Economics aside, if we look from geopolitical aspect, it's all the more reasons for US leaders to support the TPPA. This is because after the 2008 Subprime-Crisis, US was too busy to rescue their nearly bankrupt financials, bailout corporations, revive their stalled economy with QE after QE, disengage their military operations in Iraq and Afghanistan, etc, etc. After all that were done, Obama shifted his attention to the Pacific Rim, where China is making big strides in this region, and threatens US dominance here, so besides making military pacts with countries around China, for economics, TPPA is formulated to counter China's 'One Belt, One Road' Economic Belt.

US consider China as the No.1 biggest threat to US supremacy in both military and economy. If US make an exit from TPP pact which is motivated by themselves, it would bring themselves shame and loss of respects by the other nations, not to mention they may indirectly push these nations towards China's welcoming arms.

Furthermore, China's RMB is now accepted as 1 of the 5 reserve currencies, if US play a US-exit from TPP to become isolated, then the US Dollar may lose it's dominance as world currency, probably to get substituted by RMB, that's the last thing US leaders would tolerate.

So in conclusions, US will not exit from TPP, unless they let the irrationals rule over the rationals.

Here is my analysis of TPP's outcome base on 4 possible scenarios:

Scenario*1 -- Obama was endorsed by the Senate House to expedite on the TPP just 2 weeks ago (see news link below), so most likely he will succeed to get TPP legislated before his term ends by end of this year. The Republican-majority Senate House has approved it by 60-38 votes, shows that Obama's TPP efforts is strongly supported by both parties, so he should be able to get the Congress to pass it too. Once legislated, TPP can't be simply be nullified by his successor.

https://www.theguardian.com/us-news/2015/jun/24/barack-obama-fast-track-trade-deal-tpp-senate

Scenario*2 -- Hilary will most likely get elected as next US President, she is still leading Trump by over 6% in the latest poll (see link below). She supported Obama's TPP in principle when she was his Secretary-of state, but now she backed off from TPP because of workers unions demand, after seeing Trump's rejection of TPP get the unions' supports. But after election and if Hilary win, her rationality would choose to abide her party's endorsement on the TPP (see news below), which she played a part too under Obama's administration. At most she would just fine-tune the TPP instead of rejecting it, by adding some sweeteners for the unions.

http://elections.huffingtonpost.com/pollster/2016-general-election-trump-vs-clinton

http://www.dw.com/en/democrats-to-endorse-trans-pacific-partnership-agreement/a-19356105

Scenario*3 -- Trump may win the election, though not very likely, but after election he may make a U-turn on the TPP. Most Republican reps and leaders are pro-business, because they normally enjoy a lot of sponsorships and donations from US Corporations, even Trump himself is a property tycoon who enjoyed the GOP's pro-business policies. So most probably instead of "Tear off the TPP" as he promise now, he would just revise the TPP to give some candies to the unions.

Scenario*4 -- Trump win the election, he may try to nullify the TPP, but he won't be able to get pass the Senate and Congress, because not only the Democrats, even his own Republican reps would not allow it. So far, as you can see that Trump is a maverick in his own party, most of the GOP's leaders don't like him at all, because of his grossly populist approach and shooting his mouth off like a loose cannon, only the lower working class people love him, but not the present crop of reps and leaders in both camps.

So, TPP should become reality, and Obama would be remembered for his efforts to make TPP happened, a historic pact that will be effected in the US-led 12 nations that controls 40% of the world's economy.

Hi rayloo, about the concern of US exit from TPP after either Hilary or Trump become the next US president, it's not impossible, but I think it's a very remote chance to happen.

It would be most ideal if a company can give consistently high ROE without increase in equity base, but in reality can this actually happen to a small cap company? Look at current blue-chip companies with huge share capitals, how did they grow? Without increase in share base and/or equity base?

Prolexus started as a tiny Second Board company with only about 40M shares just a few years ago, can it grow without enlarged share cap and equity base and without borrowings? Having said that, don't forget Prolexus was actually financially sound with NET CASH position, until they invested on rapid expansion plans lately.

http://klse.i3investor.com/blogs/kenangaresearch/80382.jsp

iloveshare128, I don't know why you still insist your 0.78sen NA is correct, and you didn't really answer my questions. Can you please read this abridge prospectus before you make conclusions:

http://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=175568&name=EA_DS_ATTACHMENTS

Just read from page 38-41, there are Company's calculations of NA/share from Q4-2015 to after RI and after full WA Conversions. See the page-39, "Minimum Scenario (for 56.56M RI)" which is the case now because the RI issued is 56.8M. See Column-II, the NA after RI is estimated at Rm1.01, and it has taken into account of the RI's proceeds less Rm1.6M expenses (see page 41, Note-2). The Rm55.2M net proceeds will appear as increase in the "Share Capital" and "Share Premium", exactly at the amount, no more no less, please check it yourself.

The NA at Q3-2016 was estimated at Rm1.03 based on adjustments from Q4-2015 audited results, with Q3-2016 Equity for Company Owners at only Rm116.9M (actually it's Rm131.52M and NA is Rm1.19), if adjusted based on latest Q3 results, and enlarged shares after RI at 170M shares, NA/share = (131.52+55.2)/170 = Rm1.10, approximately, just as I mentioned before.

Hi rayloo, very well said, I couldn't agreed more on what you say above...

I'm very sure that Warren Buffet isn't among the 99.9% of the herd, WB is in the 0.1% who read a lot and analyse a lot, and make very detailed and accurate studies before he make his investment decisions on the companies he targeted. But I think we need to point out the errors posted here, because some readers may base on the wrong info posted here and get wrong impressions or make decisions base on such wrong info.

I don't try to advocate anyone's buy or sell decisions, iloveshare128 wants to buy Magnitech, it's purely his personal decision, and I don't deny it's also a good company to invest in.

On the Rm55.2M investment not 100% become NA, in fact, if you have followed the Company's news on their expansion plan, you would know following important facts:-

1. The 40-yrs Leasehold land of about 15-acres in Vietnam was acquired with Rm10.9M, with Company's internal funds (from their cash hoards, nothing to do with this RI proceeds),

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5081997

2. The Freehold land of about 28-acres in Johor was acquired with Rm9.9M, with Company's internal funds and/or bank loans (from their cash hoards, nothing to do with this RI proceeds),

http://www.bursamalaysia.com/market/listed-companies/company-announcements/4766893

3. The Company's major shareholders have actually increased their shareholdings via Open-market purchase and ESOS Subscriptions, so that they could subscribe for more RI shares. They made the commitments to take up the RI via their underwriters,

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5086269

So with Rm55.2M, Company actually have already paid for the land costs, the RI will be purely for construction of the new factories only, as detailed in their RI prospectus. So what's your take?

To say that there is risks of the Company abusing the RI proceeds, is whether you pick the right company and their management team, this company exists for several decades, and it's well managed with a good track records, having very healthy cash flows and balances. Don't forget item#3 above which shows that they themselves have major stakes in this, and should be more keen than us to see through the successful completion of the new factories.

I agreed that the Rm55.2M won't be 100% translated into NA, but it's definitely not going to be ZERO (0%) right? Do you agree on this point?

Please also take note that when the accounts show "Depreciation of plant & equipment", it's to Company's benefits, as they can get deducted from taxable income, so they may be depreciated to Zero over 10 years to get back the tax money, just like if you own a company, you would buy a Company Car to get tax deductions from depreciation. After 10 years fully depreciated in terms of accounting, the plant & machineries will still be running happily to churn out products at full capacity if it's well maintained.

iloveshare128,
But you mentioned "current Net asset is RM1.19/share. after right issue, it will be RM1.19x108.35/165.15=RM0.78", please take note that the Rm1.19/share is actually NA at Q3 closed date, and then you prorated it with 108.35/165.15M shares to get your estimated Q4's NA/share, which is (share base @Q3)/(share base after RI @20.June.2016), isn't that as what I queried in #1 above?

Hi iloveshare128, I'm not an accountant, so maybe you know better than me, but I wish you can explain the following doubts to your replies above:

1. Your NA/share calculation was using NA at Q3 period closed @ 30.4.16, but then you use the enlarged share base after 20.6.16, by assuming the Rm55.2M Net Cash proceeds from RI has become ZERO, no effects on the NA, is this the correct accounting practice?

2. The Rm55.2M will be gradually drawn down to finance the constructions of the 2 new factories, over a period of about 18 months (assuming no delays), as the constructions progress till full completion. Does that mean the investment of this Rm55.2M becomes ZERO? Or will it go into the account statement as "Property, Plant & Equipment"?

3. The Rm55.2M still in cash form now, does it qualify as "Current Asset"? When the factories are ready and become operational next year, will it become "Non-Current Asset" in next year account?

4. Can the Company's Prospectus state clearly that the Rm55.2M proceeds will be used for building the 2 new factories, but later end up diverted for other purposes, and then lost all the money, and the Company can get away with it?

5. For fair argument sake, the new factories will be depreciated over a period of time to become ZERO or left with some Salvage Values, can it considered that the Rm55.2M end up as NOTHING?

6. If in future these fixed assets actually appreciated as is usually the case actually, especially the land prices usually escalate with time as the developments of that location matures. Will the accounts be adjusted to reflect this? Or if it becomes ZERO from Day-1 in your assumption, then how to make this fair price adjustment?

Thanks in advance for enlightening laymen like us with your clarifications.

Dear iloveshare128,

you have said above "by looking at its P/BV, it is close to 2x (much higher than the 1.5x ratio)... so I think it is a bit overpriced... just my 2 cents.".

I wish to know how did you get the P/BV ~ 2x for Prolexus? Did you use post-RI's NA/share of 78sen you calculated earlier? So you use 146/78 = 1.87 or nearly 2x to say that it's overpriced?

But what if it's post-RI NA/share is Rm1.12, as I clarified, after adding the funds raised by the RI? Then the latest P/BV = 146/112 = 1.30, it's below 1.5x and it's not overpriced? Do you agree?

Since you compare it to Magni-Tech earlier and feel Magni is a better buy, but Magni's NA is Rm1.98 and it was trading at Rm4.12 two days ago, so it's P/BV = 4.12/1.98 = 2.08, this is more than 2x, can you elaborate?

With their capacity increased by 40% now and another 45% from earlier 10M/year, total 85% increased, and based on Prolexus' objective to grow at average 10%/pa, the total capacity should cater for their growth in the next 5 years.

Their Vietnam factory going on stream by Q3 next year is a very timely move, because TPPA will kickoff in 2018.

China has not yet become a TPPA Signatory nation, so their China factory is expected to mainly cater for China market.

The current capacity of 14M/year and the new Vietnam factory's initial capacity at 4.5M/year or +32% higher, is stated in their "Abridged Prospectus dated 20.5.2016, page#18-19.

Last year before Prolexus planned their Stage-1 expansions, their total production capacity was only about 10M apparels/year, but in Q3-2016, this has increased to 14M/year, this goes to show that their Stage-1 expansion plan has completed successfully.

Hi Weng n iloveshare128, see TheStar news below on Prolexus' expansions into China market:

http://www.thestar.com.my/business/business-news/2010/12/27/garment-maker-prolexus-counts-on-china-plant/

It started with only 200 workers about 5 years ago, Prolexus would gradually increase the workforce at its China factory to 1,000 workers.

See the Kwongwah Daily's news (sorry, in Chinese) about their expansion plan early last year:

http://finance.sina.com/bg/economy/kwongwah/20150215/04441211868.html

This was also reported by TheEdge Weekly, see this news quoted by Bull&Bear Research:

http://bullandbearresearch.blogspot.my/2015/02/update-prolexus-bhd-ramping-up.html

Actually I misinterpreted a bit on the news, it should be : China's plant to double the operation capacity by end of 2015 with a capex planned at RM8mil last year. Their China's operation is expected to contribute over 50% of group sales in 5 years time, in anticipation of China's potentially huge domestic market.

Still in correction mode, but price should stay above the 85sen strong support, then next week may resume uptrend...

iloveshare128, regarding concerns on competitions in Garment industry, it's not new, in fact it's a perennial issue. Many years ago there were already many nay-sayers who said that Malaysian Garment Industry was riding into sunset, because of competition from new emerging countries with lower costs. But decades later, look at these companies, they are still thriving and growing.

This is because instead of competing on cheap garments selling in places like pasar malam, Malaysian producers have successfully transformed and moved upmarket with higher quality and more customized products, eg., Prolexus produce apparels for premier brands like Nike, Asics, Under-Armour, etc. The reason Prolexus business is growing is because US economy is picking up steam and Consumer Spendings are increasing, thus forcing them (and others too) to expand their factories and/or build new factories to cater for their customers' increase in demands.

Another reason they still thrive is because, as the old-saying "If you can't beat them, join them", since Malaysian companies can't beat the lower costs of countries like China and Vietnam, so they move some of the productions to these countries, in the case of Prolexus, they already have a factory in China and currently undergo expansions, and now they are building a new factory in Vietnam, due to Vietnam's TPPA status and a big pool of cheap labour that will help reduce their costs further. Their China factory will eventually produce 50% of the group's total productions, whereas their new Vietnam factory will initially add 4.5M apparels/year to current production level of 14M/year, with potentials to expand and increase later in future when required.

For a company with matured business and stagnated with little room for growth, then any increase in new shares would surely cause EPS dilution. But for a company expanding due to growing business, the new funds received are invested for Productive purposes that generate more profits, then the risks of EPS should be lower, unless unforeseen circumstances happened. However, that's part and parcel of stock investments, no risks no gains, if investors cannot or not willing to take such risks, then better avoid stocks and put money into FD.

On the dilution by Warrants, in fact this was adjusted in the Ex-RI price, because at Rm1.20 conversion price, the WA was in-the-money unlike those warrants with conversion price higher than share ex-price (eg., Tomypak's case, Conversion at Rm2.29 vs share ex-price at Rm1.99):

Prolexus ex-price = (price-before-ex Rm2.04 x 2 + RI price Rm1 + WA Conversion price Rm1.20)/4 = Rm1.57. Their ex-price accounted for potential dilutions of warrants when converted to shares.

Tomypak ex-price = (price before ex Rm2.49 x 2 + RI price Rm1)/3 = Rm1.99. Their ex-price did not account for potential dilutions of warrants when converted to shares.

So Prolexus' ex-RI price have already been pre-adjusted down by making a very conservative assumption that all WA get converted, even though in reality, many warrants in BURSA ended up unconverted when they hit maturity.

Prolexus RI with warrants at such low strike price, it's actually beneficial, especially for a growing and expanding company, the WA should become more valuable later.

Sorry, #2. above should be "The funds raised will NOT sit idling, ..... "

DJIA jumps 200 pts, BREXIT rout should be over soon...

Disappointing lah... :-(

Probably bad market sentiment, itu semua BREXIT punya salah...!!!

So the "Intrinsic value" should actually increased to above Rm1.19/share @ Q3, because of the "Power of Money" when they are put to good use to work hard to make even more money for us, so to speak.

iloveshare88, good that you raised these points for discussion, first let's talk about their "intrinsic value", which I think you missed out a very important value in your estimate above:

1. The RI at Rm1.00/share has raised Rm56.8M funds (net = 56.8-1.6 = Rm55.2M after Rm1.6M RI expenses), it was not accounted in Q3, and that the "Weighted average number of ordinary shares in issue" in Q3 actually has increased from 108.35M to 113.88M shares (mainly from ESOS), and the total NA for Q3 = Rm135.95M, so the new NA/share = (135.95+55.2)/(113.88+56.8) = Rm1.12, very little drop from pre-RI at Rm1.19.

2. The funds raised will be sit idling, it is immediately channel into the construction of Vietnam factory and Johor factory, expected to start now (Vietnam) and September (Johor). Bear in mind that the money is invested for business expansions, not to pay debts or put in FD, when the factories are ready next year, their values should increase further because the money would produce more profits from higher production of apparels (Vietnam) and more value-added products (Johor).

We should be optimistic about their business expansion and their prospects instead of being sceptical about it, and to be patient to reap more profits from this as shareholders who are participating in this exercise.

iloveshare88, I fully understand ur concerns on the EPS dilution by the new shares, besides the new total shares at 165M, I also would like to discuss on the following points u raised :

1. We normally compare Q-o-Q because seasonality often influence the business performance, Prolexus' Q3 is in Feb-Apr period, Feb is the shortest month in a year and furthermore CNY usually falls on Feb, this normally cause the production and sales figures to reduce in this month.

2. By looking at past 3 yrs, 2013~15, we can see consistently that Q2 and Q4 profits are highest at roughly rm7M, and Q3 profits are lowest. The Company forecast in their report that the current year's prospects should remain stable, so give or take 1M just in case of surprises such as forex loss in Q4, we may assume Q4 profits at rm6M. So EPS'16 = (18.2+6)/165 = about 14.6sen. At current price of rm1.41, the PER'16 should be ~9.65, this is quite attractive because Prolexus is a growth stock currently in expansion mode.

3. For the warrants, it's free for RI subscribers, but it's not really free, WA holders must pay rm1.20 to convert to new shares, if all WA is converted (this won't happen soon unless it's in-the-money), then there will be rm68M cash hordes in the account, or about 30.5sen/share of CASH, So the NTA should increase by ~30sen which should also increase the value of the shares. Even if the Company simply put this cash for FD, it could earn about rm3.1M interests, or 3.1/(165+56.8) = another +1.4sen EPS. Assuming PER = 10, the share price should be worth +14sen higher.

4. Share investment is about the future prospects of the Company, not so much about the history. Your reference to 2012 Q4 profits has missed the fact that in 2012, the USD/RM exch. rates was about 3.0~3.2, compared to 2016 rate at about 3.9~4.2, this makes a very big difference to their bottom line.

iloveshare88, I fully understand ur concerns on the EPS dilution by the new shares, besides the new total shares at 165M, I also would like to discuss on the following points u raised :

1. We normally compare Q-o-Q because seasonality often influence the business performance, Prolexus' Q3 is in Feb-Apr period, Feb is the shortest month in a year and furthermore CNY usually falls on Feb, this normally cause the production and sales figures to reduce in this month.

2. By looking at past 3 yrs, 2013~15, we can see consistently that Q2 and Q4 profits are highest at roughly rm7M, and Q3 profits are lowest. The Company forecast in their report that the current year's prospects should remain stable, so give or take 1M just in case of surprises such as forex loss in Q4, we may assume Q4 profits at rm6M. So EPS'16 = (18.2+6)/165 = about 14.6sen. At current price of rm1.41, the PER'16 should be ~9.65, this is quite attractive because Prolexus is a growth stock currently in expansion mode.

3. For the warrants, it's free for RI subscribers, but it's not really free, WA holders must pay rm1.20 to convert to new shares, if all WA is converted (this won't happen soon unless it's in-the-money), then there will be rm68M cash hordes in the account, or about 30.5sen/share of CASH, So the NTA should increase by ~30sen which should also increase the value of the shares. Even if the Company simply put this cash for FD, it could earn about rm3.1M interests, or 3.1/(165+56.8) = another +1.4sen EPS. Assuming PER = 10, the share price should be worth +14sen higher.

4. Share investment is about the future prospects of the Company, not so much about the history. Your reference to 2012 Q4 profits has missed the fact that in 2012, the USD/RM exch. rates was about 3.0~3.2, compared to 2016 rate at about 3.9~4.2, this makes a very big difference to their bottom line.

Kwang2209, rightly said, instead of looking to next 1 to 2 qtrs, we should look at next 1 to 2 yrs, in order to see how they perform after completing their Stage-1 & 2 expansions.

Mizi1, where you get this "seal the deal at rm1.40"? I'd be more than happy if the deal is rm1.20.

Hi iloveshare128, see the following Bursa announcement dated last Monday, there are only 56.8M new shares, not 62.5M, this is because the Company holds a few million "Treasury Shares" which did not subscribe the RI, so the new total shares should be about 165M :

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5127953

The new shares did not appear in Q3 because it's issued in June, whereas Q3 closed in April.

BoPoint, no need to worry too much on this Q's Forex losses, if you look at the USD/RM chart, the USD was gaining strengthen from at the year's lowest in April month, and should go higher after the Brexit event and also US FED's determination to hike their interest rate this year, that means their new purchases of raw materials would be cheaper in terms of RM, and their sales of Q3's inventories should be at higher prices in terms of RM, this would neutralize their earlier Forex loss.
Since Prolexus is more of a Fundamental counter, not suitable for short-term-traders, we should look at their longer term prospects, or at least mid-term.

Just announced after 12.30pm session closed:

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5132969

Datuk Phua has confirmed the discussions on the sale of his stakes is currently in progress...

Correction, from -2 climb up to +2, very impressive... :-)

Climbed back from -2 to +0.5, despite bad market sentiments, something good should be brewing!

Anybody good in accounting can verify these?

The "Trade Receivables" dropped from Rm55 mil to Rm40.7 mil, it's converted to cash received, and the "Cash & Bank Balances" increased from Rm23.5 mil to Rm42.4 mil, their cash have increased significantly, it shows a very healthy cash flows now.

Also, have you all noted the Rm15.7 mil invested in "Property, Plant & Equipment", up from Rm8.9 mil in the proceeding period. This should be due to the investments for Stage-1 expansion carried out in this period.

This show that Prolexus should be ready for higher orders from clients in the coming 1 to 2 years, by then their Stage-2 expansion plan should be completed, with the Vietnam apparel factory and Johor's Fabric mill become fully operational.

The Company expect the current year's prospects to remain stable, particularly for the next Q. Assuming no major hiccups in the US economy, and that the EU survive through the Brexit impact, Prolexus should have good potentials in the near futures.

As for Inventories up by Rm10 mil, it could be due to more apparels produced with their increase in production capacity after the Stage-1 expansion, in order to ramp up production to meet more orders, more raw materials were purchased and kept as inventories, and the increased quantity of products not yet shipped out to customers, would have to be accounted as inventories.

Correct me if I'm wrong, I think the forex losses was due to RM strengthened from 4.2 to 3.9 over the Q3 period, the apparels production costs was based on mainly above 4.0 rates, and then sales based on mainly below 4.0, so forex losses incurred by the forex differences between the costs and sales time window.

shareinvestor88, how did you get that their revenues n profits drop over the last 3-4 Qtrs? See this tabulation from MalaysiaStock.biz :

http://www.malaysiastock.biz/Corporate-Infomation.aspx?type=A&value=P&securityCode=8966

Compare Q-o-Q, the last 4 Qtrs shows increase in revenues n profits, by +0%, +43%, +2% n +64%, care to share your findings for the benefits of Prolexus investors here?

Ini Kali Lah...!!! :-)

Revenue up +9.3% and Net Profits up +64.5% Q-o-Q, this result is considered good. Hope it can help to neutralize the BREXIT impact and price can recover next week.

Brexit fears will be like Grexit last year, it's over-hyped?

https://euobserver.com/tickers/133924

Greek prime minister Alexis Tsipras said Grexit was a stupid idea.

Good morning BoPoint, thanks for the info. The coming Q3-FY16 should be able to confirm whether their Stage-1 expansion have resulted in more business or not, let's wait and see. Btw, their Q3 results are usually weaker than other Qs, so we will compare Q-o-Q.

When you say you checked around with their no. of clients, do you mean their Malaysian clients or international clients? Please bear in mind that Malaysian market merely make-up about 3% of their total sales, so it's insignificant, if Malaysia's economy goes down, it's not going to affect Prolexus, their major markets are in US and EU, where consumer spendings are increasing as their economies are recovering now.

Also, do take note that Prolexus don't have many clients, because they are supplying to just a few key customers who are well-known premium brands, like Nike, Asics, Under-Armour, etc., so your analysts need to call these people in order to get more accurate feedbacks.

Thanks for clarifying what you mean by business maturity and down-trending.

But my take is, it's the opposite, the business is deemed as still growing when the productions cannot cope up with increasing demands despite running at full capacity. This is a production bottleneck issue, a good / happy problem to solve, not a bad / sad problem. When a business is having redundant capacity due to insufficient and dwindling demands, then it is deemed as matured and down-trending.

In the case of Prolexus, the former case is happening now, their key customers are enjoying good sales and projecting higher sales in the coming years, so Prolexus underwent a fast-track Stage-1 expansion, by adding 40% more operators and working extra shifts, to cope up with the immediate rising orders instead of turning down orders and risk losing the key customers. Their China factory also undergoes expansion plan to double it's production in 5 years, so that it will eventually add 50% more capacity to the group. As for the longer-term demand increase, a new factory will be built in Vietnam, which will initially add 30% more to the group's total capacity from 14M to 18.5M apparels/year. The time to fully commission the factory is only 1 year, that's quite a short time, more like mid-term period for an investor.

Consider the fact that Prolexus is Nike's "Designated Supplier" since 30 years ago, it is not to Nike's interests to lose a reliable and high quality supplier, they would rather have long-term working partnership with such a supplier, by giving them their projected increase in demands and tell them to get ready for it, not to play out their good suppliers by dumping them when their new factories are ready to execute the extra orders from them. They prefer Win-Win partnerships.

The mother's price is holding up quiet well, absorbing the extra free floats from the new RI shares. Some buyers accumulate ahead of Q3 good results maybe.

To say that Prolexus business has reached maturity and going downtrend, this view does not reflect the real situation. Prolexus is currently undergoing 2 stages of major expansion plans:

Stage-1: Last year saw their Malaysian factory increasing the sewing operators from 1,000 to 1,400 by adding night shifts, and their China factory to double their capacity, this was to meet increased demands from key customers, on urgent basis. The capacity should be increased to about 14 mil/year.

Stage-2: This year the RI exercise just completed has raised Rm56mil for building the new apparel factory in Vietnam by Sept.2017, and a new fabric mill in Johore by end of 2017. The new factories only take max 1 year to be fully operational, this is relatively rather short timeframe.

The Capex is derived from the RI and internal funds, given that Prolexus' Net Cash with small borrowings, it's financially undemanding to this well managed fundamentally solid company. As for dividend yields, don't expect a high growth company to give up high dividends in their expansion period, as their profits would be reinvested instead of distribution to shareholders.

I think if really confident of the Company's expansion plan, it's better to keep the WA instead of switch to mother share, as the Gearing Ratio now is 146/48 = 3.05 times, means that for the price of 1 mother share, we can buy > 3 units of WA.

The power of 3x leverage will start to kick-in when the mother share prices start trending up, the WA's total gains should be at the rate of nearly 3-folds over mother's price gains. However, the reverse is true if the mother's price go down.

I see, but in my portfolio it's stated Rm 0.001, but no worries, haha... :-)

The Company has expanded their production capacities in Malaysia and PRC in order to cope with key customers' order demands, see Kenanga Research report last July :

http://klse.i3investor.com/blogs/kenangaresearch/80382.jsp

The expansions was to be completed by end of Q3-CY2015 (Sept. last year), assuming that it took a few months for teething problems, new operators training, improving work efficiency, realization of new orders intake, etc., the full benefits of this capacity expansions should be captured in this Q3-FY2016 and the coming Q. The EPS not yet diluted by the new shares, plus the forex gain Q-o-Q that should also increase the NP Margins significantly, the coming Q3 results is expected to be good.