Friday, 24 October 2014

Huayang: Marching Toward RM100mil

Huayang FY15Q2 Financial Result

Huayang (RM mil) FY15Q2 FY15Q1 FY14Q4 FY14Q3 FY14Q2
Revenue 139.5 136.5 198.3 129.9 101.2
PBT 35.2 32.6 51.6 27.5 16.7
PBT% 25.2 23.9 26.0 21.2 16.5
PAT 26.0 23.9 37.8 19.7 12.3






Total Equity 436.9 410.9 387.0 362.4 342.8
Total Assets 828.0 811.0 824.2 764.0 664.2
Trade Receivables 68.1 62.6 75.6 51.6 56.2
Prop dev cost 159.5 145.1 142.2 142.0 87.7
Inventories 9.8 10.0 6.1 5.2 4.5
Other Current Assets 157.0 165.6 162.7 150.7 125.9
Cash 43.9 27.0 34.1 16.5 15.7
Bank Overdraft 10.9 15.0 4.9 8.6 1.9






Total Liabilities 391.1 400.0 437.3 401.6 321.4
Trade Payables 120.4 134.5 167.3 99.8 74.8
ST Borrowings 75.9 74.2 60.7 63.2 63.3
LT Borrowings 161.0 165.2 188.7 203.9 150.6






Net Cash Flow 2.7 -18.2 -0.4 -21.7 -15.8
Operation 58.1 26.1 11.1 -51.8 -75.8
Investment -23.9 -11.2 -110.8 -96.8 -20.6
Financing -31.5 -33.2 99.3 126.8 80.5






EPS 9.84 9.07 14.32 7.46 6.23
NAS 1.65 1.56 1.47 1.37 1.73
D/E Ratio 0.47 0.55 0.57 0.72 0.58






Unbilled sales 717.9 756.4 808.1 838.3 558.9


Huayang posted a commendable quarterly result of FY15Q2, with both revenue & net profit inch up 2.2% and 8.8% respectively QoQ.

Half year net profit of RM49.9mil is in line with my rough prediction of RM100mil net profit for its FY15. 

I'll  keep my previous target price of RM3.03 base on projected EPS of 37.8sen and PE ratio of 8x.

Why PE 8x and not 10x? It's nothing other than being  more conservative ahead of expected slowdown in property sector.

Furthermore, even with low PE of 8x, my target price is still higher than those given by most analysts who valuate Huayang base on discounted RNAV.




Anyway, I'll keep the PE of 10x for other property stocks in my portfolio which are Tambun & Matrix.

All 3 property developers mentioned above, together with Scientex, build affordable houses and have townships development, which I think are safer bet in property sector.


       Citywoods @ JB


Huayang has just launched its JB project Citywoods in Sep14. This RM216mil development consists of 2 blocks of 19-storey condominiums with total 417 units priced from RM550 psf.

For its township Bandar University Seri Iskandar in Perak, Huayang plans to launch RM74mil Lavendar 2 in the end of Oct14, which comprises 281 units of DST with price starting from RM244,800 a unit.

Earlier in May14 & Sep14, Ceria 2 (GDV RM36mil, 180 units SST) & D'ecolake (GDV RM31mil, 32 units gated DSSD) were launched and are currently 68% & 32% sold respectively.

Ceria 1 & Lavender 1 (total 538 units) launched last year were fully sold.

There is a plan for a new government hospital in Seri Iskandar township according to Budget 2015. This news will surely enhance property demand in this area.


       BUSI


Huayang plans to launch projects worth RM1.1bil in its FY15 (ends Mac 2015). So far I think it is still yet to officially launch Cube@One South (fully furnished SOHO), Puchong West & new phase in Taman Pulai Hijauan. 

Earlier I mistakenly thought that Cube@One South will be Huayang's last development in One South. Now it seems like there will be another future project "Zeta Residence" right next to Cube.


       Cube & Zeta Residence @ One South


I'm optimistic that Huayang's net profit can reach RM100mil for its FY15. Whether it can continue to grow from this new milestone depends on the success of its future launches.

Huayang's current quarter's net debt/equity ratio drops from 0.55 to 0.47. Its current cash level is the highest in the last 8 quarters. It is still yet to drawdown any amount of cash from the RM250mil Sukuk Murabahah Programme.

I don't mind if Huayang spends more money to buy more strategic land for development.

The management mentioned earlier that they are negotiating an acquisition of land in Bukit Mertajam of Penang. Hopefully investors can hear the good news soon.

Despite market uncertainty at the moment, I'll continue to hold Huayang.

Tuesday, 21 October 2014

My Stock Market Investment Journey

Looking back at my previous history of share trading, I can divide it into 3 phases.

Phase 1 (mid 2006 - mid 2009):
  • Buy good "fundamental" stocks, sell if achieving good profit (10-50% gain).
  • Never thought to hold a stock for long term. 
  • There was no target price and no clear concept of stock value.
  • Buy and sell when the "feel" is right.
  • No time to monitor the stock market.

Phase 2 (mid 2009 - mid 2013):
  • Started to taste the excitement of speculating in stock market (using technical analysis).
  • Allocated half of the fund for speculating, another half for "fundamental stocks".
  • If speculated successfully, usually will sell for little profit.
  • If failed in speculation, usually will cut loss at <10%.
  • If "fundamental" stocks perform well, usually will sell for profit of 10-50%.
  • If "fundamental" stocks perform badly, not willing to cut loss while hoping for a fairy tale turnaround.

Phase 3 (mid 2013 - present):
  • Resist from speculating in stock market
  • Plan for longer term investment in fundamentally sound growth stocks.
  • View buying shares as investing in a business or companies

I can't rule out further change in my stock investment style, perhaps phase 4, phase 5...

Overall, I actually made profit from speculating, even though not much. This is because first, the overall market in that period of time (2009-2013) was good. Secondly, I only speculated on those "fundamental" stocks. Thirdly, I cut loss.

Ironically, my biggest loss in stock market actually came from "investing" in those "fundamental" companies. Now you should know why I put " " for the word fundamental above.

In fact many of those "fundamental" stocks did well and earned me good profit since 2006. However, my stupidity to buy more to average down, and my reluctance to cut loss on just a few of those bad apples almost wiped out all my previous gain.

So, it's not speculating that made me suffer in the stock market.


Below are a few notable examples of my historical transaction:

Phase 1:

  • Bought WCT @ 3.32, Sold @ 4.74 (+43%) in 7 mths (My first ever stock purchased) - WCT share price reached RM10 one year later even with a bonus issue in between!
  • Bought YTL @ 5.30, Sold @ 8.55 (+61%) in 14 mths
  • Bought PBB @ 6.80, Sold @ 8.05 (+18%) in 5 mths
  • Bought IOICORP @ 5.15, Sold @ 7.47 (+45%) in 6 mths
  • Bought Topglov @ 6.35, Sold @ 8.19 (+29%) in 20 mths
  • Collected Mahsing since 2007, Sold all (+45%) in 2011 (My biggest gain in value)

I guess everyone including Ah Cat Ah Dog will do well in this period of time.

       My first ever stock


Phase 2:
  • Collected KNM since 2009, Sold all (-50%) in 2011 for massive loss
  • Collected MEGB since 2010, Sold all (-80%) in 2013 for massive loss (My biggest loss in value)
  • Collected Notion since 2010, Sold all (-40%) in 2013 for massive loss
  • Collected Tambun since 2011, still holding (My biggest paper gain so far)
  • Collected Masteel since 2011, Sold all (-45%) in 2013 for massive loss

       Beware of this


So those in red above are the "Four Big Heavenly King" or “四大天王” that were responsible for wiping out my previous gain. Luckily Tambun does help to ease the bleeding.

Phase 2 was the period of time that I have plenty of time to watch the market live in action in front of a computer. It also marked the worst period in my stock investment journey so far. So, we actually don't need to watch the market everyday to be successful in stock market investment.

For the part of speculation, I can't list out all of them but I think it is best shown in a real example.

When I first bought Amedia at 34sen in 31/1/2012, I thought it was a "fundamentally" strong counter with good prospect.

       A pearl turned stone


Referring to Amedia chart below, I decided to sell after a sudden surge in share price just 2 weeks after I bought it. I was happy with a 20% gain (white arrows).


I bought in again on the very same day near day low and sold all the very next trading day for a quick 8% net gain (blue arrows). 

A day after this I bought again and sold 2 days later for another 9% net gain (pink arrows).

Two weeks later, Amedia's share price dived unexpectedly and very bravely I caught this falling knife. However, its share price did not rebound as I would have expected so I was forced to "invest" for longer term and eventually sold it off at 37.5sen for small 3% net gain (yellow arrows).

After this, Amedia's share price was fried by big sharks to the level of above RM1 in just 4 months, only for it to fall back to the ground in days.


Amedia Buy
Sell
Net Gain (%)
1 31/1/2012 0.34 17/2/2012 0.41 19.5
2 17/2/2012 0.38 20/2/2012 0.42 8.1
3 21/2/2012 0.39 23/2/2012 0.43 9.1
4 07/03/12 0.36 27/4/2012 0.38 3.0


From the time I first bought Amedia to the last time I sold it, its share price has appreciated about 12% (34sen to 38sen). However, I gained almost 40% in this same period of time by speculating on its price movement.

This is the "beauty" of speculation in stock market which is why so many people are venturing into it.

Besides, I also bought my first and also the only call warrants in Mahsing-CB in 2011. I traded it 2 times, and both ended in gain.

Of course there were also failed speculation, but all were not big loss. Some examples:

  • Bought BJCorp @ 1.08, Sold @ 0.985 (-9%) in 1 mth
  • Bought CIMB @ 7.78, Sold @ 7.55 (-3%) in 1 day
  • Bought HSL @ 1.81, Sold @ 1.76 (-3%) in 1 mth
  • Bought Hiaptek @ 0.99, Sold @ 0.99 (-1%) in 3 days
  • Bought Huayang @ 0.985, Sold @ 0.99 (-1%) in 1 mth

       Cut by falling knife


Phase 3:

All my stock transaction in phase 3 have been recorded in this blog.

The major changes in my investment style are:
  • Set financial goals or targets
  • Look deeper into company's balance sheet & cash flow
  • Look for more free investment info online (blogs etc)
  • Set stock target price using PE method
  • Set buy & sell criteria
  • Try to be as disciplined as possible

So far I am satisfied with the outcome of a change in investment style, so no doubt I'll keep to it at the moment.

I'm fully aware that I am in a bull market in which almost everyone does well. There is also a luck component involved in picking up some good stocks early.

Nevertheless, recent market correction has hurt my portfolio to a great extent, and the bearish sentiment might not have finished yet.

Perhaps I should sell to pocket the profit first, but I actually prefer to buy more in a bear market.

.


Everyone has different styles in stock market investment. Two persons who use the same method may have totally different results. So I'm not in a position to tell people what method should they use.

As the purpose of this blog, I'm sharing my journey to readers regarding what had happened to me when using different stock market investment methods. Hopefully readers can learn something from it.

If you're suffering the same fate with me in losing, then at least you know that you're not alone.

If you're doing better than me, then at least you know that you're better than someone else :)

Thursday, 16 October 2014

OSK: A Lopsided Proposal?

OSKProp & PJDev are two excellent mid-size property development companies.

If both of them combine to form a large cap property developer, that will be good.

If both of them combine and are also given a considerable amount of shares in the country's largest bank, then it will be even better.

As we know earlier, Tan Sri Ong Leong Huat and his related parties are major shareholders in OSK Holdings (OSKH), OSK Property & PJD.

Previously Ong LH has hinted that OSKH which has sold its core business to RHB, will choose property development as its new core business. 

So people are guessing whether OSKP or PJD will be injected into OSKH. In the end, it is both of them.

History has suggested many times that Ong LH is not generous enough in offering takeovers.

This is one of the reason why I chose Huayang over OSKProp to invest in.

Sometimes learning from history is important...




I am not an expert in the field of business. I just picked and chose part of the announcement and try to understand it. I might misunderstand the proposal and give wrong opinion.


OSKH has agreed to acquire all of Ong LH & related parties' shares in OSKP (73.6%) and PJD (31.7%) for RM2.00 and RM1.60 per share respectively.

OSKH will offer to acquire the remaining shares of OSKP & PJD from other smaller shareholders at similar price offered to Ong LH.

All OSKP and PJD's shareholders must be very upset with this proposal I guess.

Just before this announcement, OSKP closed at RM2.27 while PJD closed at RM1.67. However, just 2 months ago, OSKP and PJD were traded at RM2.85 & RM2.25 respectively.

OSKP shareholders can choose to get cash at RM2.00 per share or get one OSKH share per OSKP share.

PJD shareholders can choose to get cash at RM1.60 per share or get 0.8 OSKH share per PJD share.

OSKP warrant holders are offered RM1 per warrant, while PJD warrant holders are offered 60sen per warrant.

However, both warrants holders can convert the warrants to mother shares if they want to.

Meanwhile, current OSKH shareholders will get one free warrant for 4 OSKH's shares, and a special dividend of 15sen per share.



This seems bad for current OSKP & PJD shareholders, especially those holding their warrants.

For OSKH shareholders, it is good news as it will acquire 2 good companies at a significant discount price, besides getting free warrants and special dividend.

Nevertheless, OSKH is valued at only RM2.00 in this deal. OSKH's share price reached RM2.55 in Aug and closed at RM2.08 yesterday.

So if you have 1,000 OSKP's shares, you can convert them into 1,000 OSKH's shares valued at RM2.00. If OSKH at RM2.00 is undervalued, then it's not too bad for OSKP & PJD's shareholders I guess.

The question is, what is the fair value of OSKH after the proposal goes through?




According to OSKH's announcement, the enlarged numbers of paid-up shares may increase to 2,067.5 million in maximum scenario if all OSKP & PJD warrants are exercised, and all OSKP & PJD's shareholders choose to take up OSKH shares, and all new free OSKH warrants are exercised.

Anyway, not all OSKP & PJD warrants will be exercised, though it seems attractive to do so if OSKH is trading at far above RM2.00.

Similarly, not every OSKP & PJD shareholders will want to get OSKH's shares instead of cash.

Excluding the new warrants, I assume the total shares of the newly born OSKH to be 1,700 million as an average.

I roughly guesstimate OSKH, OSKP & PJD profit after non-controlling interest to be RM200mil, RM100mil & RM80mil respectively for current financial year. This will make up a total of RM380mil. 

So the non-diluted guesstimated EPS of OSKH will be 22.3sen, with a PE ratio of roughly 9.0x at share price of RM2.00.

This is only my rough estimate base on PE method. I don't include the positives to OSKH from the recent proposed merger between RHB, MBSB and CIMB as I don't follow its news closely. It seems like this deal benefits RHB and OSKH thus OSKH might be valued higher.

It looks like OSKH at RM2.00+ is a good investment to make, unless one is very pessimistic of property sector in the near future. 

Anyway, PJD's minor shareholders might not accept this proposal, but its major shareholders might start to accumulate its shares from open market.

This proposal is expected to be completed by the third quarter of 2015. So does this mean that we will probably see OSKP & PJD traded at RM2.00 & RM1.60 respectively for about a year?

If OSKH's share price go far above RM2.00, for example RM2.30, this means if you buy one OSKP's share at RM2.00, you can get one OSKH's share worth RM2.30.

Will OSKH's share price advance far from RM2.00 in the next one year?