Saturday, 4 July 2020

Daya: Something Is Brewing?

Daya Material is a PN17 company which has defaulted its debts repayment. It is yet to submit its regularisation plan to Bursa Malaysia after countless delays.

As an Oil &Gas company, massive drop in crude oil price definitely doesn't help. Now its share price is at rock bottom 0.5sen for quite some time already. It looks like a stock in the queue of being delisted. 

However, there was a strange Bursa announcement by Daya yesterday.


Daya's independent non-executive director, who was once the head of group finance (finance department) of AmBank Group from 1992-2013, acquired 1 million Daya's shares via open market.

This acquisition was done exactly one month ago on 3/6/20 but only announced today. Why?

One million shares seem to be a lot but it's just RM5,000, perhaps a peanut for a listed company director's.

Why did he still acquire shares in an ailing company which has risk of being delisted?

As an "insider" of the company, if he is confident in its turnaround, why did he buy only RM5,000 worth of shares?


Anyway, Daya still has a mission to become one of the top 5 O&G players in the domestic market by 2025, according to its nicely designed official website.

Hopefully I can hear good news from Daya, hopefully the salted fish can come alive.

Thursday, 2 July 2020

KPOWER: Power-Up To The Next Level

Around Q4 of last year, I came across news that a prominent figure became a new major shareholder of a company and its share price rose fiercely as a result.

The company was Kumpulan Powernet (KPower) and that person was the founder of Serba Dinamik Datuk Mohd Abdul Karim.

As I did not study Serba Dinamik much, apparently I did not know this person.

I decided to briefly look into KPower. Wow! The first thing I saw was that its share price has already gone up from 30sen to RM1.50 in 6 months, and the company was making loss without fail for the past few years.

Straight away, I lost any interest to study it further.

Once in a while we hear that some famous business persons or politicians bought shares in certain companies. So what?

key-milestones-1997.jpg


When KPower released its FY20Q1 financial result on 28 May 2020, it caught my attention again.

Normally this type of so-so result of RM2.67mil net profit won't attract me but since so many companies were worse, I chose this company with increasing profit to read.

My interest in the company started to boil after I read the lengthy prospect in the financial report. It has been awarded 2 contracts worth RM500mil even in the MCO period.

Together with earlier contracts won not long ago in Nov19 amounting to RM300mil, it is a total of over RM800mil contracts for a company with annual revenue of less than RM10mil!

Then I checked the share price chart. It reached RM3 before MCO before dropping to RM1 level and now it's RM2.

Taking into consideration the contract sum and duration, as well as the private placement dilution, I roughly calculated the projected EPS of KPower and decided to make it the first share I bought after the MCO.

This week KPower won another contract worth RM174.5mil in Laos, which means overall it has exceeded the RM 1 billion mark.


KPOWER contracts

28/11/19 RM254.3mil: Nov19 - est Nov22 (KL) - sewerage + GBI building 

11/2/20 RM65mil (USD15.8mil): Feb20 - est Feb22 (Laos) - small hydropower plant

31/3/20 RM354mil: Mac20 - Dec24 (Perak) - 5x small hydropower plants

13/5/20 RM208mil (USD48mil): May20 - Feb23 (Nepal) - small hydropower plant

29/6/20 RM174.5mil (USD40.7mil): est Aug20 - Aug22 (Laos) - 2x hydropower plants

Total contracts RM 1,055.8 mil

Outstanding shares before private placement 83mil
29.32mil private placement (35%)
Total shares after private placement 112.32mil


Before Datuk Abdul Karim took over, KPower was involved in:

Property development
Just sell and then construct 6 units of shop offices in Sentul, to be completed within 2020.

Property investment
Rent out 36 units hostel to students in Liverpool UK, loss-making.

Textile manufacturing
Manufacture warp-knitted fabric, only about RM20+k sales a month, worse than Penang Char Koay Teow hawker. Loss-making.

core-business-textile-manufacturing.png

After taken over by new management, KPower diversifies into construction related business which concentrates mainly on utility and energy segment.

We can have a glimpse on this from the most recent four contracts won, which are all small hydropower plants.

It has a plan to venture into renewable energy which includes solar energy in the future, especially those with a sustainable concession-based income.

For its loss-making property investment & manufacturing businesses, I think the new management will seek to dispose them. I hope they do so ASAP.

KPower's shares liquidity is quite low with only 83mil outstanding shares before the private placement. Approximately 85% are held by its 30 largest shareholders according to annual report 2019.

The decision to split the shares is a welcomed move to improve its shares liquidity.

KPower is reported to have a tender book of RM3bil, including RM1.2bil in the Middle East. So far it has not won any contract from Middle East yet, which is Datuk Abdul Karim's contract-generating region.

RHB recently initiated coverage for it with a target price of RM3.46, which is much higher than my first target of RM2.80 based on guesstimated FY21 net profit of RM31.5mil

Those contracts won are mostly EPC contracts which I think should fetch higher margin. It will be great if its net profit margin can mirror Serbadk's above 10% mark.

There is no doubt that KPower's revenue and profit will trend up in subsequent quarters. The newly installed dividend payout policy of at least 20% is a bonus.

While KPower looks good, it leads me to another company which looks even better.

Tuesday, 30 June 2020

Green Packet's Revenue Jumps 50% in Q1 to RM147mil




From the title above, I guess all readers will think that GPacket has a great financial quarter.

However, when you try to find out how much profit it made, you might vomit blood.


Revenue increased 50% YoY but it suffered loss after tax of RM35mil.

OK, there's one-off item inside. Without it, the EBIDTA is still a loss of RM11mil and the loss has widened YoY, perhaps affected by Covid-19.

It's actually not a surprise at all when GPacket reported a loss-making result, I think investors are already used to it.

What I want to bring out here is why "The Star" is helping GPacket to "beautify" the report?

I have seen news title like this before in which revenue or profit increases by so much and so much but actually QoQ everyone knows that it's a very bad result.

For example, previous year similar quarter (YoY) profit was RM1mil and current quarter profit at RM2mil, the news title will be "100% increase in profit" or "profit doubled", but the usual quarterly profit is at RM10mil.

This result of RM2mil profit is a "gap-down" result by current standard.

This time The Star seems to deliberately and totally ignore the loss-making part. The whole article only talks about how much revenue has increased in all the business segment and doesn't mention whether it is making a profit or a loss.

I don't mean that GPacket is a bad company. Its revenue increases significantly and it seems to be in the right industry of AI, digital and communication service.

However, there must be a reason why it's always hard to make profit, and I think I know the reason.