Export-orientated stocks which sell in USD?
Companies that use crude oil-related derivatives as major raw material?
- Lower printing/toner demand due to sluggish global economy after 2008 crisis
- Lower printing/toner demand due to proliferation of smart mobile devices
- Strengthening of MYR against USD lowered its revenue as >96% sales are in USD
- Strengthening of JPY against MYR increased its cost as major raw material resin was imported from Japan
- Lower average selling price of toner due to oversupply in the market
- Higher depreciation charge after new facilities in Klang completed in 2011
Or when we buy a property and sign sales and purchase agreement, is it possible that there is no paper at all?
- Listed in second board in Apr 2006
- 4th production line (Suzhou) started in Jun 2006
- 5th production line (Shah Alam new factory) started in Dec 2006
- 95% export to 39 countries
- 6th production line, first colour toner line (Shah Alam) started in Mac 2007
- Total annual capacity reached > 5,000 tonnes, with 300 tonnes for colour toner
- Transfer to main board in Aug 2007
- Gave 1:3 bonus issue
- Bought land in Suzhou to build own factory
- Failed JV in Europe
- Bought land in Klang for expansion
- 96% export to 44 countries
- Suzhou factory relocation completed in Feb 2009
- 97.8% export sales
- Share placement 10% to Mega First Corp in Jul 2010
- 7th production line - monochrome (Suzhou) started in Aug 2010
- Gave free warrants in Oct 2010
- 98.4% export to 52 countries
- Achieved record high in both revenue and net profit
- New factory/R&D lab/warehouse in Klang completed
- 8th production line (Klang) started in Jan 2011
- 99% export to 52 countries
- Net profit shrank tremendously
- Launched Palmotone - world's first bio-based (palm oil) chemical toner in Apr 2012
- 98% export to 50 countries
- Suffered first annual loss since listed
- Started to produce own toner resin in May 2013
- 98% export to 55 countries
- Gave bonus issue 1:3 in Apr 2015
- Started to sell finished toner cartridges
- Set up a subsidiary in Europe
Nevertheless, revenue dropped quite alarmingly in the last 2 quarters of FY15Q1 & FY14Q4.
In other words, Jadi earns USD to pay its MYR loan.
The reason it can still survive until today is because of its relatively high PPE depreciation charge. Its depreciation charge in FY14 is RM11mil, compared to PBT loss of RM3.9mil.
Its operating cashflow actually stays positive for every year since listed.
Nevertheless, it has to cancel its proposed rights issue to raise fund early this year as its share price has dropped substantially.
If Jadi's capacity is fully utilized, it will make up about 40% of overall toner production in the whole Europe.
One would think that toner demand in US should increase due to economy recovery, but Jadi's export to US is relatively low at <5%.
Also, as most emerging countries' currencies depreciate against USD, Jadi's export volume to those countries might be negatively affected.
Jadi produced a commendable FY15Q1 result lately with net profit of RM1.23mil. The management credited it solely to improved productivity, even though revenue stays lowish.
Operation in China continues to register minor operating loss at -RM202k while Malaysia operation turns profitable at RM1.56mil.
It still has 464mil warrants which will expire soon in Oct15 but they are nothing but trash papers with an exercise price of 13sen.
One of its major shareholder Mega First Corp has started to dispose Jadi's shares since early 2015, which saw its shareholding fell from 22.3% to 8.5%.
However, Jadi's founder & CEO Mr Liew KS is collecting more shares at the moment but another executive director Mr Eu is disposing his shares.
However, has it over-expanded?
It faces tough challenges brought by lower printing demand and oversupply of toner due to recent worldwide over-expansion in capacity especially in China.
Recent depreciation of MYR against USD and low crude oil price might give it a breather though.
At about 5 to 6sen now, every bit up and down in share price will be about 8%. So the risk is higher.
If the subsequent quarterly results are not as good as expected, its share price can easily drop to 3-4sen level, which means 35-50% loss.