Friday, 14 February 2020

About Stock X

Malaysia's population is increasing. Certainly, its elderly population is also increasing because of increased life expectancy.

I think no one will disagree with me if I say that chronic degenerative diseases such as hypertension, diabetes mellitus, heart attack, stroke, cancer, kidney failure etc are getting not only more common, but also affecting younger age group.

Kidney failure, one disease that many people fear of, is no doubt getting more prevalent no matter you like it or not.

From Malaysia National Renal Registry data, there were 7,663 new dialysis patients and total 39,711 active dialysis patients in year 2016.







































Even though new dialysis patients drop slightly for the first time in don't know how many years in 2016, total patients on dialysis treatment is on a steady rise without fail, doubling from approximately 17,000 patients in 2007 to 40,000 patients in 2016.

Unfortunately, we only have data up to year 2016, even though now we are already in 2020.

Nevertheless, base on this trend, if I just add average 8,000 new cases each year, end of 2020 will see 72,000 patients on active dialysis.

For someone who has end stage kidney failure, the only "cure" is kidney transplant. If not, dialysis is the only other option to prolong life.

In Malaysia, when talking about dialysis, almost everyone will straight away think of "cuci mesin", “洗肾中心”, "dialysis center", which is hemodialysis (HD).

In HD, a patient is connected to a dialysis machine and the machine filter the metabolic waste from blood and circulate the clean blood back to the patient.



















Not many people realize that there is another way of dialysis called peritoneal dialysis (PD).

In PD, fluid (dialysate) is drained into a patient's abdomen where an abdominal structure called peritoneum acts as a natural filter. After a few hours, the fluid with toxin and waste is drained out.


























Peritoneal Dialysis (PD)


According to National Kidney Registry Malaysia, approximately 90% of kidney failure patients are on HD, while the rest of 10% on PD. Obviously HD is overwhelmingly a more popular choice among Malaysians.

These figures remain rather constant throughout the years, but we can see that PD might be on a slow rise.



Between HD & PD, which one is better, safer or more efficient?

Each methods has its pros and cons, and I'm not going to go into such details here.

In short, actually PD is equally good, if not better than HD according to various researches.

Since PD is at least equally good, why are so many patients treated with HD rather than PD in Malaysia? It's more about government's policy & hospital "culture".

Basically in Malaysia, when a patient is diagnosed with end stage kidney failure and needs long term dialysis, doctors will straight away prepare the patient for HD without talking much about PD to the patient.

If everything is OK, patient will start HD. Only if HD is really not suitable or failed, then the patient will do PD.

Some HD patients don't even know the existence of PD after undergoing dialysis for many years!

So in Malaysia, it's "HD First" policy even though I don't think this is officially in place.




















There are generally 2 types of PD: Continuous Ambulatory Peritoneal Dialysis (CAPD) & Automated Peritoneal Dialysis (APD).

In CAPD which is usually home based, patients need to manually drain the fluid into their abdomen through a permanent catheter fixed at abdomen, leave the fluid inside (dwell) for 4 hours then come back to drain out the fluid and put in fresh fluid again. This cycle goes on and usually 4 cycles are needed per day, everyday.

Patients with HD have to travel to dialysis center 3 days a week, with each day 4 hours of dialysis. If we include transport and waiting time, 5-6 hours might be needed for a HD session.

So in CAPD, you have 4 hours to move around freely when the fluid is in your abdomen. You have to come back home to drain out the fluid. In HD, you're stuck to dialysis machine at least 12 hours a week, the rest of the time you can freely move around.

HD needs transport to a dialysis center with big needles poked into your arm every time you are connected to the machine. CAPD can be done by own self at home 4 cycles a day everyday. Which one would you prefer if you're going for dialysis?

Most patients who stay in rural area need PD because no investors will want to set up a dialysis center in rural area just to treat a few patients, and transport to a dialysis center in town is costly and inconvenience.

If you don't want or can't go to dialysis center for HD, and don't like the hassle of draining the dialysis fluids in and out 4-5 times a day, then Automated Peritoneal Dialysis (APD) is the solution.

APD is just like CAPD which can be done at home using peritoneum in the abdomen as filter. The difference is, APD is done at night while you're sleeping using a machine (cycler) to drain the fluids in and out automatically.

















So, after waking up in the morning, you are free to move everywhere. You just need to connect to the machine when you're going to bed at night. Basically it does not affect your day time activities. You can go KLCC shopping for a whole day without the need to come back home after 4 hours.

Even when you are traveling to other places for few days or weeks, you don't need to face difficulty in searching for dialysis centers to slot you in, you can carry the portable APD machine with you.

























Personally I think APD is the best way of dialysis. However, it is the least used method in our country by miles.

Some readers should have known by now what is my "Stock X". Obviously, it is related to this APD.

Only 10% of dialysis patients are on PD, and even less patients are on APD. Will it be enough to support Stock X's business of APD home-based dialysis?

I'll discuss more in the next post.


Saturday, 8 February 2020

PPHB Into Hotel Biz

Corrugated packaging companies are having a good time recently, as we can see from the share price trend of Master-Pack and PPHB.

In the third quarter of 2019, both companies released wonderful financial results with significant jump in bottom lines.

Both attributed this to better margin or lower manufacturing cost or better cost control. Someone says that the raw material price (paper?) has dropped which probably is the case but I'm not too sure whether it remains low now.

Master's net profit margin increases from 6% to 10%, while net profit margin of PPHB shot up from 10% to 19% in FY19Q3. Personally I hope this trend to sustain for a while, but for how long?

While Master has successfully ventured into Vietnam, PPHB has diversified into hotel business.

Prior to this, PPHB has already involved in property investment through JV. If not mistaken, those properties are CMART Nibong Tebal and the surrounding shoplots. 




Its hotel operation is located at a very strategic area in Georgetown UNESCO World Heritage site (Church Street Ghaut) within walking distance to ferry terminal and famous historical sites there.

The 162-room 4-star hotel is called "The Prestige" and was just launched in Jun 2019.




From its FY19Q2 quarterly report, the hotel division registered PBT loss of RM1.4mil from RM211k of revenue, as it has just started operation for one month.

It's a bit surprise to me that it manage to break even in its subsequent quarter of FY19Q3, with revenue of RM2.15mil and PBT of RM112k.

FY19Q4 is peak season for travel and hotels, so I'd expect it to perform better in this period.

At the moment The Prestige has received lots of positive ratings from travelers who stayed there. It is rated above 9 out of 10 in average from almost all the online hotel booking sites.



























Hotel business is not expected to contribute tremendously to PPHB's bottom line. If it doesn't make loss continuously, then it is already good.

Some shareholders may not even like this diversification as the money can be used to grow the core business with perhaps better return.

Nevertheless, I still expect it to make RM1mil net profit per quarter.

Thursday, 6 February 2020

My Portfolio Jan20




Summary for January 2020


Jan-20
Numbers of stocks 15
Share Sold Stock X (part)
Share Bought None


Overall 2020
Portfolio Return Jan20 7.59%
KLCI Return Jan20 -3.63%
Portfolio Return YTD20 7.59%
KLCI Return YTD20 -3.63%


Stock Portfolio @ End of Jan20

Stocks Avg Dec19 Jan20 Div20 Jan20% Overall%
Stock X



24.2 14.6
BJAUTO 1.92 2.10 1.85 2.75 -11.9 -3.6
DAYA 0.035 0.005 0.005
0.0 -85.7
DKSH 2.500 2.620 2.550
-2.7 2.0
FRONTKN 0.980 2.290 2.340
2.2 138.8
HIBISCUS 1.050 0.940 0.850
-9.6 -19.0
INARI 0.22 1.70 1.76
-3.5 700.0
KRONO 0.76 0.75 0.785
4.7 3.3
LATITUD 2.09 2.83 2.80
-1.1 34.0
LEONFB 0.505 0.420 0.430
2.4 -14.8
MATRIX 1.42 1.91 1.91
0.0 34.5
NOTION 0.40 0.960 1.210
26.0 202.5
PPHB 0.57 1.080 1.070
-0.9 87.7
PRLEXUS 1.15 0.820 0.715
-12.8 -37.8
SCIENTEX 2.735 9.45 9.05
-4.2 230.9


Most of the stocks started year 2020 positively, only to succumb to major melt down in the last 2 trading days of Jan20 due to the Wuhan novel Coronavirus outbreak. 

My portfolio still able to achieve a positive return of 7.6% in the first month of 2020, thanks to Stock X & Notion.

Overall, 8 out of 15 stocks in the portfolio dropped in Jan20, especially BAuto, Hibiscus & Prolexus. I do not hold a lot of BAuto shares but the other two have significantly affected my portfolio return.

Those who bought Daya at 0.5sen should be "safe" because there is no more room for the share price to fall, haha.

Stock X has lifted my portfolio in Jan20. I decided to reduce Stock X shares as I feel that relatively, I have too many of them and it's quite risky. So I locked in some profit when the opportunity came.

I'm currently writing about this Stock X and hopefully I can publish it within this month.

As of today, most of the stocks in Bursa have recovered from the sell down in end of Jan20, at least temporarily.

However, the nCoV is still here with more human-to-human transmission reported in countries other than China. 

Anyway, the sell down driven by fear represents a great opportunity for investors to grab quality stocks at discount, isn't it?


Sunday, 2 February 2020

Notion with Dyson?

I wonder how many of you notice that, a listed company's executive chairman made comments and answered questions in i3investor social forum!

That company is Notion Vtec, and it was around end of last year.

From the way he answered questions and his in-depth understanding of the company, I believe that he was no doubt an important figure in the company.

He painted a very rosy picture of Notion in the near future, with how many new & important customers secured recently, most notably Dyson.

Anyway, all his previous comments in i3investor have been removed.

What he said in the forum was almost like what was reported by The Edge earlier in Nov19 "Notion Vtec Ventures Into EMS Space".

Previously Notion was dependent on HDD & Camera parts, but now these 2 segments are expected to be stagnant & drop respectively.

The growth area is the automotive segment & the new EMS (Electronics Manufacturing Services) segment.

In its automotive segment, Notion mainly produces braking plungers for Electronic Braking System (EBS). It produces 30mil plungers annually which are fitted into one of every 6 new cars globally.

It was reported that Notion recently secured 3 new customers in this automotive segment, namely Delphi International, Hilite International & BorgWarner which should contribute to its FY2020.

For its EMS segment, it will supply metal parts to customers, not plastic parts like VS industry and SKP Resources.

Aluminium is the main raw material for Notion. So recent drop in aluminium price should benefit it.



As mentioned before, Dyson should be its main European customer in this EMS segment. Notion chairman even shared a link of Dyson's airblade 9kj hand dryer in the forum.



More interesting to investors, the management gave sales target for the next two financial years in its latest FY19Q4 quarterly report.

For the past 5 years, highest revenue achieved by Notion is RM275mil in FY2017, and FY2019's (ended Sep19) revenue stands at RM238mil.

For the upcoming FY2020, it has a target sales of RM320mil, and a whopping RM400mil for FY2021.

It also targets a PAT margin of between 7.5% to 9%. If we take a modest 8% PAT margin, PAT for FY2020 & FY2021 might be RM26mil & RM32mil respectively, with EPS 7.6sen & 9.5sen based on 336mil shares at the moment (before bonus issue).

If we give a PE ratio of 15x for a company with expected growth (currently VS 15x, SKP 20x), it will be RM1.14 & RM1.43 for the next 2 years. Current share price is at RM1.21.

Nevertheless, I think Notion still has great potential for further growth. According to its chairman, Notion has competitive edge compared to its peers, and potential customers are amazed with its new modern facility and quick response time.

As reported by The Edge, Notion has a target of achieving market capitalization of RM 1 billion by 2024. To achieve this, its share price has to be at RM3.00.

Anyway, target is just a projection or forecast. Investors need to be cautious that it might not hit its target.

Readers of this blog should be aware that I have Notion's shares. After the company started its automotive segment I have a feeling that more diversified customers might come in if it concentrates on its expertise, not doing things like selling handphones.

Recently Notion's share price has advanced more than I can hope for, probably due to its proposed 2:1 bonus issue. I think I will continue to hold and hope that its business will perform better that its forecast.