Sunway Belfield vs Sunway Shares

 

In Sep 2020, when the world was still full of uncertainties due to Covid-19 pandemic, I decided to invest in a new property in KL.

This would be a much less ideal investment because I was not qualified to get 90% bank loan but in the end, I still decided to proceed as I like the whole package of this development so much.

It is located at KL city center, within walking distance to the upcoming Merdeka 118 precinct, close to monorail/MRT stations, freehold, built by renowned developer Sunway and selling at RM750 psf for its smallest unit. 

It appeared to be a "bargain" to me at least, compared to nearby Opus Residences & BBCC's Lucentia Residences which were well above RM1,500 psf. 

Now the project has achieved VP in Mac25 and I have collected the keys in Apr25. Do I regret my decision to invest in Sunway Belfield?

EUPE Joins Belfield & Merdeka 118

 

Since the euphoria in the second half of 2020, the stock market has not been doing well for the past one and a half year.

It seems like my best investment so far since 2021 is the property I invested in, which is Sunway Belfield. 

Of course it's still too early to make any conclusion to this investment. Anything can happen down the road and it might still be possible to turn into a bad investment.

Tower A & B of Sunway Belfield are almost fully sold. Tower C was launched in November last year and the launching price was more than 15% higher for the smallest unit compared to Tower A.

I'd expect at least 30% appreciation in price once the construction is completed in 2024 or 2025. This is the reason I invested in Sunway Belfield in the first place.

In other words, I bought the smallest unit at around RM750 psf and I hope it can reach RM1000 psf once it's completed.

One thing for sure is, there will be much more supply of residential units in this Belfield or Kampung Attap area in the near future.

How Underrated Is EUPE?

EUPE is a well-known property developer based in Sungai Petani, Kedah. It has multiple townships development in Sg Petani, Gurun & Padang Serai.

The most notable development is Cinta Sayang Resort & its township with a 18-holes golf course, hotel and water park. 

During previous property market boom in early 2010s, EUPE started to venture into property market in Klang Valley.

In 2011-2012, it announced its plan to acquire lands in Puncak Jalil, Bangsar South & Cheras. The Puncak Jalil land deal which was meant for landed properties was terminated later.

At that time, I had some interest to invest in EUPE as I thought those high-rise projects in KL should carry higher GDVs which would boost its profitability significantly.

However, its first KL project "Novum@Bangsar South" which was initially planned for early 2013, has been delayed to Mac 2016, the time when property market went downhill.

Nevertheless, EUPE's venture into property development in Klang Valley is a successful one.

Sunway, Sunreit or Sunway Belfield?

In September last year, I wrote something about property investment again: When Is The Next Property Boom, after ignoring it for so many years.

One month later, there was another post about property, Property vs Stock Market Investment.

These two posts were written mainly for one person, which was myself. I wrote to convince myself to go ahead with my plan to get another property.

Since the return of HOC (House Ownership Campaign) in Jun20, I started to explore the possibility of investing in a property.

I was actively looking for a good deal and I finally found one new project in Oct20. 

Merdeka 118: An Exciting New Landmark

I'm a pro-development guy, and I'm very excited about the development of Merdeka 118.

If you're going to Kuala Lumpur in the past 3 years, surely you can easily see that there are 2 new skyscrapers dominating the skyline.

One is The Exchange 106 at TRX which is already completed, and another one is Merdeka 118 which is still under construction.

Merdeka 118, developed by PNB (Permodalan Nasional Berhad), will be the tallest building in Malaysia and the second tallest in the world at 644m behind the ridiculous Burj Khalifa in Dubai at 829.8m.

It will drop to the third tallest in the world after the Jeddah Tower at 1,000m in Saudi Arabia is completed.

The 95-floor Exchange 106 stands at 445.5m which is almost at the same height as 88-floor Petronas Twin Towers in KLCC (451m).

Matrix Eyes Puchong

After proposing a 1:6 bonus issue with free warrant last week, Matrix delivers good news again to its shareholders by acquiring a piece of prime development land in Puchong.

Matrix has entered into an SPA with IRDK Ventures to acquire 5.76 acres of  leasehold land in Puchong next to Setia Walk for RM95mil (RM380 psf).

IRDK has earlier launched its project IRDK Residences@Puchong on the site since Sep 2014 and the construction is currently in progress at earthwork and piling level.

IRDK Residences@Puchong comprises 2 blocks of 23-storey condominiums with 318 units, and also 28 units of 4-storey Link Villa (townhouse).

       IRDK Residences@Puchong

Matrix plans to change the development plan a bit and increase its density to 80-90 units/acre from 60 units/acre, giving it at least RM500mil GDV. IRDK is responsible to obtain such approval from the authority.

As the land is narrow and located in a clouded area, its initial approval is just 60 units/acre and developer has to build a multi-storey car park for the public next to it.

SPA signed by existing buyers with IRDK will be terminated and they are entitled to get replacement from Matrix's development.

       The construction site

I think Matrix will reduce the built-up size of condominium units to make it more "affordable" for buyers. Previous development offered large built-up size in order to reduce the density.

The location of the land is quite strategic being close to LDP, Setia Walk, IOI Mall and the upcoming LRT station.

So, despite guarded property sector outlook, Matrix should be able to generate commendable sales from this project I guess.

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.

       EcoSky

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?

Huayang: The Future Is Still Bright

Huayang's share price hovers around RM1.75 to RM1.85 for quite some time. Yesterday it decided to move up to a higher altitude.

It is not a big surprise because Huayang does not belong there at share price below RM2.

After posting a lower than expected revenue and profit in the first half of FY14 (Apr13-Sep13), Huayang responded by producing a record breaking quarterly result in the subsequent quarter.

To my surprise, its share price fell further instead of recover. 

I think its whole FY14 net profit should at least reach RM60mil, compared to RM70.5mil in the previous year. This gives it an EPS of at least 23sen for its FY14. So I think its fair price should be RM2.30.

       Huayang's previous financial performance

Perhaps the high gearing has hindered its share price's progress. 

Huayang's borrowings increase substantially after it acquired more lands in the past 2 years, especially the RM158mil prime leasehold land at Puchong which has an estimated GDV of RM1.5bil.

Even though the balance sheet has been stretched, I think the move is still warranted as prime land's value will surely rise rapidly and it is better to secure them early.

Last year, Huayang launched new projects aggressively and it has resulted in a surge in its unbilled sales.

       Huayang's Quarterly Unbilled Sales

Its quarterly unbilled sales are generally on a rise, especially the latest quarter of FY14Q3. So it is highly likely that its revenue and profit in the near future are going to rise as well.

Furthermore, the RM1.5bil Puchong mixed development is still yet to be revealed.

       Huayang Puchong land - Immediately south of LDP West Tol

Personally, despite its recent set back, I think that Huayang is still a company that is worth to invest in for long term.

Can Property Group Purchase Lower Property Price?

There are a  few articles in Sin Chew daily today regarding government's intention to curb property speculation by tackling the so-called property group purchase clubs.

This group purchase club is formed by a few investors usually under a company name. It accumulates its members' money to buy and sell properties to make profit.

Personally I opine that these group purchase activities, which emerge like mushrooms after rain due to many property investment seminars, are one of the main culprit that has resulted in the escalating property price recently.

However, in the newspapers, one famous property "guru" holds the opposite view.

He thinks that property group purchase can actually help to suppress the property price.

The reason given is, in "true" group purchase which can enjoy lower property price, the intention is good, as it is a long term investment that takes care of everybody. It helps its members to own a house at lower price. Whereas some irresponsible people use speculating method to do group purchase, in which they flip the property to make quick profit. This is not the purpose of "true" group purchase.

Do you agree?

It seems like "true" group purchase is to buy property in a group at lower price for own stay and the group will be "dismissed" after every members got their dream homes. Does the team of this famous "guru" just buy for own stay?

I hope I interpret the newspaper report correctly though.

First of all, can group purchase really suppress property price?

It is for sure that group purchasers will get discounted price from the developers, because they buy in bulk, lets say 20 units at one shot. Developers will still launch the project to the public at their own price. So, group purchasers get lower property price does not mean that the property price is lowered!

After launch, property price will increase with time. When a true house buyer or individual investor want to buy the property from group purchaser (as they usually hold the best unit), do you think the group purchaser will sell to them at discounted price? For sure they want to maximize their profit by selling at or above market price. They have to cover various fees & tax in property transaction as well. So, this also does not lower property price as well.

If the developers want to launch another project, they know that they are backed by several group purchaser clubs who can take up lets say 50% of their units for sure. If you are the developers, won't you want to raise the selling price to maximize profit? Does this help to lower property price?

Lastly, what is the definition of a "true" group purchase club? No flipping at all? Buy cheap and sell or rent cheap to you as charity? Or hold long term for capital appreciation? Forget about the group purchase "for own stay" joke.

Even if you hold long term and do not flip at all, you still cause the exaggerated rise in property price as explained above, not the other way.

Anyway, seriously, can you find one group purchaser club that does not want to do property flipping?

Group purchases unconsciously support developers to increase property price and create huge false demand that raise the property price. This is my view.

Another group purchaser interviewed says that they do it with "good heart" or intention, as they only buy land and commercial properties, which will not cause social issues compared to speculating in affordable residential property.

When you "fry" the land price to high level, it will surely increase property price that will be constructed on it. If the commercial property price is high, this means the cost of doing business (rental) is also higher. Is this not a burden to small businesses and their workers?

Actually I'm not against the property group purchase clubs in general. As long as they are not against the law, they are entitled to do what they want. If you are smarter, act quicker, take more risk and do what most people do not dare to do, you are deserved to get your reward.

This is similar to the rich get richer. They got the money to generate more money while having more privileges, discounts & benefits compared to the not-so-rich or poor. Can we stop the rich from getting richer if they are investing their own money wisely?

What I want to show is that when your livelihood is affected or going to be affected, surely you will find all sorts of reasons to support yourself.

It's like when Penang government wanted to ban plastic bags, the head of "plastic bag association" jumped out to protest, clarify and explain.

I think it is unwise & not practical to totally ban group purchaser club, or limit the number of property one can buy or own.

However, there must be a way to reduce the influence of these clubs to the property price. This is the government's job to think about it.

Anyway, group purchasing activities have helped to increase some property stocks' share price!

The full article in Sin Chew here.

Fitters Undervalued?

Fitter caught my attention because it seems to be traded at a very low forward PE and also under its book value. That's why it is in my Stock Alert list.

For the first 2 quarters of FY2013, Fitters posts a RM20.8mil net profit, which represents 75% of FY2012 FULL year net profit. 

Its PE ratio at current share price of 72sen is 8.1x base on FY12 net profit of RM27.9mil. If we assume Fitters can duplicate its earning for the 2nd half of FY2013, then its net profit may reach RM40mil, which will give a forward PE of just 5.6x.

Its NTA stands at 85.4sen at 1HFY13, which is 18% discount from its current share price.

The question is, can Fitters duplicate this performance in 2HFY13?

Fitters has 3 core businesses, which are

• manufacturing & trading: mainly fire-fighting related products
• property, construction & engineering
• renewable energy

RM mil	Rev	PAT
2008	163.8	21.6
2009	126.2	8.0
2010	189.8	13.2
2011	446.5	22.2
2012	410.9	27.9
1H2013	181.1	20.8

   Fitters Financial Result

Despite higher net profit, Fitters revenue for 1HFY13 drops slightly due to significant lower contribution (RM90.8mil in 1H12 to RM47.8mil in 1H13) from its renewable energy segment as the work was suspended to give way to upgrade & expansion work.

The management said that the work has re-started since April 2013, so I expect Fitters's revenue in renewable energy to increase substantially in the second half of 2013. However, will this segment increase Fitters profit significantly? Probably not. Historically this segment made loss or little after-tax profit (RM1mil) despite having high revenue.

RM Mil	FY2012	FY2011
Manufacture Revenue	129.9	114.6
Manufacture PBT	8.4	10.9
Property Revenue	209.5	179.3
Property PBT	30.7	16.1
Energy Revenue	181.1	236.7
Energy PBT	-3.1	2.4
Total Revenue	410.5	446.5
Total PBT	37.9	29.7

   Fitters segment result

The manufacturing & trading segment for fire-fighting related equipment, which was Fitters bread & butter before joining the property segment, has been rather flat in revenue and earnings.

It is worth to mention that Fitters is also a specialist in theme park design and construction. It is involved in almost all recent famous theme parks in Malaysia & Singapore and some others in the Middle East, China & Russia. The notable ones include Legoland, First World, Puteri Harbour, Kidzania, Resort World Sentosa, Universal Studios Singapore etc. However, this type of job is hard to come by and Fitters does not have such job currently.

So the 2-fold rise in Fitters revenue & net profit from FYE2010 to FYE2012 is largely due to its property development activity. For FYE2012, 51% of revenue and 83% of PBT are contributed by its property segment.

It is obvious that Fitters is extremely dependent on its property segment at the moment. Can the property segment sustain its growth for next year?

Fitters first property development ZetaPark started in 2010 when it constructed the Festival City Mall in Setapak for Parkson. It built SOHO & serviced apartment above the shopping mall.

       ZetaPark @ Setapak

Fitters launched its first property project SOHO @ ZetaPark in June 2010, followed by Zen Suites @ ZetaPark in Nov 2010 and Loft @ ZetaPark in Nov 2011. Overall, ZetaPark has 424 units of SOHOs and 470 units of serviced residence, with an estimated GDV of RM500mil.

It has already been 3 years since Fitters launched ZetaPark, I presume all the construction is near the end now. Fitters will not have a lot of new property sales in FY2013 as 85% of its latest Loft @ ZetaPark has been sold at the end of FY2012. How much revenue can Fitters generate in 2HFY13 from its property development progress?

We can roughly calculate from Fitters financial report. From FY2010 until 1HFY13, Fitters has already registered RM413mil total revenue & RM61.9mil PBT from its ZetaPark development (excluding Festival City Mall construction but including small KLCC job). If the GDV is RM500mil, then it will be about RM90mil revenue & RM13.5mil PBT (15% PBT margin) left until all development get their vacant possession.

Compared to RM209.5mil revenue in property segment in FY2012, the possible RM90mil that remains seems to be small.

Next, we can see from the balance sheet that the development properties category (which includes property development cost) under current assets has shrunk tremendously from RM44.6mil (Q1FY13) to RM4.1mil (Q2FY13)! 

Does this mean that after 1HFY13, Fitters property segment from ZetaPark will only contribute very little to its future revenue & profit? Or the whole construction suddenly stop for some reasons for that period?

If property segment goes down sharply, Fitters overall profit will crash.

I'm not too sure on this and it all remains to be seen.

In July 2013, Fitters completed the acquisition of 2 pieces of land, 50 acres in Rawang and 2.84 acres in KL Jalan Ipoh.

The Jalan Ipoh land will be developed into a 2-block 284-unit condominium Zeta DeSkye. It has an estimated GDV of RM154mil.

If I'm not mistaken, Zeta DeSkye is just receiving booking and the SPA is not signed yet. So it won't contribute much to Fitters Q3 or even Q4FY13 financial results.

       Zeta DeSkye

I think Fitters will still surpass its record net profit of RM27.9mil in FY2012 slightly for FY2013. Thus, its PE ratio will remain relatively low. However, for FY2014, it will not do well if it just depends on ZetaSkye development.

The 50-acre land in Rawang may come to rescue though.

I should continue to leave Fitters in my stock alert list pending future financial results. The RM4.1mil figure in the development properties part of the balance sheet is very disturbing indeed.

Weida: Joining The Property Mania

Since listed in year 2001, Weida has achieved an uninterrupted growth in revenue for the last 12 years.

For FY2013 ended March 2013, its revenue grows another 23.7% from RM309.7mil to RM383.2mil, while its net profit  increases 29.1% from RM39.3mil to RM50.8mil.

However, there is a one-off disposal gain og RM59.9mil in FY2013Q4 (ended Mac 2013), in which Weida disposed its oil palm plantation. Thus, it will be a great challenge for Weida to surpass its FY2013 net profit of RM50.8mil in FY2014.

Without factor in the disposal gain, Weida's profit before tax in FY13Q4 is just RM3.3mil, which is a drop of  72% compared to the preceding FY13Q3 of RM11.7mil.

However, Weida posted a decent FY14Q1 financial results in which it registers RM9.9mil net profit but its revenue of RM88mil is the lowest in the last 4 quarters.

From its historical quarterly reports, Weida's quarterly earnings usually fluctuates a lot mainly due to timing of billings in work division. Thus, it may not produce similar profit like FY14Q1 for the whole FY2014.

RM mil	FY13	FY12	FY11	FY10	FY09
Revenue	380.6	309.7	285.9	276.2	267.9
PBT	30.2	30.1	34.5	28.0	26.6
PAT	50.8	25.2	21.8	17.2	15.0

The figures in the table above may not be accurate especially the PBT & PAT, as some figures are restated later.

Weida is a Sarawak-based diversified group founded in 1983. Currently it has 4 core businesses:

1. Manufacturing

• Manufacturing and sales of high-density polyethelene (HDPE) products, which are mainly water & sewerage related. Its products include water tank, pipes, septic tank, marine floats, chemical tanks, traffic equipment, playground component, litter bins, planter box etc.
• It has 5 manufacturing plants in Kuching (1983), Kota Kinabalu (1995), Nilai (1997), Miri, Tawau and one in Manila (2009).
• It manufactures and trades more than 200 types of polyethylene based products & building materials.
• Its products are designed in-house and patented.
• It is Malaysia largest HDPE products manufacturer.
• It also has a reclaimed rubber business.

2. Works

• Telecommunication  Towers: Construction, installation & maintenance of telecommunication towers and rent to telecom service providers via long term contracts. Started since 2005.
• Water & Wastewater Infrastructure:  Design, construction and installation of water supply, storage infrastructure & treatment system, wastewater treatment system and others.
• Design and build biogas plants for livestock farming and palm oil mill effluent treatment.
• Building construction

3. Service

• Sewerage treatment service, treatment and disposal of sludge service, underground mapping of buried utilities, investigation and rehabilitation of underground sewer and pipelines network.

4. Property

• Newly added business segment. To contribute starting from FY2014.

5. Plantation

• Recently disposed business segment which was started in 2007. It was still loss-making while being disposed.

Weida currently diversifies into property development segment and will launch its first property Urbana Residences in Ara Damansara in the last quarter of CY2013. Urbana Residence comprises 356 units of serviced residence in a 16-storey building with an estimated GDV of RM230mil. It is a joint venture with land owner.

In year 2014, Weida plans to launch its second property project on a 2.93 acres land in Mont Kiara. It is also a JV with land owner and has an estimated GDV of RM330mil.

       Urbana Residences, Ara Damansara

Actually this is not the first time Weida ventures into property business. Back in year 2007, Weida purchased a significant stake in listed property developer Mutiara Goodyear, who developed Bandar Tasek Mutiara (Pearl City) before Tambun Indah took over. Weida was its single largest shareholder at 13.8% in 2009 but subsequently sold all its shares in year 2009. Mutiara Goodyear was then changed its management and its name to Nadayu.

This is not the only case that Weida invested and divested in a relatively short period of time. In year 2007 as well, Weida diversified into oil palm plantation business when it acquired 16,000 acres of agriculture land in Sarawak. The land was planted with oil palm in stages. In end of year 2012, Weida decided to dispose all its plantation business to TH Plantation. The disposal was completed in 27/2/2013. 

The plantation division started to produce revenue in Oct 2011 but was loss-making until the disposal, as it usually takes more than 5-6 years for the palm trees to mature and produce significant amount of fruits. I think Weida chose to dispose its plantation at this time mainly because it sees greater prospect and faster earnings from property development, besides current lowish CPO price.

The cash gained from disposal of oil palm plantation comes just in time for Weida's first foray into property development.

Before the said disposal was completed, Weida's cash stood at RM63.1mil while its total borrowings amounted to RM158.5mil at the end of FY13Q3 (ended Dec12). In its latest FY14Q1 quarterly report, it has a total cash of RM259mil and total borrowings of RM172.6mil. Thus, it is currently in a net cash position.

RM mil	FY14Q1	FY13	FY12	FY11
Manufacturing Rev	54.2	195	140.3	116
Manufacturing Profit	7.1	27.9	14.1	15.2
Towers Rev	16.8	32	66.4	38.5
Towers Profit	6.1	7.1	17	13.7
Other Works Rev	12	122.9	75.4	103.9
Other Works Profit	0.7	2.3	5.9	9
Service Rev	5	22.9	27.4	27.5
Service Profit	0.5	1.2	-0.5	1.5

  Segment Revenue & Profit

Weida generates consistent income through long term contracts in wastewater management and rental of telecommunication towers.

So far Weida has 3 long term contracts of 25 years each with Sarawak government for the management and maintenance of septic sludge treatment plants (Kuching 10th year, Sibu & Miri 2nd year). However, as we can see from the table above, service division just contributes a little to its profit, as it's a JV with other company.

Weida has built 362 telecommunication towers to date mainly in Sabah (from 60 towers in 2007) with two third of them under long term maintenance contracts.

From a recent interview with The Edge, Weida's MD Datuk Lee mentioned that the estimated net rental income from the towers in the next 5 years will be about RM70mil, while the concession income from the septic sludge treatment will be about RM60mil in the next 5 years.

In the same interview, The MD also said that he foresees the company's revenue from HDPE products will double to RM400mil in 5 years. With its current plants running at 70-80% capacity, Weida has allocated RM100mil capex to boost its capacity from 20,000 tonne/annum to 50,000 tonne/annum.

If what the MD said are realistic and not boasting, then Weida may have a bright prospect ahead.

       Weida's HDPE products

Weida has a strong presence in the East Malaysia with 78% of its revenue comes from there. It plans to expand more to Peninsular Malaysia especially Klang Valley and Johor.

Property development in Klang Valley may help to build Weida's reputation in the peninsular if successful. The new division will push up Weida's revenue, margin and earnings significantly like what we can see in Scientex and Fitters.

In year 2007, Weida has expanded its presence in the Middle East through a turnkey contract to study, design and build sewerage and water treatment plants in Syria. Though Weida has completed its work in Syria, it suffers some impairment loss on receivables due to the political unrest in Syria. So it may not dare to get new contracts there I guess.

Weida's ventures into Syria, Plantation and Mutiara Goodyear are all short-lived. How about its property division?

I think Weida will have a great start in property as the location of its property in Damansara and Mont Kiara is strategic. However, Weida needs to scout for more landbanks to ensure that its property division will continue to prosper.

But, so many companies join the property development lately. Is this a healthy situation?

       Weida is trying to break RM1.75


Perhaps excited by the property venture, Weida's share price has reached all time high of RM1.75 recently. At this price, is it still worth to buy?

If it is not because of the one-time gain, I think Weida's profit after tax for FY2013 will be around RM20mil only, which is lower than its preceding year of RM24.1mil. Thus, EPS for FY13 will be about 15sen. At RM1.75, its PE ratio will be 11.7, which is not cheap for a company in industrial sector.

However, this does not factor in property development which should start to contribute in FY2014. With normally higher margin in property development plus organic growth of its other core businesses, Weida may give investors a surprise in FY2014.

Weida usually gives away 20-30% of its net profit as dividend. It paid the same 4sen (less tax) dividend yearly since year 2009. For FY2013, it pays 4sen dividend plus a special dividend of 1.5sen for its disposal gain. Without the special dividend, the net dividend of 3sen (after 25% tax) translates to a yield of just 1.7% at share price of RM1.75.

Anyhow, I am keen to know its Q2 results which will be announced next month, while waiting for a lower entry price.

Eco World & Liew Take Center Stage

Recently we can see Eco World's advertisement all over the place, billboards, radio, newspapers etc. Eco World might be a new comer in the property development scene, but they come with vast experience in this field and they will be aggressive in the market.

Eco World's CEO Dato Chang Khim Wah, directors Dato Leong Kok Wah & Tan Sri Abdul Rashid all jumped ship from SP Setia. Another young director Liew Tian Xiong is the son of current SP Setia's CEO Dato Seri Liew Kee Sin.

Recently on 17th September 2013, Eco World and one of its director Liew Tian Xiong has entered into a conditional share sale agreement with multiple shareholders of main board listed property developer Focal Aims, to acquire 164,775,701 shares (65.05%) of Focal Aims for a total cash of RM230.7mil (RM1.40 per share).

If this acquisition go through, Eco World as a new major shareholder has to make a mandatory offer of RM1.40 to other shareholders in Focal Aims.

Focal Aims net asset per share stands at RM1.26 from its latest financial period ended 30th June 2013. Its share was traded between 60-70sen before the news broke out. Now it has reached over RM2.

Liew Kee Sin's time in SP Setia is going to end soon, and it is not hard to predict where he will land next.

Eco World just launched its maiden project EcoBotanic in Nusajaya, Iskandar Malaysia. Its initial launch include 624 units of cluster & semi-D houses which are priced at RM900k - RM1.3mil & RM1.8 - RM2mil respectively. They are all luxury things and do not come cheap. Nonetheless, it was reported that those 500 units allocated to non-bumi were snapped up in 6 hours. 

EcoBotanic covers a 118.8ha site and has a GDV of RM3 bil which will be developed over 8 years.

       EcoBotanic: Next to industrial park & highway? Who cares?

       EcoBotanic: Power lines in the vicinity? Who cares?

You think it is a not so "eco" EcoBotanic? Who cares? It has SP Setia's DNA. Yes, this is what people care nowadays.

       Location of EcoBotanic within Iskandar Malaysia

Other projects that queue up at Eco World include the RM1.2bil EcoSky in Taman Wahyu KL and a new 246ha township in Tebrau Johor. EcoSky is expected to be launched in the final quarter of 2013 while development at Tebrau should start in 2nd quarter of 2014.

Eco World says that it has a total of 3,000 acres landbank located at Johor (1913 acres), Klang valley (1080 acres) & Penang (60 acres) with a total GDV of RM30 billion. Recently it works with Salcon to develop a RM1.2 billion mixed commercial project JB Festival Mall & Serviced Apartments in Johor Bahru. Salcon's executive director Leong Kok Wah is also Eco World's director.

Tropicana has about 2,300 acres of landbank including the recently purchased Pulai land. This means that Eco World has more landbank than Tropicana.

However, it is reported that Tropicana's total GDV stands at RM70 billion (excluding Pulai land). Wow! Can you believe it?