Friday 23 August 2013

GCB Under Pressure

It is somehow expected that GCB (Guan Chong Berhad) FY13Q2 result will be a disappointing one. For the first half of FY2013, its net profit retreats 64% YoY from RM66.6mil to RM24.0mil while its revenue remains almost the same. QoQ, its revenue drops 18% from RM364mil to RM299mil and its net profit declines as much as 55% from RM16.5mil to RM7.4mil.

While decreasing cocoa demand and lower selling price globally surely affect its revenue and margin to a certain extent, there is another significant reason that cause the downturn in GCB's financial results.

GCB's business and margin jumps significantly since year 2010 coincides with its increasing cocoa grinding capacity, now it seems like it is not a long-lasting one.

From GCB's financial report's notes, all the gain & loss from its currency, commodity future & options contracts are included in its profit before tax. The issue is, these numbers are not small.

GCB seems to have a good year in FY2012, definitely it has. Lets check the report.

       GCB FY2012

For the whole FY2012, GCB's profit after tax stands at RM118.8mil, the net gain from the foreign exchange & other derivatives is RM31.6mil, which comprises 26% of its net profit. (I'm not sure whether the unrealised portion is included in the calculation for its income statement).

However, the investment in derivatives is a double edge sword. You can gain or lose. The turnaround in fate happens starting from the end of year 2012 until now.

Lets check GCB FY13Q2 financial notes.

       GCB FY13Q2

For the first 6 months of FY2013, GCB suffers total loss of RM22.7mil in its investment in derivatives, though most of them are still unrealised. I think this is the main reason its net profit falls 64% in the same period. The problem is, the loss in derivatives seems to get worse with time. 

As one of the largest cocoa grinder in the world, GCB may have a bright future especially when the Europe and US are recovering from financial crisis. Investment in derivatives contracts is essential in business to hedge the risk of price fluctuation. Many companies do this. Whether GCB does it correctly, it is for investors to judge.

       Which GCB is better?

Thursday 22 August 2013

CSL: Too Good To Be True?

China Stationery Limited (CSL) share price plunged into a new low of 24sen, down 73% from its IPO price of 90sen in Feb 2012, or down 87% from its peak of RM1.80 in April 2012. And it may go lower.

Is CSL really so bad? It just makes plastic files and plastic tapes. It does not even make pencils or eraser. 

Nevertheless, it does make money. 

For its FY2011 ended Dec 2011, CSL registered a net profit of RM219.0mil from a revenue of RM836.6mil. The figures improve slightly a year later (FY2012) to RM226.7mil net profit out of RM964.6mil revenue. It has just released its FY13Q2 results in which it achieves its highest revenue of RM259.7mil since listed (grows 17% QoQ). Its net profit increases almost 9% QoQ to RM61mil. It stays on course to at least maintain its earning for FY13.

Besides index or blue chips stocks, not many company actually makes more than RM200mil a year in Malaysia stock market. A random check at a few companies reveals that for the latest full financial year, Mahsing earns RM230mil, Top Glove RM200mil, Aeon RM210mil, QL Resourse RM130mil, Kossan RM100mil & Globetronic RM40mil. Most of them are record high profit.

Perhaps there are 2 problems with CSL. First, being a China-based stock which is notorious for accounting fraud. Remember Sozo (HBGlobal)? Secondly, its founder and largest shareholder Mr Kwan Wing Yin continues to sell his shares like selling vegetables since early this year, with its shareholding drops from 72% to less than 45% now. Recent 12.8% shares traded off-market at 30sen in mid August was also believed to involve Mr Kwan as well.

Why did an executive chairman dispose his shares in the company substantially, especially if he expects the company to keep on earning more money? Too much money? Too generous? He said he wants to attract more long term investors.

       CSL: All over the world

Currently CSL's PE ratio is at a mere 1.26x and its net asset per share is RM1.06 which is more than 4x more than its current share price of 24sen. It has cash amounting to RM1 billion and its total borrowing is just RM26.6 million. With so much cash on hand, it may diversify into non-core business in the future.

CSL gave a total 3.4sen dividend for its FY2012. If its earning trend and dividend payout remain the same for FY2013, the dividend yield will be an unbelievable 14%!

Why is CSL at 24sen?

Monday 19 August 2013

Tambun: Into Uncharted Territory

Tambun Indah just recorded its highest ever quarterly revenue and net profit for FY13Q2 ended June 2013, and the acquisition of the remaining shares in Palmington & Tambun Indah Development is still yet to be consolidated into its account.

Pearl City development contributes approximately 62.3% of Tambun Indah's total revenue.

Tambun Indah's FY13Q2's revenue & profit rises 5% & 47% YoY, 5% & 19% QoQ to RM 82.6mil & RM14mil respectively, due to better sales and higher property selling price compared to previous quarters.

At the moment there are quite a lot of projects which are near completion. Projects that should be handed over to buyers within this 1-2 months include Pearl Villa & Pearl Square, while Dahlia Park, Tanjung Heights and Pearl Indah should follow soon in year end or early next year. Capri Park, Kelisa Residence & may be Carissa Villa should also get the OC by mid 2014. With so many projects near completion, Tambun Indah needs to keep on launching new projects in order to continue its growth.

The construction of Pearl Residence, Pearl Impian, BM Residence & Straits Garden has been running at full force while Pearl Avenue shop offices have just started piling work this month. New projects Camellia Park in Butterworth and Permai Residence at Bukit Mertajam are expected to be launched soon within this year.

       Camellia Park, Raja Uda

Camellia Park is located at Butterworth's hottest area Raja Uda next to the under-constrcuted Woolley Avenue commercial area and shopping complex, thus it should be able to generate good sales. While Permai Residence is located just in front of DNP (WingTai Asia) BM Utama where its latest gated 3 storey semi-D Sentinelle Ville is priced more than RM1 million a unit. Project at current Bukit Mertajam hottest area Song Ban Kheng road, Taman Bukit Residence is also in the pipeline.

       Location of Seri Permai (Permai Residence)

       Permai Residence

Penang Second Bridge is to be completed in September and Jit Sin High School SPS branch is expected to start construction at the same time. All these will give Tambun Indah's Pearl City a boost.

Tambun Indah has also gone back to net cash position after FY13Q2 with a cash of RM117mil and total borrowing RM107mil. It should continue to search for more land banks to "diversify" from its Pearl City development.

When the newly acquired shares from Nadayu is fully consolidated into its earning, surely Tambun Indah will be able to maintain its positive growth for the next one year or two.

Friday 16 August 2013

Yoong Onn Overlooked?

YOCB's IPO was oversubscribed 12.6x. It was listed in Dec 2009 with an IPO price of RM0.88, which represented a PE ratio of 7.6x base on FY2009's (ended June) net profit of RM13.9mil.

It seems like this stock has become an unknown now.

Yoong Onn Corp Bhd (YOCB) started its business as a trader of home linen in 1966. It then commenced its manufacturing activity in 1976. Its business involves manufacturing and trading of bed linen, bath linen and bedroom / bathroom / kitchen / living room accessories such as pillow, soap dispenser, mat, curtain, carpet etc. Currently it has 14 own brands such as Novelle, Jean Perry, Sarah Miller, Ann Taylor etc and owns 18 boutiques shops (Home's Harmony). It held 22% of local home linen market as of year 2009.

Currently YOCB's share price is at 70sen, giving it a PE ratio of just 6.5x, lower than its IPO's PE of 7.6x in 2009. Its share price does not move much since IPO. As YOCB gave bonus issue 1 for 3 in Oct 2011, its IPO price of 88sen should be adjusted to 66sen. So at 70sen now, YOCB's share price just registers a 6% gain from its IPO price.

How does its business perform for the past 3 years from 2010 til 2012? Does it grow 6%?

Rev (RM mil)
Net Profit

YOCB's net profit grows consistently throughout the years but drops slightly in FY2012 due to higher operating expenses despite higher gross profit. FY2013 will surely become a record year for YOCB as its 9 months cumulative revenue & net profit already reach RM138mil & RM16.3mil respectively.

Its net profit has increased 24.5% since IPO, why not the share price follow? Is it because of poor dividend yield?

Though YOCB does not have a dividend policy, but it does pay good dividend. For FY2010, it paid 7sen per share which is equivalent to 54% payout ratio from its net profit. However, it did not pay dividend for the following FY2011, but gave bonus issues later that year. Perhaps it needs money for its warehouse expansion. For FY2012, it paid 32.4% of net profit (3.5sen) as dividend. It is expected to pay a total of at least 4sen dividend for FY2013 (2sen interim has been paid), which represents a payout ratio of at least 30%. This gives a palatable dividend yield of 5.7% at share price of 70sen.

Perhaps YOCB's business is not attractive enough. It sells home linen, sounds like not so sophisticated and has limited room to grow as it faces stiff competition. It is true that YOCB's brand is not a market leading brand at the moment base on my personal observation, but recently I can feel its existence more in the market.

Akemi & Windsir may be the more "established" name in Malaysia, especially Akemi which is owned by Ipoh-based Eastern Decorator. Eastern Decorator business is exactly the same as YOCB. It claims to do business with over 30 countries worldwide including the United States and Europe, and it claims to own the largest home textile factory in the country which can produce 12,000 sets of bed linen per day. Thus, it is not easy to claim market share from Eastern Decorator.

Though YOCB exports its products to 15 countries, its home soil still contributes about 75% of total revenue. AEON is its main customer for 28 years now and contributes 23.9% of its sales in year 2009. AEON is now in a rapid expanding mode and this will surely a good news to YOCB.

Foreseeing an increasing demand in the future, YOCB has constructed a new 5-storey warehouse with 65,000 sqft of floor space in 2012 at its Nilai plant. Its production capacity is likely to remain the same since IPO, which is 1.2mil bed sheets & 950k pillows, which was utilized at 81% and 68% respectively in FY2009.

Because of this warehouse investment, YOCB's borrowing has increased from RM10.7mil in FY2011 to RM20.8mil in FY2012, but it drops to RM15.1mil after FY13Q3. Its cash remains almost the same at RM28-30mil level, which is more than its total liabilities combined of RM27mil. Thus, no doubt YOCB has a strong balance sheet.

What is the prospect of YOCB's business? Does it still has room to grow consistently?

I think this will very much depend on its management team. Home linens and accessories are common and necessary items in every household, if YOCB successfully raise its brand image by opening more boutique shops or outlets, or diversify its products range, it may result in better income for the company. YOCB mentions in its FY2012 annual report that it is starting to venture into furniture related products such as sofa bed. How successful is this venture is still to be seen. Furthermore, sales should pick up in tandem with the recent property boom.

Overseas expansion is also a huge potential for growth. From 11 countries in 2009, YOCB has expanded its products presence to 15 countries now in the Asia Pacific region. It still has not penetrate markets in China, India, Europe and America. It is reported during the IPO time that the management hope to achieve 50% contribution from overseas market in time to come.

In June 2013, YOCB has signed licensing agreement to utilize the cartoon characters of "Pororo The Little Penguin" in its bedding and related products. This may help to boost the sales a bit.

YOCB will announce its FY13Q4 results at the end of this August. Though Q4 is its poorest quarter historically, it is expected to record about RM20.5mil net profit for the whole FY2013. With this projected profit, its EPS will be 12.8sen (160mil shares) and PE will be further reduced from 6.5x to 5.5x at 70sen share price. If we use the PE of 8.5x which Kenanga gives to another consumer stock Asia Brands, then the target price of YOCB should be RM1.09.

With a PE of 5.5x and net assets per share of 86.5sen (at FY13Q3), YOCB at 70sen is considered undervalued.

YOCB is a value stock to hold for long term. However, its share price may not see huge movement due to limited outstanding shares and lack of interest from investors due to various reasons. There are far too many "exciting" stocks now which are as good as or even much better than YOCB which can provide greater and faster growth and returns.

So, do you think it is worth to park your money in YOCB? It looks a bit similar to Magni-tech though.

       Pororo & friends

Wednesday 14 August 2013

Fundamental vs Technical Analysis

Is there a best strategy to invest in the stock market?

In my view, investors can either:

1. buy a good company and just hold until it's time to sell (pure fundamental)
2. buy a good company but buy and sell according to technical indicator (fundamental + technical)
3. buy & sell any company base on technical indicator (pure technical)
4. buy & sell any company base on sixth sense, tips & rumours.

I'm still searching for the ultimate answer.

Without any accounting, finance and economic background, I bought my first shares about 8 years ago, 2 years after I started to work. I didn't have much interest in stock market and my thinking at that time is: parking my money in unit trust or share market is better than fixed deposit. I was too busy with my work and most of the time I just bought, left it aside and sold the shares for minor gain. I chose companies with good fundamentals. There may be a year or two that I didn't read any business news or touch the share market. 

In recent years, my investment focus has shifted towards property from unit trusts/share market. Compared to earlier years, I get more serious about investment and took another look at the share market. That was around the time I started this blog. I decided to try technical analysis as well - half of the fund into fundamental & half into technical.

However, my interest in property investment is still more than stock market, until recently the property price skyrocketing beyond my purchasing ability. Thus I'm now back in the stock market, trying to learn new investing knowledge. I'm basically still a noob in accounting and finance.

So throughout the years I have tried no. 1, 2 & 3, which are pure fundamental, fundamental + technical & pure technical. Here is my personal experience and conclusion so far.

Fundamental analysis is still the best way in stock market investment. My biggest gain comes from it. However, my fundamental analysis is not truly fundamental as my understanding in a company's account is still limited. 

For technical analysis, you need to have time to monitor the price movement closely. I made some small gain and small loss from it, so I would say it breaks even. I think this is very much depends on experience. The longer you play the chart, the more experience you have on investors/speculators mind & behaviour, then the more chance you can make profit. I wildly guess that more than 75% of the retail investors use the price movement to buy & sell shares for short term gain, that's why technical analysis works, but only the more experienced one will win the most.

When you practice pure fundamental analysis, sometimes you see the share price goes up & down like a roller coaster that makes you think that why not you use various technical analysis indicators to buy and sell? Two-in-one should be better right? For example Mahsing is a decent company which is fundamentally sound, but look at the share price chart (adjusted share price). 

If you buy at RM1.06 in end of Sep 2011, you would have gained almost 50% when the price advanced to RM1.56 in Nov 2011. But if you keep the shares, it drops to RM1.20 one month later. You see a 50% gain becomes 13% gain in one month. The similar ups & downs occur throughout the year and this makes you think why not you sell high and buy low (swing trading) while riding on the uptrend of the stock?

Well, this seems like a good idea but it may not be easy to get the timing right. You may just sold the share according to your judgement but the next few days the price shot up until you feel it is too high to buy, and the price keep on moving up and because of your reluctance to buy at higher price and anticipating it to drop, eventually you pay the price for not owning a good share. Swing trading is doable and experience counts. Somehow it makes your day more exciting.

So for me at this point of time (it may change), the best way to invest in share market is to choose some fundamentally good companies with good growth prospect, and hold them until it is time to sell. Selling shares is an art that need to be learned...

I believe that there is no answer for the best way in stock market investing, as it differs between everyone because all of us have different risk appetite, attitude, perception, fondness, way of thinking etc. We just need to find it out ourselves.

Monday 12 August 2013

Asas Dunia: Gimme Your Shares

In the 1990s, Asas Dunia built 2 large shopping complexes in Bukit Mertajam, Asas Center in Alma & Asas Parade in Bukit Minyak. Currently Asas Center has been abandoned more than 10 years, and Asas Parade has never been occupied. 

Because of "cold eye", most investors are aware that Asas Dunia has plenty of lands in the southern region of Penang mainland (SPS). It has about 1200 acres land in Tasek, Valdor, Sg Bakap, Jawi, Nibong Tebal etc, which is currently experiencing property boom due to Penang second bridge and Batu Kawan development. Those lands were acquired mostly in the 1990s and probably not re-evaluated. Conservatively estimating, now the value of those lands has at least tripled. 

Recently Asas Dunia tries to improve its image by building "higher-class" homes, such as Residensi Merbok in Nibong Tebal and the new Impian Ria / Impian Indah / Desa Impian in Alma. The area near Sg Bakap / Tasek / Valdor may not be able to generate good sales if the projects are launched there, due to poor accessibility and competition from Tambun Indah's Pearl City development. Most recent projects there comprises single storey houses which is quite rare in the market nowadays.

       Taman Seruling Emas, Sg Bakap

However, by donating a piece of land at Tasek for Jit Sin High School SPS branch, surely the value of its land at Tasek / Valdor will appreciate more once the school starts its student intake, targeted in year 2016. Furthermore, IJM Land has recently purchase a piece of 70-acre land at Jawi near the Jawi tol and plans to develop it into a small township. Together with Batu Kawan & second bridge factor, Asas Dunia definitely has a great prospect ahead.

Thus, for a zero debt company with an NTA of RM2.15 where its not-reevaluated-undeveloped land makes up of 50% of its total asset, it is not surprise that the major shareholders who already own 41% make a move to privatize and de-list the company.

They offer RM1.70, higher than the previous close of RM1.63 you know.

What do you think?

Wednesday 7 August 2013

Boilerm: Has It Over-boiled?

If you missed the slow and steady growth of QL Resources, now you might have a second chance.

As QL's associate company acquired in 2010, Boilermech has been listed in the ACE market in May 2011 with an IPO price of just 33sen. Boilermech's largest shareholder is QL Green Resources, who owns about 39% of Boilermech. Boilermech's chairman Chia Song Kun is also QL's managing director, who is the soul in QL.

So far, Boilermech's revenue & net profit continue to grow from 2009 to 2013 without interruption, and its share price consistently heads north, just like what QL has achieved. For FY13 ended Mac 2013, it recorded a revenue and net profit of RM165.8mil & RM23.7mil respectively, up 10.8% & 23.1% compared to FY2012 despite its FY2013 has only 11 months due to change of financial year end. With this kind of result, it has certainly fulfilled the criteria to transfer to main board and it is just a matter of time that this news will be announced.

Boilermech involves in the design, manufacturing and service of biomass boilers, mainly in the palm oil milling industry. Does it still have room to grow from here?

        Biomass: greener & cheaper energy

To expand its capacity, Boilermech has recently completed the acquisition of a factory nearby its existing factory in Subang. Its production capacity is expected to rise from 5 boilers/mth to at least 8/mth by August 2013, and 10/mth by year end 2013. With the increase in capacity, it is believed that Boilermech can continue to grow for the next one year or two. It may also expand its reach to other countries in the future besides Malaysia and Indonesia.

Despite a small cap growth stock, Boilermech pays dividend too. It has just announced dividend of 2sen per share for FY2013, which represent a payout of 21.8% from FY2013 net profit. The dividend payout for FY2012 stands at 20%. However, due to the escalating share price at RM1.60 currently, the dividend yield is just a mere 1.25%. But if you started to buy Boilermech's share at 79sen at the beginning of its FY2013 (April 2012), then the yield will be 2.5%.

       Boilermech's main office

Today Boilermech's share price surge again to RM1.67, PE ratio 18.2 from FY2013 earning, and its share price has increased 380% from its IPO just a little more than 2 years ago, is it still worth to collect? I wish to, but money not enough...

Friday 2 August 2013

From Johore Tin To Johore Milk

Since acquiring its own customer Able Dairies in October 2011 for RM31 mil, Johore Tin has its revenue doubled and net profit tripled, resulting in more and more cash in its bank and almost 175% rise in its share price.

When dairy products manufacturers grow big, they will produce their own tin. When tin manufacturers grow big, they will produce dairy products. Fair enough. Johore Tin has followed Canone's footstep by venturing into dairy business successfully.

In FY2012 when the contribution of Able Dairies is fully consolidated into Johore Tin's account, its new F&B division has generated more revenue and profit than its core business of tin manufacturing. The revenue of tin and F&B division for FY2012 is RM101mil vs RM164mil, while the net profit stands at RM10.5mil vs RM13.8mil respectively.

Compare to FY2011, Johore Tin FY2012's revenue jumps 84% from RM134mil to RM246mil, and its net profit grows 110% from RM11mil to RM23mil.

       Some of Johore Tin's customers

However, Johore Tin made a not-so-good start for its FY2013. Its revenue and net profit for FY13Q1 drops significantly from the preceding quarter (FY12Q4). This is mainly caused by lower sales from its F&B division. The management has said that this is because of New Zealand drought in that period that has caused a sudden spike in the price of dairy products, which has prompted Johore Tin's customers to withold their orders.

While almost all its tin customers are within Malaysia, about 80% of Johore Tin's dairy products customers come from overseas, mainly in Africa, Middle East and South East Asia. As a third largest tin manufacturer in the country behind Kian Joo and Canone, Johore Tin's tin manufacturing division is only expected to see modest growth. Thus, the future of the company may rely on its F&B division, which is said to possess an opportunity to grow rapidly.

       Products of Able Dairies, never seen all these...

Since F&B division is Johore Tin's core business now, the poor F&B showing in FY13Q1 has directly caused its share price to retreat from RM2.17 to RM1.88 currently. Now the NZ drought is over according to the management, will the F&B division bounce back?

Johore Tin's F&B manufacturing capacity has reached a max since mid 2012 and the management plans to construct a new factory to support its growth, besides squeezing space to install a few more lines in the old factory. With its increasing cash pile and strong balance sheet (RM49mil cash vs RM31mil borrowing at end of Mac 2013), I think it has no problem to finance its capex. It may also give more dividend too.

The important thing is, lets see how well is its F&B division doing in Q2FY13 first.