skiddtrader

YTLPOWER - YES, Shale and Beyond

2010-12-19T21:50:00.010+08:00

Gone are the days YTLPOWER are known as the quiet dividend old man stock of yesteryear's. Their business has switch into more uncertain and possibly profitable businesses that may be the new way they are planning to spend the rest of their cash. Which is un-nerving to say the least for investors who are more interested in old man stocks.

After the Seraya Power acquisition, the group settled down to consolidate their earnings from this massive asset injection that also includes an oil trading license in Singapore. Before the dust was settled, investors noticed a cheap acquisition of a subsidiary from another sister company which recently got its hands on a WiMax license.

After some months of debate, it was revealed that WiMax would be their new venture into Malaysian's tele-communications and Internet industry. Expected to be a capital intensive industry which sees very little profits, it was said perhaps YTLPOWER was 'given' this opportunity due to it's cash generation ability. After long delays and government fines, they finally launched their service albeit a very chaotic one on Nov 18 this year. While there are still some confusion over how the payment system actually works, the service for the past month have received good reviews from the small army of customers that have signed up. Only time will tell if their service can withstand the bandwidth surge when they become popular. Though with Pay-As-You-Use model, I don't think their system will experience clogging like other providers which has a 'monthly payment, unlimited usage' model which normally attracts heavier users. Recent financial report already has a column under segmental reporting for WiMax registering a loss which is expected.

More recently though, it was reported YTLPOWER has invested up to USD 5 billion in a oil shale joint venture in Jordan. Though it was later clarified, it was only an estimated number depending on the 'feasibility' of the project in question. But it was quite disturbing since oil shale production is not only expensive and un-established, the fact that they bought up to 30% of the joint venture from an Estonian company in JORDAN! Not exactly an oil & gas destination where their industry is almost zero and Jordanians fully import their oil from war torn Iraq. But oil shale is abundant there covering almost 60% of Jordan, but producing oil from oil shales is very different from drilling for oil in the desert.

News was that the oil they expect to produced was up to 38000 barrels per day, which will be used as fuel, for a new power plant which will be built for this project which will eventually energise the Jordanian national grid. Of course, concessions for the oil, power plant project and distribution are bound to be awarded to the investors for the project. Though this will not be visible until after 2015. So technically, it is still a utility investment which is still in its very early stage. Time will tell.

Questions are how stable will this counter be knowing that the company is starting to register costs for WiMax which will slowly increase and also possible new costs in their new venture in Jordan. Will the rise in WiMax costs be too quick for their revenues to catch up thereby eating into the profits of their more stable ventures in Seraya Power? And will the new venture in Jordan which hasn't been heard until recently be their new revenue stream or money sucking pit? Profit growth from the acquisition of Seraya Power also has not overtaken their dilution so far and it is hope after the normal 1st quarter drag, EPS will improve at a faster pace. Overall YTLPOWER is seem to be expanding into the unknown and hopefully more insight is provided for the better understanding of their investments.

UCHITEC - Recovery Without EPF

2010-12-16T12:45:00.008+08:00

Recent announcement have showed that EPF has pared down their stake in Uchi to below 5% shareholdings. It is now unknown if EPF would continue selling their stakes as it is not going to be reported anymore.

Financially, Uchi is doing very well this year compared to last year where demand for their products was reduced. So far for the past 9 months of this year, they've doubled their profits compared to last year as orders picked up. Cash levels are still very healthy and they are still debt-free. Continued growth is dampen by the strengthening RM against the USD, where their recent report stated although their USD revenue grew by 36%, when translated to RM it is only 26%.

Dividend was proposed in the latest report but ex-date will be announced later. It is expected Uchi will announce another dividend in the last quarter. Uchi are known to pay at least 70% of their EPS as dividends. Which makes ownership of their share very rewarding based on their performance.

Current price of RM1.30+ range is within the >5% dividend yield for 2010 including the 5 sen declared. If next quarter results mimics the Sept 2010 results, a minimum of 10 sens dividend is expected making the dividend yield about 7.5%.

If we believe that the recent price is being subdued due to continuous EPF dumping, it is only a matter of time before the sell-off stops and the counter resumes its natural, dividend backed share price appreciation. That is if the next quarter results performs the same or above the last results.

TDM - CPO Boost Profits

2010-11-30T07:55:00.007+08:00

TDM has reported one of their best quarterly results in the past four years only 2nd to the 3rd quarter of 2008 when the CPO prices were sky high during the commodity bubble. This quarter's EPS of 12.82 sens is supported by the steady rise of CPO prices in the past year following the bubble burst in early 2009.

Since Oct this year, prices of CPO has continuously appreciated above RM3000 and is now hovering near the RM3400 range. TDM with their fully matured plantations will reap the benefits fully this current quarter if the prices of CPO can carry over to 2011. As long as CPO maintains at current levels, this quarter will easily surpass last quarters results.

Health care is another point of growth for TDM. So far these past 9 months, health care profits has increased 38% compared to the same 9 months period in 2009. Although small compared to the plantation segments results, it nevertheless provides TDM with a steady growing income that is not affected by 'world' prices like the CPO.

Tecnic - Continued Growth

2010-11-29T00:53:00.019+08:00

Net income is still growing in the 3rd quarter and from the looks of it, their full year net profit will again surpass their previous year performance. Management has also stated they are cautiously optimistic of their internal target of 20% growth will be met this year.

In other words, EPS will rise about 20% and so will the dividends if it is met.

2009

EPS = 31.74 sens

Dividends = 16 sens (minimum 50% of EPS)

2010

EPS = 31.74 + 20% = 38.09 sens (estimated)

Dividends = 19.05 sens

Current EPS for 3 quarters is 30.14 sens so it won't take much to surpass last years performance and NTA is currently RM1.89 as stated in their latest quarterly report.

Last closing price is RM2.25 on Friday before the results was out, which means the estimated FYE2010 PER is at 5.9x and dividend yield of 8.4%. As per norm, it is common to see share prices appreciate to cause dividend yield to fall to normal levels of of around less than 7%. That would mean the price can appreciate up to RM2.70+ once the next results are out.

YTL-E: Growth Over-Expected?

2010-11-11T23:59:00.006+08:00

Although the price of YTL-E has more than double for the past 3 months in the expectation of YTL's WiMax roll-out this coming Nov 19th, little is known how they are going to reap the benefits of the roll-out.

But a recent announcement in Bursa Malaysia shed light on their financial relation to the WiMax business. The announcement was regarding selling their VOIP business under the name Extiva for RM18+ mil to YTL-Comm, a subsidiary of YTL-POWER directly involve in the rolling out of the WiMax network in Malaysia under the 'YES' brand.

While the announcement itself is informative on their intentions and the future growth of Extiva under YTL-Comm, what is more interesting and equally important in my opinion was the explanation of how WiMax business will affect YTL-E's bottom line. A quote from the announcement;

"The YTLe Group currently earns a fixed fee for the leasing of its WiMAX spectrum to YTL Comms and will also have the opportunity to share in future revenues once the 4G platform is launched and becomes operational."

I'm not sure whether the specifics are already out but YTL-E currently earning 'rent' from YTL-Comm and also the ability of earning 'future revenues' is somewhat an indication of profit sharing of the WiMax networks revenues. If "YES" were to be successful and some say at least a minimum of 300k subscriptions to be so, the possibility of earning a much larger and passive income is indeed very lucrative for YTL-E. If it is true the profits are shared, I'm just speculating here.

But at the moment, the share is trading at the current PER of 262x based on the last yearly EPS FYE2010, it's all about speculation now so no point pondering on the fundamentals. YTLe needs to earn in net profits up to RM460+ mil or 34.6 sens EPS just to push their PER down to the reasonable 20x. Which I doubt will ever happened in the near future for their WiMax venture. Their FYE 2010 full year EPS is less than 1 sen or 0.66 sen specifically, which is double their previous FYE2009 of 0.31 sen.

Results Review

2010-09-08T10:37:00.008+08:00

TECNIC has reported some favourable results although the stock has seen little trading other than the increased BUY/SELL price which has rise but still cheap if assuming their EPS can be maintained for another 2 quarters. Latest result has bump up their EPS to date to 18.9 sens and if the trend continues, we would see a minimum of 35 sen EPS FYE2010. That would mean a minimum of 17.5 sen dividend and represents a 7.6% yield at current price of RM2.30. That is if they can maintain their EPS for the rest of the year. Strong dividends but very low volume counter.

UCHITEC also reported a stronger quarter bumping their 6 month accumulated EPS to 6.4 sens. If their recovery continues in the next 2 quarters, their expected EPS will be near 15 sens. With a policy of minimum of 70% dividend payout from EPS, the stock price will see greater upside if their 3rd quarter results shows continuous normalisation of their profits. FYE2008 their EPS was 15.75 sens and they paid out 12 sens of dividends. Being cash rich and almost no debts will allow it to continue paying generous dividends to their shareholders as long as EPS can be maintained. Expect stock price to exceed RM1.80 if yearly EPS of 15 sens is achievable.

WELLCAL which has announced that one of its directors controlled company have been liquidated and now almost all Executive directors have direct shareholding of the company with the biggest shareholder being Mr Huang Sha with a 15% direct stake. Their recent results has also shown some improvement and declared a 2.5 sen dividend which went ex-date at the end of last month. So far they've paid 8 sens worth of dividends FYE2010. The company also have a habit of announcing and paying the dividends within 30 days. Being an industrial hose which exports 90% of their products, the RM appreciation will affect their bottom line and the world economy will dictate their growth.

PROTON has seen a great start to FYE2011 with big improvement in sales and importantly profits. A final dividend of 15 sens after tax is also announced going ex at the end of Sept for FYE2010. Cash levels has also increased dramatically last year and the NTA of PROTON is now a staggering RM9.85, when compared to the current price of RM4.72. Their current cash per share is already at RM2.90 which makes me wonder why is PROTON priced so cheap by the market. Their debts is less than RM200mil for long and short term combined although their payables are at RM1.8 bil which is worrying. The car industry which is currently seeing it's best year in Malaysia with record growths of car sales, is unfortunately not expected to last past 2011. PER wise it is more realistic as it show PROTON is priced at about 14x of last year's EPS. In other words, PROTON may be priced cheaply in terms of assets but fair relative to earnings. Expect PROTON to hit above RM6 if EPS is replicated throughout the rest of the year.

Uchitec : Expecting Recovery

2010-08-17T00:56:00.005+08:00

Uchitec was started up in Taiwan by 2 brothers and set up their manufacturing site in Malaysia in the 80s. The Group is principally involved in OEM and ODM, specialising in the design of electronic control systems. The electronic control modules are developed and manufactured by the Uchi Group for MNCs such as Eugster, Krups, Bosch, Sartorius, Eppendorf etc. These companies are global leaders in electrical and electronic products such as precision weighing scales and household appliances such as fully automatic coffee machines, semi-auto coffee machines, steam iron etc. (Taken from their website.)

They were in their prime in the early 2000s, stocking up an amazing cash hoard which they generously distributed back to their shareholders. Their policy is a minimum of 70% payout of their EPS. But recent years starting from 2007, their revenues and EPS is on a decline reaching the lowest in 1st quarter 2009. But they still maintain a high dividend payout almost matching their EPS FYE2009.

FYE 2009 saw their revenues and profits plummet to new lows and hence their share prices as well concurrent with the financial crisis. It was reported their customers were also holding back orders due to new Euro quality standard changes which requires all new electrical products to have a lower maximum standby power consumption of less than 1 watt. These changes in addition to recognized forex losses and the financial crisis has not affected their ability to generate cashflow however. Cash levels is still above RM100 mil even after high dividends payout and best of all the company is debt free. End of year saw some consolidation and subsequent rise in orders which translated to a recovery of EPS.

On top of being debt free and a hoarder of cash, the company also enjoys tax free revenues incentive from their products from 2008 which lasts for 5 years. This is due to their pioneer status for their products which they researched and develop themselves. This is the strenght of Uchi Technologies which allocates up to 7% of total revenues to their R&D according to their annual report. Management is optimistic FYE2010 as their orders have increased and their new products all adhere to the EURO standards of quality achieving the 2013 target standard of less than 0.5w of standby power.

However the strengthening RM against the USD and EURO will have a negative effect on margins as Uchitec is an exports driven company. The lingering effects of the financial crisis is still being ironed out in EURO and consumer demands have not recovered. Management FYE 2010 expectations are that it will maintain a strong balance sheet and increase their revenues and profits. So far 1st quarter results are encouraging but not sufficient to prove they brushed off their lagging performance in 2009.

Expectations and risks.

I expect Uchitec to grow quarterly in revenue and profits FYE2010. If they can ahieve a 11-13 sens EPS, that would justify the current entry price of RM1.35. Please do note that their current cash with no debts accounts for about 33 sens in NTA. I don't value this stock based on PER mainly because of their dividend policy. As their dividends are high, the per annum returns will exceed 7% if the PER is only 10x. Since there is no risks of debts, the company will only grow based on costs cutting measures and demand for their products. It's like betting on the European economy or rather their consumer behaviour. Tax free status until 2013 is a bonus advantage this company enjoys.

Past 3 months have seen the stock fluctuate between RM1.21 and a current high of RM1.38. Historically the stock has seen prices above RM3.30 in 2007 and a low of RM0.80 in 2009. Planned entry below RM1.30 is great as an EPS of 11 sens would constitute a minimum 7.7 sens dividend which will translate to at least 6% dividend. Though an optimistic investor would buy now even if they think the EPS can improve beyond 20 sens FYE2010.

Past performance

2007

EPS = 20.91

Dividend = 12 sens + 8 sens special

2008

EPS = 15.75 sens

Dividend = 12 sens

2009 Worst year

EPS = 7.27 sens

Dividend = 6 sens

Wellcall Holdings Bhd

2010-08-15T00:13:00.005+08:00

Wellcall Holdings is industrial rubber hose manufacturer which exports over 90% of its product over 60 countries worldwide. Company has been growing since 2004 and hit a peak in their turnover of RM119 mil FYE2008 before stuttering during the recent financial crisis which affected the world. FYE 2009 turnover was only 76% of its peak at RM79 mil. Main factors affecting their margins are costs of raw materials and the exchange rate to MYR as they export the majority of their products.

Financially, Wellcall Bhd. is doing well with no debts whatsoever and latest quarterly result shows it has a healthy RM37.9 mil in the bank and generates a steady cashflow every quarter which is uses to pay dividends to shareholders. They have a dividend policy of at least 50% payout of their EPS.

During the peak of their company's performance, the counter achieved a price of RM2.32 in early 2007 (after adjustment for bonus in 2008) and a low of RM0.80 in the beginning of 2009 during the height of the financial crisis post-quarterly results. The stock have recovered above RM1.00 and during 2010 reached a height of RM1.53 and a low of RM1.20. Currently it sits in the RM1.25-30 range with a 2.5 sen dividend going ex on 30th August 2010.

At the end of July 2010, Wellcall announced their main shareholder Lifewise Alliance Sdn Bhd which owns 31.11% of the company shares are winding up volunteeringly which prompted a query from Bursa regarding the impact on the shareholdings of the company. Wellcall has replied stating that shareholdings among the major holders are intact and no new shareholders or directors will emerge from the winding up of Lifewise and the winding up will take 8 - 12 months to complete. Lifewise Sdn Bhd is controlled by the 3 directors in Wellcall, it is not clear why they are winding up Lifewise which will distribute its shares back to them. By liquidating Lifewise, the 3 directors will probably own Wellcall directly though the the distribution ratio is unknown.

Mr Huang Sha which is the managing director and mentioned as the person regarded for the high growth of Wellcall over the years is Taiwanese and a PR in Malaysia whom also holds the highest shareholding in the company according to the last audited annual results. But his indirect shareholding is shared with 2 other directors.

The current prospect of will depend on FYE2010 4th quarter results which will paint a clearer picture where they are heading in terms of growth. MYR appreciation and the raw materials prices such as rubber can be a good indication of their margins. Post June 2010, their taxes would see an increase as their pioneer status tax incentive will expire though it might not be as significant.

Management has stated they are optimistic FYE2010 will be better than FYE2009. From the 3 quarters thus far their revenues, net profits and dividends have almost reached FYE2009 full year results. Although revenues have been steadily increasing every quarter so far, their net profits are not corresponding equally due to higher costs of manufacturing and strenghtening of the MYR.

Historical Dividends and EPS

2010 (3 quarters)
EPS = 8.44sens
Dividends = 8 sens

2009
EPS = 10.16 sens
Dividends = 11 sens (7 sens + 4 sens special)

2008
EPS = 13.33 sens
Dividends = 8.67 sens

2007
EPS = 12.07 sens
Dividends = 6.33 sens

NOTION: From Prince to Pauper

2010-08-07T10:50:00.009+08:00

Notion was sold down badly in the market and lost more than 30% post warrant pricing. It would seem from the market that it anticipated the very bad quarterly results from Notion although all the research houses was painting a pretty picture. No doubt the closer it got to the release date of the quarterly report, the selling was more intense with large amounts of dumping happening everyday pushing the prices lower and lower.

Initially what was thought to be a result of a profit guidance by Western Digital of the HDD market which is slowing down, most investors and some research houses still re-affirm their BUY calls for the stock. The quarterly results was expected to be reported on August 5th and up until end of July there were still research houses affirming their BUY calls, stating that management through analyst briefings has shown that the costs of HDD start-up was manageable and on track.

But the slide continued, somehow pointing out that some major parties probably knew something was wrong and the expectation of a bad result grew stronger and stronger until the last day before the release of the results. Research houses who weeks earlier trumpeted the expansion programs of the company suddenly made large U-turns in their expectations and posted new targets of almost 50% off their previous Target Price. Forward PERs were also slashed and warnings of bad results and a clearer picture of the company will come to light post results and subsequent analysts briefings the following day.

The stock touched a low of RM2.01 during the opening hours of August 4th, one day before the results before selling subsided. In the final hour there was a enthusiastic push towards RM2.20 with SELL queues snapped up. At 4.45pm, the SELL queue at RM2.20 grew to almost 2 million shares and the moment the TCP was set and the market re-started for the last 10 minutes, the SELL queue was snapped up again diminishing the queues at RM2.20. It was the last triumph for the stock before the next day.

On release day selling continued and although there was a a slight push at the end of the day, the stock closed lower at RM2.04. Then come the wait for the results after market hours.

Results Released

The report was finally released to the public and showed that NOTION although increased their revenue for the 3rd quarter, their costs of operation shot up and diminished their profit margins. Their HDD 2.5" base-plate operations start-up was blamed for their increased cost and profit guidance for the rest of the year was trimmed from RM50 mil to RM30 mil. Management also expected coming quarters to be similarly pressured by the start-up cost and the last quarter was expected to bear the full brunt of the cost of start-up.

Net profit for the quarter came to only RM3 mil which is 75% lower than previous quarter due to higher costs of operation. Management expects the last quarter to be worse and to date EPS of 20 sens after 3 quarters is internal target for the rest of FYE2010. Meaning next quarter they expect to either break-even or eek out a slight profit only. Maybe even a loss making quarter.

1. Antidisc program was more or less a failure, with cancelled orders from the customers due to contamination issues on one of the production lines.

2. HDD 2.5" base-plate start-up was also a head-ache for management which suffered extremely high rejection rates and thus loss making and will be for the next 2 to 3 quarters.

3. Lower orders from major customers for HDD in the near future from Western Digital.

4. Lower exchange rate of USD to RM compounded their problems.

Research Houses

After the results was out, all came out cutting forecasts and slashing forward PERs and target prices. The company stock is now rated under-perform and all research houses recommends a SELL and advises to cut loss. Perhaps the most fitting description of all the u-turns and change of heart for the research houses can be summarised by a quote from Maybank Investment report;

"More headwinds ahead. Notwithstanding the Samsung production setback, Seagate and Western Digital’s quarterly results which fell short of expectations and the grim outlook on ASP trends are telltale signs of weakness ahead. That aside, management will face the daunting task of regaining investors’ confidence following inaccuracies in quarterly guidance, a major sore point for now." <-- No shit.

Prospects

As a company, Notion is growing and expanding rapidly. Maybe to fast for its own good where it rushed through their programs until they could not keep up with the quality. The antidisc program is a prime example where their reputation is tarnished and the customer rejected the rest of their quality management and cancelled their orders.

In the report management stated they are re-organizing their in-efficient manufacturing process which is incurring additional costs. Funny that they didn't organize themselves before they actually started operations which shows they somehow lack the operational expertise to start-up properly.

Notion is now a pariah in the eyes of the investment houses which used to praised it continuously. Why the hate? Well because the management more or less misled the analysts about their current state of affairs. This report isn't what happen last week, it is reporting what happen from April to June, which is months ago but they still brief the analyst that everything is hunky dory in the past few weeks.

Financially, at current prices of around RM2.0x, their warrants which has an exercise price of RM2.55 are pretty much worthless and they won't be getting any capital injection from that. Private placement is also more or less cancelled since the free fall in price. Their latest report showed their short and long term borrowings increased and thus additional financial costs will be expected in all future reports.

Camera and automotive segments is still profitable and resilient with some growth in revenue for both. Higher revenue is expected next quarter for the camera segment which would probably be overshadowed by the costs of their HDD 2.5" base-plate operations.

It's too risky to jump in unless the company can show it has successfully reduced their costs effectively in their new start-up and it is actually making more money from them. Their higher financial costs will burden their future net profits and that is likely to stay will not reduce until they pay them off. Best is to wait what the next 2 quarters show and see if the investing public find favor with it again.

Proton - Comeback

2010-05-13T15:22:00.006+08:00

Proton has seen some of the worst years in it's time as a National car-maker leading people to think it was better left to rot without throwing more good money into it. But as national pride goes, the car-maker has seen some improvement in the way it is run. It'll be a long story indeed if political ramblings and commentaries are included so I'll just stick to financial facts reported in the past year.

Even as early as March 2009, they were still making losses but the bottom line has improved a lot with the cost improvement and better model role-out lately. Past 3 quarters it has reported earnings that has naturally propelled its stock to higher ranges. It is also very surprising to know that the NTA for this company is a staggering RM9+ compared to the current price of RM4.75 or even RM3.80 in the beginning of the year. Goes to show how much margin of safety the market has about the prospect of Proton.

Cash levels are currently healthy with enough to cover it's total debt obligations although the receivables and payables are in billions. Since its a capital intensive industry, cash levels are normally expected to be even higher serviced by debts and bonds.

The car industry in Malaysia is expected to expand this year as buyers take advantage of the lower loan rates. With the imminent normalization or interest rates in the coming quarters, buyers are pressured to make their purchases this year compared to next. This is especially true for budget car buyers/Proton buyers. With the country's IPI showing an increase in automobiles production, it is assumed that Proton will be looking at another quarter of profits which would cap 2010 as a profitable year for Proton.

Although a long shot, Proton might be giving out dividends for a profitable year. FY2009 closed red but they still gave out a 5 sen dividend due to improving business. Expected EPS for Proton FY2010 is around 45 sens conservatively, dividend yield expected to be no more than 20% of EPS.

Conclusion

Buying Proton share is like betting on the Malaysian car industry. Saturated and competitive. It's too bad Perodua is not listed since it would be the healthier of the two. But Proton shares will appreciate based on its financial performance, and the best way to profit from that is not Proton shares but their respective structured warrants namely Proton-CB by CIMB and Proton-CC by OSK.

Both have at least 4 more months before maturity, Proton-CB has strong daily volume but higher premium compared to Proton-CC with lower volume but trading at a discount. Although both recently dropped out of the "in the money" category after the recent sell-down. It's a good alternative to hitch a ride on the Proton train. Structured warrants do carry leverage risks though and since it has a rather limited lifespan, it is considered speculative in nature.

TECNIC - Dividend Investment

2010-05-06T17:02:00.016+08:00

TECNIC recently came to my attention after announcing a minimum 50% dividend policy FYE2010 onwards. They started the ball rolling FYE2009 when they announced 16 sens TE dividends out of their 31.7 sens EPS. The dividend was announced in Feb with their quarterly report and the share shot up from RM1.90 to Rm2.++. The only other occasion they announced dividends was FYE2008 when they declared 3 sens.

TECNIC is a injection & blow molding company previously known as STS TECNIC. Since 2005, they have been profitable but has only started some form of dividend payment from 2008 onwards.

Growth since 2005 has been impressive with the management successfully turning around a loss-making company to a growing profitable one. Debt levels has also been reduced to a point where their cash is double of their long and short term debts combined. Last reported NTA is RM1.74.

EPS Growth;

2005 = 136.75% from a negative EPS of -24.16 to positive 8.88 sens
2006 = 47.74% to 13.12 sens
2007 = 9.00% to 14.31 sens
2008 = 49.05% to 21.33 sens + declared 3 sens dividend
2009 = 48.80% to 31.74 sens + declared 16 sens dividend

Prospects

Being a small cap company, it's possible this counter has been overlooked but it cannot be ignored anymore since their announcement of the dividend policy. Their company grew even in the midst of the financial meltdown and global recession and with the announcement of a dividend that gave a yield of 8.4% at that time. By establishing a minimum 50% dividend policy, investors will soon find a place in their shareholders list as it is still considerably cheap in terms of yield.

Where normally anything above 8% dividend yield will see the stock appreciate until the yield drops near or below 6%. Including the fact that for the past 4 years, their EPS growth is phenomenal with low gearing. At current price of RM2.14 after being sold down in the past few days and using FYE 2009 EPS of 31.74, PER currently stands near 6.7x.

Assuming there was no further growth FYE2010, at current price range of RM2.14 dividend yield would be about 7.5%. It is unknown since the announcement whether TECNIC will be paying dividends in one big sum or in batches although so far on the 2 dividends they did, it was all in one go.

Compared to their peers, TECNIC is offering one of the highest dividend yield in the industry at the moment with one of the lowest PER. EPS is also growing, cash in the bank is about RM10 mil with total debts amounting to only about RM5 mil.

Notion Vtec Bhd Capital Exercises

2010-05-04T03:36:00.007+08:00

NOTION VTEC BHD (NVB) has announced another private placement exercise of up to 10% of total shares for capital expenditure for the construction of their new factory in Klang. NVB has also announced they are issuing free warrants that lasts for 5 years. Exercise price to be determined at a later date.

No doubt news of the new private placement of 10% total shares has affected the market price of the share close to RM3.02 from the higher range of RM3.30. Or roughly 10% less than before. This is logical considering the share was priced roughly a PER of 10x to the expected EPS of 33 sens. With additional 10% shares, the EPS will be eroded by the same percentage and thus the share was sold down.

Previous private placement was first announced on 22nd Oct 2009 when share prices was slowly inching up due to news of the consolidation exercise and better EPS. Subsequently in Jan 2010 at RM2.44 or 10% cheaper than market price, the private placement was done and was later announced the private placement was to strategic investor Nikon which is one of their major customers. This is considered good news as its a win-win situation for both of them.

The rationale for this current private placement is to cater for future capital expenditure for the centralised 2.5" HDD baseplate facility in Klang. And again this private placement is targeted at long term institutional or strategic investors. Like Nikon for the previous placement, NVB could place this shares to Samsung since that would be their main customers for the HDD baseplates although they are not restricted to them.

OSK in its latest research report on NVB after an analyst briefing was that NVB gave a guidance of RM228 mil revenue FY2011 from the HDD baseplates alone. That means FY2011, revenue might double although EPS will not grow as much due to dilution from the private placement and warrant issue. New target price was RM3.88 upgraded from RM3.55 in their previous report.

Warrants

The free warrants is a separate fund raising activity not conditional on the placement although the number of warrants can be higher depending on the number of share placed during the warrant issue. The warrant has a life of 5 years and is a great alternative to NVB mother share mainly because NVB has very minimal dividends to begin with and will not pay significant dividend for time to come due to its rapid expansion. Warrant conversion is 1:1 and since it's free, the exercise price could well be near the current price of the share with possibly 10% discount. Therefore holding the warrant might be more economical if one is intending to ride the capital appreciation of NVB. Cash from the warrant conversion will be used for working capital. That's an average of RM20 mil/year for 5 years if the exercise price is at current market price of RM3.02.

If we use their lower expectation of RM50 mil net profit FY2010, and assuming all warrants were exercised and private placement is 10%, EPS is reduced to 24.5 sens compared to current expected 33 sens. At RM3.02 now, PER is 12.3x based on expected diluted fore casted EPS and without taking into account the future earnings and growth of the company FY2010. Warrants exercise price is expected to be discounted 10% like the private placement so it should be a slight boon to investors currently holding the shares.

Packaging Industry

2010-04-22T08:54:00.015+08:00

In the blue corner...

TOMYPAK

TOMYPAK was recently highlighted in CIMB research house and was rated a BUY due to the favourable outlook of the company in 2010 after a stellar performance in 2009. FYE 2009 alone, their net profits surpassed their past 5 years combined profits and their dividend payment FYE2009 alone also surpassed the past 5 years dividend payments combined. TOMYPAK is involved in manufacturing of flexible aluminium packaging usually used for consumer products both locally and abroad.

Balance sheet wise, their prudent debt management has successfully turned the company around by reducing the amount of company debt from RM43 mil a year earlier to only RM17 mil where RM10 mil is short term tenures and also increased their cash levels to RM9 mil. Their EPS is a staggering 49.7 sens and they reported a NTA of RM1.83 for the last quarter. Dividends has been consistently 3 sens per quarter in FYE2009 and total dividends so far is 12 sens FYE2009. Their last dividend announcement did not indicate if it was the final dividend for the year. Previous years dividends were only once per year due to much lower profits compared to 2009.

Current price of RM3.20 means their PER is 6.4x for FYE2009 EPS. Their dividends if maintained would mean a yield of 3.75% at current prices. Their close competitor DAIBOCI which commands a 11.3x PER based current price of RM3.40 and FYE2009 EPS, has a better dividend policy of at least 50% payout.

Probably due to their recent success, their ESOS conversion has gone into overdrive increasing their total shares from 40 mil to 43 mil, about 7.5% increase since FYE2009. This will drag their EPS down by the same % and will probably continue as the company is doing well. Based on recent reported total share, FYE2009 EPS after dilution is 46.5 sens respectfully increasing their PER to 6.88x.

In the red corner...

HPI

HPI or Harta Pack Industry Resources BHD is a packaging company involve in producing and transporting corrugated boards, product package, covers, etc. Their operation also covers paper milling which contributed positively to their bottom line FYE2009. HPI also have a smaller operation in Cambodia which has so far contributed about 21% of profits for past 3 quarters (18% share FYE2009) .

Their past few years growth has been steady and EPS has already double to where it was before in 2006. Balance sheet wise, their long term debts are slowly being reduced but their short term debts has been on a rise. Cash levels in the bank only account for 21% of their current short term borrowings which can be un-healthy in a wrong situation. Recent investments include increasing their holdings in a paper mill company. FYE2009 saw a very big increase in net profits but its due to 1 time insurance payout for their factory fire in 2007 and also some reversal of provisions to bad debts.

HPI has hardly any consistent dividends to speak of with the most recent in 2009 for 2.5 sens after a long absence since 2002. I believe with a healthier dividend policy or a transparent growth plan, prices may appreciate further.

At the current price of RM1.51, PER stands at about 5.3x for only 3 quarters accumulated EPS after adjusting for bonus issue. Expected PER after 4th Quarter EPS announced is less than 5x at current prices. NTA reported in latest
quarterly report is RM2.59.

Their current low evaluations, high EPS growth values, recent bonus issue, debt levels and lack of dividends kind of put them in a "uncertain growth stock" criteria, although their growth in the last 4 years were strong, their lack of any transparent growth planning isn't fostering any faith. But HPI's ever growing EPS can't be ignored as well as their low evaluations. Their borrowings are still manageable, their profits shows no sign of abating, their cash levels every year has been positive, their operations and revenues has increased. I believe once they stabilise their cashflows as establish a consistent dividend policy, their share prices will appreciate strongly.

Compared to their peers in packaging, HPI is a laggard at share prices but business wise, their ROE is great. It does come at a price of higher borrowing though and compared to TOMYPAK which has pared down their debts and started a consistent dividend policy, HPI does deserve a lower ranking.

And the winner is...

Conclusion

Both are still lagging in terms of PER and dividends if compared to DAIBOCI, although TOMYPAK seems to be coming along. It remains to be seen if HPI can follow the steps of TOMYPAK as it is in the similar position as TOMYPAK was in FYE2008 in terms of share price, dividends and debt levels. According to HPI's FYE2009 Annual Report, their short term borrowings of RM73 mil are due within a year. So meaning this coming quarter we might see a massive reduction in their short term debts which constitutes 80% of their total borrowings.

Since DAIBOCI at PER of 11.3x is better in terms of dividends, they command the premium in valuations. TOMYPAK at PER of 6.88x is heading in that direction with a consistent quarterly dividends in FYE2009 and their share will command a premium as well if an official announcement is made regarding their dividend policy. HPI on the other hand at PER of 5x is a complete laggard, due to their lack of dividends other than 2.5 sens FYE2009 and higher debt levels.

But HPI does offer the chance to be another TOMYPAK although their products are different. All it needs to do now is maintain operational profits, pay their debts and start a consistent dividend policy. Sounds easy, right? It would be enough if they can re-structure their debt to a more manageable level or taking longer term loan and settling their short term debts.

ANALABS

2010-04-10T11:07:00.004+08:00

A recycling company which has remain profitable in their core business suddenly got a boost in earnings after acquiring a company producing resin impregnated paper. For the past 2 quarters, their new business is overtaking their core business of recycling in terms of revenues and profits.

Their 4th quarter earnings expected in June will be the next catalyst for their share price as currently their EPS for 3 quarters has already exceeded their FYE 2009 EPS 15.74 sens. If the profits from their new acquisition continues, their FYE2010 EPS would exceed 24 sens assuming they only replicate 50% of last quarters results. But because their new business has only been in business for the past 2 quarters, it is entirely possible that it may have some sort of cyclical business that is still not obvious.

Cash wise they have depleted their bank to acquire their new business with only RM11 mil of cash left. Although they do not have any significant long or short term borrowings, their Payables currently stands at about RM30 mil. Latest reported NTA for the company is RM2.13. Their PER is about 9x at current price of RM1.70 only taking into account 3 quarters EPS of 0.19 sens. Dividend is moderate at about 5 sens FYE2009 when the yearly EPS was 15.43 sens.

The only reason I'm even interested in this is due to the potential explosion of EPS in the coming quarters and the share price follows. With an NTA of 2.13 which is a good 40 sens above the current share price of RM1.70 as well as an expected PER of 6.5x makes it very attractive. Although the share price have appreciated greatly to RM1.70 from less than RM1.30 at the end of March, it still has much more room for upside due to further improvement of EPS. But a more cautious approach would be prudent due to the lack of information regarding the new operations full year operations.

With a low EPS expectancy of 24 sens for FYE2010, their future PER would only be 7x. Higher EPS expectancy of 28 sens would reduce their PER to about 6x. Returns on investments would be expected to be around 11-33% from current stock price of RM1.70. Worst case scenario is when EPS is erased in the 4th due to unforeseen circumstances, at that point PER would be near 9x.

TDM Berhad

2010-04-02T13:38:00.002+08:00

Being a plantation stock, its a wonder how this company has managed to stay in the low PER range. With commodities staging a sort of comeback led by oil, it's only a matter of time before palm oil will follow suit, thence plantation stocks.

Companies like IOICORP enjoy a premium in the prices due to their size and also future growth. TDM with a much smaller but matured plantation are now reaping the benefits of the labour and the timing couldn't be better with expectations of Crude Palm Oil hitting RM3000/tonne in 2010.

TDM also has a venture in health care, running 3 medium-low costs hospitals which is now contributing about 10% of profits for the company. Their smaller venture into poultry farming is profitable but almost insignificant compared to their plantation profits.

While most plantation companies tend to have moderate dividend payouts, TDM with their lower valuations offers some good returns from their dividends. FYE2009 they have declared 4 sens before tax and another 9 sens tax exempt making a total of 12 sens. At the current price of RM1.97 per share, that's a 6% dividend. That's a dividend payout of about 50% based on their FYE2009 EPS of 25.03 sens. Their dividend history only started from FYE2006 onwards.

PER is 7.8x based on FYE2009 EPS of 25.03sens and current price of RM1.97/share. NTA is last reported at RM2.88 per share.

Debt levels are extremely good for both long and short term borrowings. Although their trade payables are on the high side but it has been pared down since last year from RM190 mil to a more moderate RM136 mil. Overall view of their cash flow is steady with RM112 mil cash in banks and RM78 mil in trade receivables. Their deferred taxation accumulated in 2008 is another sore point in their liabilities section, 2009 only see an insignificant increase in that area.

Their monthly production throughout the year are slightly cyclical due to rainfall in and it's at the beginning of the year before picking up again in June and peaking in the final quarter. No wonder their dividend ex-date is in May and they only pay once a year. Their future planning includes planting more acres in Kalimantan, Indonesia as their total plantation land is only 37000 hectares which is all situated in Terenganu. But good news is 95% of their plantation is matured trees.

Overall the company is an attractive counter for the sake of plantation play as they are relatively cheap compared to their peers, small amount of debt compared to their cash levels, attractive dividends and good prospects of increasing CPO yields in the near future.

Favelle Favco

2010-03-11T16:53:00.003+08:00

Favelle Favco is an industrial crane manufacturing and sales company which began making cranes in Australia about 40 years ago. It is currently owned by Muhibbah Engineering which bought the company in 1995. In 1997 it bought over Kroll Cranes from Denmark. The company was listed in the KLSE in 2006.

As an industrial crane company, it has made and supplied cranes for the oil and gas industry, shipyards and construction sites. It is known to have supplied cranes for the construction of the Petronas Twin Towers as well as the Taiwan 101. Their cranes are currently being used in the construction of the Freedom Tower in New York as well. The oil and gas sector still remains as their majority customers with lesser shares to shipyards and construction.

62% of their revenues are from overseas sales according to FYE2009 figures while their local revenues aren't subjected to tax due to their pioneer status. The figures FYE2009 while looks good compared to last year, it also shows the strain they are under. Their orderbook has shrunk to it's lowest level below RM500 mil and 2010 will be a challenging year for them. With the strengthening prices of oil, they can only hope the industry will lift their profits higher.

Their latest quarterly report shows their cash levels have risen almost 2 times more than what they had in their best year which is 2008. This is a good sign of consolidating their current assets possibly for repayments of debts to further pare down their interest payments for their short term borrowings which constitutes almost all their debts.

Profit wise their revenue is 10% lower than 2008 but their net profits rose more than 27% compared to 2008 to RM27 mil due to better margins from sales. This can be due to the effect of material costs which was sky high in 2008 during the commodity bubble. With commodity prices more of less stabilised, their costs management are expected to improve for their manufacturing sector.

With the current EPS of 16.2 sens, FAVCO's PER is below 5x at current market prices which includes the 4 sens tax exempt dividends expected to be approved. Conservatively we can shave off 20% of their EPS and still get about 5.6x PER after deducting the 4 sen dividend. Market volume is on the low end and prices has been stable for the past 3 months staying around RM0.80 range.

Overall I like the increasing cash levels, known brand name, low PER and acceptable dividends. But their short term borrowings are not being reduced and their cyclical business may hamper their future growth.

YTLPOWER 2Q Results

2010-02-26T22:27:00.002+08:00

Latest results show YTLPOWER has improved on their Quarter to Quarter profit from RM230 mil previously to RM250 mil. As a result EPS improved by about 10% to 4.03 sens as compared to 3.93 sens previously.

It's not really clear if we tried to compared to the same quarter last year as this year Power Seraya revenues has been consolidated into the report. With revenue ballooning from about RM4 bil/year to about RM6 bil in 6 months. Net profits however remained elusive. Looking into segmental profits shows a bright spot, as previously Power Seraya was weak in performance this quarter however it managed to report a profit before tax in line with expectations. At RM128 mil this quarter in profits, its is more than 100% higher than RM59 mil PBT in the previous quarter. If we compared the yearly profits of Power Seraya before the takeover, their record net profit was about SGD218 mil. That if converted is about RM523 mil net profit, which is by average RM130 mil/quarter. As such it is only expected that Power Seraya delivers the similar results and possibly better after the takeover.

Other segments such as local electricity generation increased by RM10 mil to RM93 mil but water/sewerage business in the UK reported lower profits of RM141 mil compared to RM159 mil previously. With the British Pound being hammered lower this quarter, their UK operations are expected to report lower earnings in translation to RM. Last quarter also saw the complete subscription of its WA warrants that were due in January 2010. Almost the entire 750 mil warrants left was subscribe at RM1.19 per share, which would net YTLPOWER about RM890 mil in cash. Under their cash flow statements, their bank balance boosted by financing activities has reached almost RM8 bil. That's a lot of cash they are sitting on, almost like before they
acquired Power Seraya. Unfortunately, this year will see them spending it on servicing their expiring bond obligations.

I noticed something odd when the reported number of ordinary shares stands currently at 6,217,620,000 shares. As I wrote earlier, their report stated that almost the entire WA warrants which when subscribe will be converted into ordinary shares is about 750 mil. Their previous quarter report stated that there was 5,876,160,000 shares then.

6,217,620,000 - 5,876,160,000 = 341,460,000 only

So where did the other 408 mil over shares went from the 750 mil warrants that was converted? What happens if we add the 400mil shares into the EPS calculations?

RM250 mil / 6,625,620,000 = 3.77 sens as EPS

Comparatively the diluted EPS of 3.77 sens is much lower than previous 3.93 sens. This does not look very promising at all. But at least for now, there is no more looming massive dilution of EPS expected compared to few quarters back when the WA conversions were imminent.

The current poor performance of their reported quarterly profits has more to do with their translation of profits from GBP to RM. Since the financial crisis, the GBP has been severely weakened against the RM and has not recovered to previous levels. Past 2 quarters, reported segmental numbers from their water business also is considerably weak compared to FYE2009 numbers.

Worries for this stock include their very high gearing of 70% for their UK operations, depreciating GBP against the RM, under-performing Power Seraya after consolidation, late announcements in their report, un-clear margins for their oil trading/swapping and deteriorating EPS after full dilution.

Good prospects is the recovering UK economy which will boost earnings and well as future appreciating GBP, Power Seraya growing contribution after their 800MW power plant commissioned and possible income from WiMaX telecommunications venture which has no sign of capital expense so far.

New Year Expectations

2010-01-02T22:08:00.007+08:00

Happy New Year!

YTLPOWER

With the conclusion of the year, the GBP ended average at RM5.5001 per GBP. Not as high as I expected as I was looking more towards RM6 again but can't be helped with the Dubai effect still not fully realised as of yet for British banks.

Good news was Ofwat was kind to Wessex Water and allows them to increase their rates instead of asking them to freeze or reduce. Bad news was YTLPOWER is more or less confirmed to be the provider of WiMax service in some way or form. No word yet on how their subsidiary is being financed. Though they did tie up with TM to 'lease' their bandwidth thus negating the expected heavy expenditure into infrastructure.

I still don't like the business, because I don't like very new technology especially if you're the pioneering entity mainly because you'd had to do all the hard work of promoting the new technology only for some other late upstart to take the market from you. In this case, Green Packet is the one doing the hard work promoting WiMax with an array of ads. So YTL can hop on later without worrying people haven't heard of WiMax before.

As details of their project is still scant at best, I'll take a wait and see approach for this matter. And also, I admit that I was totally wrong about YTLPOWER not taking up the business even though most news more or less confirm the story.

Dividends are plenty at the end of the year, not as plenty as before though. With the acquisition of Seraya Power, there won't be any share dividends anymore. Cheque for December dividends has already arrived and expecting another payment in Jan 21, which ex-date is the 1st trading day of 2010 on Jan 4th.

I hope for the rest of 2010, YTLPOWER's newly acquired subsidiary would contribute much more positively to the group. And a more clearer and transparent quarterly report without any delayed announcements.

MAXIS

I got my share of MAXIS from the IPO. Strangely I got all I applied for from the public spread and got none for the 1000 shares I applied with the Blue form. Though I spent more time and effort to get the Blue form into the mail box. Where initially everyone thought the Blue form were of higher chances of succeeding, in the end the public spread via White form is the much better way to go. I got everything I applied for.

Regardless, I've already taken some profit on listing day itself and am keeping the rest for some dividends. Not really expecting this counter to fly up due to limited growth, so mainly will be another dividend counter for me. With the surprise 6 sens dividend at the end of the year, hopefully things will be even better in the new year.

Watch lists

I'm still on a lookout for more dividend counters other than REITS. My initial plan to enter STAREIT was stopped in its tracks when YTL announced some re-structuring with their REITs. My main attraction to STAREIT, Lot 10 shopping mall and Starhill Gallery is being sold and STAREIT is to concentrate on hotels. So now I have to find another REIT that I might like, researching on HEKTAR now.

UCHITEC also caught my eye as it was a dividend counter as well. The downturn has affected their business but they are picking things up again. Will find a nice entry price soon.

Was watching LEADER since it was into Power Generation in Cambodia but only 100MW, so I lost my interest again. But their cable business is good, it seems.

SUCCESS was recommended to me but since they are selling one of their profitable subsidiaries, doesn't seem like a good venture for now.

TITAN chemicals also bouncing up, their industry PER is normally about 5x and this one is around 3x. Their short term debts are almost paid off and their dividends will probably start again this year maybe. Nice counter since oil prices has been stabilizing, meaning their raw products prices are also stabilizing allowing them to profit more on margins. The were about 40 sens when their company ran into huge losses during the high oil price collapse. Now they are making money 3 Qs in a row. Last quarter results are expected end of January and it should be a good quarter for them.

GENM is again on my list mainly because the prices have stabilise though it's still not exactly cheap. Not a dividend counter but hotel vouchers are cool too. Their related party transactions are gaining notoriety with the new chief on the helm.

Notion Vtec, mainly for their robust growth and foray into Thailand. Although I suspect HDDs will be a thing of the past in the future, it still have a lot of life yet and still the most affordable storage around.

YTLPOWER 1Q 2010 Results

2009-11-20T09:51:00.003+08:00

With the release of 1st Quarter 2010 results, I would think that all the clarification needed to see through the company easier will be available. Alas I spoke too soon. The latest quarterly report makes the numbers more murky for me and still nothing reported on their hedging operations other than required holding and inventories.

P/L / Balance sheet / Cash flow

First it looks great from the 1st line you read as the revenue grew quite a sum compared to previous quarter (not last year's 1Q beside it). But as I read further, it became clear their operations suffered somewhat a setback compared to last quarter. With only RM556 mil in operational profit which is about RM200 mil less than last Q but with higher revenue. Doesn't make sense huh. But the answer lies in the notes (B2) which states last Q revenue was higher due to a write back in fuel provisions which amounted to RM170 mil. Heh, talk about late disclosure. Shouldn't that statement be last quarter instead of this quarter to explain it?

Net profits after tax was only RM230 mil which is comparable to the time even before Seraya Power was acquired. This tells you something or someone is not quite making it in terms of profit for the group. It's as though Seraya never existed. RM230 mil is only RM10 mil more of what they made in 3rd Q 2009 with a lousy GBP conversion! And that was considered a lousy quarter. So definitely Seraya is not performing somewhat.

Not much to say about their balance sheet. They paid off some of the loans in SG and long term loan reductions looks OK but not much. Their asset and liability value fluctuates with the currency so there is no easy way to look at it. But I normally concentrate if there are big difference which indicates some sort of payment. Such as RM300 mil less in Payable but RM 200 mil more in borrowings.

Cash flow looks healthy enough from the operations contribution. Due to their higher financing requirements, they registered a negative flow of cash which normally shows a positive figure from all their warrant conversions. This quarter also reflected last Qs dividends which is RM219 mil which is low as they only proposed 3.75% last quarter. Financing activities is expected to balloon positively next quarter when the warrants 2010 are expiring in January. At the end of the day, they added more money into their bank accounts to a tune of RM 6.1 bil.

Their notes also showed they issued 2 term notes, one in GBP for 50 mil which comes to about RM 275 mil and also another in MY for RM 480 mil.

Segmental reporting

My current beef with this report is this part. This is where it all becomes muddy and blurred. Where previously, they would segment their operations by electricity, water/sewerage and investment holdings. Now the decided to separate Power Seraya into it's own segment under "Multi-Utilities" to reflect its operational status as a multi-utility player. I suppose it would make it easier to understand their operations from a distance. As each segment can be separated into Malaysia, UK and Singapore.

What I hate is that there is no further segmentation of their Singapore operations. Because Power Seraya (PS) not only generates electricity for sale, they will also sell Steam, industrial air and operate an oil trading business. Not to mention they are actively hedging their activities in terms of fuel swaps, interest swaps and exchange forwards. Thus their PS operations becomes hard to predict, as you can't tell how much each separate business in PS is affecting their overall business. For example if they made losses in the hedging part, we won't know because it is being masked by their electricity sale profits.

Looking at the segmental reporting, I can tell that Power Seraya profits are seriously lacking the boost required to pump their net profits up. It only showed 50% of what I expected it to contribute quarterly. Out of RM2.2 bil worth of revenues, they can only show for only RM59 mil in profits. Their revenues I suspect are inflated by their oil trading activities which includes buying and selling kilo tonnes of fuel to earn a small profit by the margin of difference. Lower profits could also be explained by their increased financing responsibilities.

Malaysia electricity operations are always on full steam so their results are normally due to the efficiency of running at full capacity. It's revenues are quite comparable to previous quarters but the profits are lower by about 20%.

UK operations are also weak this quarter compared to GBP exchange where GBP depreciated 5% BUT their profits dropped RM100 mil or 39% to RM159 mil. To compare some more, when the GBP was weakest in 3rd Q 2009, Wessex Water actually earned RM180 mil. So definitely not up to par compared with other quarters if currency exchange is not concerned.

Now I'm not saying its the end of the world, YTLPOWER 1st Quarter results are always on the lower end of the spectrum out of 4 quarters in a year in the last 5 years. So this can be due to multitude of reasons from re-valuating assets, financial obligations and consolidation of accounts.

But the best part of this report was the proposed dividend of 7.5% which harks back to previous quarters interim results. Definitely a welcome relief ever since last quarter they announced only 3.75% interim. Hopefully, it can be incrementally higher in coming quarters.

Wish List

What I would like to see were the segmented business reporting for their Singapore operations like how PS website reports it. It shows how each business is making money and how important they are to the business core which is utilities.

Most important is their hedging/swapping operations and how good a job they are doing there.

Repayment schedules of term loans or at least a mention of how much they paid and when.

Higher dividends to reflect the additional profits that somehow PS is not delivering.

Maxis IPO results

2009-11-19T09:11:00.002+08:00

Well surprising results for me, as I got all my applied shares from the Public option aka White form application and NONE from the Blue form which is only for Maxis subscribers.

Lots of people are disappointed for not getting any, especially disappointed are those applying from the Blue form. I mean I'm more disappointed from not getting from my Blue form compared to what I've got from my White form. Maybe due to the expectations that the Blue form application are assumed to be almost guaranteed 'success'.

Even broking houses are not spared the despair of not getting any allocation they bid for. A fund actually rejected their allocated portion because it was too small and the costs is not worth the effort. Though most complained of their small portions, some are delighted they got a share and due to shortage of allocation for all funds, they expect the share to appreciate higher.

Well at the end of the day the markets will determined how high or low Maxis will go. Hopefully I can unload a few before the 1st day is out.

MAXIS - Mother of all IPOs

2009-11-10T22:35:00.005+08:00

Well whatever I want to say is all stated in the local news already. Other than the very optimistic analysis of local broking houses, there hasn't been any negative news on the IPO other than lack of public shares for allotments compared to institutional offerings.

Considered expensive in terms of PER for an IPO and also compared to other listed telcos, analyst has been hyping up the IPO and the premium due to their market leader status. And also the fact that they will be included in the KLCI index on No 20th. Their listing date is the 19th of Nov.

I tried my luck in this IPO and got all the shares applied which was a great surprise to me. Now this is the public offer, not those 50k minimum institutional offers which some brokers provide. My Blue form application for 1k shares status is unknown for now but I think I'll be getting that too. Reason being the public IPO was not overly subscribe, only by 2 times.

Normally I suck in IPOs. Which is why I normally apply for more than I'm willing to hold. So it did got me worried that the extra shares I applied suddenly got handed to me. Though it's not like I can't afford it, but I did not appreciate the extra risks taken now compared to half of what I originally intended to hold. I wonder if anyone else feels the same.

Anyway with that said, I'm planning to sell half of what I've got so I get back to my original intended holding. Best time to do it I suppose would be listing day. Hopefully the market will 'goreng' it up a little. But I'll be happy to sell it for anything above RM5.00 per share, of course more would be nice. Hehe.

Overall the IPO generated more institutional investor interests than retailers, most likely due to the higher price per share. Don't think I've seen an IPO for more than RM5 per share before. Well my only hope now is that the counter doesn't tank on listing day.

Reason why I applied for Maxis IPO probably dates back to the time when it was first listed. At that time I saved some cash already and was prepared to apply for the IPO then, but work commitments kept me out of the country and I was unable to get a chance to apply. I kicked myself over it because I did not have any contingency to do it. Which is why for this IPO, I was already well prepared even though I was a bit skeptical about any truth in the rumors of it being listed again. Wasn't expecting the Blue form application which made me run around a bit, but it was all good.

Now just waiting for Nov 19th.

Notion VTec

2009-10-18T07:01:00.010+08:00

First off, I was first introduced to Notion Vtec when I read an article by Insider Asia from Edge Malaysia Online. They did and some coverage on the stock they bought and tracked it's performance on a weekly basis as part of their portfolio watch.

I've had the habit of scrutinizing a counter if someone claims it is good and excellent, to see if it suits me. Though not exactly in-depth or anything when I do it as I merely screen them from financial summaries. Just to keep myself updated and quick on info links and such. One of the most important thing an investor should have is his ability to find information on his investments or in this case, his future investment. At least in my opinion anyway. With the internet, the is no such thing as enough good information, more like too much dis-information to screen.

Business Prospects

I was quite surprised when I was reading the Notes 'B3' that came with the latest quarterly results when management actually gave a projection of how the year end results will look like. Now this was released in August.

Quote;
"Based on nine months results and visibility of orders, management targets the FYE2009 revenue to be approximately RM165 million and EPS between 4.8 and 5.0 sens. It is assumed that there will be no major change in exchange rates, raw materials prices and other cost of productions."

So basically management tells us that, it'll look like that when the last quarter results comes out. Take note also that this was in August when the latest accumulated EPS was only 3.26 sens and share prices was less than RM0.40 a piece. And when the quarterly results was released, the prices appreciated strongly and now sits pretty at 50 sens. Not bad huh for cheap publicity.

Still though, it's one thing of management to say something and another of how things will turn out to be. But based on that statement, Notion will go ahead with it's expansion plan into Thailand buying a new factory and setting up another manufacturing plant for HDD components. Recently they announced a proposal for private placement to get a cash infusion for their Thailand start-up.

Bulk of their customers are HDD makers like Western Digital and more recently Samsung. Their camera parts for SLR production serves mainly Nikon. Part of the reason of the Thai expansion was to have a manufacturing plant closer to Nikon camera factories which have bases in Thailand. It is seen as though Notion is shifting their camera operations to Thailand so that full scale HDD parts operations can continue in Malaysia.

Risks

Their quarter performance was hindered in the 2nd quarter due to the economic crisis but have rebounded strongly in their 3rd quarter. I would say this growth stock has some good projections with it's good recovery in revenues. Still it depends on the strength of the USD vs RM and as USD is currently suffering another downfall, the risks are there.

Another risk I can think of for their HDD business is the technological advancement of flash storage media. HDD will soon be a thing of the past since the SSDs or solid state drives will soon take over the market. Although not projected to have any impact so soon. Maybe another 3 to 5 years more before SSDs become affordable to the public. So in terms of long term revenue, their HDD business has got to go. Unless the HDD technology can be further enhance to match the speed of the SSDs.

Their cashflow isn't particularly impressive but manageable, same as their debts. But if their private placement comes through, it should be a welcome addition to their operating cash levels. Though it would be mainly used for their Thai expansion. At least we know it won't get them too deep into debts.

Consolidation

Notion Vtec will be going through a 5 to 1 share consolidation in November. This will get the counter out of the "cheap stock" mentality and further reduced high price fluctuations we normally see in less than RM1 stocks. Good for stability but may force price downwards a little if the current valuations are already inflated due to market activity. Expected price after the consolidation exercise will the in the RM2.50 region based on current prices.

Conclusions

Now I always have a feeling whenever a stock is undergoing some sort of share exercise, the market will play up the share for who knows what reason. But the evaluation at the current moment is still fair but then for almost no dividend counter, a PER of 10x is a bit much based on future evaluations. But this company makes no excuse for the lack of dividends because they are trying to expand aggressively.

It all depends whether the coming economic recovery will help sustain current earnings in 2010 and subsequent opening of their Thai facilities will further increase their profits. Still a lot to read but I'm already itching to jump in.

YTLPOWER: 1st Quarter Expectations

2009-10-08T09:57:00.002+08:00

With the conclusion of September or 1^st quarter of 2010, YTLPOWER earnings still seem shaky despite the consolidation of Power Seraya (PS)’s contributions. Foreign exchange translation changed directions again with the GBP faltering 5% at the end of Sept compared to end of June to RM5.5679 per Pound compared to RM5.8592 earlier.

The Singapore Dollar (SGD) now play as big a role as the GBP in YTLPOWER’s foreign earnings translations as PS is expected to contribute as much as 30-40% of total net profits of FYE2010. SGD appreciated about 1% at the end of Sept compared to June to RM2.4573. This quarter is also expected to show without any other extra-ordinary write-offs, the ‘new’ normal of YTLPOWER’s earnings and profits.

Due to 2009 year of write-offs coupled with falling GBP exchange, it was bad year in terms of profits for the company. 1^st quarter of 2010 will therefore set a benchmark for the rest of the year for predicting or rather forecasting earnings for YTLPOWER. No doubt it will also give the counter direction preferably upwards throughout the year.

Although historically and statistically, 1^st quarter earnings are always weaker compared to the rest of the year in the past 5 years since June 2003. Only on 2 occasions where the net profits for 1^st quarter was not in last place, which was in 4Q2004 and 4Q2009. Although they did came in 2^nd last. But nevertheless, this coming quarter results will definitely be better than 4Q2009 measly RM9mil net profit.

Challenges Ahead

On the WiMax issue, there is still no clarity from the management. Hopefully the coming AGM can at least answer generally in what way YTLPOWER is involved in this business. I still hold the believe they won’t be directly involved in the operation of the WiMax license nor will they be financing it. Still, the uncertainty about the issue has made at least one research house to downgrade the counter to SELL due to the expected participation in a “risky” business.

Their UK operations Wessex Water (WW) is also feeling some pressure. OFWAT which is the regulatory body of the UK is currently reviewing water rates for 2010-2015 for all water treatment/providers in the country. It has recently drafted a proposal to reduce water rates up to 4% by 2015. Final price limits will be announced in November 2009. From what I read in the news, I expect minimal impact to the bottom line of WW in the near future.

Come 3^rd quarter 2010 will be the interesting part as January is when up to 800mil WA warrants will be due for exercise for conversion to normal share. Expected to generate almost RM1 bil of cash for the company as well as dilute current share value by about 13%. No doubt share prices will be negatively affected and it’ll be interesting to see how management will take care of this. Although the remaining 800 mil warrants can also be exercised before January 2010 and acts as a reminder why share prices are currently subdued.

Question is, will the coming appreciation of EPS from the PS earnings will negate the dillutive effects of the 800 mil warrant conversions?

Maybulk Buckling Under Economic Environment

2009-08-26T21:33:00.003+08:00

When the previous quarter results was released, I had an opinion that Maybulk was way over-rated for it's price. And the fact that they still paid a 30 sen dividend means it can't possibly go on forever.

The latest quarter report released by Maybulk showed improvement over it's previous quarter but still, a lot less than what it needs to continue it's trend of 30 sen dividend. Revenue improved to RM70 mil compared to last quarter's RM50 mil. Operational costs remained the same at about RM50 mil. This allowed them to post almost RM20 mil operational profits. Coupled with a RM31 mil contribution from it's associates which is Pacific Offshore Services.

Overall net profits is RM72 mil which is an EPS of 7.11 sens this quarter. That's more than 3 times less than what it earned last year in the same period.

Looking through their cash flow statements, their cash hoard was reduced tremendously after paying out RM300 mil in dividends last quarter. So this quarter, they are left with RM400mil in cash deposits with negative cash flow from their investing, operating and financing activities. If this trend of negative cash flow continues, investors can kiss their dividends goodbye. Because it is not sustainable in these economic environment where the BDI is still below 3000 points.

Their new vessels which they have ordered for long term charters are only due in 2010. With their reduced fleet size, low freight rates and lousy economic environment, they would have to scale down their dividends at least until the new ships arrived.

At current price of RM3.13, it is still overpriced. Fairer would be in the RM2.50 I would think. At least that's the price I would consider.

But without a doubt, if the BDI increases steadily in the next few months, expect Maybulk to trend together.

MAYBANK Quarterly Loss

2009-08-25T18:11:00.005+08:00

Wow, surprising loss of more than RM1 bil for Maybank this quarter. Their yearly EPS took a hit and fell all the way to 12 sens only. They also announced an 8 sen dividend compared to 20 sens last year which is less than half. Although it is expected they take a hit from the PT Bank Internasional deal, I wasn't expecting a loss though. Today's closing price was RM6.52 without change. Current PER would be 54x and dividend yield of 1.2%.

I guess the rumours of their management being booted out due to poor financial results was very true after all. It is a very poor result. Classic example of "Price is what you pay, value is what you get". Do remember that Maybank and YTLPOWER acquire these assets roughly the same time, but YTLPOWER at that time got the better deal according to this article in the local newspaper.

Although their operational revenue has increased about 10%, their cost after consolidating their new Indon ventures ballooned up to 30% more according to their annual report. It will take some tough banking to bring it back to it's feet as they hope for the world economic recovery to propel them out of the loss pit back into it's former glory.

If their impairment of RM1.6 bil and an additional RM111 mil for Pakistan operations isn't recorded, Maybank would have registered a profit mimicking last quarter's result of about RM500mil or so. Give or take several generous percentage.

Heh, looking forward to tomorrows market reaction if it hasn't been already factored in. Since Maybank is one of the largest components of the new KLCI index, it will affect the index even more.