Thursday, 26 March 2015

Updates On Scientex

It's too bad I just get to know that Scientex has "Investor Presentation" in its website since Dec14.

No wonder I can't find information about its property sales and unbilled sales in its financial notes submitted to Bursa Malaysia anymore.

I'll just paste a few useful slides here for my reference.

Consumer packaging is currently driving its manufacturing growth. It has a RM300mil capex plan from 2014 to 2016 to increase the production capacity for PE, CPP & BOPP films. The capacity of its consumer packaging division will increase by 140% from 5,000MT/month to 12,000MT/month in 2017.

The construction of new CPP film plant has just started in Jan15 and is on track to be completed in Jun15. Commercial production is expected to start by end-2015.

The new BOPP film plant, which has just commenced its construction in Feb15, is expected to start commercial production in mid-2016.

The management anticipates good demand for its BOPP films as majority of BOPP films used in Malaysia are imported at the moment.

For its property segment, it has current projects worth RM1.5bil, with another RM4.0bil worth of GDV in the pipeline.

It has launched 6 new projects worth RM276.1mil in 1H15 but manage to achieve sales of RM397mil in the same period. Unbilled sales reach RM640mil now, slightly higher than RM631mil last quarter.

It will launch 1,420 units of affordable houses in Pasir Gudang in April 2015 under Johor Affordable Housing Scheme.

I think this kind of project should be able to generate better sales. If average price is RM400k per unit, then it is a potential RM568mil sales. 

Is the RM400k price tag too low for "affordable" houses in Pasir Gudang?

Manufacturing segment's growth is slow or minimal for the past one year, dampened by forex loss. However, the exciting part is from 2016 onward.

Property segment continues its impressive growth with probably some pre-GST shopping effect. It's a good sign that unbilled sales continue to move upward.

As mentioned in previous post, Scientex management team has reduced its USD exposure quite significantly in year 2015. I think they have done a good job.

Scientex has a minimum dividend policy of 30%. It paid 31.7% in FY14 with a decent DY of 3.2%. It has a EV/EBITA of 7.6x.

For complete slides of Scientex's investor presentation, please go to its website.

Wednesday, 25 March 2015

Scientex: Slowed By Forex Loss

Scientex FY15Q2 Financial Result

Revenue 462.9 431.1 415.4 426.8 383.5
PBT 47.3 40.2 56.0 48.1 44.4
PBT% 10.2 9.3 13.5 11.3 11.6
PATAMI 36.1 30.3 48.8 37.2 33.9

Manu Rev 327.0 320.3 297.3 317.2 288.5
Manu OP 17.4 14.7 18.8 16.4 15.9
Prop Rev 135.9 110.8 118.1 109.6 95.0
Prop OP 40.3 32.0 36.9 32.5 29.3

Total Equity 808.6 769.8 712.7 686.2 649.9
Total Assets 1533.3 1475.8 1400.4 1333.2 1304.4
Trade Receivables 340.2 303.2 243.5 274.8 251.7
Inventories 81.3 83.7 109.0 82.1 76.3
Cash 121.7 102.9 83.8 56.4 89.3
Prop Dev Cost 117.0 104.0 104.6 71.8 74.4

Total Liabilities 681.4 664.7 665.0 624.9 633.3
Trade Payables 232.1 246.6 272.1 238.9 214.2
ST Borrowings 311.4 297.9 262.9 179.1 205.8
LT Borrowings 50.2 66.6 77.5 156.2 163.7

Net Cash Flow 38.0 19.1 -68.4 -95.8 -62.9
Operation 16.4 1.5 153.5 89.5 30.9
Investment -4.0 13.2 -149.2 -106.7 -67.0
Financing 25.5 4.5 -72.7 -78.6 -26.8

EPS 15.98 13.69 22.09 16.43 15.34
NAS 3.58 3.47 3.22 3.10 2.94
D/E Ratio 0.30 0.34 0.36 0.41 0.43

At a glance, Scientex's FY15Q2's revenue and PATAMI are better both QoQ and YoY. So that's good enough.

Scientex has a huge percentage of its bank borrowings (77% or RM280mil) denominated in USD at the end of FY15Q1. In current quarter, it has dropped to (58% or  RM210mil).

Inevitably, Scientex has to recognize a RM9.7mil foreign exchange loss (RM9.2mil realized loss) in Q2 due to weakening of RM against USD. 

If this amount is added back to the PBT, then the PBT of RM57mil is actually its record high.

To recap, Scientex registered RM5.2mil forex loss in the preceding quarter of FY15Q1. So total forex loss in the first half of FY15 is RM15mil.

It has forex gain of RM4.4mil in FY14Q4.

I think the worse should be over even though US seems reluctant to raise its interest rate early. Ringgit might still break its recent low against USD but it might not be as severe as the last few months.

Moreover, I'm pretty sure that Scientex management will continue their effort to reduce its exposure to USD debts.

In FY15Q2, revenue from both manufacturing and property segment hit record high while their operating profits show significant improvement compared to previous quarter of FY15Q1.

FY15 6 months PATAMI of RM66.3mil is slightly higher than RM63.3mil in the corresponding period of FY14 despite the huge forex loss in FY15.

New property sales so far in 1HFY15 stands at RM397mil, which represents 84% of the total revenue of its property division in the last 4 quarters added together (RM474mil), which I think is great.

Total property sales in the whole FY14 was RM470mil.

There is no info regarding the latest unbilled sales. Its unbilled sales in the end of FY14Q4 was RM537mil. Current unbilled sales should be at least RM650mil I guess.

For its manufacturing division, it's all the old stories again. Its CPP film expansion is on track to be completed by the end of CY2015 while its new BOPP film plant should be ready by second half of CY2016.

Overall, I'm quite surprise by its property sales achievement in 1H15 (provided that the figures given by Kenanga is correct). It will give me more confidence to continue my investment in Scientex.

At the moment, I'll just keep my own target price at RM7.75.

Monday, 23 March 2015

How's Your Business Acumen?

"Buying shares in a company is like doing the business with the company". This is what I try to practice in stock market investment in the last 2-3 years.

Any business needs time to bear fruits, so I believe that I need to hold for longer term.

Even though I have rather good "results" from speculating in stock market in the past, I have told myself not to do this again, as advised by Buffett & Cold Eye.

I think I will make money rather than lose money if I continue to speculate in the last 2 years while the stock market is in its uptrend, because most of the stocks that I'm keen to speculate on went up in share price.

Nevertheless, I manage to resist myself from speculating, even though there are a few occasions which I nearly do so.

If I continue to speculate in the past 2 years, may be I will earn less by owning less shares in Latitude, or may be I will earn more by selling Tambun earlier above RM2.40 to take more cash. So it's hard to know whether I'm better off by not speculating in stock market.

It seems like it's easy to earn money in stock market. You just need to follow the theme.

What are the hot stocks at the moment? Technology, furniture, poultry, export-orientated etc. If you have your portfolio laden with these stocks, then you are surely doing extremely well.

Are you going to invest in property, oil & gas, plantation, finance etc at this time? It doesn't mean that you will certainly lose money in these stocks. They just need more time and patience perhaps. Remember being a "contrarian" as advised by Buffett & Cold Eye?

To be successful in stock market investment, apart from luck and homework, I think that business acumen or foresight is very important.

Investment in a stock is exactly investing in the company's business. Thus we normally consider a company's:
  • past records (how was the performance of its business & management team)
  • future prospect (the demand of its products or services in the future)
  • stock price (is it worth to pay that kind of price to be part of the business)

To check a company's past record and to determine its value are not that hard actually. The most difficult and important thing is to predict the company's future prospect.

Most famous and successful investors certainly have this either "gifted" or "acquired" business "sixth sense" or acumen. They will see the business opportunity earlier that other people.

When I first started investing in stock market, past financial records are the most important thing to me. I believe that if the company is doing well in the past, it should have a good enough management team to do well in the future.

As I gain more exposure to stock market, I find that future prospect is the most critical aspect which can "overwrite" past record and stock price (current value).

If you follow this blog long enough, you should have known that I have "Four Heavenly King" that made me lost a lot of money.

Just look at KNM's revenue and net profit from 2003 to 2008. Isn't the past records magnificent? It has billions worth of contracts on hand as well!

I didn't look too much into its balance sheet, cash flow or general market sentiment. I bought its shares just before its revenue and profit fell. So I got trapped.

The others are Notion & Masterskill which produced great earning reports too before they collapse. 

Notion was doing fine until the emergence of tablets and smartphones which seriously eroded the demand of its hard disc drive and camera parts. If my business foresight was good enough, then I would not put my money into it.

The old MEGB's management was not good enough I think. They was slow to react when PTPTN loan was reduced and nursing course requirement was raised. Why was it suffering while its direct competitor Mahsa seems to do so well?

It's hard to explain why I didn't add stocks like Hevea, Homeritz, Pohuat, Mitra, Prolexus, Magni, Teoseng, LTKM, VS, Vitrox, MPI, Unisem etc into my portfolio, even though they are under my radar and I know these are good stocks with good potential.

Instead, I chose to buy stocks like HHGroup and Johotin which are not following the "theme play" at all.

Perhaps I have a tendency inside me to buy stocks which are not "hot" and are relatively unknown.

When I started to invest in Inari, Latitude and Tambun which are my best investment so far, they are all relatively unknown.

Anyway, business acumen is very important, but I don't mean that I possess good business sense. I still made a lot of bad decision until today.

Bad decision does not only mean buying the wrong stocks, but also missing the good opportunity.

Many of us do not grow up in an environment that gives us this skill. So, no choice, we have to read more, try more, and fail more in order to make more correct decision.