ASEAN Indices

Jakarta Composite Index (JCI)
JCI broke below 3,400-level support yesterday and fell lower to 3,346 this morning. When looking for a pattern, it has formed a triple top, followed by a breakdown below support. Despite the breakdown, JCI is reaching the projected decline soon around 3,300-level while its RSI looks set for a soft-landing around 25 level-point.

Stock Exchange of Thai Index (SET)
The outlook for SET is quite worrying as it has dropped by more than 4% today, the worst among the ASEAN countries. Obviously, the index is near to the next support at 950-level, once broken next will be 900. Yet, when I was writing this, SET has returned to green zone at 969.7 compared with open at 968.15.

Philippine Stock Exchange (PSEi)
Apparently, PSEi has rebounded before everyone did.

Overall, the selling pressure by foreign funds may come to an end. Yet, investors should be alert and be aware of the Chinese New Year effect as many people may exit for New Year “Ang Pow”. Technically, FBM KLCI is reaching an upward sloping support around 1,533-level while RSI has flatten at 50-point-level. If index successfully rebounds on 1,533, next resistance is at 1,575.

Today’s Juices

• MRCB@RM2.18
Catalyst: New contract, Acquisition of land, 10MP, ETP, 4th quarter result is coming up. It should be around February 2011.
Technical: Bounded between RM2.00 and RM2.17 and just broke above the resistance today. Next resistance at RM2.25
Average Consensus Target Price: RM2.25, representing only 2.7% upside.

• Steelmakers in Asia may be forced to pay as much as 33% more for hard coking coal after the worst floods in 50 years in Australia's Queensland state. Prices may increase to $270 a metric ton for 3-m contracts starting April 1. (Source: Bloomberg)
The only listed company on Bursa that has principal activities of production and sale of metallurgical coke is HUAAN. Its business operation is located at Linyi City, Shandong Province, China. It may be benefited from the rising coking coal price.
But Too bad! Average consensus Target price, RM0.36 is below the current share price at RM0.385. Please also note that steel industry is not one of the top gems at this timing.

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.

IPO – Tambun Indah Land Berhad

IPO

• Public issue of 32 mil new ordinary shares of RM0.50 each comprising of:
1. 11.05 mil for Malaysian Public
2. 11.05 mil for eligible directors, employees and etc
3. 9.9 mil identified investors via private placement

• Issue and offer price of RM0.70per ordinary share

• Offer sale of 22.1 mil shares made available for application by bumiputra investors

• Closing date of the application for IPO shares: 6 January 2011

• Listing date: 18 January 2010

• Utilization of Proceeds: Out of 22.4 mil, 12.7 mil will spend on working capital, 7.1 mil on repayment of bank borrowings and 2.6 mil on listing expenses, which represents approximately 57%, 31.7% and 11.6% respectively. 1.2 mil of working capital will be spent on operating and marketing expenses and the rest will go to construction cost. 3.2 mil will repay the borrowings for Intanasia and 3.9 mil for TID development.

Background

• Involved in property development, investment holding and operation of car park as well as project and construction management in mainland Penang.
• The founder of the company is the managing director Ir. The Kiak Seng.
• Incorporation in 1994 as Tambun Indah S/B
• The company product was the 1st guarded & gated community and the 1st landed strata scheme property
• Structure of the group:
- Cenderaman - 100%
- Langstone – 100%
- Denmas Development - 100%
- Perquest – 100%
- Denmas – 100%
- Tokoh Edaran – 100%
- Epiland – 100%
- Tambun Indah Development – 70%
- Hong hong – 100%
- Tambun Indah S/B – 100%
- Intanasia – 100%
- TID Development – 100%
- Juru Heights – 100%
- TKS Land – 100% - CBD Land – 50%
- Jasnia – 100%
- Zipac – 100%

Highlights
• Purpose of listing: enable the group to gain recognition and further enhance reputation and image in order to expand the business and to move in line with the big players in the local market.
• Catalyst: Building the second Penang bridge, which connect Batu Maung and Batu Kawan, is regarded a catalyst to add value to the company since its products are near to the bridge.
• Dividend policy: The Company has a progressive dividend policy of distributing 40% to 60% of their PAT attributable to shareholders excluding non-recurrent items.
• Net Cash: Cash & cash equivalents – Short & long term debt = 26.947 (pre IPO), 46.747 (post IPO), where most developers in Penang island have higher gearing ratios.
• Instead of marketing the Company’s products, I would prefer to compare it with its peers.

	Price	Mkt Cap	P/NTA	BPS	Total debt /C.Equity	Div Yield	P/E
Ivory	1.17	217m	1.26	0.93	95.44%	0%	9.64
Hunzpty	1.71	332m	0.79	2.18	21.14%	3.26%	4.20
E&O	1.31	1.09b	0.95	1.38	90.34%	2.90%	20.03
Tambun Indah	0.70	154m	1.4	0.58	10.32%	6-7%	~5.5-6

• Assuming products’ location, value, quality among these companies remains constant, what would you think about these 4 companies purely based on the figures above.
• First, for safety purposes, I’d look at debt. Somehow, Ivory, Hunzpty and E&O have higher gross gearing compared with Tambun Indah. In such circumstances, the concern of the Company using its IPO proceeds to repay borrowing will no longer an issue. With Net cash on hand, Tambun Indah is considered as healthy and has lower loan default risk.
• Since Tambun Indah has the highest price to NTA among the peers, the important question is whether the premium is worthy or not? Under the circumstance where in that fact that Penang Island is short of affordable properties to new generation, second thing comes to my mind is whether people will compensate them with cheaper property and bigger space if the only condition is that they have to live far away from the heart of the city – You will never know – it depends. However, there is a risk there. Hopefully, someone can answer. I’m not sure whether the second link bridge has been officially approved. If not, the properties may have a hard time to turn hands. If yes, everything will be in place.
Results:

• I wouldn’t spend time on result since the figure below tells it all.

Income Statement Ratios	2007	2008	2009	2010
Gross Profit Margin (%)	27.50%	29.99%	31.99%	35.24%
EBITDA Margin (%)	28.11%	27.53%	30.54%	32.85%
EBIT Margin (%)	27.94%	27.40%	30.36%	32.74%
PBT Margin (%)	27.81%	27.34%	29.76%	32.74%
PAT Margin (%)	20.15%	18.63%	23.56%	24.60%
Net Profit Margin (%)	20.15%	18.63%	23.56%	24.60%
Effective tax rate (%)	27.56%	31.88%	20.83%	24.84%

Comments:
Fundamentally sounds, catalyst remains uncertain. Listing date is on 18 Jan 2011. I believe retailers will think “as long as not China stocks, not making shoes, everything will go during IPO.” No support for this statement, but it’s just purely a sentence that I regularly heard from others. Well, 18 Jan is about 2 weeks before the CNY and subscription for the IPO is closing today. For those who have sent in their subscription form, Good Luck! For those who didn’t send, we can only sit and wait for the performance of the stock.

Source: the Company's Prospectus

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.

ENG TEKNOLOGI

ENG TEKNOLOGI
Description: manufactures hard disk drive peripherals components, industrial machinery, equipment, precision tools, electronic and computer parts, high precision mould, die, jigs, fixture, and automation system.
Price: MYR 1.88 as at 10am 27 December 2010
52Wk High 3/25/2010: 2.98
52Wk Low 12/28/2009: 1.46
Highest P/E since 1/1/2009: 9.94
Lowest P/E 1/1/2009: 2.54
Average P/E: 5.59
Book Value/share: RM2.00
Holders
• PNB is the majority stakeholder, 14.46%
• Lembaga Tabung Haji 8.34%
• AIG ASIAN Oppurtunity 4.86%
• Prudential Unit Trust 1.09%
• Apex Investment Securities 0.08%
• RHB Unit Trust 0.06%
• Integra Capital 0.05%
• 28.94 out of 63.60%, about half of the substantial shareholders are institutions.
Highlights
• Dividend yield 6.49%, the highest among the peers
• Market Capitalization 228.22 million, the highest among the peers
• Net Cash
• Lowest trailing 12 month P/E among the peers
Risks
• Revenue, net income and EPS q-o-q decreased.
• Strengthening Ringgit Malaysia against USD
• High inventory levels as HDD’s consumer demand has been weak.
Catalyst
• ENG is technically bottomed out with return of buying interest, resistance at RM2.25 and RM2.63. RSI is getting closer to 70 level while daily fast MACD has entered positive territory.
• HDD companies have bottomed out and are recovering, thus I think ENG will follow suit.
• Higher demand for Notebooks & PCs
• Research house comments
HLG Research said “HDD growth is expected to continue, driven by growth in China, cloud computing, DVRs and the PC placement cycle”, “Notebook makers are seeing good demand, translating to increased orders in November”, “A re-stocking of HDDs in 1Q CY2011 could spur a re-rating cycle for Malaysian HDD companies.”

HLG Research has downward revised the target price to RM2.15, but maintained its Buy call. Personally, I think ENG has more upside compared with its peers. Why? 1) ENG has higher dividend yield of 6.49% compared with other local players such as JCY at 5.65%, Notion Vtec at 4.12%. 2) ENG has the lowest trailing 12-month P/E of 3.7x among the local and global players such as JCY at 9.56x, Notion Vtec at 6.72x, Western Digital at 6.03x and Seagate at 4.84x. 3) ENG priced below BPS.
Thus, I believe ENG will grow further. With an average industry P/E of 6.7 after 20% discount and FY2010 consensus EPS of 46 sen, i think ENG should worth about RM2.46, which is 15% more than HLG Research's target. Combined with technical configuration, I believe ENG may increase further to at least RM2.25.

Source: HLG Research
Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.

Zelan technically bottoming out?

Facts:
1)Historical fundamental less attractive as FYE2010 revenue dropped by half
2)Loss making company
3)Gearing about 60%
4)Book Value 0.83
Current price 0.58
Yesterday 0.53

Technical-wise
Daily chart shows that the counter is bottoming up with the forming of second consecutive higher low.
Daily fast MACD crosses signal line, moving towards the zero line.
RSI improves and remains at neutral zone.
DMI is in the midst of staging positive crossover.
Support is at 0.50
Resistance lies between 0.65 and 0.75

Technically, i think downside of the company is limited without taking the fundamental into consideration. short-term ? I guess okay. Medium/Long-term? No Idea.

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.

SCIENTEX (#2)

Update on 1QFY2011 Result

·         Although revenue q-o-q dropped slightly to 186.63 m from 191.69 m in 4QFY2010 (-2.64%), it recorded a 13.17% increase from the same quarter in 2010. 

·         Within our expectation, the first quarter always has a lower sale value compared with the fourth quarter but overall it is in a rising trend as shown below.  

·         In line with revenue, PBT y-o-y surged 43%. This is mainly due to lower interest expense and higher investing results. However, a higher tax amount caused PAT y-o-y only recorded a 32% increase.

·         Y-o-y, EPS leaped higher  from 5.91 sen to 7.89 sen, representing a 33.5% increase.

·         Reserves increased by 18.444 m. Largely came from the current asset includes receivables, derivative financial assets and cash and bank balances whilst total borrowings decreased by 6.37 m.

·         Gearing improved from 0.11x (July 2010) to 0.08x (October 2010). (net of cash)

·         ROE & ROA improved.

·         There is no dividend policy but the company said that they will try to distribute 30% on average based on performance basis.

Highlights

Packaging Industries

·         Stretch film and pp strapping band are the major contribution among the manufacturing lines to the top line, which contributed 55% and 10% respectively.

·         Stretch film’s capacity has been growing since 1998 from 8k MT p.a to currently 100k MT p.a, which has a total of 8 production lines. The company will continue to expand its capacity by adding another RM 18 mil CAPEX for FY2011. (This CAPEX includes the expansion on strapping band as well). According to the company, capacity of stretch film will increase to 120k MT p.a. in FY2011. The expansion will help the company to aim for becoming one of the top 5 producers of stretch film where it is currently the only Asia Company in the top 10 stretch film producers among the world competitors.

·         Strapping bands has a capacity of 16.2k MT p.a with 10 production lines. The company will expand its strapping band capacity to 24k MT p.a in FY2013.

·         95% of both stretch film and strapping band are exported to foreign countries.

·         I’ll not cover the other packaging products as I do not think it will bring any significant changes to the top line.

Property division

·         Current  project in hand of RM418mil

·         Pipeline projects of RM1.8mil last until 2018

·         Total GDV – Completed GDV – On-going GDV = RM1.8 b.

·         RM1.8b divided by on-going GDV RM418 m = 4.3 years                                                                                                                                                                                                                                                                                                        

My View

 

	RM '000
	Manufacturing	Property	Assumption
Asset	214.35		PAT 25.16 *Ave. P/E 8.5x
		351.37	Remains the same
Total Value		565.72
Net Debt		32.96
Equity Value		532.76
Share m		230.00
Value of Share		2.32	~13% upside (Last price RM2.05 as at 20 Dec 2010)

 

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above. 

Mamee-Double Decker (M) Berhad

Details
Share Price as at December 14, 2010: RM3.46
Distribution for FY2010 13 sen (50% dividend policy, YTD~41%)
Dividend Yield (%) 3.76%
Trailing 12-m P/E 9.61x
Average Historical P/E (2008 to present) 7.70x
Historical range of P/E (2008 to present) 5.18x – 10.40x
52 week High RM3.78
52 week Low RM1.99
Average Historical P/Book (2008 to present) 1.29
Historical range of P/Book (2008 to present) 0.74 – 2.26

Corporate Structure

Source: Company’s website

Management
• Datuk Pang Chin Hin, Chairman
• Datuk Pang Tee Chew, MD/CEO
• Datuk Pang Tee Nam, ED/COO
• Mr. Vuitton Pang, Business Development Manager

Source: Company’s website

Snapshot
• Established in 1971 as a manufacturer of dry noodle and instant vermicelli
• Listed on Main Board of Bursa Malaysia in 1992
• Malaysia’s leading manufacturer and marketer of a wide range of Food & Beverage products with 4 factories in Malaysia and 1 in Myanmar.
• Brands include Mamee Monster, Double Decker, Mister Potato Chips, Cheers, Nutrigen, Nicolet, Corntoz.
• Top market share among the snack food manufacturers in Peninsular Malaysia – approximately 31% share in February 2010.
• Actively serving more than 80 countries
• Non-core segment – oil palm plantation in Indonesia. Target to contribute to group revenue in 3 years’ time

Awards
• ISO9002
• ISO9001
• HACCP

Operational Highlights
• Launched “Rio Fiesta” orange and apple drinks to be sold in Malaysia and overseas
• Marketing support for new and existing products
• Additional warehouse in Melaka to increase capacity by 46%
• New building and machinery

Historical Financial Highlights

• Compounded Annual Growth Return over the past 5 years is 9.05%
• 9MFY2010 revenue y-o-y increased approximately 15.9% from 9MFY2009.
• Y-o-Y increasing trend of revenue seems to be maintained or better as several positive developments may act as catalyst.
• Geographically, main contributor is Malaysia followed by Australia, Singapore, Russia, Hong Kong and Netherlands based on 2009’s figure.
• Annualized PBT and Net Income margin for FY2010 are approximately 12.5% and 9.72% respectively dropped slightly from FY2009 13.48% and 10.78%.

                                               Q-o-Q Revenue
• FY2010 quarterly revenues seem to be stable at a higher level compared with FY2008 and FY2009. Imagine the new developments start to kick in, what will be the result?
• Free cash flow remains healthy after RM10mil CAPEX in 3QFY2010
• Gearing – net cash. As at 3QFY2010, cash was 64.613m and no borrowings. However, we should consider that the new borrowings will be occur in FY2011, which is the 50% of 100mil capex.


*FY2010 figures are annualized. If new developments bring positive contribution to the top and bottom lines by FY2011, all percentage terms will not be the same. It may appear to be different from what we expected.


Risks
• Cost of raw materials increase.
• Business risk - Non-core segment – oil palm plantation. Contribution remains uncertain.

Technical Configuration
• Broke below the intermediate upward trend line in October 2010.
• Formed lower highs hinting at a short term downward trend.
• Indicators are mixed.
• Symmetrical triangle is brewing along with decreasing volume.

My view is neutral on the share price until it breaks the symmetrical triangle.

Reason to be positive
• Launched “Rio Fiesta” orange and apple drinks to be sold in Malaysia and overseas few weeks ago
• Additional warehouse in Melaka to increase capacity by 46%
• New building and machinery

Increase capacity may improve volume efficiency of production by end of 2011—as well as increase top and bottom line??????

• The company announced 50% dividend payout policy in April 2010. YTD distributed dividend is about 41%. Hopefully, there will be a surprise for this coming 4Q2010.
• Top substantial shareholder remains the Pang family. Direct interest increased from approx. 61.42% as at 6 April 2010 to 63.6% recently. Position of the family may indirectly reflect how keen they are on the new developments and the company business???
• Although technical-wise I view it as neutral, all these catalysts may bring back the interest of the counter.

• Mix of different market cap counters – average P/E among them = 13.51x

As MAMEE’s average volume for the last 30 days is the third largest among the companies and yet lower than LONBISC and F&N.

Majority counters are overvalued based on the comparison between price and book value per share. Thus, I personally don’t think it is applicable.

MAMEE’s historical highest P/E was 10.40x, which was above the historical trailing 12-m P/E.
If 13.51x times annualized FY2010 EPS 32 sen, Mamee should price at RM4.32.
If 10.40x times annualized FY2010 EPS 32 sen, Mamee should price at RM3.32.
If 9.61x times annualized FY2010 EPS 32 sen, Mamee should price at RM3.07.
Then, I have a view that Mamee should range between RM3.07 and RM4.32.

Encouraged by all the catalysts n facts, by now, you should have your own view of how far MAMEE can go! 

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.