Wednesday 30 April 2014

Gtronic: Still Holding Strong

Globetronics FY14Q1 Financial Result

GTRONIC (RM mil) FY14Q1 FY13Q4 FY13Q3 FY13Q2 FY13Q1
Revenue 83.4 78.5 79.5 85.5 77.5
PBT 17.0 15.0 18.6 16.5 12.3
PBT% 20.4 19.1 23.4 19.3 15.9
PAT 14.1 13.1 15.2 14.1 10.1

Total Equity 272.4 275.2 285.8 276.9 259.0
Total Assets 325.9 338.8 343.8 331.9 309.7
Trade Receivables 60.6 62.4 60.0 63.3 60.1
Inventories 11.1 14.2 17.2 15.4 16.0
Cash 141.0 147.3 148.8 131.0 109.7

Total Liabilities 53.5 63.6 58.1 55.1 20.7
Trade Payables 9.9 18.4 15.6 19.3 18.1
Other Payables 29.8 34.3 32.6 30.8 27.6
ST Borrowings 9.9 5.2 4.8 0.0 0.0
LT Borrowings 0.0 0.0 0.0 0.0 0.0

Net Cash Flow -6.3 41.5 42.2 24.6 3.5
Operation 13.2 87.5 62.3 40.3 18.1
Investment -7.1 -11.2 -9.4 -7.1 -2.3
Financing -12.3 -34.7 -10.7 -8.6 -12.3

EPS 5.04 4.73 5.51 5.15 3.73
NAS 0.97 0.99 1.03 1.00 0.95
D/E Ratio net cash net cash net cash net cash net cash

Globetronics management  has guided that the first half of its FY14 will be flat. However, both its revenue and net profit in Fy14Q1 improve YoY and QoQ, which is not bad indeed.

The better result is mainly due to better volume loading from most of its customers.

Balance sheet is still as strong as before.

The upcoming FY14Q2 result might look like this. However, I would expect some surprise in its second half after the 3 news products start their contribution to its top & bottom lines.

Globetronics has recommended a final & special single tier dividend of 4% each (total 4 sen) for its FY2013. This is higher than total 3sen declared in the corresponding period last year.

Total dividend in FY13 sums up to 18sen, 50% more than 12sen paid in FY12. This works out to be almost 95% dividend payout from its FY13 net profit.

At current share price of RM3.58, it is still a good 5% dividend yield.

I predict Gtronic can achieve RM60mil net profit in FY14 which represents a 15% growth. With current total paid up shares of 281 million, target EPS will be 21.4sen, thus target price is RM3.20 given a PE of 15x.

Similarly, even though current share price is higher than my target price, I'll still hold Gtronics for the time being.

Tuesday 29 April 2014

Tambun: RM100 Million In Sight

Tambun Indah FY14Q1 Financial Result

Revenue 112.0 118.4 97.1 82.6 78.3
PBT 35.3 36.3 31.2 26.3 24.0
PBT% 31.5 30.7 32.1 31.8 30.7
PAT 25.3 22.1 17.2 14.0 11.7

Total Equity 336.0 310.1 273.9 243.1 235.3
Total Assets 596.9 496.9 510.2 475.0 455.5
Trade Receivables 99.1 86.6 83.8 79.8 82.0
Prop dev cost 96.4 125.1 129.6 131.5 132.9
Inventories 0.3 0.3 0.0 0.0 0.3
Cash 142.8 125.9 141.9 117.2 99.7

Total Liabilities 258.7 183.3 185.0 185.9 178.8
Trade Payables 93.1 81.1 74.5 69.7 63.9
ST Borrowings 39.5 24.8 26.4 26.7 16.6
LT Borrowings 116.6 73.3 73.8 80.3 92.1

Net Cash Flow 29.0 24.3 52.5 22.9 4.4
Operation -23.0 57.9 32.5 2.0 -16.7
Investment 4.1 -21.4 -4.5 -4.2 -1.7
Financing 47.9 -12.2 24.5 25.0 22.7

EPS 6.41 6.14 5.22 4.46 3.77
NAS 0.85 0.79 0.82 0.76 0.76
D/E Ratio 0.04 Net cash Net cash Net cash 0.04

Compared YoY, Tambun's revenue and PAT in FY14Q1 improve 43% and 116% respectively. The remarkable increase in net profit is due to acquisition of remaining shares in its Pearl City development.

As expected, its revenue falls slightly this quarter as many projects were completed in the final quarter of last year. Profit before tax margin still stays above 30% mark consistently.

Tambun took a RM68mil bank loan this year, thus sending it back into slight net debt with net gearing of 0.04.

As at 31 Mac 2014, Tambun achieves average take-up rate of 84.91% on its on-going projects with a total GDV of RM975.67mil. Its unbilled sales increase slightly from RM455mil in previous quarter to RM467mil.

Recent new launches earlier this year including Permai Residence, Bukit Residence, Pearl Harmoni, Pearl Avenue 2 and Rain Tree Park are still not classified into its on-going projects yet.

       Bukit Residence

The final single tier dividend of 4.6sen will only be announced officially in June and ex in August. The total 6.6sen dividend for FY13 (dividend payout 40% of FY13 net profit) is 25% higher than previous year's 5.3sen. Dividend yield will be 3.3% at share price of RM2. 

Regarding my own target price, I'll keep with my earlier estimation of RM100mil annual profit for FY14. So the new target price should be RM2.53 base on EPS 25.3sen and PE ratio 10x.

Sunday 27 April 2014

EcoWorld: Set For Explosive Growth

Since it acquired Focal Aims's shares at RM1.40 per share in Sep last year, Eco World's share price has appreciated more than 5-fold, from less than RM1 to more than RM5.

I didn't buy Eco World's shares as I don't know how much it can earn in the future, even though I'm quite sure that it will reach SP Setia's current level in the future. However, how many years will it take? Is it worth to park my money here for many years?

Now here comes some clues.

As expected, Eco World has made a few major corporate exercises which will propel it to be one of the largest property developer "overnight".

In summary, Eco World Bhd proposed to acquire the development rights to 8 projects and the shares of a company with development land from the subsidiaries of its private company Eco World Sdn Bhd.

Before this, the listed part of Eco World only has one on-going project at Kota Masai township with 991.6 acres remaining, which was inherited from Focal Aims. The other project EcoSanctuary at Kota Kemuning, which was recently acquired from Tropicana, is only expected to be launched in 2015.

After the proposed acquisition, Eco World's total landbank will increase from 1,326 acres to 4,433 acres, while total GDV will increase almost 3-fold from RM13.5bil to RM43.5bil.

The table below shows Eco World Bhd & Eco World Sdn Bhd's landbank, in which all are in the property hotspots of Klang Valley, Iskandar Johor and Penang.

Eco World has already launched EcoSky (GDV RM970mil) and EcoBotanic (GDV RM3.79bil) in the fourth quarter of last year. It plans to launch all its other projects except EcoMacalister between 2014-2015.

It sets a sales target of RM2bil in 2014 and RM3bil in 2015. It has achieved sales of RM1.13bil as at 31 Mac 2014 from the two projects launched last year.

Eco World plans to launched another 6 projects shortly within the 3rd and 4th quarter of this year. They are EcoMajestic, EcoSpring, Eco Business Park I & II, EcoTropics and EcoTerraces. 

EcoMajestic at Semenyih which has 1,073 acres land will be Eco World's largest township development at the moment. Inevitably this makes me link it to the success of Setia Alam by SP Setia.

The maps below show the location Eco World's projects.

       Eco World In Penang

       Eco World In Klang Valley

       Eco World In Iskandar Johor

To fund all these acquisition, Eco World will pay Eco World Sdn Bhd's shareholders (EW Holdings & Sinarmas Harta) in the form of Eco World's shares (shares subscription), as well as proposing rights issue with free warrants and then a 20% private placement.

Currently Eco World has total paid-up shares of 253.3mil, with par value RM1.

First, it will carry out share split of 1 into 2 ordinary shares, to total 506.6mil shares with par value of 50sen each.

Then EW Holdings and Sinarmas harta will subscribe to 403.4mil new Eco World's shares each, for RM1.70 per share, thus increasing the total paid up shares to 1,371.64mil. 

After the share subscription, the public will only hold 13.48% (from 34.95%) of Eco World's shares, which will not be compliant to listing requirement of at least 25% shares in public hands.

Because of this, EcoWorld has proposed rights issue with free warrants and then 20% private placement.

The proposed rights issue with free warrants will raise approximately RM788mil before full exercise of the warrants. The number and pricing of the rights share are yet to be determined, but the price is expected to be fixed at not less than 20% discount!

After the rights issue, Ecoworld will carry out placement of shares up to 20% to investors to be identified later.

Below is the estimated paid-up shares after all the corporate exercises are completed. The number of shares after the share subscription is confirmed. After that, all are just base on assumption only.

In the calculation above, the proposed rights issue is assumed to be 1 rights to 2 ordinary shares at RM1.20 each, and 4 warrants for every 5 rights shares with exercise price of RM1.97 for warrants.

Even before any warrants are converted into shares, Eco World's total paid up shares already surges to 2.364 billion, about 4.6 times more than its total shares now after share split.

So the earning will be diluted by 4.6x (if the assumption on rights issue is true) and the GDV will increase by 3x.


How "BIG" will Eco World be after all the proposed corporate exercises completed?

We know that Eco World will have 4,433 acres of land with total GDV of RM43.5bil after this. Lets compare with other major developers in Malaysia.

The table below is obtained from CIMB analyst report dated 31 March 2014.

In term of landbank, Eco world with 4,433 acres will become the third largest land owner in the list behind UEM Sunrise & SP Setia. In term of GDV of RM43.5bil,  it will still be quite a distance behind UEM Sunrise, Tropicana & SP Setia.

What should be the fair value for Eco World's share price?

Eco World's share closed at RM5.40 last weekend. Is it worth to buy now?

If the share split happens now, the price will be adjusted to RM2.70. Remember that the share subscription is fixed at RM1.70 per share, while the rights issue price is assumed to be only RM1.20 after at least 20% discount. 

After the proposed rights issue and placement are completed, the total paid up shares are assumed to jump to 2,364 million (exclude warrants conversion). 

If the fair value is RM2.70 (or RM5.40 before split) given a PE ratio of 15x, the EPS should be 18sen. For total shares of 2,364mil, its profit attributed to shareholders needs to be RM425mil.

Can Eco World achieve RM425mil annual net profit in the next few years?

Below are the FY13 results & latest PE ratio of other major developers.

FY13 RM Rev (bil) PATAMI (mil) PE
UEMS 3.43 579.1 18.4
SPSetia 3.06 417.8 17.9
Tropicana 1.48 362.3 6.0
Mahsing 2.00 280.6 11.6

After comparing to the others, do you think RM400mil annual net profit is achievable for Eco World, given its target sales of RM5bil in the next 2 years?

I'm not sure. What I only know is that its projects will sell very very well.

If Eco World can get about 15% net profit like SP Setia, then it will be RM750mil net profit from the RM5bil sales but this should be divided into 3-4 years.

I don't think Eco World can produce an impressive result for its FY14 which will end in Sep14. So far its FY14Q1 only produced PATAMI of RM0.8mil out of revenue of RM22.6mil, even though it has achieved sales of RM1.13bil in Mac14.

So I think it will take quite a number of years before it can reach the earning level of SP Setia which Mr Liew Kee Sin took decades to build.

Anyway, there will be a further 20% earning dilution in the future when the warrants are fully converted to mother shares.

Eco World & Tropicana, both are going for fast & furious growth, both has precious land at Macalister Road Penang and Canal City, which one do you think is better?

Saturday 26 April 2014

Tambun: What To Expect From Its FY14Q1?

In my latest write-up on Tambun Indah, I mentioned at the end of that article that Tambun's FY14Q1 financial result will be released in May.

Actually the date is incorrect, as the result is scheduled to be released on 28th April 2014 according to its website. The corresponding period's result last year was also released in April.

What to expect from Tambun's upcoming quarterly result?

Of course, for the first time it will include the full quarter contribution from its remaining shares of Pearl City acquired in end of Nov last year. Last quarter it only contributed for one month.

In its previous quarter FY13Q4 result, net profit & PATAMI stood at RM28.2mil & RM22.1mil respectively. I expect more than 95% of net profit will be bagged by Tambun later as minority interest in projects such as Kelisa Residence (OC expected in June14) and Permai Residence (just launched) should not contribute too much.

Nevertheless, it is important to note that there were quite a lot of projects completed in the end of last year, and perhaps FY14Q1 may not produce record breaking revenue, depends on the timing of billings.

       Tambun: Listed on 18th Jan 2011 at IPO 70sen

As for the recent shares disposal by Tambun's major shareholder Nadayu, for me there is absolutely nothing to worry about.

Since the day Nadayu decided to sell all its remaining stake in Pearl City to Tambun, it is expected that sooner or later Nadayu will cash out the 55 million shares it obtained from the deal at RM1.30 per share. It needs cash to run its own property development business.

Those shares were sold in the region of RM1.90 - RM2.00, which is a 50% gain in half a year for Nadayu, not bad indeed.

Anyway, I still think that Tambun can better its FY13 financial performance. I will set my own target price after the release of FY14Q1 result next Monday.

I predict Tambun to deliver RM100mil PATAMI for its FY14, and thus EPS of 25.3sen or a preliminary fair value of RM2.53 given a PE ratio of 10x.

Friday 25 April 2014

Pantech: Pengerang RAPID A Saviour?

Pantech FY14Q4 Financial Result

Revenue 127.8 131.1 153.8 162.2 156.3
PBT 19.1 16.3 21.9 18.5 18.8
PBT% 14.9 12.4 14.2 11.4 12.0
PATAMI 14.6 12.1 15.3 13.8 12.6

Manu Rev 49.9 56.0 76.8 82.5 65.5
Manu PBT 9.3 10.1 13.0 12.6 7.6
Trade Rev 77.9 75.1 77.0 79.8 90.8
Trade PBT 9.8 7.0 9.9 8.9 12.4

Total Equity 430.0 417.7 411.4 393.2 376.7
Total Assets 687.6 698.8 722.2 687.6 695.8
Trade Receivables 128.7 120.8 128.5 125.1 111.2
Inventories 252.3 235.7 245.1 246.9 258.5
Cash 59.9 99.7 97.6 78.3 79.3

Total Liabilities 257.5 281.1 310.7 294.4 319.0
Trade Payables 44.8 36.9 56.3 46.2 36.5
ST Borrowings 130.6 144.2 148.9 151.0 181.1
LT Borrowings 63.1 78.8 75.1 79.1 75.4

Net Cash Flow -27.5 15.5 13.9 0.5 -22.9
Operation 65.9 41.2 29.5 4.6 38.6
Investment -33.4 -24.3 -16.7 -5.8 -82.2
Financing -59.9 -1.3 1.2 1.7 20.8

EPS 2.68 2.24 2.91 2.70 2.64
NAS 0.76 0.74 0.73 0.77 0.74
Net D/E Ratio 0.31 0.30 0.31 0.39 0.47

In its latest FY14Q4, Pantech's total revenue continue its gradual downtrend since 4 quarters ago because of weaker demands from Oil & Gas sector with slower projects execution. However, profit after tax improves both QoQ and YoY due to sales of better margin products.

After the acquisition of Nautic steel and the positive on Oil & Gas sector, I anticipate Pantech to make more sales due to its expanded reach worldwide through Nautic steel's network. However, current results are a bit disappointing.

Anyway, Pantech proposes a final single tier dividend of 1.0sen for its FY2014, which makes it altogether 4.4sen dividend in FY14, slightly lower than 4.6sen in FY13.

Thus its dividend yield is at 4.4% at share price of RM1.00 currently.

This represents a dividend payout of 45% from its FY14 net profit. Its quarterly and consistent dividend payout of between 40-45%, and the decent dividend yield make Pantech quite attractive.

Pantech's balance sheet still remain stable thanks to its strong operation cash flow. It managed to repay its borrowings while maintaining good dividend payout.

Its net debt/equity ratio stays at a healthy 0.31, even though cash drops significantly from RM100mil to RM60mil. 

PANTECH (RM mil) FY14 FY13 FY12 FY11 FY10 FY09 FY08
Revenue 574.9 635.7 434.6 335.8 401.6 511.6 313.3
Rev growth % -9.6 46.6 29.4 -16.4 -21.5 63.3
PBT 75.9 80.2 47.2 37.4 66.8 82.0 45.0
PBT margin % 13.2 12.6 10.9 11.1 16.6 16.0 14.4
PATAMI 55.8 56.1 34.2 29.0 50.8 61.5 34.1
PATAMI growth % -0.5 64.0 17.9 -42.9 -17.4 80.4

Trade Rev 309.8 384.7 308.2 243.9 363.5 428.6 265.1
Manu Rev 265.2 250.9 126.4 91.9 64.3 116.3 71.1
Trade PBT 34.3 60.6 43.0 43.1 44.4 73.5 36.3
Manu PBT 44.6 26.3 7.6 7.3 5.8 16.6 14.7

EPS 10.23 11.73 7.60 6.45 13.60 16.43 9.10
ROE 13.0 14.6 10.1

For the whole FY14, revenue falls 9.6% while PATAMI falls only 0.5% compared to FY13, thanks to improved margin.

Generally contribution from manufacturing division continue to rise but at slower pace. Its trading division encounters a setback with lower demand and lower margin.

Its ROE is still at a good double digit 13.0%.

For its future outlook, Pantech is widely tipped to benefit from the Pengerang RAPID project which was given a green light in early April 2014 and is expected to be fully completed and operational by 2019.

Pantech will benefit in RAPID's construction stage by supplying the pipes, fittings & flow control solution (PFF). However, it is not sure that when will this project start and what is the contract value that Pantech can get.

It is reported by analysts that Pantech has good business relationship with most of the major O&G players in the country so it should not have a big problem to get orders and contracts.

       Pengerang Integrated Complex

Apart from this, the increased capacity at Nautic Steel from 500 MT/annum to 800 MT/annum might contribute positively to the group due to robust O&G activity worldwide and recent NORSOK certification. The management guides that it may increase the capacity further to 1,000 MT/annum by CY2015.

After being "disqualified" as Syariah compliant stock last year, Pantech is restructuring its debts so that it can be reinstated to Syariah compliant by the end of CY2014.

Even though FY14 is not a good year for Pantech due to slower than expected O&G projects execution, I believe that with the approval of RAPID, it can only get better in the future.