Wednesday 28 May 2014

Matrix: Sendayan To Lead The Way

Matrix FY14Q1 Financial Result

Revenue 134.7 144.3 127.4 147.3 155.6
PBT 54.0 56.4 48.7 40.6 61.5
PBT% 40.1 39.1 38.2 27.6 39.5
PAT 38.6 40.7 36.2 30.0 46.0

Res & Com Prop %
74.1 66.7 76.0 76.0
Industrial Prop %
20.8 27.8 21.0 24.0
Industrial Land %
5.1 5.5 3.0 0.0

Total Equity 582.0 552.4 540.1 518.3 387.9
Total Assets 964.5 900.5 862.8 793.0 645.4
Trade Receivables 144.3 140.8 161.5 118.1 185.7
Prop dev cost 523.5 443.8 362.4 400.0 360.5
Inventories 0.7 1.6 1.4 2.6 3.0
Cash -OD 96.0 83.8 211.2 206.5 38.5

Total Liabilities 382.5 348.1 322.7 274.7 257.5
Trade Payables 299.3 245.7 229.5 198.3 204.8
ST Borrowings 34.4 35.5 36.7 8.8 17.0
LT Borrowings 13.2 15.3 15.5 16.1 16.9

Net Cash Flow
53.4 180.8 176.1 8.1
Operation 85.6 39.7 120.7 65.2 9.5
Investment -29.4 -69.2 -37.7 -17.0 -0.4
Financing -29.0 82.9 97.8 127.9 -1.1

EPS 12.80 13.50 12.10 13.10 63.70
NAS 1.92 1.83 1.80 1.73 1.63
D/E Ratio Net cash Net cash Net Cash Net cash Net Cash

Matrix latest FY14Q1 result is slightly poorer QoQ, mainly due to timing of construction billings and absence of land sales from its Sendayan TechValley (STV).

Its PBT margin improves slightly to 40.1% even without the high margin land sales.

Its is reported that Matrix is close to secure at least RM100mil (RM130-147mil) from 75 acres of land sales in STV within this year. Matrix has 243 acres of industrial land remaining at the end of year 2013 and it is in the process of replenishing its STV land.

Matrix achieved sales of only RM126mil (292 units) in the first quarter, with an average take-up rate of about 40% two months after launch. It is expected to post better sales & result in the subsequent quarters.

The management target to launch RM763mil worth of properties (excluding industrial land sale) in FY14, mainly in Bandar Sri Sendayan. The launch of condominium in Kuala Lumpur has been delayed to second half of FY15.

Unbilled sales currently stand at RM440.8mil, increases marginally from RM437mil at the end of Dec13.

Matrix's balance sheet and cash flow remain strong. It has declared a first interim single tier dividend of 5sen for FY14. 

Now the government is looking to extend express rail link (ERL) from KLIA to Malacca. It is confirmed that there will be a stop at Seremban.

By looking at the geographical location of Bandar Sri Sendayan (BSS), KLIA, Seremban and Malacca, it is highly likely that the ERL route will pass through and stop at BSS.

The proposed Senawang-KLIA expressway will pass beside BSS as well.

If this is true, then it will certainly increase the demand of properties in Sendayan.

Even though BSS has over 5,000 acres of land, actually quite a big portion of it are for STV (934 acres), TUDM (750 acres) and also for agricultural use (1,241 acres). Its actual size for residential & commercial development is 1,942 acres.

The initial plan of TUDM Academia & Training City includes a 18-hole golf course, university, training centre & residential units for TUDM personnel.

For the agriculture land, I'm not sure whether it has been or will be converted to residential, commercial or industrial use. I think this will happen sooner or later.

Anyway, in Negeri Sembilan and KL, Matrix still have 1,779 acres of land with GDV of RM6.6 billion for its future projects starting from year 2015 to 2022.

       Acquisition of land in 2013 to extend Bandar Sri Sendayan

Personally I am still comfortable to hold Matrix's shares even though property market is slowing down. This is because Matrix pays good dividend and mainly builds landed properties, which should be more resilient in a difficult market.

Besides, the freehold Bandar Sri Sendayan, supported by Sendayan TechValley, has a massive potential to become a very successful township.

Thursday 22 May 2014

Huayang: Cross The Finishing Line In Style

The credibility of Huayang's management remain intact.

Six months ago, Huayang's highest quarterly revenue is slightly above RM100mil. To achieve a target annual revenue of RM500mil, Huayang still need RM318mil in the next 2 quarters.

Its management reassured investors that they are confident that the RM500k target revenue can be achieved.

Three months ago, it still need RM189mil revenue in its final quarter. It looks like mission impossible.

Now, its last ditch effort produces an astonishing final quarter revenue of RM198.3mil, together with a net profit of RM37.8mil. These are 53% & 92% higher QoQ respectively.

With that, the total revenue for FY14 reaches RM509.9mil, which is 24.8% higher than FY13's total revenie of RM408.7mil.

As a result, overall net profit of RM82.2mil for FY14 has increased 16.6% from RM70.5mil in FY13.

       Metia Residence

At the same time, its net gearing improves from 0.7x three months ago to 0.56x.

However, its latest unbilled sales drop slightly to RM808.1mil from RM838.3mil. 

Can Huayang maintain its revenue above RM500mil for its FY15? I think it certainly need help from its upcoming RM1.5bil Puchong mixed development.

With 264 million shares, Huayang's actual EPS for FY14 (ended in Mac14) is 31.1sen. This means that at current share price of RM1.82, it is trading at a low PE of 5.8x.

Will there be bonus issue again in Sep/Oct this year?

Wednesday 21 May 2014

The "Cow" (GUH) Joins In

Two days ago, GUH announced that it has proposed to acquire 99.46% of Million Crest Sdn Bhd, who owns approximately 46 acres of land in Mukim 14 & 15 in Seberang Perai Tengah & Selatan.

This acquisition will cost GUH RM69.68mil, which means the land will be acquired at about RM35 per sq ft, slightly lower than Eco World's RM40 psf in the area.

The freehold land is described as located in Simpang Ampat along & fronting the federal road connecting Bukit Tengah and Simpang Ampat, and is about 2.5km from Bukit Tambun Toll. It covers both SPT & SPS.

Base on the land features above, the land should be somewhere around the river near Permatang Tinggi that separates both SPT & SPS.

It is also mentioned that there are as many as 221 occupiers residing at one corner of the land and they will be relocated.

So I guess that it should be located next to and behind the old Boon Beng primary school in the old town of Simpang Ampat. If not, it may be further north around Permatang Tinggi light industrial area.

       Possible GUH's land location

A master plan for a mixed development on the land has been earlier approved by Town Planning Department in the year of 1995 & 1996. It is still valid until today.

The initial launch of this project is planned in the first half of 2015. It is reported by The Star that it comprises 322 units of landed properties on 16-acre site.

However, in Bursa announcement released by GUH, the first 2 phases that worth RM238mil will include 218 units of 2-storey shop offices, 153 units of single storey semi-d and 104 units of 3-storey terrace.

I think this is unlikely because 218 units of 2-storey shop office in this area should be sold at close to RM218mil already in year 2015.

       From GUH's Bursa announcement

Meanwhile, Eco World has earlier revealed that it is planning an eye-popping RM920mil mixed development EcoMeadows in its 60-acre land in Bukit Tambun, Simpang Ampat in 2015.

There will be terraces, superlinks, semi-ds and condominiums in which the price would start from RM600k! Excuse me, the RM600k is for terrace or condominium?

I think the RM600k minimum price is for double storey terrace, as condominium in this area should be launched in the last phase.

Eco World will even build a mini mall in its EcoMeadows.

So, Eco World will compete with GUH in Simpang Ampat next year. If both of them sell their properties at sky high prices, then it might benefit Tambun Indah's who acquired its land there at a mere RM11-14 psf.

Tuesday 20 May 2014

Can Oldtown Survive In Australia?

Yesterday, Oldtown (White Coffee) has just announced its venture into Australia market.

Nevertheless, I read a local newspaper article recently saying that Starbucks has failed quite miserably in Australia.

From what I understand, coffee is extremely popular among Australians, especially in Melbourne.

Starbucks came into Australia since year 2000 and have 87 chain stores at its climax. However, it has been reduced to only 22 in 2012 until now.

It seems like Starbucks do not fit into the "local coffee culture" of Australia. It was even described as "selling ice to Eskimos".

I think Oldtown should have done a careful market study before making a decision to venture into Australia. What are the strategies it has in order to compete with local coffee chain stores?

I'm not a coffee lover. Any brands of coffee will taste the same for me.

However, I'm aware that most of my friends who look like "coffee experts" will not go to Old Town White Coffee.

Perhaps Oldtown can provide a totally different type of coffee experience to Australian?

Can Oldtown do better than Starbucks in Australia?

Friday 16 May 2014

Inari: The Journey Continues

Inari FY14Q3 Financial Result

INARI (RM mil) FY14Q3 FY14Q2 FY14Q1 FY13Q4 FY13Q3
Revenue 191.8 186.6 191.3 67.6 56.8
PBT 27.2 26.6 22.1 13.5 8.3
PBT% 14.2 14.3 11.6 20.0 14.6
PAT 25.0 24.4 21.0 13.1 12.4

Total Equity 231.1 202.2 176.8 153.4 110.0
Total Assets 461.4 438.8 406.2 366.4 181.3
Trade Receivables 131.8 123.5 121.1 93.0 38.6
Inventories 137.7 126.2 107.4 105.5 24.7
Cash 53.2 60.0 48.9 44.6 31.0

Total Liabilities 231.1 236.9 230.0 213.8 71.3
Trade Payables 118.4 131.2 138.7 120.2 48.0
ST Borrowings 33.0 26.2 19.6 20.4 5.5
LT Borrowings 15.8 16.4 17.8 10.3 13.3

Net Cash Flow 8.8 15.3 4.3 3.8 -9.9
Operation 12.4 11.5 7.2 86.3 20.1
Investment -30.4 -14.5 -9.6 -112.2 -31.1
Financing 26.9 18.4 6.8 29.7 1.1

EPS 5.19 5.31 4.7 3.69 3.68
Net D/E Ratio Net cash Net cash Net cash Net cash Net cash

Inari produces its best ever financial result in its latest FY14Q3. Revenue increases marginally by 2.8% QoQ while PATMI improves by 2.5% QoQ.

The PBT in FY14Q3 includes an ESOS charge of RM2.1mil. Excluding this item, Inari's current quarter PBT will be RM29.3mil, which is 10.1% higher QoQ.

Amertron contributes RM106.8mil of revenue in this quarter, which means Inari has RM85mil revenue that represents 49.6% organic growth in one year.

PBT margin stays healthy at 14.2%, while cash flow is still good despite paying consistent dividends.

       Inari South Key

The practice of quarterly dividend is continued. Inari declared a third interim dividend of 1.2sen plus special dividend of 0.8sen for its FY14, all single tier.

This is the highest "quarterly" dividend for Inari, which is in line with its higher & higher profit. The date of entitlement is still yet to be announced.

The table below shows Inari's dividend for the last 3 years. Figures in bracket represent special dividend.

Div (sen) FY14 FY13 FY12
1st 1.1 (0.4) 0.8 0.6
2nd 1.1 (0.4) 0.9 0.6
3rd 1.2 (0.8) 0.9 0.8
1.0 (0.9) 0.8

Total dividends after 3 quarters are already 5sen, which is more than 4.5sen for the whole FY13. Total dividend for FY14 should be about 7sen, base on payout policy of up to 40% and estimated full year net profit of RM90mil. However, the yield of 7sen dividend is just 2.5% at current share price of RM2.84.

At 9 months PATMI of RM70mil, I think Inari should be able to reach RM95mil for its FY14. Base on current paid-up shares of 499.6mil, estimated EPS will be 19sen, thus target price should be RM2.85.

At this moment Inari seems to be fully valued, but I think it is still a growing company. Apart from anticipated robust growth in mobile devices, its subsidiary Ceedtec is pointed out by analysts to start  to contribute meaningfully to its bottom line in FY15.

So, just like Gtronic, I will hold Inari for the time being.

Anyway, there is still no news regarding main board transfer, as well as the anticipated bonus issue.

Thursday 15 May 2014

Latitude & Poh Huat: Buy Or Sell?

Since China placed an oil rig at the disputed waters between China & Vietnam in early May 2014, the relationship between both countries have been tense.

Sadly, the supposed-to-be peaceful rally against China in Vietnam turned into riot on 13th May 2014.

From the news, the area that is most heavily affected is Binh Duong province in southern Vietnam, which is an important industrial zone where both Latitude Tree and Poh Huat have their factories there.

There are news that many factories are sabotaged and even set on fire.

Yesterday both Latitude Tree and Poh Huat released an announcement regarding this issue.

Unfortunately, even though they are from Malaysia, both companies' factories in Vietnam were affected by the riot, in which trouble-makers vandalized the main office buildings & its equipment there.

Fortunately, both companies mentioned that their manufacturing facilities were not affected, there is no serious fire damage and nobody is seriously hurt. However, like almost all factories in the area, production was halted at the moment for the safety of the employees until further notice.

Both Poh Huat's facilities in Binh Duong & Dong Nai province were affected, while one of two Latitude's facilities in Binh Duong was affected.

Latitude's assets in Vietnam are insured against riot but there is no mention from Poh Huat regarding this matter.

For Latitude, as all the damage to assets are insured, the main problem will be loss of revenue arising from production halt. Latitude operation in Vietnam contributes almost all of its net profit at the moment.

It seems like the peak of the riot was on 13 May, and has subsided the day after as Vietnam police started to make arrest.

Personally I think the most important thing is when will the production restart. If the production stops for less than a week, then it is still acceptable. However, if it is more than that, then it's not a good sign.

I don't think that Vietnam government will be so naive to continue to let the rioters causing troubles in one of its most important industrial area. It will negatively affect foreign investment in the future.

Furthermore, Vietnamese are at risk of losing their jobs if factories close down or stop production for a long time. Some workers were actually protecting their factories during the riots.

So I think this will be a short-term setback for both Latitude Tree and Poh Huat, and it may present an opportunity to collect their shares, unless the production halt persist for too long.

Monday 12 May 2014

Tropicana: What A Big Surprise!

Before 9th May 2014, everything looks so positive for Tropicana.

Its share price has formed a bottom at RM1.20 and has reversed its downtrend recently.

RHB gave it a target price at RM2.40 while CIMB gave it an "unofficial" fair value of over RM3.07.

It just paid its first interim single tier dividend of 4sen for its FY2014. This already represents a yield of 2.5% at share price of RM1.60. It may or may not give another dividend for FY14 anyway.

Besides, it has just sold a piece of prime land at Bukit Bintang and will pocket a net gain of RM145mil. It also formed a 30/70 JV with Agile Property, a renowned HK-listed China property group to develop the land with an expected GDV of over RM1bil.

The Bukit Bintang land is located just a short walking distance from the upcoming Pasar Rakyat MRT station and Tun Razak Exchange.

       Possible location of Tropicana's land at Bukit Bintang

Previously I'm wondering how will Tropicana's quarterly income statement look like if there is no land sales and fair value gain adjustment. Now here it comes, and it is a rather disappointing one.

Tropicana FY14Q1 Financial Result

Revenue 299.1 444.7 363.4 362.1 305.3
Gross Profit 110.4 203.4 130.2 117.7 130.7
Other Income 9.9 181.4 9.0 14.6 1.9
Finance Cost 19.5 18.2 27.7 15.6 16.5
PBT 24.8 325.2 49.3 62.3 66.8
PBT-FV 24.8 117.9 49.3 50.2 67.7
PBT-FV% 8.3 26.5 13.6 17.2 21.9
PATMI 7.8 256.5 23.7 38.3 43.8

P/Dev Rev 208.6 363.4 269.2 312.4 270.1
P/Dev PBT 8.2 120.2 31.3 45.6 64.2
P/Dev PBT-LS 8.2

P/Inv Rev 39.2 36.6 36.8 33.9 35.1
P/Inv PBT+FV 19.8 105.0 19.9 25.5 14.0
P/Inv PBT-FV 19.8 12.2 19.8 13.4 14.9
Inv Rev 51.4 44.7 57.5 15.8 0.0
Inv PBT+FV -3.2 99.9 -1.8 -8.8 -11.4
Inv PBT-FV -3.2 -14.4

Total Equity 2633.3 2570.3 2345.5 2336.7 2174.5
Total Assets 5836.2 5425.7 5045.4 4990.5 4667.1
Trade Receivables 380.2 383.3 236.0 214.9 101.2
Prop dev cost 746.2 554.3 370.3 412.8 517.1
Inventories 54.0 67.1 68.8 73.4 30.4
Cash 380.8 446.7 333.6 372.0 282.9

Total Liabilities 3011.3 2691.7 2520.3 2477.8 2362.0
Trade Payables 0.0 0.0 226.8 205.3 178.1
Other Payables 0.0 0.0 152.4 161.1 132.5
T&O Payables 882.3 474.9 379.2 366.4 310.6
ST Borrowings 399.0 350.8 315.2 298.2 240.2
LT Borrowings 1467.2 1566.8 1613.6 1562.6 1610.9

Net Cash Flow -65.8 258.9 145.4 139.2 59.0
Operation -48.7 171.4 -98.4 -120.6 -94.7
Investment -31.2 -48.2 32.3 106.0 105.6
Financing 10.2 135.7 211.5 153.8 48.1

EPS 0.66 23.18 2.20 4.31 5.50
NAS 1.90 2.32 2.12 2.45 2.54
D/E Ratio 0.56 0.57 0.68 0.64 0.72

For its FY14Q1, Tropicana achieves revenue & PBT of RM299.1mil & RM24.8mil, compared to RM305.3mil & RM66.8mil in FY13Q1.

However, results in FY13Q1 include proceeds from land sales. Excluding the land sales, the revenue & PBT for FY13Q1 should be RM179.2mil & RM23.5mil respectively. So, current FY14Q1 is a 66.9% & 5.5% improvement YoY.

Its profit after tax in FY14Q1 is RM19.7mil, but profit attributable to owners of company is just a mere RM7.8mil. This represents the least PATAMI since a loss making quarter in FY11Q3.

There must be a lot of sales billed for JV projects in this quarter, as there are so much profit being distributed to non-controlling interests. If not, the result will not be that "ugly". I'm not sure whether this will still be the case in next quarter's result.

       Penang World City

It seems like there is no significant fair value adjustment and land sales in current quarter of FY14Q1. So it may reflect the real story of Tropicana's property development.

For FY14Q1, its property development division registers a revenue of RM208.6mil, while PBT is at RM8.2mil which means the PBT margin is just 3.9%.

The low PBT margin might be due to its high expenses and high finance cost. Its gross profit margin is still at a good 37%.

Anyway, the property investment division produces a commendable result with improved revenue & PBT of RM39.2mil & RM19.8mil respectively.

In the first quarter of FY14, Tropicana has sold RM395mil worth of property, which is 20% of its target of RM2bil sales for year 2014.

Its unbilled sales has risen to an all-time high of RM2.4bil, from RM2.2bil at the end of year 2013.

Tropicana's total borrowings drop a bit from RM1917.6mil to RM1866.2mil a quarter ago, while net usable cash also drops from RM 446.7mil to RM380.8mil.  Its net debt/equity ratio remain the same at 0.56x.

It is noteworthy that the payables increase 85% QoQ.

       Penang World City

My conclusion is that Tropicana's core property development business is gathering pace and growing well, as shown by a 67% YoY increase in the group's revenue excluding land sales. Its gross profit margin still stays at a healthy 37%.

However, without the profit from land sales and fair value gain, the group's overall PBT margin is just 8%. For its property development division, the PBT is even more pathetic at 3.9%.

It seems like the profits from its improving sales of property are eroded by the high admin/other expenses, as well as finance cost.

I believe that for the rest of year 2014, proceeds from land sales and fair value gain will probably push up its top and bottom lines close to what it has achieved in FY13. So we might see vastly improved results & margin in the subsequent quarters compared to this one.

Can Tropicana succeed in its transformation plan to become a premier property developer in Malaysia? I still believe that it can, due to its strategic landbanks and established brand.

Nevertheless, it certainly takes time, but the softening of property market is not going to help though.