Thursday, 18 December 2014

Scientex: Lower Margin In Packaging

Scientex FY15Q1 Financial Result

Revenue 431.1 415.4 426.8 383.5 364.8
PBT 40.2 56.0 48.1 44.4 37.8
PBT% 9.3 13.5 11.3 11.6 10.4
PATAMI 30.3 48.8 37.2 33.9 29.3

Manu Rev 320.3 297.3 317.2 288.5 289.2
Manu OP 14.7 18.8 16.4 15.9 17.7
Prop Rev 110.8 118.1 109.6 95.0 75.6
Prop OP 32.0 36.9 32.5 29.3 22.2

Total Equity 769.8 712.7 686.2 649.9 635.9
Total Assets 1475.8 1400.4 1333.2 1304.4 1263.1
Trade Receivables 303.2 243.5 274.8 251.7 209.7
Inventories 83.7 109.0 82.1 76.3 86.0
Cash 102.9 83.8 56.4 89.3 91.2
Prop Dev Cost 104.0 104.6 71.8 74.4 57.5

Total Liabilities 664.7 665.0 624.9 633.3 606.8
Trade Payables 246.6 272.1 238.9 214.2 229.4
ST Borrowings 297.9 262.9 179.1 205.8 167.9
LT Borrowings 66.6 77.5 156.2 163.7 164.3

Net Cash Flow 19.1 -68.4 -95.8 -62.9 -61.0
Operation 1.5 153.5 89.5 30.9 13.5
Investment 13.2 -149.2 -106.7 -67.0 -54.1
Financing 4.5 -72.7 -78.6 -26.8 -20.4

EPS 13.69 22.09 16.43 15.34 13.27
NAS 3.47 3.22 3.10 2.94 2.88
D/E Ratio 0.34 0.36 0.41 0.43 0.38

Scientex's FY15Q1 result is a bit disappointing to me. Though quarterly revenue hit all-time high at RM431.1mil, PBT margin drops significantly from 13.5% to 9.3% thus causing its PATAMI to fall 38% QoQ to RM30.3mil.

The fall in margin is mainly due to products mix in its manufacturing segment.

However, there is a provision for forex loss of RM5mil in this quarter from USD borrowings. If it is added back to PBT, its PBT margin will be 10.5%.

From analysts report, it is said that Scientex revised the pricing in its packaging arm to increase market penetration in Southeast Asia to fully utilize its new capacity.

Balance sheet does not change much with net debt/equity ratio drops slightly to 0.34.

Free cash flow in the next 2 years might not be that great as it plans to spend RM240mil for capex. The RM40mil share subscription by Futamura has already been included in the cash flow this quarter.

It will be a challenge for Scientex to break its FY14 profit record in FY15 as property sector is expected to slow down next year. 

Scientex's property division contributes as much as 68% to its operating profit in FY15Q1, and 64% in FY14.

I'm not sure how was its property sales in FY15Q1 and I can't find its latest unbilled sales as well.

It is expected to launch RM550-600mil worth of new properties in FY15.

Anyway, while I expect its property segment to be flat in FY15, what makes Scientex interesting is its expansion plan in its packaging business.

Scientex has just completed capacity expansion for its blown film, which includes the latest 9 layers barrier films.

Its Cast Polopropylene (CPP) film plant with expanded capacity of 12,000MT per annum should be able to commence operation by the end of 2015.

In the second half of year 2016, its new BOPP film plant should also be up and running. It will increase its BOPP film capacity 10x from 6,000MT to 60,000MT per year.

While it is acceptable to lower its margin to penetrate more markets, I do hope that its revenue will increase significantly to offset the damage caused by lower margin.

As Scientex used to have better second half, I will keep my target price at RM7.75 first.

Scientex is the only stock in my current portfolio that I am confident to hold for more than 10 years.

Friday, 12 December 2014

Tambun: Disaster Or Opportunity?

I'm sure that many Tambun Indah's investors are wondering what the hell is going on with its stock price, which has dived from RM2.60 to RM1.56 in less than 3 months time.

It is a massive 40% drop from its peak.

Similar to almost all property stocks, it is likely due to guarded outlook for property sector next year, coincides with overall bearish market.

Then why does Tambun drop more than other property stocks? I think may be it's because the more it went up, the more it will go down.

My paper gain for Tambun has gone down from 240% at peak to 100% at the moment.

Am I a fool for still holding on to Tambun?

       Rain Tree Park 1

Since last year, I have decided to adopt "Cold Eye's" philosophy in stock market investment, in which I will treat buying shares in a company like doing the business with the company.

As long as the company can keep on generating consistent profit or even better, growth, and giving good & consistent dividends, I will keep its shares for longer term unless it is way too overvalued.

With expected softer property market in 2015, Tambun might not be able to sustain its outstanding growth shown in the last 2 years.

However, with ample cash on hand, it is able to acquire new development land.

In a cautious property market when most people will only buy property for own occupation, buyers will certainly concentrate more on affordability & landed property, apart from strategic location.

Tambun will only work on its Pearl City for new launches next year, until it can find another piece(s) of land.

Recently called-off land deal is also within Pearl City which is not expected to be developed in the next 2-3 years.

Tambun still has over 450 acres of undeveloped land left in Pearl City with approximately RM2.6bil GDV which can last for at least 4-5 years.

For me it is better if Tambun can acquire new land elsewhere as diversification. So the termination of land deal was not totally negative for me.

Closed at RM1.56 today, Tambun is trading at forward FY14 PE of 6.5x, with an estimated dividend yield of 6%.

I think Tambun is currently trading at a very attractive price but bear in mind that anything can happen in a bear market. It may still go lower.

I have relegated Tambun from my core portfolio in Sep14. However, my plan was just half-executed as I still haven't reduce its shares to my desired level to hold for long term.

This is due to greed as I was waiting to sell at higher share price. My latest disposal was done at its peak of RM2.60. So naturally I was waiting to dispose again above that level.

When the share price started to drop from RM2.40 in early Nov14, I was still waiting for a rebound.

Now we know that the rebound does not actually happen for the past one and a half month.

This shows that I'm still an inexperience investor. I should not be too greedy.

Anyway, my investment strategy still remain the same.

I think I should not dispose at current level, as it should be a level to collect.

What do you think?

Tuesday, 9 December 2014

Baby Horse vs Baby Bear

Bear is arriving? Let it be.

No more money to shop in the stock market? Let it be.

My 3rd baby has arrived. That's what matters most :)

I just want you to be happy and healthy.