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Sunday, May 31, 2020

Riverstone (SGX: AP4)- The forgotten twin brother of Malaysia’s glove king

Riverstone was established in 1991 and listed on the Mainboard of the Singapore Stock Exchange in 2006. The company specialise in the production of Cleanroom and Healthcare Gloves, finger cots, cleanroom packaging bags and face masks. It was the pioneer in nitrile glove production from Malaysia.

Currently, Riverstone have five manufacturing facilities, located in Malaysia, Thailand, China and established network of sales offices and strategic partners in Asia, the Americas and Europe. They export more than 80% of our products to key high technology customers in Asia, the Americas and Europe and play an important role as global supplier of Cleanroom Consumables and Healthcare Gloves.

Coming into 1Q20, Riverstone saw sales growth of 16% which was generally in-line with its historical volume growth. Net Profit skyrocketed from RM$30.2m in 1Q19 to RM$46.6m in 1Q20 or a 54% improvement, largely a result of Gross Profit Margin (GPM) improvement where its GPM increased by 4.6ppt on a YoY basis to 24%.

GPM improvement was largely the result of 1) Better pricing environment for Riverstone’s products 2) lower raw material prices 3) Wider market reach and reduce distribution cost

Better pricing environment

The average selling price (ASP) increase for the healthcare segment only materializes in May, thus 1Q20 did not benefit from any ASP rise. From May onwards, healthcare glove ASP is set to increase by 10% for existing customers and 20% for new customers.

Based on management’s guidance, the order backlog for healthcare glove has now extended to 6 months vs. prior level of 3 months. This could potentially further extend given number of COVID-19 cases increase exponentially.

Lower raw material price

Riverstone has benefitted from the down-trending prices of Butadiene, a key raw material used in the production of its nitrile-based gloves. Butadiene price, which tends to move in tandem with oil prices, is down 33% in 1Q20. This has a huge impact on Riverstone’s gross margins since this raw material alone accounts for 50% of Riverstone’s cost of good sold.

Wider market reach and reduce distribution cost

Riverstone have factory and office located in Malaysia, China, Thailand and United States. This can reduce the middleman cost for the glove distribution around the world.

Just like Supermax and Topglove who have factories spread across the world, this helped company to save the middleman cost for distribution of the sales across the world. This explained the higher revenue growth of this company compared to Hartalega and Kossan.

Benefit from strong US currency with falling MYR Currency

Riverstone’s revenue is denominated in USD while costs are mostly in MYR. Hence, the strengthening of the USD against the MYR tends to be beneficial to Riverstone in terms of GPM improvement.

The exchange rate have increase of around 7% from 1 USD to RM 4.05 in Jan 2020 to RM 4.35 (May2020)

Pricing at a discount compare to his Peer

Among all the glove company, only Riverstone and Hartalega with free cash flow. In their latest QR in March 2020, Riverstone is holding RM 170 million is cash.

Among all the glove company, Riverstone is one of the highest profit margin and gross profitability.

If Riverstone PE move closer to his peer. For PE 48 , the reasonable price should be SGD 2.8 (RM 8.59) or if PE move to 60 SGD 3.5 (RM 10.7)

Top Glove





Glove production output (Billion pieces/ year)






Revenue (RM)





1.0 B

Free Cash Flow (RM,mil)












PE ratio






Price/ NTA






Revenue growth






Gross profit margin






Net profit margin






Return on Equity






Gross profitability






Debt to net profit






Debt to cash flow






Current ratio






Cash ratio






Current price


RM 12.54

RM 8.70

RM 7.70

SGD 2.23

(RM 6.80)

Revenue growth QoQ






Reliable management team

Mr. Wong Teek Son who is the CEO of the company has owned around 50% of the company stock. From 19th March 2020 onwards, he bought back 2,180,000 of Riverstone stock. His holding in his company has increased from 50.77% to 51.04%. Even now with the stock price rising so much, none of the major shareholder sell their stock. This has directly informed us about the management team confidence of their coming business prospect.

Another excellent thing about Riverstone, the company has not issued any additional share listing so far, hence investor does not need to worry about dilution of their company earning. Their number of ordinary shares issued still at 741,084,000 share for the past 5 years.

Excellent dividend pay-out ratio

Due to strong free cash flow, the company has been very generous for dividend pay-out. The ratio has been around 40% for the past 13 years.

In Riverstone corporate presentation 2020 published on 13th May 2020, the key milestone highlighted the further expansion of their factory with the aim of rising their capacity of glove production up to 14-15 billion by FY 2023, which is another 34-44% increase production from the current capacity of 10.4 billion pieces of glove per year.

Below is the investment merits for Riverstone presented in their business highlight.

In Summary, Riverstone with a lowest PE among glove stock, higher profit margin, higher cash flow/ cash ratio, higher dividend pay-out ratio and good business prospect is definitely a good choice for value investor. Short term, I am looking at the next target price at SGD 2.8 then SGD 3.5 if the PE marching up to match his peers. Based on the last Friday closing price of SGD 2.23, there is 26 to 57% discount!

Friday, May 29, 2020

Analysts unfazed about US FDA's import alert on Top Glove’s unit

Wong Ee Lin/
May 28, 2020 17:31 pm +08

KUALA LUMPUR (May 28): There is no doubt that the main beneficiaries from this Covid-19 outbreak are rubber glove makers as demand continues to surge worldwide while the pandemic remains unabated.

Therefore, when Terang Nusa (M) Sdn Bhd — a manufacturer and distributor of surgical and medical gloves that is owned by Aspion Sdn Bhd, a subsidiary of Top Glove Bhd — raised import alerts and was placed under Level 1 detention by the US Food and Drug Administration (FDA) over product quality issues, analysts were not concerned.

“We understand that this is for the examination gloves and the seized shipment failed the pinhole test. To be released from Level 1, Terang Nusa's next five shipments will need to pass the US FDA test,” said Maybank Investment Bank Research, in a recent text message sent to institutional clients.

Maybank noted that Top Glove had known about the quality issue since November 2019 and has already renovated the plant, which now has double dipping lines and stricter quality assurances (QAs) in place.

Hence, Top Glove is confident that its next five shipments will be able to pass the test, said the investment bank.

But, assuming if the subsequent shipments do not pass the test, Top Glove can still ship the gloves to other countries, while the void by Terang Nusa can be filled by Top Glove's other entities, said Maybank.

Terang Nusa has a capacity of around 2 billion pieces per annum or 3% of the group's total 73.8 billion pieces per annum.

“In our earnings model, we have only assumed net profit of RM26 million in the financial year ending Aug 31, 2020 (FY20) for Aspion (or 3% of our FY20 net profit for Top Glove),” said Maybank.

For the first half of the financial year ended Aug 31, 2020 (FY20), Top Glove's net profit was up 5.22% to RM227.11 million, from RM215.85 million in the year-ago period, as the tax incentives helped offset lower pre-tax profit arising from lower operating margins.

Revenue for the six-month period grew 0.7% to RM2.44 billion, from RM2.42 billion in its first half of the financial year ended Feb 29, 2020 (1HFY19).

A quick check on Bloomberg data shows that Maybank Kim Eng has a “buy” call with a target price of RM10.95.

CGS-CIMB Research, in a recent text message circulated to institutional clients, noted that this is not the first time a subsidiary of Top Glove has been flagged. “In 2013, examination glove exports from Top Glove’s China subsidiary were also flagged under Level 1,” he wrote.

“Our channel checks with Top Glove highlight that this is not a big issue, as it has many other factories and subsidiaries to export gloves to the US while it solves the quality issue from production of a particular plant,” said CGS-CIMB Research.

With a very diversified customer base and sales location, of which 26% of its 1HFY20 sales volume were to North American countries such as the US, Canada, Mexico and others, the research house believes that Top Glove can reroute its gloves to other countries with less stringent requirements.

On top of that, CGS-CIMB Research noted that profit contribution from this particular plant is minimal, at less than 1% of Top Glove’s FY19 net profit.

CGS-CIMB Research said Top Glove is confident that it can pass the FDA's requirement for the next five shipments. However, should there be another setback, Terang Nusa will then be placed under Level 2 detention, which requires 10 shipments to pass the US FDA approval.

The research house has an “add” call with a target price of RM16.50, based on Bloomberg data.

At 3.51pm, shares of Top Glove rose 10 sen or 0.78% to RM12.96, valuing the counter at RM33.14 billion. Year-to-date, the counter has jumped some 176% from RM4.70.




買賣找大型代理 租賃選地頭蟲



[湯文亮 敢說反話]

譚新強:美國面對政治三元悖論:(1)經濟 (2)抗疫 (3)打壓中國







特朗普的最優先任務當然是成功連任(不要誤會是美國)。很多人以為特朗普必贏,其實選情仍非常接近,且離開大選仍近半年,變數仍多。美國貨幣和財政刺激雙管齊下,印了3萬億美元,又派了2萬億,今年財赤或升至前所未見的GDP 15%以上。


在此情形,美股怎可能不強力反彈?標普距離歷史高位只約10%,納指更只約4%。但不要誤會這就對特朗普選情有很大幫助,請留意他也不再經常提起股市表現。因為受惠股市的主要仍是top 1%的富人,如果再炫耀股巿表現,只會激怒99%的老百姓。絕大部分美國人面對的實體經濟是另一回事,失業人數近4000萬,失業率近20%,第二季度GDP將前所未見的下跌近40%!即使經濟重開,估計年底失業率仍將高企在10%以上。



美國充滿樂觀的愛國者,他們認為疫情將很快變成過去,一切將回復正常,今次衰退亦將是有史以來最短的一次。名策略師Tom Lee更預測標普將在年底前再創新高!這個預測不是無可能,但如成真,將完全是無限QE的功勞,跟基本面脫節,PE高達30倍以上!

不過,成功重開經濟的前設是成功控疫。過急重開,但仍未有足夠測試系統,接觸追蹤系統和人手,後果堪虞,出現第二浪的機會很高。再加上美國的嚴重反科學傾向,例如特朗普支持者拒戴口罩,簡單的科學事實,已淪為部族圖騰。他們亦拒絕承認家居隔離有用,幾同謀殺,跟民主一點關係都沒有。用藥也不妥,迷信效用有限的HCQ,當然拒絕跟香港學習,用證明非常有效的Kaletra加Interferon beta-1b和Ribavirin的雞尾療方。不科學,所以就一直無法把每天感染個案大幅減少,平均死亡人數更高企在1000以上,非常恐怖。




上周某大投行安排了一個小規模CIO電話峰會,其中一位參加者為Stanley Druckenmiller。他現時投資態度較為審慎,但認為特朗普極需要落實中美第一階段貿易協議,所以暫時不會把貿易戰升級。但到了八九月,如選情不利,就可能採取行動。




最關鍵是5G各樣標準的制定權,在這方面似乎華為仍有頗大優勢,佔據近半的IP產權。美國的最大弱點是隨着原來AT&T的解體,Bell Labs的沒落,最後連Lucent都被Alcatel收購,然後再跟Nokia合併,美國已再無任何大型電訊器材公司,所以司法部長Barr才會越權建議美國收購Nokia和Ericsson。中方還擊,主要需看兩個層面:貿易和金融。貿易戰或將升級,但如連第一階段協議都不能落實執行,對美國農業影響尤其嚴重。Wisconsin和Iowa等重災區,亦是關鍵的搖擺州份。


搬到其他發展中國家一定會繼續,但未來兩年肯定減慢。中國疫情控制得最好,印度、巴西和墨西哥等仍是每天數千宗的熱點。即使蘋果或P&G等有興趣尋找新的供應商或設廠,旅遊仍是個大問題,有誰願意當「死士」? 況且A.C.後企業元氣已傷,有能力再花錢分散投資在多條供應鏈和大增庫存嗎?2008年後,銀行被迫去槓桿,ROE大跌,從此市場給予的估值更低。工業股亦可能出現類似情况。






美元的最強支柱當然是軍事力量,並非黃金儲備。但當世界警察不容易,美國國防開支近8000億美元,多於後面九個國家的總和,比19世紀英國執行的"two power standard"更誇張!美國的海外軍事基地更多達800個,中國則只有一個。這麼龐大的國防開支,在戰爭時或有作用,但當然誰也不願見到大戰。但在A.C.後負債纍纍的年代,這就是百上加斤的超巨負擔。世界一哥還勉強可靠印鈔票來充撐場面。數年後當失去寳座時,怎麼辨?

[譚新強 中環新譚]

Thursday, May 28, 2020

My favorite Indicator - Andrea Unger

Hi guys, hi from Andrea Unger.

Do you use indicators?

This question is often asked to me and it comes together with: “What indicators do you use?”.

We have already discussed this but I just want to go more in-depth in this matter.

My answer normally is that I don’t use indicators for my trading systems and this answer is astonishing for most of the guys out there who are asking me the question because the common thinking about the trading systems is that a trading system is a proper mix of indicators put together to realize the automation which is far from the truth.

I don’t mean they don’t work at all, but for sure there are better ways to build trading systems.

All the students of the Trading Systems Supremacy program know the way I build trading systems, know that I use chart patterns as filters and I use analysis with these patterns to understand what a market normally does, based on that I develop further to get the end result.

The indicator for my trading systems: what it is, how to use it and why

Thinking a bit better about this I also realize that yes, sometimes I use indicators, but I don’t use indicators in the way people think.

So I don’t use indicators to build my setup but if I use them, I use them as a filter to another kind of entry or activity.

One of the indicators that I love most, it is a big word, that I prefer, let’s say, is the ADX.

ADX is an indicator that moves between 0 and 100 even if 0 and 100 are both crazy levels, and it measures somehow, let’s say, the acceleration of the price move.

I’m not going in-depth into the formula, the equation because it doesn’t make sense here and on most of the charting software you find the ADX as is so you have just to input the number of bars on which it is calculated, but just be aware that it tells you, more or less, how accelerated the market is in that very moment.

The indicator for my trading systems: which values to take into account?

Big values of ADX are all those exceeding, I might say, 65, whereas 80 or 90 are very seldom seen on any chart, so with about 65, you are already in a situation of strong acceleration.

Small values are, I might tell you, below 40/45.

I don’t consider values of 15 or 90 because, as said, they are at such a limit that doesn’t make any sense to investigate on that.

These values play an important role in your entries and they also change if you change the number of bars on which you calculate the value of ADX.

The shorter they look into the market, the longer of course…

This is pretty easy to understand but obviously, you might target a small number of bars if you go for a longer move or… sorry a small number if you go for a short move, a short time horizon of your trade, or longer number of bars of which you calculate this oscillator if you go for a longer time horizon of the trade.

How to use it, what is the ADX telling you and how can it help in your trading systems?

If you imagine a breakout, imagining a breakout you might think that the strength of the market helps in a breakout, so the higher the ADX the better the entry.

Is this true?

Does it really work like that?

To understand it a bit better by looking at numbers as I normally love to do, I prepared a small investigation on my computer just to show you.

Take care and have a look at it.

I’m going to show you immediately.

A practical example of how I use it

So, guys, this is our code, very simple code, very easy.

We have our input MyADXLimit, this is input so that I can optimize it to understand how it works.

It’s here and has a limit MyADXValue which is a variable and it’s actually the ADX on 5 bars, that simple, daily bars in my example here, but it doesn’t matter, just bars.

Then this limit, this limitation, if my ADX is smaller then my limit, which is set at 100, which is no filter, but then we will analyze it, and I can perform this task here.

Here we have an additional task: if yesterday’s close is smaller than the close of the day before then you can buy at the breakout of the high of yesterday, it’s a typical breakout entry, very very simple.

If on the contrary, the close is higher than the close of the day before, then you can enter short at the low of yesterday.

This is just the set of rules to enter the market, very simple.

This part here is a sort of a retracement rule to the entry, which helps and also helps to separate the long and short on the same day because obviously, I cannot have both a close smaller and a close greater than the close of the day before.

Then we close at the end of the day, “setexitonclose” is the instruction that means the positions close at the end of the day, as said, it’s just an example.

We have this basket of instruments here.

Sorry, I put it to 100 now because we don’t want a filter immediately.

As said, 100 is my maximum value of ADX.

Some Forex pairs and then I have some future crude oil, sorry I mean miniS&P, crude oil, gold, and DAX future.

So we run the backtest and here we have the results.

So these are the results, they are positive results, the strategy makes money, the equity curve is not the best of the world but it shows a rising equity which means that the idea works… the idea works.

Does the ADX have some effect on this?

We run therefore an optimization from 20 to 100, step 5.

20 as said, is the lower limit because I don’t believe it makes sense to go lower than that as I’ve already said.

So let’s see what happens with this optimization.

Here we are.

The results this is without a filter $380,000, it’s fine and then we see that the result does not change very much, actually, sometimes we get something more, sometimes something less.

A remarkable improvement in the drawdown… and in the number of trades

Here above, when we reach to a small number like 40 or 35 and 30 we see… at 30 we get more or less half of the profits, but at 35 we get more or less the same, just a little bit less $350,000 compared to $380.000 which is okay, but look at the drawdown.

Here we had a drawdown of $150,000, here is only $43,000.

So it has an enormous impact on drawdown!

We had an incredible improvement in our drawdown and the number of trades here with over 19,000 trades, now we have only about 8,000.

So we cut a great number of trades we work less to make more or less the same result.

So we take this and we have a look at the overall result, so we are working less we’re lazy traders, we are working less and making the same amount of money, and now the equity line, well this equity line looks much better than the previous equity line, no doubt about this.

The numbers are more or less the same, long and short are more or less equivalent and if we look at the symbols, which are even almost all profitable, just some symbols show some small losses, but I mean this is obvious in any portfolio and it would be tricky to just to take these symbols out, I leave them there and we can work.

This strategy cannot be used in real money because we have an average trade of about $44 which is not enough to cover all the trading costs, so this is just a model that might require more development.

Remember this, we have not shown the ultimate model to make money, it’s a model that works on which you could work.

What if we use it only with the Gold Future?

In some cases, it’s even good.

Look at the gold future for example, we see the gold future and with no filter, it’s 100 now, we have this situation.

A profitable strategy, the short is losing anyway and the equity line, well it made money in the early years and stopped making money.

Here we have the drawdown as well and you see the drawdown is stabilized here around $40,000 or something like that.

This, obviously, is not very exciting.

Now, if we use the input that we just found of 35 here, let’s see how things change on the gold future.

Fewer trades clearly and here we are the performance report.

Now the short is positive as well, it’s a good balance between short and long and the equity line looks much much better.

The drawdown only ones went in direction $20,000 and then normally stayed around $10,000, a big difference, a huge difference with the previous solution!

So this is something that looks very interesting.

We could even consider trading this.

If we look at the average trade of this strategy you can see that it is nearly almost $200, $196.

This is something that could be usable in real life, because it’s enough on gold future $200, especially on an intraday strategy, because we are closing the positions at the end of the day.

To tell the truth, anyway, if we look at the yearly performance, the annual performance here, you see that in the latter years, the performances were weaker than in the early years, so… but in 2020 was not bad $3,000 in only six trades!

This is something we would be happy to achieve, of course.

In conclusion

So you saw.

Maybe you were already aware, maybe this is nothing new for you, but actually, it might be surprising that breakout entries work better after a relaxing of the move and work obviously worse when the moves are already in a strong way.

As said, this was an example, I use ADX this way, obviously depending on the setup that you build you can use it with different parameters and you make, I suggest you make a different kind of investigations.

It’s not the same on every single market, on any instrument, this is clear I hope for you now, but the principle works and the evidence of the numbers is giving me the right to tell you something like this.

So ADX is one of the stuff or the things that I use in building my trading systems.

As said it comes after another world of things and if you want to learn and understand a bit more about trading systems and what I do you can register at the link here below which is completely free.

We have a pick into the world of trading systems, Andrea Unger and the Unger Academy, what we do in this world and how we work.

This might be interesting because you might find some insights as I hope you found thanks to this small tip about ADX.

So indicators? No, but yes sometimes.


As a filter, I’ve just shown you.

Guys this was it, if you have questions, write them below and we’ll keep in touch.

See you next time.

Ciao from

需求高售价涨 券商喊买顶级手套贺特佳























【行家论股/视频】联昌国际 全年财测砍34%













疫苗量产最快要1年后 手套需求售价还会涨





















Wednesday, May 27, 2020

ComfortDelGro Corp Ltd – Pain Everywhere

  • Revenue and PATMI were below expectations. 1Q20 PATMI fell 49% YoY, dragged down by taxi profits declining 92% YoY. The full impact of circuit breaker and rental rebates to taxi drivers in Singapore will occur in the following quarter.
  • Comfort will be providing a total of S$116mn worth of taxi rental rebates. Rebates started in mid-February and will end in September. The bulk of the rebates will occur in 2Q20 when 100% waiver of rent is given for almost two months.
  • The taxi operations will be loss-making in FY20 due to the rebates. The rental relief from Comfort will help retain taxi drivers longer than competitors. We expect the path to recovery will be gradual. Social distancing behaviour, working from home and the decline in tourist will all weight on passenger volumes. We downgrade to NEUTRAL with a lower target price of S$1.50 (prev: $2.20). Our PATMI for FY20e is slashed by 62%. It excludes the job support scheme to be received from the government.

The Positive

+ Free cash-flow of S$57.4mn in 1Q20. In 1Q20, Comfort generated free cash-flows* of S$57.4mn (1Q20: +S$0.4mn). Operating cash-flow of $S105.5mn during the quarter was higher than a year ago (1Q19: S$95.6mn). This allowed the company to turn net cash position of S$ against the net debt of S$40mn as at end Dec19.

*Operating cash-flow less capital expenditure

The Negatives

– Taxi profitability plunged. Taxi operating profit plunged 92% to S$2.4mn. Rental rebates and lockdowns depressed earnings and volumes respectively. Of the S$116mn of rental rebates to Singapore taxi drivers, we believe only S$13.7mn was incurred in 1Q20 (Figure 2).

– Bus operations are not immune. The lower frequency in bus mileage will impact revenues. The service fee paid by the authorities is dependent on mileage travelled. 1Q20 there was less impact on Singapore. Reduction in advertisement revenue was another negative driver for earning.

– Overseas operations perform poorly. Poor weather and a declined in tourism pushed the UK and Ireland operations into losses. China similarly swung into losses due to lock-downs and rental relief to taxi drivers.


Taxi – Comfort taxi drivers will receive rental relief in stages from 13 February onwards (Figure 1). Taxi drivers will also receive 100% rental waiver from 7 April to 1 June, to coincide with the circuit breaker period. We estimate the rental rebates from Comfort in 2Q20 will be around S$68.9mn (Figure 2). Taxi operations are expected to be loss-making in FY20e.

Public transport – Public bus and rail ridership was down between 70-75% during the circuit breaker period. Lower mileage operated will lead to less service fee to be received from the authorities. However, capacity needs to be close to pre-Covid level because safe distancing measures cannot totally be enforced on public transport. Rail operations will bear the full brunt from the collapse in ridership.

Downgrade to NEUTRAL with a lower target price of S$1.50 (prev. S$2.20)

The recovery will be slow. Bus operations can recover faster as revenue depends on capacity, not passenger volumes. However, rail and taxi will suffer for a more prolonged period. The unknown for us will be the number of taxi drivers churning out of or into Comfort. With rental rebates still underway, the taxi fleet for Comfort has been relatively stable.

Source: Phillip Capital Research - 26 May 2020

Silverlake Axis (SGX: 5CP) - Why I Think This Company Is Severely Undervalued

Silverlake Axis (SGX: 5CP) has a rough performance this year so far.

Just by looking at the chart, share price has dropped by almost half since the start of this year from 40 cents to the current 21.5 cents.

If we take its performance from one year back, it has dropped a lot more from 54 cents/share.

For those who does not understand what the company does, one might misunderstood thinking that the company is related to aviation or tourism industry because of the level the share price is descending.

With share price hovering at an all time low valuation (with exception to 2017, I'll explain why), the question is if there is light at the end of the tunnel and if the company represents an opportunity buy to investors.

Business Segment

The company's business segment is divided into two parts: recurring and non-recurring in nature.

The recurring aspect of the business is referring to the maintenance and enhancement services that it provides to banking institutions as well as Software as a service (SaaS) while the rest are more project based related.

Maintenance and Enhancement Services:

The maintenance and enhancement services segment focuses on providing software support to banking institutions.

The company performs maintenance services for the software solutions that they have implemented for their customers. Enhancements are also planned and deployed per the required software release schedule.

From FY2014 to FY2019, the maintenance and enhancement services segment have doubled from Rm 210m to Rm 421m. For the period ending Q3 FY2020, the segment has also outperformed the Q3 FY2019 period by 10%.

This is what the company described as sticky moat because the digital banking back end are generally complex and contracts procured are generally long term in nature, thus contributing to a high level of retention of the same customers. Margins are also high for this segment as most of the operating costs incurred are human capital in nature, providing round the clock solutions to customers.

This segment will continue to grow as they continued to win small marginal contracts.

Software as a Service (SaaS)

I'm a big fan of SaaS business because of the high profit margins, positive operating cashflow and easy visibility on the revenue.

Providers usually capitalize software and amortize it over a period of time over the length of the useful lives. They would then do a mark-up to charge a subscription fee to customers who depend on these services.

It is great for cashflow because not only will the company be able to generate a positive cashflow from this segment but also easily plan for the next 6 to 12 months with clear visibility.

The insurance processing business, undertaken by Merimem Group, focuses on providing cloud computing SaaS platform for policy claim processing for the insurance industry.

In the past recent years, the Group has established its operations and services in the ASEAN. The next few years the Group will see growth in North Asian countries like Japan.

In FY2019, revenue from this segment grew 10% from Rm30.3m to Rm33.4m with contributions coming from the expansion in Philippines, Vietnam, Thailand, Hongkong and Indonesia from its analytic software suite called Truesight.

Software Project Services

This is project services which the Group has to bid and tender for implementation or customization of software services.

While 9M FY2020 revenues are down to Rm51m versus Rm67m in the previous year due to completion of projects, the Group is optimistic that the digital banking license assessment, which MAS has delayed to 2H2020 will be a one to watch out for.

Software Licensing

This segment is highly correlated to the software project services.

Software licensing contributed about 15% of the overall Group's revenue.

In 2019, the Group also acquired 80% of SIA X Infotech Group's shares, enabling them to offer Digital Identify and Security Technologies such as biometric verification and enrolment to existing and new customers.

Licensing fee is highly dependent on securing new contracts from existing and new customers so this segment will be lumpy in nature.

For the 9M ending FY2020, this segments were already down to Rm 52m from Rm66 last year for the same period due to completion of projects in Thailand.

Sales of Software and Hardware Products

Although this constitutes a smaller portion of the Group's overall revenue, 9M FY2020 numbers have increased significantly to Rm 21m versus Rm 5m last year due to one sale of high value hardware to support technology advancement for existing customer.

The Group is an authorised reseller of IBM hardware products and system software in Malaysia.

As a reseller of products, this is a lower margin business as compared to the other segments.

Credit Cards Processing

This is one segment that I think the Group is trying to unwind down because it's a low margin business with many competitive areas from other competitors.

Two of the Group's main customers in Japan has decided to terminate and this results in the huge drop from this segment for this year and previous year.


The Group's financials are healthy and fairly stable over the years, although you could argue that topline doesn't grow by much over the years.

What has really changed for me is that the nature of the revenue has switched from more project work (which tends to be more lumpy) to more on maintenance and enhancement, which are more recurring in nature.

This provides visibility on financial planning, capex and cashflow needs.

Both GP margins and NP Margins have been fairly healthy over the years, with exception to FY2020 where they lost the tax concession pioneer status due to expiry for the Malaysian subsidiary effective Q1 FY2020. The pioneer status allows for income tax exemption of up to 70% to 100% of statutory income for 5 to 10 years. It also allows any unabsorbed capital allowances and accumulated losses incurred during the pioneer period to be carry-forward. It remains to be seen if the Group can apply for extension on this pioneer status validity for the next 2 to 3 years.


Earnings per share for FY2020 annualised looks to be at around SGD 1.88 cents/share, which translates to about 10x PER.

That's the cheapest it has ever been (excluding FY2017 due to one-off disposal of marked to market interests in associates) from a valuation perspective in the last 10 years.

In fact, for a company with a such a predictive and sticky moat, it is hard to imagine that the market is pricing the shares at 10x price to Covid-earnings. There's a lot of bad news that is baked into the current share price and I think what investors need from the company is really just patience, and time for its value to be realized.

With so much software, tech and SaaS company outside trading at crazy multiples, it is quite a steal to be getting such a valuation for a company that I think we know will be around for a number of years and will prosper as we move towards more digitalization, fintech and banking licensing needs from both banking and non-banking institutions.


I believe why the market is attributing such low valuation right now is because there is currently no catalyst in play.

While management has cited that they are still winning the smaller contracts, larger contracts are harder to come by as most banking institutions are conserving their cash to delay some of the capex projects in hand in view of the economic uncertainty. As a result, this lack of catalysts calls for a drop in the valuation which investors are currently switching their money elsewhere in mind.

Nevertheless, I believe that the market has overly discounted the resilience of the business in mind, the stickiness of the moat and how the business can take advantage of the upcoming digital banking and considering they are trading at a valuation of 10x PER, this will continue to be an accumulation play for me.

Target price would be 32 cents, which represents a 50% upside in the next 12 months with either new contract announcement, or post-covid return to normalcy whichever is earlier.
Disclaimer: Author is vested in the abovementioned company as of writing

Thanks for reading.

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Riverstone Holdings - Positive Takeaways From Conference Call; Raise Target Price by 18%

  • We held a conference call with Riverstone (SGX:AP4)’s CEO on 21 May 20. Key takeaways are:
    1. there is robust demand for healthcare gloves and ample room for ASP hike, with ASP hikes only starting in May 20;
    2. cleanroom gloves are enjoying healthy demand, with a surprise ASP hike in Jun 20; and
    3. capacity expansion is set to fully come on line in 4Q20.
  • We raise our 2020F EPS by 21% and PE-based target price by 18% to S$2.53 (23.1x 2020F PE). Maintain BUY.

Robust Demand for Healthcare Gloves and Ample Room for ASP Hike

  • Demand for healthcare gloves has exceeded production capacity by more than 2x. Lead time has also increased from 3-4 months to 6 months, implying that new orders will only be delivered at the start of 2021. Several industries such as home care and food industries are also starting to use gloves. ASPs for healthcare gloves are set to increase by 10% for regular customers and 20% for non-regular customers in May and June, before increasing by 5% and 10% in July.
  • 40% of Riverstone’s healthcare customers are non-regular customers, with 20% being periodic customers and 20% spot buyers. Periodic customers pay a 10% higher ASP as compared with regular customers whilst spot buyers pay about 50-60% more than regular customers.

Cleanroom Gloves Segment Remains Healthy; Surprise ASP Hike

  • Strong demand for cleanroom gloves was backed by the hard disk drive, semiconductor, lenses and pharmaceutical industries. What came as a surprise is Riverstone also raising ASP by around 10% for its cleanroom gloves, starting in June.
  • Demand remains robust during the COVID-19 pandemic as major cleanroom gloves competitors have shifted production capacity to healthcare gloves. This is significant as cleanroom gloves’ ASP is 2-3x higher than healthcare gloves and has a much higher gross margin.
  • Also, cleanroom gloves segment contributes around 50% of Riverstone’s gross profit.

Capacity Expansion Set to Come Fully Online in 4Q20

  • With surging demand, management is confident that the new 1.4b capacity from its Phase 6 expansion would help absorb the surge in demand arising from the COVID-19 outbreak. Also, Riverstone has set in place Phase 7-8 expansion plans with commencement expected in 1Q21.

Raise Our 2020-22 EPS Forecasts, Backed by Favourable Tailwinds

  • We raise our forecasts with Riverstone's revenue at RM1,334.5m (+4.4%), RM1,385.9m (+2.4%) and RM1,501.5m (+2.5%), for 2020-22 respectively. Our net profit forecasts for 2020-22 are at RM250.0m (+21.0%), RM268.8m (+19.8%) and RM288.6m (+21.6%) respectively.
  • The significant increase to our net profit forecasts is due to our higher gross margin assumptions for 2020-22 at 27.0% (+3.1ppt), 27.0% (+3.4ppt), 26.5% (+3.5ppt) respectively, led by higher ASPs and lower raw material costs. Raw material price was down 9% y-o-y in 1Q20 and has fallen 10% q-o-q in 2Q20.

Maintain BUY on Riverstone With a Higher PE-based Target Price

  • Maintain BUY on Riverstone with a higher PE-based target price of S$2.53 (up from S$2.15) pegged to a PE multiple of 23.1x (23.7x previously) 2020F PE. Our new valuation method is based on +1SD of Kossan’s 3-year forward PE band.
  • We have switched our valuation methodology from ascribing a discount to peers’ PE multiple which included industry leaders such as Top Glove (SGX:BVA) and Hartalega, as we reckon Kossan represents a better comparison in terms of profit size, market cap and industry positioning. Although Riverstone is trading near its all-time high, it is still only trading at 17.0x 2020F PE, well below the sector’s 32.5x 2020F PE.
  • In our view, our valuation is justified as Riverstone commands higher EBITDA margins, dividend yield and the highest net cash than most of its peers (comparable to Hartalega).
  • We believe the valuation gap is primarily due to its listing outside of its home market of Malaysia. Malaysia-listed glove makers are more closely tracked and better understood due to their combined market size and clout.
  • Riverstone share price catalysts:
    • Second wave of COVID-19 infections or new health epidemics.
    • Better-than-expected ASP hike and operating leverage.
    • Potential takeover target given its dominance in the niche cleanroom glove segment.
Source: UOB Kay Hian Research - 26 May 2020

[第一天] 5分钟看懂大马30大蓝筹股最新数据 ~ 哪些有受COVID-19影响的呢?

Author: moneyKing | Publish Date: 27 May 2020, 10:01 AM






























BY ~ 第一天

Tuesday, May 26, 2020

(Tradeview 2020) - 2 Months Later, ”Cash Is King”, Time to Sell?

There are many reasons as to why this has happened but today I would like to just keep this article short and focus on showing you all the outcome since 2 months back when we deployed our cash reserves and make big investments into the stocks of our choice. In between, we added stocks along the way. Similarly, we also called to sell on strength. This list is the same as the one we shared in our public articles to everyone. (Feel free to cross check against our articles above as we are honest & transparent to all)

We previously shared the following stocks as our favorite as at 24th March 2020 vs the price today 20th May :

1. CCK - RM 0.34 vs RM 0.51 (50% Gain)

2. OCK - RM 0.38 vs RM 0.56 (47% Gain)

3. RCE Capital - RM 1.46 vs RM 1.85 (27% Gain)

4. DKSH - RM 1.92 vs RM 2.60 (35% Gain)

5. Riverstone Holdings Ltd (Singapore listed) - $ 0.80 vs $ 1.76 (120% Gain)

6. Pintaras Jaya - RM 2.25 vs RM 2.77 (23% Gain)

7. GCB - RM 1.90 vs RM 2.75 (42% Gain)

8. MFCB - RM 3.67 vs RM 5.95 (62% Gain)

9. Scicom - RM 0.605 vs RM 1 (65% Gain)

10. RHB Bank - RM 4.94 vs RM 4.76 (-4% Loss)

11. Pentamaster - RM 2.83 vs RM 4.43 (56% Gain)

12. Public Bank - RM 15.24 vs RM 15.42 (1% Gain)

13. QL Resources - RM 6.97 vs RM 8.48 (22% Gain)

Our total gains of +42% exceeds KLCI rebound of +17%. 

**Please note our gains measured excludes dividend gain, and some stocks we bought at lower price / average down, some stocks we have sold. Some we are still holding. Our subscribers would know.

(Tradeview 2020) Long Term Value Pick - Oriental Holdings Bhd. (4006) A Gift For The Next Generation

Author: tradeview | Publish date: Wed, 6 May 2020, 11:23 AM

Dear fellow readers,

This is my Long Term Value Pick for 2020.

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :

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Long Term Value Pick 2020 : Oriental Holdings Bhd. (Fair Value RM 8)

As you all know, the team and myself have been writing for quite some time and over the years have accumulated a published track record for all to cross check / verify. There are some stock picks much more successful than others and have stood the test of time. These stocks are those I would say to buy and leave for your children / grandchildren. For example, I have called to buy QL Resources back in 2015 at RM2.40, Magni Tech in end 2015 at RM4.49 (before 1:3 Bonus Issue & 1:2 Stock Split), CCK in early 2016 at RM0.645 (before 1:2 Bonus Issue & 1:2 Stock Split) and Allianz in early 2017 at RM10.80 amongst many others. For ease of reference, I call it "Long Term Value Pick".

Recently, as it was the birthday of my child, I would like to share with you all a company that I would invest and leave for her as a gift. This kind of long term investment is something that transcends generations and carries my investment philosophy through the passage of time. More importantly, I hope through this investment she can share a bond with me and understand the thoughts I have as I was writing about this fabled company.

1. History & Background

When it comes to Penang, the number of legendary and successful individuals are countless. The list consist of many brilliant Malaysians who have accomplished great things locally and globally. It includes names like Lee Chong Wei, Nicol David, Tun Lim Chong Eu, Jimmy Choo, Tan Hock Eng and of course Tan Sri Loh Boon Siew.

Have you all heard of Boon Siew Honda? Well Tan Sri Loh Boon Siew was the man who was synonymous with Honda so much so people call him "Mr. Honda". He was the man who brought in Honda to Malaysia and Southeast Asia as the sole distributor and grew it to what it is. The founder, Soichiro Honda had amazing relationship with Tan Sri Loh who grew their business empire together for many years. Until today, even after the passing of late Tan Sri Loh, Honda Motors Co. Ltd still hold significant share in Oriental and even have a board representative.

Tan Sri Loh was revered and respected by many because he was a poor immigrant who started from humble beginnings of repairing buses to building an empire and becoming probably the richest man Penang have ever seen. Oriental Holdings Bhd. is owned by the low profile Loh family and is now in the hands of the 3rd generation Datuk Loh Kian Chung, Tan Sri Loh Boon Siew's grandson.

2. Sprawling Conglomerate Across Sectors

Oriental Holdings Bhd is one of the soundest and most established family owned conglomerate which is keeping on a strong legacy. Some of course would regard Oriental as "old money". It has a diversified business interest across plantation, property, hotel and resorts, automotive, healthcare, plastics, building materials and trading. It has large land banks and I would presume to be among the biggest landowner in Penang Island besides the state government, GLC and other institutions funds. Rumours has it that when Tan Sri Loh was in the car passing by a particular location in the later years, he asked his aide "that is a beautiful piece of land, I think we should find out the owner and potentially make an offer to acquire". The aide smiled and softly replied "but Tan Sri, the owner of that nice piece of land is you." This rumoured story shows 2 things to us, 1. Tan Sri has a good eye for investment and remain steadfast in his vision 2. He has such vast land holdings that he didn't recall that he was actually the rightful owner.

Moving on, for the core business segments, outside of Malaysia, Oriental has large investments overseas. For plantation, their biggest investment is in Bangka Island and Sumatra Indonesia with close to 80,000 Hectare and 4 palm oil mills. For hotel and resorts, they have 10 investments in UK, Australia, New Zealand, Singapore and Thailand combined. For automotive, the government engaged hostile takeover of Boon Siew Honda and gave the master distributorship of Honda to DRB Hicom (like how Toyota was taken from Inchcape to be given to UMW) many years ago, hence today, Boon Siew Honda and Kah Motors distributes Honda in Singapore, Brunei and have over 92 dealerships across Malaysia. They have dealership for Mitsubishi as well. For plastics, Teck See is the oldest plastics spare parts manufacturers. In addition, for Malacca, Oriental has the rights of reclamation in Klebang of almost 1125 acres (completed 85%) and a 300 bed medical healthcare hospital.

3. Outstanding Financials and Balance Sheet

A nice story aside, Oriental Holdings Berhad has very sound financial numbers and balance sheet to weather the current economic crisis. It has after all done so for many years. When people mention Oriental, they think of it being a net cash - cash rich company. A simple overview below would suffice to exhibit their financial muscle in this trying times.

Oriental has cash and equivalent of RM 3.8 billion and borrowings of RM 2 billion, which means it is net cash of RM1.8 billion. At current share price of RM5.03, the market capital of the company is RM3.1 billion. Effectively, the company net cash position is 0.58x. That is unbelievable. If the saying Cash is King, then it is especially apt at times like this. Some may be concern about the borrowings of RM 2 billion, well Oriental has managed to obtained predominantly extremely low interest Japanese loan for the purposes of business expansion. The low interest rate environment due to quantitative easing is perfect time to borrow funds and this is especially so where central brands around the world including Federal Reserves, European Central Bank and Bank of Japan continue to maintain low interest policies to stimulate economy. You can refer here :

If you look at the past 8 years chart, Oriental have been growing topline and bottom line continuously whilst maintaining a margin above 6%. From RM2.7 billion in revenue to a peak of RM6.4 billion before a recent dip in the 2019 financial year easing to RM5.2 billion. Even in a challenging time where the company was probably affected on all fronts such as trade war, low CPO price, dampened consumer spending sentiment, the company was still able to deliver RM 5.2 billion in revenue and profits of RM351 million. On top of that, Oriental has managed to deliver consistent dividend growth for the past 8 years from 9 sens to 40 sens per annum. This translates to 8% dividend yield at current share price. For financial year 2019, so far 12 sens have been declared awaiting the final dividend announcement in coming QR. One of the most important factors to consider when investing is to study the dividend growth model as that is the way to assess whether the company is sharing profits with the shareholders.

At today's price of RM5.03, it is the lowest level since end 2012 which also signifies that this provides an opportunity for a good entry price. If we summarise the financial numbers, it can be read as below based on trailing quarters :

PER = 8.8x
Dividend Yield = 8%
NTA = RM10.75
PTBV = 0.47x
Beta = 0.7
Net Cash = RM 1.8 Billion / 0.58x of market capital
ROE = 5.26%

4. Potential Risk / Downside

It is quite obvious Oriental suffered a bit of set back in terms of performance growth in financial year 2019. Whilst last year affected many companies especially a company like Oriental which is a conglomerate cutting across sectors, we believe it has been factored in the share price. In addition, Oriental has always been undervalued all these years probably due to the fact that institutional funds & investors prefer the company to be more aggressive in deploying capital for expansion. This can be seen from the weak ROE number. The public float is about 25% which is the bare minimum required by Bursa, so this indicates low liquidity.

With Covid-19 causing demand destruction and affecting the economic landscape globally, we see Oriental being affected as well across all their industries. Automotive is still the biggest contributor to the group with Plantation coming in second. Hotel & resorts and investment properties are third and fourth respectively. We believe management is well aware of the economic repercussions from Covid-19 and will be affected in the next quarter as well due to their exposure in all sectors affected.

5. Legacy Investment

Conglomerates are usually valued lesser and unless they break into parts for separate listing in order to unlock value, it will always be trading at a discount. This is a consideration that one has to understand when investing in Oriental. Our long term fair valuation for Oriental Holdings Bhd is RM8 based on the back of EPS of 60 sens at 12x future PER for FY21/22. This is excluding the positive of their substantial cash holdings, net tangible asset, high dividend yield, near completion of their land reclamation in Malacca and positive contribution from their healthcare arm. This is our prudent estimation without taking into account of the growth of the other businesses within the group.

Tan Sri Loh Boon Siew have built a sprawling business empire from rags to riches which has endured the toughest of time through economic upheavals, politics and personal family tragedies. Despite so, the second generation worked closely together and united, they ensured the family business was intact. When it came to the time to pass on the rein, the second generation did so with Datuk Loh Kian Chung emerging as the new third generation leader for this low profile family conglomerate. As we are a financial writer, we do not like to comment unnecessarily on non-business / financial matters.

However, our humble view is that this company is unlike many other rich business dynasty where the second and third generations are openly flaunting their wealth on social media, boasting about the new toy or expensive jet setting lifestyle they enjoy whilst the society's B40 suffers economically. This family conglomerate have good moral values instilled in them and their offsprings from their founding patriarch. Business challenges and personal tragedy has held the family closely together to weather tough times together. It is a clear example that a united family do ensure wealth last beyond 3 generations. In our view, Oriental Holdings Bhd is an ideal vehicle of wealth preservation with capital growth.

After all, those who who had acquired 1,000 Oriental shares at its initial public offering in 1964 would have 48,306 shares worth RM298,048 based on its share price of RM6.17 as at the end of FY2018. In addition, the shares would have earned a total gross dividend of RM228,801.02. The gross dividends received and appreciation in value work out to an average rate of return of 12.07% for each of the 55 years. (Source edgemarkets)

For those who likes a company with honest management, substantial land and cash holdings, a fundamental business with a strong legacy that has stood the test of time, one can consider Oriental Holdings Bhd. as your long term value pick. We are personally invested and we are rooting for this company to continue to do well. This is one stock I would invest and leave it as a legacy gift for my child.


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Food for thought: