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Thursday, November 26, 2015

OCNCASH - Post Q3 2015

OCNCASH posted a WOW-ing result today (25 November 2015), well at least for me, it is a WOW. Let's go through the Quarterly Result.

1) Fundamental Analysis:

OCNCASH Q3 2015 Result

Comparing Q3 2015 with Q3 2014, the revenue increased 9.76% while net profit had a whooping triple digit growth, 599.79%. Cumulatively, revenue improved 12.24% while net profit improved 127.55% [2].

A point to note here, if we compare the cumulative Q3 2015 against 2014 annual result, the net profit had already exceeded 2014 annual result by 44%. This is just the Q3. I think roughly we will know what will be happening in Q4. And how the result will impact the price, especially when the chart had broken a historical new high. This is what we call a growing company. Just to recap, OCNCASH is specialized in felts division and nonwoven division[1].

Cumulative Revenue by Geographical Segment

Next, let's look at the revenue by countries. The ranking will be Malaysia (31%), Japan (29%), Indonesia (19%) Thailand (17%) and others (5%). Around 69% of the net profit is generated from overseas, which is using USD. So, OCNCASH is a USD benefit country.

Remember in my previous post, in the annual report, Mr Chairman assured the nonwoven division will have a double digit growth this year. The increment of 9.76% in revenue for nonwoven industries on quarter on quarter basis is mainly due to increase in sales to Thailand and Japan. Revenue from air condition market also recorded an increase. The air condition is the mask industry, remember the haze that happened in Malaysia and Indonesia during September and October. However for the felts division, Indonesia showed a decrease in revenue due to the slowdown in new automotive sales. New factory will be completed in June 15 in Indonesia. That's why we see the liabilities increased for the felts division, it is all for the expansion of the business in Indonesia.

Page 6 of Q Result

From the Q Report (comparing 30 Sep 2014 and 30 Sep 2015), if we focus at the Insulation Division, the liabilities had increased from RM3,518k to RM11,413k. Meaning to say, the money had been used for the new factory, hence the assets also increased from RM40,120k to RM51,040k. When we compare the revenue, it is almost the same, around RM21,600k, meaning to say that the factory had been completed in Q2 in Indonesia. The new second production line will be installed and commissioned during the Q3 of 2015. Next the existing first production line will be relocated to the new factory at the end of 2015. So we will expect the two production lines to be fully operational in 2016 and the revenue and the net profit to be pumped in Q1 result announced in May 2016[1].Mr Chairman had warned in the Annual Report that due to slowdown in automotive sales in Malaysia and Indonesia [6], the felts division suffers a slight drop, the net profit will be lesser but with export of nonwoven industry to Japan, it will balance off the lesser profit from the felts division.

In terms of fundamental, the company had no problem at all. It is expanding its plants in Indonesia and the sales of nonwoven industry is high in Thailand and Japan. With such pace, i think the company might be net cash in a year or two. OCNCASH also announced a dividend of 0.7sen which will ex on 8 December 2015, which is around 2 weeks more from now.

2) Technical Analysis:

The chart had been in a tremendous uptrend. From September till November, it had been rising for 2 months. An uptrend channel is formed with a resistance at 0.46. Next, the chart will be challenging a historical new high and will continue to break their record. Of course, once they break their historical high, normally they will rest a while. With its supports at 0.415 and 0.39, together with the profit taking activities taking place usually at the result announcing month, the chart faces two bearish engulfing. But still, i am thinking after they announce the triple digit growth, will the result gap up tomorrow and heavy profit taking activities will further push the price down tomorrow? Well, it might happen. Be mindful of our volatile market also.

But for me, personally, i will wait again for the chart to break new high, reason being:

1. The cumulative 3 quarters net profit had already exceeded last years full year, with new factory fully operating in Q1, 2016.

2. My entry price is low, and i will be waiting for the last Quarter, no matter how bad the result is, it will still be pushed up due to its low price with strong fundamental and net profit margin.

3. Theme play of transfer to Main Board. Take a look at the example of HHGROUP, once they announce that they wanna apply for Main Board, notice how HHGROUP flies...

3) Projection Analysis:

The Projection Analysis is the new thing that i want to highlight in the coming posts. By assuming a few assumptions, we might have our target price.

Annualized Net Profit = RM7,085k divided by 3 quarters times 4 = RM9,447k, lets assume RM9,550k

Number of Shares = 223,000k (Assume remains stagnant)

Annualized EPS = 0.043

Current PE (26 Nov 2015) = 10.54

Target Price (TP) = 0.042 x 10.54 = 0.45

Assume new PE (15), the New Target Price = 0.645 (let's round it off to 0.65)


OCNCASH for me is still an OCEAN full of CASH. It is my STAR STOCK of 2015.

- A whooping 3 digit growth of NET PROFIT 600%

- New factory in Indonesia and expected to pump in profit at Q1, 2016 for Felts Division

- Good sales from Thailand and Japan for the Nonwoven Division.

- Only announced 3 quarters of result, but the net profit had already overtaken last year's full result by 44%.

- 69% of the net profit generated from overseas, earning USD.

- Ex-date for the 0.07sen dividend is on 8 December 2015.

- Broke historical new high and will be continue to challenge the resistance of 0.46, after that, sky is the limit.

- Eligible to transfer to Main Board. This might be another theme play for OCNCASH.

- Low price with good fundamentals, a possible target for market makers to push. If your price is low, you can continue to hold.

- Stay calm and wait for the fruit to ripe

- You can always refer to my post

Gainvestor short term TP: 0.65

Let's Ride the Wind and Gainvest
Gainvestor 10sai
26 November 2015
[2]: Q13 2015 Report

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