KLCI - JOHOTIN - 7176 - May 2015 Update

REVIEW OF PERFORMANCE & UPDATES...
JOHOTIN released its quarterly report@29-May-2015, revenue rose by 48% if compared to preceding year corresponding quarter, however being hauled back by foreign exchange related loss that driving net profit margin back to 4.4%, vs 8.2% with preceding year corresponding quarter.

source from : www.malaysiastock.biz


A mystery expenses of RM5.156 million (16x higher than last year), recorded as 'Other expenses' was not given explanation by the management.

At the same time loan and borrowings exceeds RM100 million, driven by short term banking facilities (secured). 

Utilization of fund raised from right issue to build a new ware house and factory is ~98%, expect completion in 3rd quarter of 2015.

THE GOOD, THE BAD & THE BOTTOM LINE...

THE GOOD :

• Sustainable revenue and has set a good foundation for future growth
• Completely walked out from disastrous quality issue that led to loss making quarter 2014 Q2.
• Completion of new warehouse and factory would contribute positively to the revenue of the company after 3rd quarter 2015.
• Immune to GST (To be confirmed in next financial report) 

THE BAD :

• Erosion of net profit margin to 4%.
• Fragile to the fluctuation of foreign exchange as reported. 
• Integrity of management is questionable for not providing explanation on the huge RM5.156 million expenses, accounting for 30% of its gross profit.
• Growing debt that exceeding RM 100 million, which is huge for SME standard.

THE BOTTOM LINE :

• In general not a bad quarter at all as JOHOTIN manage to stay in profit but should have done better to hedge the risk of foreign exchange.
• 4% net profit margin is simply not good enough, using PER of small cap from 7 to 12, the fair price should be ranging from RM1.14 to RM1.95 (if margin stays flat for the entire fiscal year). Not much upside from current price of RM1.60.
• Not recommend to add position until improvement in profit margin.
• Malaysia's cautious macro economy outlook is not helping either, even though the author expect recovery in the second half of 2015.     

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

KLCI - History Repeats Itself ?

 

The FTSE Bursa Malaysia KLCI Index (Kuala Lumpur Composite) is a major stock market index which tracks the performance of 30 largest companies by full market capitalization listed on the Main Board of the Bursa Malaysia. It is a free-float (minimum of 15%), capitalization-weighted stock market index.


INDEX PERFORMANCE ...

Ignoring insignificant market correction, the KLCI investors experienced 2 bear market and 3 bull market starting from 1998 until 2015. Question arises is 'Has the bull market run out of steam?". I wrote this article out of fun, and there are few interesting observations ...

BULL vs BEAR ...

Summary from table above :

• Bull market becomes longer (539 -> 2408 -> ??days)
• Bear market becomes shorter (448 -> 400 days)
• %change of index is always -65% in transition from Bull to Bear and +199% in contrast

If the history repeats itself, Big bear would be coming to town once %change hits +99% in current aging bull market. 

YEAR 2017 or KLCI HITS 2017 POINTS ...

To hit +199%, KLCI has to hike further by,

  -> 570 * 199% =  1134 points

Gap to +199%,

  -> 1134 - 879.89 = 236 points

Last KLCI Index, 1781 points, then KLCI index before BEAR strikes, 

  -> 1781 + 236 = 2017 points

  

Average index hike/day,

  -> 879.89 / 2218 = 0.40 points per day

To hike 236 points,

  -> 236 / 0.40 = 590 days

  -> 590 / 365 = 1.6 years

Now is March 15, then year before BEAR strikes,

  -> 2015 + 1.6 = End of Year 2016 or 2017

TRIGGER POINT ...

Now lets look at what is the potential trigger points that might lead to the market dip 

• Rapid depreciation of Ringgit vs USD
• US federal of deserve in the mist of raising interest rate as soon as June 2015 due to better than expected economy growth and unemployment.
• Raising interest rate means stronger USD weaker ringgit, companies with huge USD noted debt would encounter tremendous financial pressure and eventually collapse
• Bank Negara can follow suit to increase interest rate, however this will curb economy growth and reduces competitiveness of exports. 

• Deflation & Deterioration Global Economy Condition
• Deflation is looming in Euro Zone and economy slowing down in China, QE might not be the solution.

Anything else ??? However, Bear market is not entirely bad as it creates good opportunity for value investor as well as wealth reshuffling. Lets keep our fingers crossed for now. =D

KLCI - MITRA - 9571 - Feb 2015 Update

UPDATES...
MITRA continues to demonstrate robust revenue growth as reported in latest quarterly report @ 24-Feb-2015, on track to become one of few bright stars in KLCI in coming quarters. In this post I will conduct a comparison between my prediction vs actual financial performance, new contract secured and new price target ...


STOCK PERFORMANCE ...
The last price is RM1.61, up 70% from RM0.95 since Dec 2014 update, and a whopping 170% from RM0.59 since my first post about MITRA ...

PERFORMANCE COMPARISON...
MITRA recorded net profit of RM53 million and eps of RM0.136 based on latest financial report. If compared to my prediction from previous post, the error is merely ~4% whereby my prediction for net profit is RM56 million, with eps of RM0.14. Bravo !!!
 

NEW CONTRACT & UPDATE...

MITRA secured another contract worth RM229.9 million in Jan 2015, great addition to its already huge order log.

Using small cap PER of 7, the price target for MITRA is going to be RM2.90 ended financial year 2015. With current PER of 12, RM5.00 is within reach. =D

Lastly, at your own risk of course ... Happy investing ... =) 

KLCI - JOHOTIN - 7167

BACKGROUND...
JOHOTIN (7167) is a KLCI counter in my 2014 portfolio, which fell short of my expectation due to a severe quality issue in 2014 Q2, whereby 40% of annual net profit (RM 8.0M) was paid as one-off compensation to affected customers. Stock price gap down immediate after Q2 result was released to public. 

FUNDAMENTAL ANALYSIS...
JOHOTIN, with existing stock price at RM 1.35 is a Johor based company primarily focus in tin can manufacturing (30%) and dairy products (70%). 



SUMMARY :

• Revenue generated from tin canning business (30%) and dairy product (70%).
• Low NOSH @ 93 million units
• Net profit margin of 9% vs industry average of 3% indicating the company is leader in cost control and diversification of business.
• High current ratio (Net Asset/Liability) of 3x indicating strong balance sheet with enough liquidity.
• High cash/short term loan ratio of ~2x indicating cash rich and low debt.
• Growing demand of dairy product however tin canning business remains stagnant
• New factory operation expected in end of the year and will adds 25% capacity for dairy products, resulting dip of cash flow in 2013.

TECHNICAL ANALYSIS...
Bearish trend as a result of negative sentiment after released of Q2 result.

PROSPECT ANALYSIS...

SUMMARY :

• Tin business is stagnant and stable.
• Dairy product segment expects to grow 66% as reported in financial report for 2014 March quarter.
• New factory expect to add 25% capacity for dairy products end of 2014.
• RM8.0 million is one-off payment to affected customers, should observe full revenue recovery in 2014 Q4.
• Consumer products - operating cost can be easily transferred to end users.
• Dividend yield is around 4%, comparable or better than FD. 
• Target market (80%) is oversea, renders minimal impact from GST as exporter would be able to get full tax rebate.

BOTTOM LINE :

• Excluding the one-off payment, JOHOTIN stock price would have been better if management had paid attention in product quality control.
• Long term prospect remains bright, using small cap PER@7, 2015 might be a breakthrough year for Johotin.

INVESTING STRATEGIES ...

• JOHOTIN is not attractive at the moment, 2015 Q1 financial report (End of May 2015) should give us more insides.
• Lets wait until May next year.   

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

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 ... =)