Thursday, 1 October 2015

My Portfolio Sep15

Summary for September 2015

Numbers of stocks 12
Cash:Share ratio 1:12
Share Bought None
Share Sold None

Overall 2015
Portfolio Return Jul15 4.1%
KLCI Return Jul15 0.5%
Portfolio Return YTD15 47.0%
KLCI Return YTD15 -8.0%

Stock Portfolio @ End of Sep15

Satellite Portfolio

Stocks Avg Aug15 Sep15 Div 15 Sep15(%) Overall(%)
GESHEN 0.575 0.815 0.895
9.8 55.7
GTRONIC 2.43 5.75 6.25 13.0 8.7 157.2
HEVEA 0.775 0.94 1.19 1.125 27.1 53.5
HHGROUP 0.327 0.385 0.445 0.75 15.6 36.1
HUAYANG 2.32 1.81 1.81 13.0 4.4 -22.0
INARI 0.82 3.10 3.39 6.7 10.1 313.4
INARI-WB n/a 1.16 1.35
16.4 n/a
JADI 0.056 0.055 0.055
0.0 -1.8
JOHOTIN 1.54 1.47 1.55 3.5 5.4 0.6
LATITUD 2.09 7.38 6.95
-5.8 232.5
MATRIX 1.77 2.31 2.29 14.25 0.6 29.4
MATRIX-WA n/a 0.395 0.435
10.1 n/a
SCIENTEX 5.47 6.90 7.11 22.0 3.0 30.0
TAMBUN 0.77 1.38 1.30 9.7 -1.0 68.8

  • No transaction in Sep15
  • Dividend ex-ed for Hevea (0.5sen), Huayang (8sen), Inari (2.3sen), Matrix (3.5sen) & Tambun (6.7sen) in Sep15
  • Sep15 return of 4.1% manage to beat KLCI's 0.5% return
  • Latitude Tree which is the only stock to escape Aug15 collapse, suffer heaviest loss among the stocks in portfolio in Sep15.
  • Has quite a lot of potential stocks to add into the portfolio such as BJAuto, Superlon, KESM, Gadang, First Resource etc but end up with nothing

  • I think I should not try to time the market...

Monday, 14 September 2015

Automotive Sector & Weak Ringgit

For the past one year, MYR has depreciated almost 35% against USD (RM3.20 to RM4.30).

As a result, export-orientated stocks celebrate.

What about those import-orientated stocks?


Weakening of MYR is definitely not good for importers as cost of goods will be higher and profit margin will be lower.

Automotive industry selling foreign brands are one of those importers that suffer.

Even though most of the non-national cars on the road are CKD (completely knocked down) which means they are assembled locally, some of the parts are still imported.

Below are some info I get from SinChew daily last week which shows localisation rate of 3 most famous non-national car brands and their forex exposure.

  • Toyota (UMW) local parts 40-50%, import 50-60% in USD
  • Honda (DRBHicom) local parts 50%, import 50% in JPY
  • Nissan (TChong) local parts 40-50%, import 40% in USD, 10% in JPY

As I also follow BJAuto closely, I know that about 40% of its CKD parts are sought locally and the rest should be imported from Japan in JPY.

  • Mazda (BJAuto) local parts 40%, import 60% in JPY

We know that USD has strengthened a lot against MYR, so UMW & TChong who import CKD packs in USD should have a hard time.

Until two months ago, JPY still remain weak due to Japan's QE.

So those companies who import from Japan have enjoyed a good time.

This is especially true for BJAuto who still sell quite a lot of CBU cars imported from Japan last year, though more CKDs are on the way.

However, in August 2015, MYR suddenly fell a lot against USD while JPY strengthen a little against USD.

This makes MYR weaken by almost 16% against JPY (RM310 to RM360) in just about one month's time!

       MYR/JPY surge in Aug15

       MYR/JPY going toward recent high

With this kind of situation, I think BJAuto should be most affected.

Nevertheless, the good news is, BJAuto's management has hedged the currency at RM3.15/100JPY until the end of CY2015. This is just slightly higher than RM3.10/100JPY in the first quarter of 2015.

What if the JPY still stays at RM3.60 level or even higher at the end of 2015?

I think this forex issue should not be overlooked.

To what extent will the weak MYR affect automotive sector in Malaysia?

A google search found this article in, which quoted research from Maybank IB.

USD exposure

UMW ~35% COGS (cost of goods sold)
TChong ~19% COGS

Every 1% variation from RM3.60 on a full year basis will affect net profit by

  • TChong 8%
  • UMW 4%
  • MBMR 1%

At RM4.30/USD now, MYR has weakened 20% from RM3.60 level. Does it mean that TChong's net profit can be potentially lower by 20 x 8% = 160% (loss???).

I mention "potentially" here because things are definitely not that straight forward. The RM4.30 level is not an average level on full year basis, those companies should have hedged the forex risk and are also involved in other business other than assembling & distributing vehicles etc

JPY exposure

BJAuto ~37% component cost
TChong ~5%
Perodua (MBMR/UMW) ~10%
Hino (MBMR) ~50%

Every 1% variation from RM3.03 on a full year basis will affect net profit by

  • BJAuto 3%
  • TChong 2%
  • MBMR 2%
  • UMW 1%

At RM3.60/100JPY recently, MYR has weakened about 19% against JPY from RM3.03.

So, will BJAuto's net profit be potentially lower by 19 x 3 = 57%???

BJAuto's net profit in FY15 (ends 30th Apr15) is RM219.5mil.

Another research house Kenanga reported that every 1% fluctuation from base rate RM3.05/100JPY will affect BJAuto's bottom line by 4%.

So a 18% change will affect its bottom line by 72%?? That's a lot!

Does it mean that BJAuto's annual net profit will be lower than RM100mil?

According to RHB Research, every 10sen change in MYR/100JPY will affect BJAuto's pre-tax profit by RM3-4mil.

However, I don't know the base rate RHB use for this.

If I assume the base rate to be around RM3.00/100JPY, a 60sen change (in similar scenario above) will reduce its pre-tax profit by RM18-24mil. 

This doesn't look too bad right?

In the end, I still don't know clearly to what extent weak MYR can affect automotive sector even with all these researchers' analysis.

Anyway, BJAuto's financial results should not be affected drastically until year end as the management has hedged MYR/100JPY at RM3.15 level.

CBU cars imported from Japan will be directly hit by strong JPY.

Fortunately for BJAuto, most of its popular models are already CKD which include CX-5, Mazda 3 and soon-to-follow Mazda 6.

However, recently-launched Mazda 2 Skyactiv is a CBU imported from Thailand. I think it should be traded in JPY and so its already lower profit margin will be further affected.

BT-50 pick-up truck is also imported from Thailand but it should not affect BJAuto much due to its low volume.

Other CBU from Japan include Biante, MX-5, CX-9, facelifted Mazda 6 and already phased-out Mazda 5 Skyactiv version.

All these models are not expected to generate high volume, except for Mazda 6 I guess.

As mentioned earlier, Mazda 6 will be available in CKD soon probably around end of the year.

The main problem for BJAuto is its imminent launch of CX-3 which is a mini SUV fully imported from Japan.

CX-3 should be a model that goes for volume with lower margin. So it might be affected heavily if JPY stays strong next year.

       CX-3 to rival HR-V

For BJAuto's CKD vehicles, about 60% parts are imported.

However, the import of these CKD packs is solely done by MMSB (Mazda Malaysia Sdn Bhd) in which BJAuto only owns 30% share.

BJAuto will then buy the fully assembled CKDs from MMSB for local distribution and export.

So, strong JPY should not have a direct effect on BJAuto's CKDs.

MMSB which is 70% owned by Mazda Japan will be more directly hit by strong JPY.

The question is, will MMSB still sell the CKDs cheap to BJAuto?

Automotive sector is very competitive in Malaysia. Lots of brands are doing "fire sales" to clear their inventories.

Almost for sure, BJAuto's profit margin will go under pressure from now on.

Can it still continue with its impressive growth in revenue & profit? This will very much depend on how many cars it can sell I think.

Do you think Mazda's car has the competitive edge? I think so.

Wednesday, 9 September 2015

Huayang's Land In Bukit Minyak?

However, according to TA research at that time, Huayang will acquire 2 pieces of land in BM. The other land measures 3.14 acres and costs RM9mil.

I think Huayang did not announce the acquisition of "Land 2" above until today, or did I miss it somewhere?

In its latest FY15 annual report, Huayang mentions that it has acquired 8.04 acres land in BM for RM31mil, which is exactly the same as reported by TA.

The lands are planned for a condominium block and serviced apartments respectively, with estimated total GDV of RM314mil.

It is obvious that Land 1 has commercial title while Land 2 has residential title.

The location of Land 1 is confirmed at BM town center near Jit Sin Independent School but there is no mention on the location of Land 2.

Recently penangpropertytalk website reveals an upcoming property development by Huayang in Bukit Minyak which is pending approval by the authority.

This development comprises: 
  • 28 units 3-storey terrace  (gated & guarded)
  • 62 units 2-storey terrace  (gated & guarded)
  • 41-storey condo with 268 units

The location of the land is at Bukit Minyak/Juru area, next to a driving school which I used to get my motorcycle license.

       Huayang's Land 2 in BM?

Bukit Minyak/Juru area is notorious for congested traffic & foreign workers as it is sandwiched between lots of industrial areas.

However, I opine that it is still a good buy for Huayang if the location is really as shown.

The question is: Can a 3.14-acre land accommodate 90 units terrace houses and a block of 41-storey condominium (and also a block of low cost apartment)? It is about the size of 2-3 football fields.

I think it should be OK if the land shape is good.

For comparison, the land area of Huayang's Mines South condominium project is 3.7 acres.

This proposed 41-storey condominium is even higher than the 39-storey Exo Horizon at Juru Sentral not far away. It could be the highest building in the region.

If Huayang can get the approval to build gated & guarded landed community and condominium on this piece of land, then I think the potential GDV should be much higher than RM70.7mil. It could be above RM150mil.

Huayang should not face too much difficulty selling landed G&G houses here, but it needs to come out with something special in order to make the condominium a success.

That cross junction in front of AEON Big in Bukit Minyak should get a flyover ASAP...