Based on Q3's more realistic profit margins, it then be reasonable to use it as a base to annualise its profits. This would give RM40m or 14sen EPS.

At current price, its only trading at 5.5x PE.

Please note, the earnings estimate has not yet taken into account the longer term potential of import substitution production and sales growth.

Another point - with its parent not doing well, Mycron will probably be required to declare high dividends to its parent. Minority shareholders like us will benefit accordingly.

Mycron's recent sharp fall is NOT due to management integrity, but to over-promotion by bloggers.

Also, investors in Mycron are mainly short-term players eg. OTB followers whom were advised to cut loss at the 84 sen trigger. In contrast, CSCsteel has more solid investors and institutions who were willing to look beyond one quarter's results.

Vis-a-vis CSC, both companies reported similar profit trends - Q-on-Q, both reported roughly 35% drop in pretax profit. (for like-to-like comparison, Mycron's pre-tax profit is adjusted for the impairment for fixed assets in Q2). Thus Mycron's financial performance and/or management expertise are not be inferior.

Probability and stockmanmy:

Anti-dumping duties on selected crc imposed by MITI from end-May 2016 to May 2021.
Check MITI press release May 2016.

CSC Steel had said Oct & Nov sales showed improvement due to restocking. I suspect Mycron's and CSC's sales were front-loaded during the 2nd quarter in anticipation of this anti-dumping duties resulting in their lower 3rd Q sales.

A concise analysis and good rebuttal to the bloomberg report. Well done felicity!
I hope the shortist fund manager that fed bloomberg the misinfomation make a huge loss covering its Airasia shorts at higher prices..

thanks ronnie

ronnietan There may be some short term impact from higher resin costs, as since Datuk Ang gave that July interview, resin prices increased about 30%. Most of that may be passed through, with some lag effect, it may e did you get the info on resin prices?

Hi ronnie, where did you get the info on rising resin prices?

Venfx, to add to your Melewar's attractiveness:

FY2017 PE, Mycron 5.2 vs Melewar 3.5, (both based on Wealthwizard's mycron forecast)

Venfx, I think your profit assumptions may be in error -

1. Melewar has stopped accounting for Mperial losses since FY2015 when its investment in Mperial has turned to less than zero.

2. nevertheless, melewar suffered an exceptional loss of RM7m in Q4 2016 in its engineering division. Otherwise, melewar would have reported a RM6m profit instead of RM1m loss.

3. From my analysis, Melewar's non-mycron operations currently incur about RM2m losses annually.

4. Using Wealthwizard's RM63m profit forecast for mycron, Melewar would reap RM45m of those profits. Deduct out RM3m losses from other operations, melewar profits would be RM42m.
This translates to EPS of 18.5sen or PE of 3.4x !!

venfx, is there a MOU signed regarding the sale of Mperial?

Great. My partial switching to melewar from mycron seems to be vindicated.
At almost 40% discount to mycron's valuation, it might just outperform its 71.5% subsidiary from now on.

Moneysifu, thanks for your advice. However, I find your description "time bomb" as a gross exaggeration.

In a worst case scenario, where this associate is not viable, and therefore cannot be sold off for any value, Melewar will take a ONE-TIME hit of RM33m which represent roughly 10% of their net asset value. Operating earnings flow remain the same. NTA will come down to RM1.25/share.

Anyway, appreciate your highlighting this point to me. Cheers.

But Inari is only an associate of Insas, and its profit contribution is only 25-30% of Insas' total. Hence not a pure proxy for Inari.

I am already a holder of Mycron.
I am thinking of switching to Melewar as a cheaper alternative to Mycron.
Is this a good strategy, Mycron sifus?

probabbility.... this is normal. When there is more clarity on the fate of megasteel, and future release of another 1-2 quarters of good earnings, the share price will gradually reflect this.

Based on the learned wealthwizard's post, Mycron is expected to earn RM63m profits this coming FY, which translates to EPS of 22sen or PE of less than 4 now.

Provided Megasteel remains closed, these earnings should be sustainable, if not grow moderately as Mycron gains market share through import substitution.

As the market realised that Mycron's earnings are sustainable, it might just ascribe a more normal PE of 8-10x. Hence price target RM1.70-2.20 over 1-2 years is not impossible.

Monkey, your concerns are not misplaced. 3rd Q earnings will be lower. However,

1. AVERAGE price during 2nd Q was probably RM2200, not RM2400.
2. Since the imposition of anti-dumping duties, prices are now in the RM 2,000 region.
3. Also, imports which command 50% of the domestic market, will now be substantially reduced. Hence, local players will soon have larger volume sales to offset lower margins vs the exceptional margins of 2nd Q.

stocknewbie1, thanks for the info

cephasyu, thanks for your reply. I still view your forecast as being a bit conservative.

And cephasyu, why do you expect only 40 sen EPS (equivalent to RM 72m net profit) this year?. Already, Q1 earnings were RM 21m, after incurring a RM 5m forex loss. Adjusting for forex loss, earnings would have been at least RM 25m. Annualised, would give RM100m or EPS of 55 sen!

Good report. Thanks. BTW, did you ask management if they are working on 1 or 2 shifts? By increasing no. of shifts, they can increase production without much additional capital investments.

Paper, on fundamentals liihen should be worth more. But short term there is a supply-demand imbalance, namely sellers more aggressive than buyers. Therefore, despite >5% yield, buy on weakness first. Chart-wise, a 50% correction from its March lows may indicate roughly RM 2.75 target.

steve jub, 4 sen div, divided by 299 sen share price, gives you 1.33% yield per quarter. Annualised it is 5.3% yield.

Just bought half of what I intend to buy, today. Will buy more if price drop further.

Have been monitoring this stock lately. Strongly believe its undervalued.

weng77, great analysis. Using a normalised 15% tax rate, net profit would have been RM28m, a 14% increase y-o-y. Still, overall results is disappointing.

noob, if you were to survey most of the export-orientated stocks, their charts are almost similar. I put it down to sector-wide pattern.

Icon, I respect you for the fundamental research you have done.
HOWEVER, yesterday you said you will "dumb dumb hold" on to comcast, today you declare you sold everything!! Where is credibility? Responsibility?

ignissimia, I agree with you. TF is stretching his management expertise too thinly. He should cut loss in some of the regional operations. The malaysian and thai operations can easily generate RM600m profits (equivalent to 22sen eps).
Also, TF should also come into the market to mop up at least a few million shares to show his confidence in AA.

My reading of the selling spree by wellington and epf is POSITIVE..... some other buyers are absorbing their selling. And these buyers are STRONG BUYERS, otherwise the share price would have dropped like a stone if the buying are merely from retail clients.

been monitoring AA for the past few weeks. Seems wellington's and epf's selling have been quite well absorbed - share price has essentially stayed flat in the face of big holders' selling and bearish market sentiment !!! This is Relative Strength, a bullish sign.

Added some more exposure today around 1.35. Believe upcoming operating stats and financial results should be good.

if AA sells off or liquidate all its regional operations except Thai's, then this stock can be worth RM3.00

Still I believe AA is undervalued at these prices. My 12-mth price target - RM2.00

Basically Tony needs to slow down or be more selective in his regional expansion strategy.
He also needs to adopt more conservative accounting policies to present a more down-to-earth corporate image

This US$1B loan is not a big deal given the scale of AA's balance sheet. Also part of it will be used for refinancing existing loans.
What would be good news is AA manage to reduce losses or get rid of some of its regional associates (except Thai AA, which is doing well).

hi chankp,
your analysis is essentially correct except the eps should be halved, as its issued shares totalled 455m.

The problem with gob is it sold a substantial portion of its crown jewel in Batu Kawan at a not very lucrative price, leaving only the RRI development and a few smallish landbank in KL.

Its share price is no doubt at a sharp (at least 60% in my estimate) discount to its NTA, but the market now needs to know what the directors are going do to sustain its property business beyond its now smallish landbank portfolio.