Friday, 28 August 2015

Johotin: That's More Like It

Johore Tin FY15Q2 Financial Result

JOHOTIN (RM mil) FY15Q2 FY15Q1 FY14Q4 FY14Q3 FY14Q2
Revenue 113.6 90.8 104.7 90.7 58.8
Gross Profit 18.4 14.6 16.0 11.7 5.7
Gross % 16.2 16.1 15.3 12.9 9.7
PBT 9.2 6.1 6.6 4.0 -0.5
PBT% 8.1 6.7 6.3 4.4
PATAMI 6.7 4.0 5.2 2.9 -0.3

Tin Rev 20.8 20.9 24.7 21.1 21.4
Tin PBT 2.7 1.3 4.4 1.3 3.3
F&B Rev 93.1 69.9 79.9 69.6 37.3
F&B PBT 7.3 5.2 3.0 3.0 -3.4

Total Equity 191.4 184.7 179.9 175.5 174.4
Total Assets 320.2 328.8 323.6 252.8 253.6
Trade Receivables 75.6 42.0 70.5 39.4 44.3
Inventories 112.6 148.2 125.0 81.8 74.1
Cash 21.8 28.9 25.5 31.1 38.7

Total Liabilities 128.9 144.1 143.6 77.2 79.0
Trade Payables 26.9 14.8 54.5 16.1 18.6
ST Borrowings 69.7 95.0 58.8 35.6 32.9
LT Borrowings 8.1 9.4 10.5 11.7 12.9

Net Cash Flow -3.7 3.4 -12.7 -7.1 0.6
CFOperation -6.6 -26.7 -28.7 -9.0 -6.3
Depreciation 3.8 1.9 7.1 5.3 3.5
CFInvestment -6.5 -6.5 -12.3 -6.7 -2.5
Purchase PPE 6.6 6.5 12.7 7.1 2.8
CFFinancing 9.4 36.5 28.3 8.7 9.4
FreeCF -13.2 -33.2 -41.4 -16.1 -5.8

Dividend paid 0.0 0.0 1.9 1.9 0.0

EPS 7.16 4.27 5.59 3.15 -0.27
NAS 2.05 1.98 1.94 1.88 1.87
D/E Ratio 0.29 0.41 0.24 0.09 0.04

Johotin's FY15Q2 financial result does not disappoint. It posts the highest ever quarterly revenue and second highest PBT in its history.

Compared QoQ, revenue increases by 25% to RM113.6mil and PATAMI jumps 68% to RM6.68mil.

While its tin manufacturing segment is still suffering from soft demand and higher material cost due to stronger USD, profit margin of F&B segment increases due to higher demand and lower milk powder price.

       Whole milk powder price: Getting even lower

Compared to preceding quarter of FY15Q1, inventories, borrowings and debt/equity ratio fall back to a more comfortable level but trade receivables has increased.

However, operating cash flow improves tremendously in current quarter and the company is able to make net short-term borrowings repayment of about RM25mil in FY15Q2.

Anyway, there is still a realised foreign exchange loss of RM1.5mil in current quarter but it has actually improved compared to RM2.7mil in FY15Q1.

The lower forex loss might be due to lower USD borrowings in FY15Q2. If operating cash flow continue to improve then it might have lower borrowings in Q3.

When I first invested in Johotin early this year, I expect at least RM20mil PATAMI in a year.

With RM10.7mil PATAMI at 1H15, Johotin is definitely on track to achieving this target.

If we annualize 1H15's earning, projected EPS for Johotin will be 22.9sen which means it is currently trading at PE ratio of just 6.4x at share price of RM1.47.

This makes Johotin super cheap as a consumer & dairy stock.

What's more, its new milk packaging factory is still not completed yet!

Johotin's management did mention earlier that this new milk packaging business can generate ~RM40mil revenue a quarter, or USD4mil a month, when fully operational.

Its management hoped that with this new venture, revenue in its F&B segment can hit RM250mil and above by FY15.

Currently at 1HFY15, revenue in its F&B segment has already reached RM163mil and it should surpass RM250mil easily by year end even without the contribution from milk packaging business which has been delayed.

I think the increase in sales is mainly because Johotin has successfully penetrated Central America market.

So, when milk packaging business starts to contribute probably in Q4, it should lift Johotin to a new height.

Thursday, 27 August 2015

Tambun: Another Surprise

Tambun Indah FY15Q2 Financial Result

Revenue 60.0 130.4 110.1 116.8 128.0
Gross Profit 28.0 47.6 38.8 43.8 38.1
Gross% 46.7 36.5 35.2 37.5 29.8
PBT 22.2 41.3 35.1 34.8 33.1
PBT% 37.0 31.7 31.9 29.8 25.9
PAT 17.1 29.9 25.9 25.5 25.4

Total Equity 417.1 427.5 397.0 377.9 351.0
Total Assets 733.7 667.5 661.8 636.8 676.1
Trade Receivables 125.0 146.0 118.0 117.0 106.8
Prop dev cost 67.6 59.5 72.5 83.9 57.2
Inventories 2.2 2.2 2.4 0.3 0.3
Cash 143.4 116.0 131.5 151.1 194.4

Total Liabilities 314.0 237.1 262.4 256.6 323.0
Trade Payables 104.2 95.9 103.9 93.1 102.0
ST Borrowings 39.2 30.9 35.2 13.8 38.3
LT Borrowings 165.0 119.1 117.7 133.2 164.7

Net Cash Flow 12.0 -12.3 17.7 37.3 80.6
Operation 3.6 28.8 -5.5 3.0 -23.1
Investment -28.3 -11.6 -12.8 8.5 2.4
Financing 36.7 -29.6 36.0 25.8 101.3

Dividend paid 12.6 12.6 26.8 26.8 7.9

EPS 4.05 7.10 6.24 6.22 6.34
NAS 0.99 1.01 0.94 0.92 0.86
D/E Ratio 0.15 0.08 0.05 Net cash 0.02

After a pleasant surprise in FY15Q1, Tambun posts another surprise in FY15Q2, but this time it's a negative surprise.

FY15Q2's revenue (RM60mil) and PATAMI (RM17mil) drop 54% and 43% respectively QoQ.

I don't expect FY15Q2 to match FY15Q1's result but I actually expect a PATAMI of RM20-25mil.

At 1H15, revenue and PATAMI drop 21% and 7.3% respectively compared to 1H14.

Net debt/equity ratio increases to 0.15 as it has completed acquisition of land worth RM39.4mil in Bukit Mertajam in Jun15.

Besides, another surprise is about its new sales achieved in FY15Q2 which is just RM25mil. It is a far cry from RM146.3mil a quarter ago.

According to Tambun, the reason for poorer FY15Q2 is because of the timing of billing, in which a few projects are near completion while 2 new projects launched in end of 2014 are in early stage of construction.

Pearl Avenue shop offices have got its OC in mid Aug while Pearl Residence, Permai Residence & Pearl Harmoni should follow very soon.

The 2 new projects launched in end 2014 mentioned here should be Raintree Park 1 and Pearl Avenue 2.

Construction of Pearl Avenue 2 is running quite well now but progress of Raintree Park 1 is rather slow and is still at very early stage.

Average projects take-up rate is at a good 89.2% which is not a surprise to me, while unbilled sales at end of 1H15 drops from RM443.6mil to RM408.1mil.

Tambun has started to sell other new projects in Pearl City such as high-rise Avenue Garden (2 blocks), Pearl Tropika (DST) and  Raintree Park 2 some time ago.

It seems like these projects are still yet to be approved by local authority by mid-2015 but most of the units have already been snatched up by buyers.

From a visit to Tambun's sales office, I think these projects should register at least 70% take-up rate, especially Avenue Garden.

Earthwork and piling have already started at the site of Avenue Garden, and the show houses of Raintree Park 2 are being constructed now.

When these projects are approved later, then new sales figure is likely to jump.

Avenue Garden & Raintree Park 2 are said to have a combined GDV of RM300mil.

According to the latest Pearl City master plan, there are a few new additions to its residential projects such as Pearl Botanik (gated & guarded) and non-gated Pearl Saujana I, II, III & Pearl Impiana.

I expect these projects to be launched in 2016.

After this, vacant land in Pearl City will be about half the size when Tambun started its first project Pearl Garden here in 2009.

However, high-rise projects such as apartment and retirement village in the future will help to boost its GDV.

       Avenue Garden

In June last year, Tambun Indah announced that it planned to acquire 27 parcels of land measuring 209.54 acres south of its Pearl City for RM150mil.

Unfortunately, this proposed acquisition was terminated in November by Tambun Indah due to non-fulfillment of a condition precedent. 

Since early June15, I believe that the same plot of land has been put on sale online at The location and size (209 acres) are similar.

The land is still on sale at the moment.

The red line in the map above marks the border of Tambun's existing land according to its latest master plan. It looks like there is an overlapping here...

The asking price for the land is now RM182.1mil, which is 21% higher than price offered to Tambun Indah last year.

The land which is mainly planted with oil palm trees, is accessible via Tambun's Pearl City and a new fly-over on the southern part of the land.

Which developer will get the land finally?

Meanwhile, the construction of GEMS International School is already completed, with internal renovation on-going. It will be the first international school in mainland of Penang.

It has a great list of facilities and those who are interested can arrange for a school tour. It will start operation on 7th September 2015.


I have toured the school and I would say that I am quite impressed.

It has 2 sports complex halls with 3 & 2 badminton courts respectively, 2 swimming pools, 2 basketball courts, a futsal court and a football field.

Other facilities are standard such as library, study corners, play corners, outdoor corners, dance room,  music room, science labs, black box theater etc.

There is a meal plan designed by dietitian as well.

Annual school fees range from RM24,000 to RM40,000, excluding books, uniform, resource fee, exam fee, meal plan etc.


I heard that there are already 170 students enrollment 2 weeks ago. I think it should get at least 200 students when the school starts next week.

Unlike Matrix who owns 100% of its private school, Tambun does not have shares in the operation of GEMS International school but will get rental income from leasing out the 3-storey buildings & land.

According to earlier analyst report by RHB, the rental for the first 8 years will be fixed at 8% of construction cost plus 4% of land value. The rental will increase by 2% annually from ninth year onward.

The construction cost for the school is reported as RM38mil earlier by RHB. If the 8-acre (350k sq ft) land is valued at RM35psf, then the potential gross annual rental will be RM3.5mil, which represents a good yield of 7%.

From latest cash flow statement, there is an addition of investment properties worth RM29.3mil and I believe that it should be the cost for GEMS International School construction.

So, Tambun will start to get full contribution from this rental income from FY15Q3.


Just opposite GEMS, the construction of Pearl City Mall is progressing well and phase 1 is expected to open for business in the first half of 2016.

Tambun has 50% shares in the operation of the mall as it is a 50:50 JV with a mall operator based in Kedah who also operates Amanjaya Mall in Sg Petani.

The construction cost for phase 1 (170k sq ft) is about RM45-50mil and could potentially offer a yield of 8% according to RHB analyst.

So in year 2016, Tambun will add another asset to its book.

Meanwhile, the construction of Jit Sin SPS branch is progressing rather slowly due to shortage of fund. It is expected to start student intake in 2017.

For me, it remains the most important catalyst for residential demand in Pearl City.

       Raintree Park 1

Everyone is concern about the slow down in property market.

In Penang, some may worry that the launch of so many affordable projects by the state government may affect developers who build affordable homes.

I'm not too worry though, as Seberang Perai Selatan is booming and Tambun mainly sells landed houses.

Though I won't define a DST selling at RM450k is affordable, it may still looks relatively cheap when Eco World launch its DST at Eco Meadows later.

If you visit Pearl City sales office, you can see that their new projects still sell very well.

Of course we won't expect Tambun to grow at the same pace like it did since 2010. Its earning may even fall in year 2016.

Like any other developers, Tambun needs to purchase more land to sustain its earning in the future.

Personally I'm still optimistic that Tambun's net profit in FY15 can reach RM100mil.

Tambun's share price has dropped quite a lot in the past one month. With this kind of quarterly result, it will surely succumbed to more selling pressure.

I just consider myself a "business owner" in Tambun who develops Pearl City and who now owns a 20-acre land in the bustling Song Ban Kheng road in BM.

Tuesday, 25 August 2015

Heng Huat: RM15mil PATAMI On Track

Heng Huat FY15Q2 Financial Results

HHG (RM mil) FY15Q2 FY15Q1 FY14Q4 FY14Q3 FY14Q2
Revenue 26.6 26.5 23.2 23.1 24.1
Gross Profit 12.9 10.6 8.8 10.4 10.4
Gross% 48.5 40.0 37.9 45.0 43.2
PBT 6.2 3.5 3.5 2.3 3.7
PBT% 23.3 13.2 15.1 9.9 15.2
PATAMI 5.0 2.9 3.4 1.2 2.7

Biomass Rev 21.8 19.9 18.1 18.6 19.7
Mattress Rev 6.6 12.6 9.8 9.1 9.2
Biomass OP 6.4 3.6 3.6 4.3 4.2
Mattress OP 0.04 0.3 -0.1 -0.1 -0.2

Total Equity 75.1 70.0 68.3 64.8 43.1
Total Assets 117.4 114.3 109.8 110.5 95.3
Trade Receivables 30.1 26.7 22.3 19.7 21.4
Inventories 5.8 4.8 5.9 6.3 5.4
Cash 13.7 14.1 15.2 18.8 2.6

Total Liabilities 37.1 39.9 36.8 42.2 49
Trade Payables 11.8 13.1 11.2 9.2 11.4
ST Borrowings 13.9 11.4 9.6 12.1 15.5
LT Borrowings 10.5 14.3 15.3 19.0 20.5

Net Cash Flow -1.6 -1.2 13.0 16.6 0.4
CFOperation 7.3 4.9 13.5 8.7 6.5
Depreciation 3.5 1.6 5.9 4.3 2.8
CFInvestment -4.3 -4.3 -7.7 -7.5 -5.1
Purchase PPE 4.5 4.5 7.1 7.1 4.7
CFFinancing -4.6 -1.7 7.3 15.5 -1.1
FCF 2.8 0.4 6.4 1.6 1.8

EPS 2.45 1.42 1.67 0.64 1.69
NAS 0.36 0.34 0.38 0.38 0.27
D/E Ratio 0.14 0.17 0.14 0.19 0.77

Heng Huat's FY15Q2's revenue is marginally higher than FY15Q1 but PBT increases by an astonishing 77%, thanks to vast improvement in profit margin.

It is a record-breaking quarter for this relatively new company proposing to be transferred to main board.

The higher profit margin is contributed by higher average selling price of its biomass materials and lower raw material cost.

However, revenue from mattress division falls quite significantly but still able to stay profitable.

At first half of FY15, revenue increases 17% to RM53mil, while PATAMI improves 39% to RM7.95mil compared to 1H14.

This means that the RM15mil PATAMI the management guided earlier is highly achievable.

Heng Huat has recently completed the acquisition of land in Gua Musang to build a new plant which is expected to be operational in Q2 of 2016.

The new plant will increase its oil palm EFB fibre production lines from 20 to 27, with annual capacity rising from 100.5k tonnes to 135k tonnes.

The capacity expansion is mainly to cater for rising China demand, as well as new markets in Australia, South Korea and Japan.

Besides, the construction of its biomass power plant is expected to be completed in Q3 of 2016.

After bonus issue, Heng Huat's ordinary shares have increased to 308.7mil. 

If its PATAMI can reach RM15mil in FY15, projected EPS will be 4.86sen.

At current share price of 37.5sen, it is trading at forward PE of 7.7x.

As about 45% of its sales are to China, current devaluation of RMB and fear of China slow down have already affected Heng Huat's share price negatively.

Its share price has fallen 19% from 45.5sen since its bonus issue ex-ed in early July.

Since biomass market is forecasted to grow further, and Heng Huat is still showing signs of growth, probably I will continue to hold its shares despite China concern.