Matrix Got A New Major Shareholder

Matrix's share price closed at RM2.97 last week, 5 million shares are worth RM14.85mil.

This is the amount that Dato Lee Tian Hock, Matrix's founder, chairman & CEO, donated to a school in Port Dickson last week.

Why did he donate shares instead of cash?

I think it is because he knows that Matrix's shares will increase in value in the future!

Furthermore, with its higher than FD's dividend, the schools can get quite a big sum of "recurring income" every year.

In my opinion, Dato Lee is a real generous and humble man, he didn't announce the news himself. He also uses his wife's name to donate another RM1mil cash to the school.

So I don't think he will donate overvalued shares that are likely to fall in price soon.

At shareholding of 1.1% (5 million shares), this school will definitely appear in the top 30 shareholders list as long as it doesn't sell.

It's definitely great to be a small shareholder of Matrix who has such a great CEO.

Pantech: How RAPID Can It Grow?

Pantech FY15Q1 Financial Result

PANTECH	FY15Q1	FY14Q4	FY14Q3	FY14Q2	FY14Q1
Revenue	130.7	127.8	131.1	153.8	162.2
PBT	18.1	19.1	16.3	21.9	18.5
PBT%	13.8	14.9	12.4	14.2	11.4
PAT	13.6	14.6	12.1	15.3	13.8
Manu Rev	55.4	49.9	56.0	76.8	82.5
Manu PBT	10.7	9.3	10.1	13.0	12.2
Trade Rev	75.3	77.9	75.1	77.0	79.8
Trade PBT	8.5	9.8	7.0	9.9	7.7
Total Equity	444.3	430.0	417.7	411.4	393.2
Total Assets	701.5	687.6	698.8	722.2	687.6
Trade Receivables	136.9	128.7	120.8	128.5	125.1
Inventories	253.6	252.3	235.7	245.1	246.9
Cash	66.3	59.9	99.7	97.6	78.3
Total Liabilities	257.2	257.5	281.1	310.7	294.4
Trade Payables	49.3	44.8	36.9	56.3	46.2
ST Borrowings	132.5	130.6	144.2	148.9	151.0
LT Borrowings	62.3	63.1	78.8	75.1	79.1
Net Cash Flow	2.1	-27.5	15.5	13.9	0.5
Operation	6.1	65.9	41.2	29.5	4.6
Investment	-2.6	-33.4	-24.3	-16.7	-5.8
Financing	-1.4	-59.9	-1.3	1.2	1.7
EPS	2.39	2.68	2.24	2.91	2.70
NAS	0.78	0.76	0.74	0.73	0.77
Net D/E Ratio	0.29	0.31	0.30	0.31	0.39

Pantech achieves an "average" result for its FY15Q1. Both revenue and net profit drop YoY but PBT margin is still good at 13.8% thanks to high margin from newly acquired Nautic Steel.

Its trading division is still struggling to crawl back to its previous revenue high of RM100mil a quarter in FY13, while manufacturing division also shows sign of slowing down.

All these are because of lower sales due to lower demand from the Oil & Gas sector.

Most analysts give Pantech a target net profit of RM60mil in FY15.

Balance sheet & cash flow remain healthy. A first single tier interim dividend of 1.0sen was declared. 

Nevertheless, Pantech investors' eyes will be on the RM90bil RAPID project which has just been given green light 3 months ago.

It is estimated that 15% of the RM90bil (RM13.5bil) is likely to be allocated to pipes, valves & fittings (PVF). 

Pantech is said to be the only one-stop PVF supplier in Malaysia and has a market share of as much as 40%. Its major competitors come from Singaporean firms.

If Pantech can get only 20% share of the PVF supply contracts from RAPID contractors (though it has 40% market share), then it could be RM2.7bil over 6 years or RM450mil revenue a year. With 10% net margin, this could be RM45mil additional yearly net profit for Pantech.

Anyway, all these are just rough estimates only.

Even without new projects like RAPID, Pantech said that it can generate recurring income from replacement market which makes up 40% of its sales every year.

Pantech has clients in 59 countries with almost 50% of its products are exported. Its sales to Brazil has tripled since the acquisition of Nautic Steel and expect more to come from this country. 

It also plans to double the production capacity of Nautic Steel to 1,000 MT/annum by FY16.

The contracts award for RAPID is expected to flow from second half of CY2014 onward. Can we hear the good news from Pantech soon?

Heng Huat: Shareholders Surely Heng & Huat?

Heng Huat Resources will be listed in ACE market tomorrow on 25th July 2014 with an IPO price of 45sen per share. Its IPO was oversubscribed by 60.3x by the public!

Heng Huat is a relatively new company established in 2007. Its main business involves:

• Manufacturing and trading of coconut biomass materials
• Manufacturing & trading of oil palm biomass materials
• Manufacturing & marketing of mattresses & related products (Fibre Star brand)

The Penang-based company started with 2 production lines for manufacturing of coconut fiber & coconut peat back in 2007. It then expanded its reach to include oil palm empty fruits bunch (EFB) fiber which has better economy of scale in 2009, and later went downstream into fiber mattress business in 2011.

So Heng Huat can be considered as a "green" company which makes waste products (coconut & EFB fibers) to good use.

Besides mattress, these fibers can be used to make upholstered furniture, cushion, carpet, mat, broom, paper, fertilizer etc, as well as being used as erosion control mat, green fuel and farming materials.

Heng Huat mainly exports its oil palm EFB related products to China, which makes up 59.13%, 62.88% and 55.22% from FY11 to FY13. It has a major customer in China (Shenzhen Yuemao) who accounted for 30.14% of FY13's total revenue.

How is Heng Huat's past financial performance?

RM mil	FY13	FY12	FY11
Revenue	73.7	63.0	31.7
Gross profit	32.0	30.6	17.6
PBT	11.4	13.6	13.7
PATAMI	9.7	12.2	10.5

FY ends 31 Dec

It is an extremely positive sign that its revenue grows for the last 3 years. However, PBT & PATAMI drops quite significantly in FY13, mainly due to higher selling & distribution expenses, finance cost & tax.

Though gross margin drops throughout the years, it is still a good 43.4% in FY13.

Heng Huat has just released its FY14Q1 results.

RM mil	FY14Q1	FY13Q1
Revenue	21.3	16.1
Gross profit	9.7	7.7
PBT	3.8	3.0
PATAMI	3.0	2.6

Revenue & PATAMI rise 32% & 15% respectively YoY, while gross margin manage to stay at 45.5%. This is definitely a great result which can charge its share price up when trading starts on 25th July.

As at 31 Mac 2014, Heng Huat has RM6.3mil of cash, RM36.7mil borrowings & RM40.4mil shareholders equity. This makes its net gearing at 0.75x which is high.

It has accumulated debts due to acquisition of production land/plants and expansion of its production lines for the past 2 years.

So the IPO which will raise RM20.93mil cash comes timely. As much as 45% of the IPO cash will be used to repay the borrowings. The net gearing is expected to ease to 0.3x.

Heng Huat offers 46.5mil shares to the public at 45sen each. Its enlarged paid up shares will be 205.8mil when listed in ACE.

Is the IPO price attractive?

Heng Huat's net asset per share stands at 25sen according to latest FY14Q1 report, and it is expected to reach 27sen after IPO. The price/book ratio is 1.7.

With its FY13 PATAMI of RM9.7mil, EPS (post IPO) should be 4.7sen, and PE ratio at 45sen per share is 9.6x. 

If we annualize its FY14Q1 result, FY14 might give a PATAMI of RM12mil and thus EPS 5.8sen. With this, its forward PE ratio for FY14 is just 7.8x at share price of 45sen.

I think IPO at 45sen is a good price for investors. For those who still do not own the shares, can they still get it at 45sen when it starts trading? I doubt so.

In its notes in latest FY14Q1 quarterly result, Heng Huat mentions that there is recent banning of new coal-fired plants in Beijing, Shanghai & Guangzhou which are China's largest cities.

So Heng Huat who has more than half of its business in China might benefit from anticipated higher demand for alternative greener fuel source such as palm briquette.

       Palm Briquette

Palm Briquette is an Ideal Green Fuel due to

• Eco friendly and Renewable Energy Fuel.
• Economical and Cheaper than other solid fuels ie. Coal and Wood.
• Higher Thermal calorific value around 4000 Kcal/Kg.
• Pollution free because there is no sulphur or any hazardous materials.
• Lower ash content 2 to 5%. There is no fly ash when burnt.
• Consistent high burning efficiency due to the low moisture.
• Contain High Density and Higher Fix Carbon Value.
• Easy for Transportation, feeding & combustion due to unique shape.
• Combustion is more uniform compared to other fuels.
• Good Market due to rise in price of Fossil Fuels.

Perhaps Heng Huat can just forget about the mattress and concentrate on its core business.

Inari: Should I Subscribe To The Rights?

Inari's net profit for its FY14 (ends Jun14) will surely doubles the figures of FY13. 

Can it grow at the same pace in FY15? It is unlikely because FY14 results are contributed largely by newly acquired Amertron.

Anyway, Inari itself still registered impressive organic growth at 50%.

Currently its four Penang facilities which mainly cater for RF products are running at a utilization rate of 90%. Even if it does not expand the floor space, it probably still can expect a satisfactory growth from maiden contribution from 51%-owned Ceedtec & 100%-owned Inari South Key.

Forecast by Maybank KE shows that both ISK & Ceedtec may contribute about RM100mil revenue (10%) in FY15.

Inari South Key, which was established just in 2012, has its facilities in Johor which manufactures fiber optics products. It is expected to do well due to increasing popularity of high-speed internet and cloud computing.

Anyway, I still can't grab the concept of cloud computing...

It was a surprise to me that Inari announced a cash call (1-for-8 rights issue with 1 free warrant) in early July 2014, since it just did the same thing a year ago in May 2013.

The first thing that came to my mind was, earnings will be diluted again...

However, as Inari urgently needs to expand its highly-utilized facilities, this can be a positive move. Perhaps it is better than borrowing from financial institutions which charge interest. Better save the loan interest to distribute as dividends right?

The indicative rights issue price is at RM1.50 per rights share and the indicative new warrant exercise price is at RM2.00 (1:1).

At current share price of RM3.25, this represents a great discount though the ex-ed share price will be adjusted. Anyway, the price is just indicative only.

Investors who subscribed to previous rights and kept the warrants are surely laughing all the way. The old warrant exercise price is just 38sen.

The table below from Maybank investment shows the possible dilution after the rights issues & new warrants.

The proposed rights issue will raise about 80+mil new shares (about RM120mil). It is expected that most existing warrants (expires in June 2018) & ESOS will be converted to Inari shares in order to be eligible to subscribe to the attractive rights issues.

Almost two third of the fund raised will be used to expand its production (new land/factory/machinery). It might set up a new facility in Batu Kawan.

Inari's major shareholder Insas has said that it will subscribe fully to the rights issue. However, I'm not sure whether it will convert its existing warrants before this.

As at today, Inari's total shares stands at 541 million.

The rights issues exercise is expected to be completed in the final quarter of CY2014.

It's a way to force myself to add more Inari shares. So I think I will subscribe to the rights issues.

Asiapac (Imago) Vs Hunza (Paragon)

Investors of Asiapac are surely anticipating the grand opening of Imago Mall which is scheduled to be in the end of this year.

Imago Mall is a grade A shopping mall in Kota Kinabalu with a net lettable area (NLA) of 800,000 sq ft. Asiapac expects it to contribute RM70mil of annual rental income once fully tenanted. 

       Imago Mall

Gurney Paragon Mall, a new mall at the prestigious Gurney Drive in Penang island, has been up and running since 23th July 2013, though it was officially launched later on 10th Oct 2013. The first phase which comprises 15% of NLA has been opened to public a year earlier.

This "luxury" mall which sits just next to CMMT's Gurney Plaza, has an NLA of 700,000 sq ft, also with condominiums above it like Imago Mall.

Hunza, the owner and constructor of Gurney Paragon Mall, is expected to enjoy good recurring rental income from it.

Its management targets an annual rental income of RM60mil from the mall once fully occupied.

So both Asiapac (Imago Mall) and Hunza (Gurney Paragon Mall) are quite similar.

       Gurney Paragon Mall

It has been exactly one year since the whole Gurney Paragon Mall was opened to public. How much rental profit has Hunza pocketed from it so far?

Hunza currently has 2 main business segments which are property development and property investment. Its construction & trading segments are negligible.

Its financial year ends at 30th June each year. So the financial impact of Gurney Paragon Mall will be included from FY14Q1 onward.

Hunza's FY14 Quarterly Results

RM mil	FY14Q3	FY14Q2	FY14Q1
Revenue	37.7	33.0	31.3
Gross Profit	14.8	14.5	13.2
PBT	2.6	12.1	4.7
PATAMI	0.2	7.4	1.4
Core Net Profit	4.3	2.4	1.4

As FY14Q2 has a one-off fair value gain of RM6.7mil and FY14Q3 has a one-off payment of RM5.5mil as gratuity to retired director, it's better to look at its core net profit given by analyst.

After 9 months into FY14, its total core net profit stands at RM8.1mil which is far less than FY13's whole year core net profit of RM21.8mil.

Why does the profit drop while it is starting to receive rental income from the shopping mall? Is the property development segment affecting Hunza negatively?

Hunza currently only has one on-going project at Bertam but it has contributed quite consistently, though not much, to Hunza in FY14.

RM mil	FY14Q3	FY14Q2	FY14Q1
Prop Dev Rev	26.4	22.9	23.7
Prop Dev EBIT	4.9	3.8	9.2

The problem lies in its property investment segment.

RM mil	FY14Q3	FY14Q2	FY14Q1
Prop Inv Rev	10.9	9.6	7.1
Prop Inv EBIT	1.8	2.5	-0.3
Prop Inv Interest	-1.3	-4.1	-3.5
Prop Inv PBT	0.5	-1.6	-3.8

Total revenue from rental income reaches RM27.6mil in 9 months, so it could give Hunza approximately RM40mil in the first year. This is not bad as it achieves 67% of management's target at 80% occupancy rate.

However, due to the high interest payment, this segment is still in red with a loss before tax of RM4.9mil for 9MFY14.

Hunza's finance cost at 9MFY14 is RM9.3mil, which is 365% more than RM2.0mil in the corresponding period of FY13.

Similarly, Asiapac has accumulated quite a lot of debts from constructing its mall. So I guess the high finance cost will also start to appear in Asiapac's income statement once the mall is completed?

Other things like promotional expenses and higher direct operating overhead seem inevitable too.

However, all these should not be too visible in Asiapac's income statement as the earnings can still be supported by its high unbilled sales.

So, it takes time for a new mall to generate expected recurring profit, as the mall needs time to mature.

       Gurney Paragom Mall, with Hunza Tower

Anyway, with a new investment property, the assets of both Hunza & Asiapac will increase significantly.

Hunza seems to be suffering at the moment in term of financial results. However, it is not wise to overlook this company, as it has a diamond in Bayan Baru, Penang.

Keladi: From Kulim To KL

In early July 2014, Keladi Maju announced that it has entered into an SPA to acquire 9 parcels of land in Mukim Batu, Kuala Lumpur from Goh Ban Huat (GBH) for RM192.4mil.

The 13.93 acres of land in Segambut consists of 6 parcels of freehold and 3 parcels of leasehold land. GBH's office, factories and warehouses currently sit on the land.

The purchase price should be about RM317 per sq ft.

GBH is another listed company which mainly involves in ceramic products manufacturing and trading.

Both GBH and Keladi have similar major shareholder & chairman which is Tan Sri Dato Tan Hua Choon. The purpose of the land sale by GBH is to partly fund its reversed takeover of Dynac to venture into Oil & Gas sector.

As Keladi is mainly a property developer which has development projects only in Kulim, Kedah, the injection of land in the country's property hotspot is definitely very positive for the group.

However, Keladi can't develop the acquired land in the near future, as it houses GBH's current operating facilities. Keladi has entered into a tenancy agreement with GBH to lease back the land & buildings to GBH at a rental of RM350,000 per month. The tenure is 2+1 years.

So it will be RM4.2mil pre-tax rental profit for Keladi. This is equivalent to 14% of its previous FY's PBT which seems not bad indeed.

But, its FY14's interest income of RM4.1mil will be reduced substantially for sure, and it has to start to serve the loan interest afterwards. 

It's likely that GBH will retreat from its ceramic business gradually and concentrate on its O&G venture.

As for Keladi, it has approximately 1,400 acres of land in Kulim district, where 667 acres of them is currently planted with oil palms.

At the end of April 2014, Keladi's net assets per share stands at 35sen. Most of the land are not revalued since 1990s.

Development
Mukim	Acres	Last Valued
Padang Cina	515	1996
Naga Lilit	102	1999
Sg Ular	18.36	2001
Padang Meha	65	1994
Sg Seluang	23.25	2006
Sg Seluang	9	2006
Lunas	13.6	2010
Plantation
Naga Lilit	667	1999

Keladi recent projects are Taman Lagenda near Padang Serai and Taman Kulim Square Indah near Kulim town. As at 31 Jan 2014, it has sold a total of 3,825 units of properties from these 2 projects, with nearly 100% take-up rate.

I feel quite surprise because it's hard for me to imagine that the property demand in Padang Serai can be so high.

Anyway, Keladi builds mainly low & medium cost affordable houses.

For FY15, besides continue to launch new phases for Taman Lagenda, Keladi also plans to develop 455 units of single storey terrace and 152 units of shop houses in Mukim Padang Meha which was converted from its plantation land. It may also launch Taman Puteri in Padang Serai which comprises 1,585 units mixed development.

Thanks to its high take up rate in recent launch, Keladi's financial performance has been good for the past 2 years. 

Revenue in FY13 rose tremendously due to high property construction billing, while the rise in PBT in the same FY was partly due to a fair value gain of RM30.3mil (re-measurement of an associate under liquidation to other investments).

Its PATAMI in FY14 is lower at RM21.5mil compared to FY13's RM53mil due to the one-off gain in FY13.

It is noteworthy that Keladi's PBT margin is always high at 40-50%. Its gross profit for FY14 stands at an impressive 53.4%.

Property development is its main earning contributor with 93% of total revenue. Its oil palm cultivation business is declining as more land was converted for property development.

RM mil	FY14	FY13	FY12	FY11
Property revenue	54.8	88.6	41.5	47.4
Property PBT	28.5	59.2	15.4
Plantation revenue	2.5	3.5	5.4	4.8

Base on FY14's PATAMI of RM21.5mil and total paid-up shares of 758.3mil, Keladi's FY14 EPS will be 2.84sen. Current share price of 35sen will give it a PE ratio of 12.3x.

Its latest FY15Q1 financial result (ended April 14) is not so good with poor revenue of RM7.9mil and lowest PATAMI (RM2.9mil) since FY11Q2.

Keladi has a strong cash flow & balance sheet with zero borrowing and RM152.7mil of cash (Apr14). Net cash per share is 20sen which is 57% of it net assets per share of 35sen. Its NAS will be much higher if its land are revalued.

Nevertheless, surely it will take loans to fund its KL land acquisition.

For me, I think it is more important to look at how well the company makes profit from its assets, not how many assets it owns.

Keladi is not too generous when it comes to dividend even though it is cash rich. It paid 0.5sen dividend per share for the last 3 years. For FY14, this will be about 18% payout from PATAMI, and a yield of only 1.4% at share price of 35sen.

So I don't expect it to pay more dividend when it turns into net debt after the land acquisition.

       Location of Kulim district

I'm not too sure about the property demand in Kulim but I'm not too optimistic. Furthermore most of Keladi's land are located far from Kulim town.

In the next 2-3 years, Keladi will not be able to develop its newly acquired land in KL.

However, there is one thing which may be very positive to Keladi - the proposed new Kedah International Airport.

In June 2014, Kedah's MB DS Mukhriz Mahathir has voiced his desire to build another International airport in Kulim.

The proposed 600ha site is located at Sidam, which is at the northern area of Kulim district close to Padang Serai town.

       Proposed new airport in circle; Kulim Hi-Tech Park in rectangle

As a major land owner in Kulim, the airport will surely benefit Keladi IF the plan materialized. Keladi's land in Mukim Naga Lilit, Padang Meha & Padang Cina are quite close but not too close to it.

The airport will certainly grow the population and business activities in southern Kedah and northern Penang. So it will benefit both states.

However, is it feasible to have another international airport so close to Penang International Airport (PIA) at Bayan Lepas?

It is reported that the necessity to build this new airport is because PIA is expected to reach its maximum capacity in 2 years. A lot of stress is given to PIA's reduction in cargo handling as passengers flights increase.

I get an impression from news report that the main reason is to make air freight more convenient to businesses in Kulim esp in Kulim Hi-Tech Park and even from southern Thailand. 

Can we build an international airport mainly to cater for air freight?

Who will take a flight from and to this proposed new airport? Probably it will serve the population in Sg Petani, Seberang Perai Utara & Kulim. Is the population huge enough to make an airport with 2 runways viable?

Anyway there are many things to consider and it should be left to those decision makers. If it will benefit the people more, then it is a good project.

If it ends up like Melaka international airport which is upgraded with RM240mil but has no plane landing there since Mac14, then it is a waste of tax payers' money.

Even an airport in International tourist city can't survive...

       Melaka International Airport: planeless

Keladi's share price is not undervalued at the moment and its near term prospect is a doubt. It will be more exciting if it is ready to develop its land in KL or the new airport gets a green light.

L&G: Towards RM500mil Market-Cap

From news report last week, L&G's management aims to achieve a market capitalization of RM500mil by the end of 2014 or in early 2015. It might also give bonus issue next year.

Currently L&G's market cap stands at approximately RM397mil at share price of 57sen. To reach RM500mil market cap, it is still 26% short. Does the management hint that its share price will appreciate 26% to 72sen by year end?

Actually it's not that way. L&G's management expects shareholders to convert their loan stocks (ICULS) to ordinary shares to increase its market cap.

As of today, L&G has 695.7mil issued shares & 500.9mil ICULS. Its total mother shares have increased by 10% since Dec 2013 due to conversion of loan stocks.

L&G's FY14 ended Mac14 generates a PATAMI of RM75.3mil, which is a superb 71% improvement from FY13's RM44mil. Its 50%-owned Elements @ Ampang project is fully completed while the wholly-owned Damansara Foresta phase 1 is only 30% completed.

If all ICULS are converted to mother shares, L&G's diluted EPS for its FY14 should be at 6.3sen. This makes current share price at 57sen quite attractive.

As L&G will only launch its next project in the first quarter of calendar year 2015, its next 3 quarter's earning (FY15Q1, Q2 & Q3) will be mainly supported  by Damansara Foresta phase 1 which has a GDV of RM800-900mil.

L&G plans to launch 3 projects with total GDV RM2bil early next year, which are:

• Elements@Ampang: 4 towers, 1,000 units, GDV RM800mil (50:50 JV)
• Foresta phase 2 & Tuanku Jaafar Seremban: combined GDV RM1.2bil

Meanwhile, L&G also plans to convert its 2,500 acres of plantation land in Ladang Sungai Jernih, Lembah Beringin, to a township with a GDV of RM100 BILLION! (any typing error?)

The initial master plan of this northern Selangor new township may be unveiled as early as next year!

       Possible site of L&G's land. Is it too far away?

L&G has about RM164mil of net cash in the end of Mac14. It will reward shareholders with its first dividend in n years. The dividend will be 2 sen per share, representing RM23.9mil or 31.8% payout if all loan stocks are converted to mother shares.

If L&G is able to achieve 50% sales from its RM2bil worth of projects launched in 2015, then I think it should be good enough.

As for the RM100 billion township, the location seems not as strategic & promising as southern Klang Valley...

Weida: Property To Stir Excitement

Recently Weida's share price has been pushed up by heavy volume. It seems like long term investors are taking position in this stock in anticipation of better financial results ahead.

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.

This comes from the work progress of Urbana Residences @ Ara Damansara which was launched in the final quarter of calendar year 2013.

The development with GDV of RM230mil is almost fully sold.

       Urbana Residences: near to LRT extension

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.

Furthermore, its RM350mil second project at Mont Kiara is on the verge of being launched soon. I guess Weida should not have a big problem to do well in Mont Kiara. It is the last chance before GST.

Both projects are joint-venture in which Weida holds 85% of them. The total GDV of RM580mil is quite a huge figure for a small company like Weida.

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.

       Urbana Residences: Luxurious condominium

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...

I notice that in high rise property construction, initial billing progress will be slow and little in the first 1-2 years after launch, and will spike in the third year or at least after the whole framework of the building is done.

As Urbana was launched in late 2013, I'm thinking to take position only after mid-2015, unless Weida is extremely undervalued at one point or its other business segment are doing extremely well.

However, it seems like other business segment are not performing too well.

WEIDA (RM mil)	FY14Q4	FY14Q3	FY14Q2	FY14Q1	FY13Q4
Revenue	81.5	80.5	71.3	88.0	96.9
PBT	11.3	4.9	1.9	14.0	3.3
PBT%	13.9	6.1	2.7	15.9	3.4
PATAMI	10.5	1.9	0.3	9.9	55.0
Manu Rev	47.5	50.9	38.2	54.2	44.5
Manu PBT	3.1	6.3	5.7	7.1	2.9
Work Rev	16.4	26.3	27.6	28.8	58.3
Work PBT	7.1	-0.2	0.2	6.7	6.7
Service Rev	4.0	3.3	5.5	5.0	4.7
Service PBT	0.5	0.9	-0.2	0.5	-0.2
Prop Rev	13.7	0.0	0.0
Prop PBT	1.1	-1.4	-3.5

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	321.4	380.6	309.7	285.9	276.2	267.9
Revenue growth %	-15.6	22.9	8.3	3.5	3.1
PBT	32.0	30.2	30.1	34.5	28.0	26.6
PBT%	10.0	7.9	9.7	12.1	10.1	9.9
PATAMI	22.6	50.8	25.2	21.8	17.2	15.0
PATAMI growth %	-55.5	101.6	15.6	26.7	14.7
Manu Rev	196.2	196.8	140.3	116.0
Manu PBT	23.5	23.1	14.1	15.2
Work Rev	93.6	184.7	141.8	142.4
Work PBT	12.5	19.4	22.9	22.7
Service Rev	17.8	27.9	27.4	27.5
Service PBT	1.7	1.2	-0.5	1.5
Prop Rev	13.7
Prop PBT	-3.8
EPS	17.80	40.00	19.87	17.21	13.55	11.84
NTA	2.86	2.74

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.

       Trusted & leading brand in Malaysia

Overall, Weida is still a net cash company (after disposal of plantation business) with high NTA (RM2.86). At current share price of RM1.80, PE will be 10.6x base on FY14 EPS of 17sen. Its current ROE is at an unattractive 6.2% though.

It is noteworthy that Weida has made quite a few investment since 2007.

It expanded overseas into the Middle East by carrying out a sewerage & water treatment plant project for Syria government. Unfortunately, Syria was hit by civil war later so it ended up with bad debts and the plan to further expanding its presence there was halted.

       Syria - Malaysia - Philippines

In 2007, Weida acquired a significant stake in a property developer Mutiara Goodyear and later became its largest shareholder at 13.8%. 

Mutiara Goodyear has a township project over 1,000 acres called Bandar Tasek Mutiara in Simpang Ampat, Seberang Perai Selatan of Penang.

Earlier in 2006, the ground breaking ceremony for Penang Second Bridge has been done and Simpang Ampat is expected to benefit from the new bridge. This might be the reason Weida bought Mutiara Goodyear's shares I guess.

However, Weida sold all its stake in Mutiara Goodyear in 2009, after Penang state fell into the hand of opposition in 2008.

Thereafter, Tambun Indah came in and took over the development of Bandar Tasek Mutiara and renamed it to Pearl City.

Look at how well Tambun Indah has done in recent years on its Pearl City, aided by the completion of new bridge and development of Batu Kawan. Weida just missed a golden opportunity to increase the value of its investment by selling early for small gain.

       Pearl City: Mutiara Goodyear's development in white

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.

The palm trees will mature in stages from 2012 onward but Weida decided to sell all its stake in the end of 2012, which was the time when the plantation segment was expected to contribute to its bottom line.

Furthermore it was also the time when the CPO price was at recent historical low. Soon after Weida sold the plantation business, CPO price has reversed its downtrend and head upward from early 2013.

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.

       Weida sold plantation asset to TH Plant in Oct 2012

So I think Weida has lost the opportunity to earn good recurring income with minimal extra cost for the next 20 years.

With the money from disposal of plantation business, Weida diversified into property development and has launched its maiden project in the end of 2013. Property is a lucrative business but is it too late to join in now?

Anyway, there are still many companies queuing up to share the cake of property boom.

At the moment Weida has one ongoing and one future property development project. It is yet to acquire new landbank to extend its property business.

Investors should pray that this time it is not like previous "hangat hangat tahi ayam" investment.

For the 5-year plan, I hope the the MD will keep to his words.