KLCI - MITRA - 9571 - Dec 2014 Update

UPDATES...
In this post I will update the earning prediction for Mitra based on contract secured since Mar 14 and latest company's financial control. The result is very encouraging and further strengthen my belief that this would be one of the star performer for the next 1-2 years...


STOCK PERFORMANCE ...
MITRA is doing really well despite two significant corrections in Oct & Dec. The last price is RM0.95 (vs RM0.59 back in Mar) and I can't imagine how far can it go once revenue inflow from contracts start to kick in ...

CONTRACT & PROFIT MARGIN...
MITRA secured contracts worth RM1135 million since March 14, expect to contribute positively to its earning starting from 2015 in the form of progressive payment.

In addition to that, Mitra seems manage to improve its profit margin for the past 2 quarters from ~8% to ~10%. GOOD NEWS !!! 

PROSPECT ANALYSIS...

Using small cap PER@7 and latest company profit margin of 9.8%, 2015 is going to be a good year for Mitra judging on the strong order book in the pipeline. Are you ready ?? =)

INVESTING STRATEGIES...

• Dollar cost averaging to limit downside of market fluctuation
• Fibonacci retracement suggests RM0.92 (1st support) is a good entry price, shall the price drops below 1st support we should then look at RM0.85

At your own risk of course ... Happy investing ... =) 

KLCI - MITRA - 9571

BACKGROUND...
Mitra(9571)is a KLCI counter in my portfolio, this post is simply serve as my record keeping for stock analysis. The report was written back in March 2014 and haven't been updated since then.


FUNDAMENTAL ANALYSIS...
MITRA, with existing stock price at RM0.59 P/E is trading lower @ 7.67X than industry average of 14.35X, however net profit margin is at the low side of ~8% if compared to industry average of 13%. In addition to that, NTA is significantly lower than the trading price indicates the stock is undervalued.

With current ratio of ~2.1X Mitra is healthy financially, however Cash: Short Term Loan ratio of 0.12x shows that the company will be running into cash problem shall the macro economy deteriorates. Anyway, it survive 2009 crash with same cash position … Magic

Judging by the recent contract secured worth RM430 million from Malaysian government, and potential revenue of RM1.6 billion from launching two properties projects in prime area of Wangsa Maju and Puchong, expect the net income for Mitra will boom exponentially from the next 2 years.

TECHNICAL ANALYSIS...
Bullish trend confirmed, and with floating shares of close to 40% the price swing is going to be wild.

COMPETITIVE ANALYSIS...

Comparing to companies in same field and with similar market cap, P/E ratio for Mitra is lower than industry average. Net profit margin is in mid-range

  

INSIDER TRADING...

Guess who is accumulating ?? The average price of his current transaction is ~RM0.53 ...

PROSPECT ANALYSIS...

Some mathematics works here …...

• Construction, Properties & Health Care should continue to contribute EPS 7.43 cents.

• New contract worth RM427.9M should contribute 1.5 cents to EPS, factor in down payment, progressive payment of 30% in 2014 and profit margin of 8%.

• Assume no new contract secured through year 2016 (worst case scenario)

Simulations result shown in table below ... 

At your own risk of course ... Happy investing ... =) 

Mutual Fund Talk

Mutual fund? What?

According to Investopedia, Mutual Fund is : 

'An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by fund managers, who invest the fund's capital and attempt to product capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.'

In general, mutual funds are divided into 3 categories :

• Equity Fund (Focus in stocks, higher risk, ~8% return)
• Bond Fund (Focus in money market, debt securities, risk and return are lower, ~3% return)
• Balanced Fund (In between of Equity and Bond Fund)

Mutual fund enables access to professionally managed, diversified portfolios of securities (equities/bond etc) and is particularly attractive to investor with small capital & minimal investing knowledge. An initial investment of RM1000 is enough to start his/her investment journey. 

There are a lot of mutual fund managers in Malaysia, for instance Public Mutual, Eastspring Investment Berhad, Kenanga Investment Berhad and many more. 


A good investment?
Investing in mutual fund can be profitable, provided with proper strategies, mindset, fund selection and competency of mutual fund consultant -> the most important !!! 


Investment Strategies ...
The two most important strategies in mutual fund are :

• Dollar Cost Averaging 
• Purchase monthly with a fix amount of dollar (not quantity) to leverage risk of market fluctuation.
• For instance with a fix amount of RM100, automatically one will get more units during oversold market and get less units during overbought market.

• Fund Switching  
• Switching between equity and bond fund at the right time (Bull market -> Bond to Equity, Bear Market -> Equity to Bond) will boost return % tremendously.
• Chart below is the actual performance of Public Bond Fund (PBF)& Public Regular Saving Fund (PRSF), take note that PRSF suffers massive loss ~33% in 2008 while PBF left unscratched at the same time. A good mutual fund consultant should be able to advice his/her client to switch from PRSF to PBF in 2008.
• Chart to the right shows wealth growth comparison with/without switching, with initial capital of RM10,000.

Avoids ...

• Lump sum one time investment 
• Avoid one lump sum investment without dollar cost averaging, we have no idea if the market is already at the peak or bottom.

• Incompetent Mutual fund consultant  
• Some of the consultants are only interested in sale commission and is not committed to grow his/her client wealth growth
• Be very careful when choosing your consultant

What about myself?
As I am able to grow my wealth at least 30% from stock market consistently, my investment in mutual fund is minimum and only limited to :

• Employee Provident Fund (EPF) approved mutual fund, the goal is to seek for higher annual return (>6%)  
• Private Retirement Fund (PRS), the main intention is for income tax avoidance, the Malaysia government allows tax exemption up to RM3000  

However I am a true believer of mutual fund, it is a good investment vehicle that helps individual who has minimum fund, zero investing knowledge or has no time to become a self-directed investor for wealth accumulation.

Maybe someday I will stick solely to mutual fund when I am getting tire of FA/TA analysis, stock selection or reading financial reports...

Happy Investing !!!

Investment Opportunity In Crude Oil Price Crash

Hottest topic in the town ...

Crude oil? Shale oil Boom? Russian conspiracy? Oversupply?
For whatever reason it is, the falling of crude oil price from ~$100 to ~$60 has sent shock wave to worldwide financial market and as a result, index especially KLCI (Malaysia) retracted as much as 200 points.

However this is not the end of the world, the sharp dip of oil price creates opportunity for individual who holds high % of cash in his/her portfolio or with plenty of Greenback (USD) to buy cheap. I personally believe the rebound of KLCI is pretty much depends on the performance of oil price. 


What is this all about ...
Today I am going to introduce a class of investment vehicle called 'Exchange Traded Note' or simply as 'ETN'.

According to Investopedia, ETN is : 

'A type of unsecured, unsubordinated debt security that combines both the aspects of bonds and exchange traded funds(ETF). ETNs returns are based upon the performance of a market index minus applicable fees, no period coupon payments are distributed and no principal protections exists. ETN are traded on a major exchange, such as the NYSE during normal trading hours.'

Don't get too worry if the explanation confuse you a lot, ETN basically tracks the performance of predefined index, for instance WTI Oil Price and can be traded just as the normal stock in exchange. But be warned that ETN has no capital protection and investors might not getting a single cent back during the maturity date.

The ETN of interest today is 'VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return' =.=|| or simply as 'UWTI'. In general it tracks the performance of WTI/Brent Oil price. 


More explanation ...
The value of UWTI is proportional to crude oil price as shown from chart below, the respond function for UWTI vs Crude Oil price is polynomial (sorry I am an engineer =P) 

Some simple math using the quadratic formula ... As of now the Crude oil price is around ~$55 ...

There are some unofficial research pointing to the break even cost of crude oil is around ~$45, seen as a strong support point for oil producers to avoid making loss in daily operations. 

Some high cost producers might start to cut back production, reduce capital expenditure and there might be consolidation among smaller oil producers. Eventually supply and demand will back to normal after the ugly price war and oil is expect to stabilize around ~$80 as soon as next year.

So ... if you pay attention to the table as shown above, downside risk is limited and shall oil price rebound, 100% gain can be achieved easily ... 

UWTI Change/Crude Oil Change :-
Downside Risk (Crude Oil < $55) : $0.26 per dollar
Upside Potential (Crude Oil > $55) : $0.44 per dollar

Upside potential is almost 1.7X if compared to downside risk

At your own risk of course ... =)