Hevea: From Debt-Ridden To Net Cash

Heveaboard FY15Q3 Financial Result

HEVEA	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	123.8	111.4	116.4	115.1	95.7
Gross Profit	30.5	23.0	22.0	20.0	13.8
Gross%	24.6	20.6	18.9	17.4	14.4
PBT	21.4	16.5	14.6	9.0	6.3
PBT%	17.3	14.8	12.5	7.8	6.6
PATAMI	18.1	16.0	14.0	8.9	5.8
PB Manu Rev	59.9	51.3	47.6	51.1	46.4
PB Manu PBT	11.0	10.9	7.6	1.6	4.1
RTA Manu Rev	59.9	56.5	64.4	59.7	44.5
RTA Manu PBT	10.2	5.6	6.7	7.5	1.9
PB Trade Rev	0.5	0.2	0.2	0.2	0.02
PB Trade PBT	0.11	0.02	0.1	0.05	0.04
RTA Trade Rev	3.5	3.4	4.3	4.1	4.7
RTA Trade PBT	0.03	0.02	0.1	-0.08	0.2
Total Equity	320.8	301.1	284.7	270.7	261.8
Total Assets	441.6	416.8	412.7	412.5	414.5
Trade Receivables	47.7	52.3	44.7	53.5	49.2
Inventories	57.9	62.7	64.5	60.7	62.2
Cash-OD	74.9	48.3	44.6	35.6	35.3
Total Liabilities	120.7	115.6	128.0	141.9	152.7
Trade Payables	25.9	26.3	26.7	27.4	37.9
ST Borrowings	32.4	29.7	25.0	27.4	23.2
LT Borrowings	29.8	32.6	44.0	41.7	64.6
Net Cash Flow	39.3	12.7	8.9	8.1	7.8
Operation	84.7	44.5	27.0	50.4	36.6
PPE Depreciation	19.4	12.9	6.4	26.1	19.6
Investment	-8.9	-2.3	-3.5	-10.7	-6.3
PPE purchase	8.8	2.3	3.5	10.7	6.3
Financing	-36.6	-29.4	-14.6	-31.6	-22.4
FCF	75.9	42.2	23.5	39.7	30.3
Dividend paid	4.0	1.5	0.0	1.9	1.9
EPS	4.63	15.82	14.05	8.96	5.85
NAS	0.82	2.97	2.86	2.72	2.63
Net D/E Ratio	Net cash	0.05	0.09	0.12	0.20

Hevea's remarkable rise continues with its best ever quarterly result in FY15Q3.

Its revenue and PATAMI of FY15Q3 increase 11% and 13% respectively compared QoQ.

This better result is contributed by improvement in both of its particleboard & Ready-To-Assemble (RTA) products manufacturing.

Hevea has gradually shifted its particleboard product range from conventional to higher value low-emission eco-friendly products which serve higher-tier customers.

This has resulted in higher revenue and profit margin for the company.

It has also invested heavily on automation in its RTA products manufacturing to improve operation efficiency.

This might have started to reap the reward as we can see a jump in the PBT margin in this segment in current quarter.

Hevea's cost are mainly in MYR and about 90% of its sales are denominated in USD. So it should benefit from stronger USD against MYR.

However, it actually registered a net forex loss of RM1.56mil in this quarter due to USD denominated loan.

Its cash flow remain robust anyway and so its balance sheet strengthens further.

It finally turns into a net cash company before year 2016.

As a result, it continues to pay second interim dividend of 0.5sen for FY15, after a first interim dividend of 0.5sen being paid after the share split.

Though the total 1sen dividend so far is merely 13% payout from 1H15's PATAMI, I believe that higher dividend or may be a special dividend will be paid next year.

I also believe that Hevea will be another company that pays quarterly dividend.

I guess Hevea should be able to achieve RM65mil in PATAMI for its FY15.

Base on current outstanding shares of 424mil, projected EPS will be 15.3sen.

Fully diluted (144mil warrants expired in 2020) projected EPS for FY15 will be lower at 11.4sen.

Hevea does not have a fixed dividend policy yet I think.

If it decides to pay 30% as dividend, then it will be 4.5sen for FY15, with a possible yield of around 3% at current share price of RM1.47.

Can Hevea continue to grow?

There are rumour that it is looking to acquire SHH Resource which is a solid wood furniture manufacturer.

I don't know what will be the outcome but it's clear that Hevea's management is trying to grow the company inorganically. 

It will also venture into the retail furniture market by producing and selling eco-friendly (low formaldehyde emission) children furniture.

This new product is expected to be available in local Malaysia market by 2015 year end before exported to regional markets.

I expect MYR to stay flat or rebound against USD in 2016.

If it stays flat, it should benefit Hevea as USD loan will be pared down in stages.

If it rebound modestly, I think it should not affect Hevea too much as it is still losing on strong USD now.

Anyway, I think Hevea has a good future so I will continue to hold its shares even though only a little.

Matrix: Poor Result & Run!?

Matrix Concept FY15Q3 Financial Result

MATRIX	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	121.4	120.4	317.6	151.0	148.8
Gross Profit	68.3	63.0	187.1	97.5	83.8
Gross%	56.3	52.3	58.9	64.6	56.3
PBT	40.2	41.4	155.4	73.8	58.5
PBT%	33.1	34.4	48.9	48.8	39.3
PAT	31.1	29.9	115.4	56.5	45.1
Prop Rev	116.7	117.1	315.5	150.5	148.8
Prop OP	41.6	45.2	158.4	77.6	61.2
Edu Rev	2.4	1.2	1.4	0.5	0.0
Edu OP	-1.2	-2.1	-1.8	-2.9	-1.9
Club Rev	2.3	2.1	0.8	0.0	0.0
Club OP	-0.3	-0.2	-0.6	-0.4	-0.4
Total Equity	808.9	774.2	758.3	686.0	643.5
Total Assets	1167.7	1129.6	1154.6	996.2	1000.9
Trade Receivables	148.6	149.4	192.6	79.5	174.9
Prop dev cost	649.5	597.2	583.5	566.2	556.3
Inventories	2.2	2.3	2.3	2.1	0.7
Cash -OD	52.7	75.7	84.3	58.7	23.3
Total Liabilities	358.9	355.4	396.4	310.2	357.4
Trade Payables	159.1	141.0	171.8	195.7	274.7
ST Borrowings	75.0	74.2	68.8	42.3	23.6
LT Borrowings	74.2	75.8	82.3	35.8	21.4
Net Cash Flow	-5.7	17.3	25.8	-10.1	-45.5
Operation	-6.2	11.2	-18.4	130.0	65.3
Investment	-39.3	-33.4	-22.9	-93.2	-63.9
Financing	39.7	39.5	67.2	-46.9	-46.9
Dividend paid	66.8	47.1	17.1	77.6	60.5
EPS	5.90	6.50	25.20	12.40	10.50
NAS	1.47	1.67	1.64	1.50	1.41
D/E Ratio	0.12	0.09	0.09	0.03	0.03

Matrix's FY15Q3's result is flat compared to preceding quarter of FY15Q2.

However, it is significantly lower compared YoY to FY14Q3 mainly because of timing of billings.

Some people might be disappointed with this result.

What I am more interested in is how well it sells its property.

Despite a slowdown in property market in the whole country, Matrix actually does very well by bagging in sales of RM245mil in Q3 of FY15, with only RM8.3mil coming from industrial land sales.

For 9MFY15, its total new sales has reached RM612mil, which is 87% of its RM700mil annual sales target for FY15 (including industrial land sales).

Bandar Sri Sendayan alone has contributed RM519.7mil new sales in this period of time.

Unbilled sales surge to RM640.5mil (as at 30th Sep 15) from RM540mil a quarter ago. This should be its all time high quarterly unbilled sales.

New projects launched in Q3 include Suriaman 1 (phase 1 GDV RM77mil - 83% sold) & Hijayu Resort Homes (phase 1B) in BSS, and also Impiana Bayu 2 (88% sold) in TSI.

It seems like Matrix will not launch any new projects in Q4. It has delayed the launch of the RM229mil Residency SIGC to Q2 of 2016, may be because it sees no problem to hit its sales target in FY15.

Its high GDV condo near PWTC might be launched in the first half of 2016.

If you still think that Matrix's Q3 result is poor then just have a look at its year-to-date performance below.

       9-months comparison YoY: Improvement across the board

Matrix Global School has got 490 students enrolled as at end Sep15 and the management targets 660 students by end of 2015, which is revised downward from 800 students earlier.

Revenue from education arm increases progressively every quarter and its operating loss has narrowed.

Operation of clubhouse is also at loss but the main purpose of these two investment is to increase the selling point of its BSS.

Matrix continues its quarterly dividend payout with a 3rd interim dividend of 3.5sen. 

I think Matrix should be able to pay at least 15sen dividend for its FY15. So it might be another 4.5sen dividend after 10.64sen has been paid so far.

This translates into a dividend yield of 6.2% at share price of RM2.45.

For me, Matrix simply looks better than ever.

Inari: More Aggressive Expansion

Inari Ametron FY16Q1 Financial Result

INARI (RM mil)	FY16Q1	FY15Q4	FY15Q3	FY15Q2	FY15Q1
Revenue	274.9	225.0	228.3	227.9	221.9
Gross Profit	57.7	56.5	47.7	49.4	43.4
Gross%	21.0	25.1	20.9	21.7	19.6
PBT	43.9	39.8	38.0	40.0	33.9
PBT%	16.0	17.7	16.6	17.6	15.3
PATAMI	45.5	40.4	38.1	40.3	33.8
Total Equity	604.1	537.2	511.5	352.9	313.4
Total Assets	953.9	835.2	720.1	583.5	544.3
Trade Receivables	236.9	187.4	136.8	128.1	143.4
Inventories	178.1	145.2	139.9	134.0	135.8
Cash	282.3	296.7	260.4	141.9	89.5
Total Liabilities	349.8	299.9	210.2	230.6	230.9
Trade Payables	215.9	171.3	92.2	107.3	107.9
ST Borrowings	45.2	45.3	42.1	44.8	46.8
LT Borrowings	31.5	22.0	21.9	14.9	15.1
Net Cash Flow	-19.4	218.0	181.9	65.0	14.0
Operation	35.3	176.2	110.6	88.3	23.7
Depreciation	11.6	32.5	22.4	14.3	6.7
Investment	-52.8	-89.0	-52.7	-44.9	-34.4
PPE purchase	52.8	62.4	24.8	18.4	8.5
Financing	-1.9	130.8	124.1	21.5	24.7
Dividend paid	15.3	49.3	49.3	21.0	10.1
EPS	6.24	5.57	5.69	6.59	6.00
NAS	0.83	0.74	0.71	0.58	0.56
Net D/E Ratio	Net cash	Net cash	Net cash	Net cash	Net cash

Inari posted another record-breaking quarterly result with its highest ever quarterly revenue, PBT & PATAMI in FY16Q1.

The management mentioned that favourable forex mainly contributed to this "widely expected" financial result.

In FY16Q1, Inari registered a net forex gain RM3.33mil.

We know that Inari's rise is very closely linked to its largest customer Avago.

Recently Avago acquired Broadcom Corp, a communications semiconductor company, and sold its optical modules business to Foxconn, which is an electronic & optoelectronic manufacturer similar to Inari.

How will these development possibly affect Inari?

Will Inari lose its existing contracts or get more contracts?

I have no reliable insider info and I'm not an expert in this industry. So I really don't know.

What I think is that IF Inari's management foresees potential lower demand for its service, they should slow down or withhold their expansion plan.

However, from analysts reports after Inari's latest analyst briefing, Inari has tabled an aggressive capex of RM100mil for FY16 which is even higher than previous record high of RM62mil in FY15.

From this amount, RM42mil is set aside for machinery, RM15mil for automation, RM8mil for R&D and RM35mil for P13B expansion.

It even showcased the conceptual design of its new Batu Kawan plant which is planned to accommodate 2 news businesses should they materialize, according to HLIB.

What kind of new businesses?

Currently it is still expanding its P13A new facility in Bayan Lepas.

Total RF testers has reached 609 in Oct15 compared to 522 last year. It is expected to reach 800 by Oct 2016.

Management guided that contribution from the new P13 plant will be flat in FY16 Q1 & Q2 but is expected to increase significantly from Q3 onwards.

In my view, it looks like Inari's management is bullish over at least maintaining existing contracts, if not securing more new contracts from Avago as there will be more outsourcing from Avago groups of companies.

No matter what, I think Inari will continue to do well financially in FY16.

Its RF chips are not only used in Samsung and Apple smartphones, but also in those China brands.

I will continue to hold its shares and follow the company's development.

Parallel to its increasing profits, Inari announced its highest ever quarterly dividend of 2.8sen.

Besides, it also proposed its first ever bonus issue with 1 bonus share for every 4 existing shares held. 

Maximum new shares issued will be 206.1mil if all warrants and ESOS are exercised before ex-date.

Everything looks good to me at the moment. Hopefully we can hear some good news from Inari in 2016.

Div (sen)	FY16	FY15	FY14	FY13	FY12
1st	2.3 (0.5)	1.8 (0.4)	1.1 (0.4)	0.8	0.6
2nd		1.8 (0.5)	1.1 (0.4)	0.9	0.6
3rd		2.1	1.2 (0.8)	0.9	0.8
4th		2.3	1.8	1.0 (0.9)	0.8