Why better results? It's because Weida's investment in property development starts to bear fruits.
In its latest quarter of FY14Q4 which ended in Mac14, Weida registered its first ever revenue from property development at RM13.7mil, with a PBT of RM1.1mil.
So it is only about 6% of the GDV recognized. We can expect Urbana's sales to contribute massively to Weida in the next 2 years.
A 15% net profit margin will produce about RM74mil net profit after minority interest to be distributed in the next 3 years or so.
We can study Fitters to have a glimpse of how Weida will perform in the near future.
Both Weida & Fitters are very similar - mainly a manufacturer with construction business and then venture into property. It's just that Fitters entered property much earlier.
These 2 property projects by Weida were already made known to the public last year and it is predictable that Weida's share price will rise sooner or later. However, I still haven't put my money in it yet...
|WEIDA (RM mil)||FY14Q4||FY14Q3||FY14Q2||FY14Q1||FY13Q4|
Weida's quarterly results are quite inconsistent, especially in the work segment just like a lot of construction companies.
It delivers a good FY14Q4 quarter result mainly due to contribution from work segment, not the maiden profit from property segment.
However, revenue from work segment drops consistently for the past 5 quarters and there is no guarantee that it will pick up in the next quarter. We don't know whether they are out of contract or it's all because of timing of billings.
|WEIDA (RM mil)||FY14||FY13||FY12||FY11||FY10||FY09|
|Revenue growth %||-15.6||22.9||8.3||3.5||3.1|
|PATAMI growth %||-55.5||101.6||15.6||26.7||14.7|
Since 2009, Weida's revenue & PATAMI grow consistently until FY13 when it got a special gain from disposal of plantation business.
FY14 was not a good year as PATAMI of RM22.6mil was even lower than FY12's level of RM25.2mil.
I anticipate its manufacturing segment to grow convincingly in FY14 amid robust property & construction activity in the country but it did not really happen. Contribution from work segment also dropped sharply though more telecommunication towers are expected to be built in East Malaysia.
I think the new telecommunication towers contract will be very important to Weida, just like it is for Instacom.
Perhaps the award of contracts is slow...
In an interview with The Edge in 2013, Weida's MD Datuk Lee has a 5-year plan:
- RM70mil NET rental income for telecommunication tower
- FY13: RM19.4mil
- FY14: RM12.5mil (PBT from work segment)
- RM60mil concession income for septic sludge treatment
- FY13: RM1.2mil
- FY14: RM1.8mil (PBT from service segment)
- RM400mil revenue of HDPE products
- FY13: RM196.8mil
- FY14: RM196.2mil (Revenue from manufacturing segment)
Frankly, I am not too optimistic that the target can be achieved even though 2018 is still quite far away, especially the target income for service segment. We may experience another financial crisis within this period of time and everything can change.
In 2007, Weida acquired a significant stake in a property developer Mutiara Goodyear and later became its largest shareholder at 13.8%.
In 2007 as well, Weida also ventured into oil palm plantation in which it acquired 16,000 acres of land in Sarawak and planted it with oil palm trees.
MKH also ventured into oil palm plantation business at the same time with Weida though MKH has bigger plantation size. Now MKH is starting to taste the exponential profits from it.
So I think Weida has lost the opportunity to earn good recurring income with minimal extra cost for the next 20 years.