Retail in a corporate exercise that would go to shareholders for approval next month.
Parkson Holdings says the sale of PRA is aimed at consolidating the retail business in the region with that of Parkson Retail which operates a similar business in China.
Parkson Retail is listed on the Hong Kong stock exchange and is one of Malaysia’s biggest success stories of local companies breaking into mainland China market. But the market in China has slowed down, hence giving it a chance to expand in the region.
As for PRA, it has not been able to replicate the success of Parkson Retail. The regional operations of Parkson under PRA that cuts across four countries with 67 stores has been loss-making.
Singapore-listed PRA recorded a S$52.8mil (RM163mil) in losses for the financial year ended June 30, 2015, compared to the S$32.06mil (RM99mil) in profits it made the previous year.
The Hong Kong-listed Parkson Retail, meanwhile, is profitable, although net profit dropped by 34% to 245.77 million yuan (RM169.64mil) from 372.6 million yuan (RM256.73mil) the previous year, according to its 2014 annual report. Parkson Holdings owns 53.49% of PRG.
The company takes cognisance of PRA’s challenging operating environment. According to its latest annual report, Parkson Holdings said the business in South-East Asia had become increasingly challenging, while in China, it was expected to grow.
“The group anticipates China’s domestic consumption will gain more forward momentum in line with the Chinese government’s economic rebalancing programmes to maintain a sustainable growth in the country.
“On the South-East Asian retail scene, the challenges are expected to continue in the near future,” it said.
For the financial year ended June 2014, the group had registered a weaker set of operating results with marginally higher gross sales proceeds of RM11.6bil, up by about 2% compared to RM11.3bil in the previous year.
It posted lower profit before tax of RM384mil, down 38% from RM615mil, and lower net earnings of RM139mil, down by about 42% from RM238mil a year ago.
Parkson Holdings said the corporate exercise was aimed at consolidating PRA’s retail business, which has a presence in South-East Asia, with that of Parkson Retail, which operates a similar business in China.
“The proposed acquisition would allow Parkson Retail to geographically diversify into high growth markets, enabling it to seek opportunities in South-East Asian markets. PRA has an established platform in South-East Asia, and this would allow PRG to establish an immediate foothold in the region, with a unique geographic footprint of 67 stores as at July 15, 2015 across cities in Malaysia, Indonesia, Vietnam and Myanmar, and at completion, be one of the leading Pan-Asian department store retailers,” it added.
In the corporate exercise announced in July, Parkson Holdings proposed to sell off its entire 67.6% stake in loss-making PRA to its profitable Hong Kong-listed subsidiary, Parkson Retail.
Retail industry officials say that there are “plus and minuses” to the streamlining of operations.
The downside of the deal, says an official, is Parkson Retail of Hong Kong has to bear with the capital required to grow the PRA operations in markets that are competitive.
“There is potential in Vietnam, Indonesia and Myanmar where there is an affluent middle-class growing,” says the official.
The bright side of the proposed transaction is that the Parkson group team in Parkson Retail of Hong Kong knows best how to handle the markets in the region.
“They have experience from growing Parkson into a success in Hong Kong.
“The team in Parkson Retail is best equipped to handle the operations of the region that are loss making,” says the official.
Singapore-listed PRA operates and manages an extensive network of 67 stores spanning about 797,000 sq m of gross floor area across cities in Malaysia, Vietnam, Indonesia and Myanmar. The Malaysian listed Parkson Holdings will receive RM641.42mil in proceeds from the proposed sale which the company says will be used to expand its business and to explore new investment opportunities.
In a reply to StarBizWeek, a company spokesperson says that of the proceeds, a sum of RM531.16mil is to be used as working capital and another RM109.26mil will be distributed as dividend to shareholders.
“The acquisition will enable PHB to raise cash proceeds and is expected to contribute positively to the company in the long term as and when benefits from the utilisation of proceeds crystalise,” it says.
Shareholders of Parkson Retail would deliberate on the corporate exercise in an extraordinary shareholders meeting on Oct 12. In the circular to shareholders issued by Parkson Retail, the company said the acquisition of stakes in PRA will enable them to realise economies of scale across Asia.
“The group is principally engaged in the operation and management of department stores offering a range of fashion brands and lifestyle elements in China.
“Given the target group’s retail business follows an identical retail format to that of the group, the acquisition would enable the group to realise economies of scale across Asia,” it says.
As at July 15, 2015, it said PRA has 43 stores in Malaysia, 14 in Indonesia, nine in Vietnam and one in Myanmar.
“At completion, the group would be one of the leading pan-Asian department store firms,” it says.
Parkson Retail said it intended to continue to leverage on the “Parkson” brand and to continue rolling out new stores in both China and South-East Asia. Kenanga Research had said that the divestment would dilute Parkson Holdings earnings next year by an estimated 15% to 20% but the cash proceeds can be utilised for business expansion and new investment opportunities.
“Upon completion of the proposal, Parkson’s effective equity interest in PRA will be diluted from 67.6% to 35.9% which will result in lower earnings contribution to the PHB Group going forward,” Kenanga had said in a research note.
“Looking ahead over the next subsequent quarters, we expect Parkson to continue facing a tough operating environment on the back of weak consumer sentiment due to the economic slowdown, particularly in the China market, which contributes the crux of its earnings,” it said.

Eco World bets on Ijok

Developer aims big with a RM1.18bil move to buy over 2,000 acres
Property magnate Tan Sri Liew Kee Sin (pic) was once criticised for buying 4,000 acres in Shah Alam to develop a self-contained integrated township.
Market watchers back in 2002 said Liew had gone off his rockers for buying such a large plot of land, with some saying he was being too ambitious, especially because of its distance from the Kuala Lumpur city centre.
The deal, which involved SP Setia Bhd buying the oil palm plantation North Hummock Estate for almost RM600mil in cash, saw many concluding that it was too big for the then company with a market capitalisation of RM1.5bil to swallow.
The stock took a hit the day after SP Setia made the announcement, resulting in a 26 sen, or nearly 7%, fall to RM3.48 on April 3, 2002.
Now, more than 10 years later, that “ridiculously large” piece of land that was developed into what we now know as Setia Alam and Setia Eco Park, had won a slew of awards. These awards all praised Liew and the company for having vision and foresight in the development.
In 2003, SP Setia teamed up with two institutions, namely the Employees Provident Fund and Great Eastern Life Assurance (M) Bhd, to jointly develop part of the landbank in Bandar Setia Alam. This allowed it to minimise its capital commitment in the project, and opened up a new avenue for it to grow its business, rather than go through the traditional way of borrowing money to build a project.
Back then, property market observers were convinced that the company could extract a gross development value (GDV) of no more than RM5bil from the land. Today, Setia Alam and Setia Eco Park boasts an estimated GDV of about RM20bil, four times more than anticipated earlier.
It seems as though Liew is replicating the model, which he groomed and moulded during his time at S P Setia, at Eco World.
On Tuesday, Eco World announced in a filing with Bursa Malaysia that it proposed to buy 2,198.4 acres of leasehold land in Ijok, Kuala Selangor for a RM1.181bil.
The land is located at the north-west of Klang Valley and is 45km from the Kuala Lumpur city centre, 40km from the Petaling Jaya city centre and 18km from the Sungai Buloh town centre.
Its wholly-owned unit Paragon Pinnacle Sdn Bhd (PPSB) had entered into five separate sales and purchase agreements with Mujur Zaman Sdn Bhd, Ringgit Exotika Sdn Bhd, Liputan Canggih Sdn Bhd and LBCN Development Sdn Bhd to buy the land.
Eco World’s rationale for the acquisitions is that it would give the company sizeable tracts of land in the north-western growth corridor of the Klang Valley. Furthermore, such sizeable Klang Valley landbank comes as a rare opportunity. The company has already identified three projects to develop, including a 1,400-acre mixed-eco township project to be known as “Eco Gardens”, consisting mainly of landed and high-rise residential homes, among others.
It intends to build a 518-acre integrated gated industrial hub to be known as “Eco Business Park V”, and about 280 acres of affordable homes to be known as “Laman Indah”.
The estimated GDV is RM15bil over a 15-year development period based on the preliminary management estimates.
Analysts were surprised at the scale of the acquisition, saying that it would definitely put a strain on Eco World’s balance sheet, and nudge its net gearing levels up. If it shoulders the acquisition on its own, Kenanga Research says that this would increase its estimated net gearing for the financial year ending Oct 31, 2016 to 1.09 times from 0.73 times currently.
“We were taken by surprise by the magnitude of the land size especially when Eco World’s net gearing is expected to exceed the comfort levels of 0.5 times over the 2016 to 2017 estimate,” it says.
However, Eco World clearly indicated that it intends to fund the acquisition using a mix of internal funds, bank borrowings and, or equity funding. And to this extent, it is inviting institutional, private equity and corporate partners to jointly fund PPSB.
It is willing to let go of a 70% stake, while 30% is the minimum stake it wants to keep in PPSB, for it to be able to enjoy meaningful share of the development profits.
Analysts note that Eco World would prefer not more than three external investors.
These partners will enter a development management agreement with the company, where it will receive management fees.
CIMB Research says the company is already in the process of negotiating with potential new partners. It believes that Eco Gardens and Eco Business Park V could be the company’s first projects to have such a structure.
In Kenanga’s base case scenario where Eco World holds a 50% associate stake in PPSB, the company’s equity commitment would only increase 2016 estimated net gearing to 0.78 times. This is still manageable, says the research house, considering that it would take up to 2017 for property earnings to normalise.
It is “longer-term positive” on the acquisition, as long as Eco World is able to secure the right partners and does not assume more than an associate stake in the project for balance sheet management reasons.
“We believe this model is one of the best ways to grow their brand and future project earnings without overtaxing their balance sheet. If they do take on a subsidiary stake in this project, we do not discount the possibility of cash calls which would be dilutive to shareholders’ returns,” it says.
Amid a more subdued property market, Eco World is still taking advantage of landbanking opportunities and aggressively carrying out new launches. “Surprisingly, the recent launch of Eco Meadows enjoyed overnight queues. This exemplifies Eco World’s strong execution capability. We view Eco World’s gumption positively,” says CIMB.
But it now has run into a little hiccup. The Selangor government (MBI) “regretfully” said that the land Eco World is proposing to acquire is actually land involved in ongoing legal court proceedings with the state government.
MBI said it would explore any legal relief or remedies, which might include an application for an injunction due to action made by the vendors.
Eco World issued a statement on Thursday saying it believed the land referred to by MBI might be a separate parcel north of the land the company is proposing to buy.
It said it would meet with MBI officials soon to clear any doubts on the development.