anything noteworthy to be shared from the AGM?

the company looks solid although short term may lack excitement absence of newsflow. its own tin operations contribution is not doing great but the food products is still growing and kian joo contribution also stabilised after some previous forex losses. for the past 5 years, excluding extraordinary gain for purchase of KJ in 2012, the profit was also on a strong upward trend. it wouldn't be surprising if they achieve profit of RM80-RM100m for 2016 which for a market cap of RM650m, it's not expensive at 6-8 times PE.

yeoh jin hoo seems to me a very typical chinaman businessmen. low profile, doesn't talk much in public and not overly generous to shareholders as well (in terms of dividend). but from his raiding of kian joo, buying over of FnB, sales of KingKoil to KPS and his own takeover of Alcom, I think it's fair to say he's quite a ruthless and shrewd in his biz dealings.

kian joo stake itself has decent value (about RM400m by market value), FnB as well. not sure if the rumours of KWAP is still ongoing (RM280 for 30% stake), but from what I heard from sources was that an IPO was always on the plan in these few years (which was why they bought over the remaining 20%). for separate listing of FnB, it is unlikely that it will be at such low PE that Can-One commands now, so that would unlock some value for shareholders.

a company with good value and great potential but when will the value be realised, that's the million dollar question. its low profile doesn't help...

imo yesterday's share price correction was long overdue. the share price has slumped previously because of poor sales and profit in last QR but recently the price rebounded strongly simply because of news that some products were in qualifying stage. as I understand, qualifying means only at the audit stage, it is not certain that the customers will adopt your chips/sensors and even if they adopt, how much order will they place with you is also uncertain.

so the price has previously rebounded because of speculation, it's also fitting that it slumped back down because of speculation (heptagon). my take, stay away from this counter for now due to the uncertainty unless you are really strongly convinced by the rebound in sales order story. previously gtronic's selling point was its track record, now unfortunately it's just like any other story stock, selling you the future which cannot be backed by figures.

whoever attending the AGM tomorrow, would be great if you can ask the management some questions and share the answers here.

1. what do they plan to do with the massive piece of land now? develop, sell or both? any timeline and GDV numbers?

2. for the UiTM Phase 3 contracts they won earlier this year, when is the expected commencement date? how much will Triplc be paid every year?

The Puncak deal I'm guessing they will probably not answer citing confidentiality etc. but you can try as well.

thanks

better take cue from the last drop. when sudden drop in price, don't catch the falling knive

??? how can you be stuck at 2.8?

http://www.thestar.com.my/business/business-news/2016/10/19/puncak-niaga-loss-seen-continuing/

at current market cap of 500m, even if 20 times PE will need RM25m annual profit. Existing biz losses easily 60-80m a year plus some losses from the new plantation. to get a biz that immediately contributes RM100m profit with its remaining cash of 800+m is not easy. need to cut down the losses, acquire profitable biz and grow its profit before its share price can move up

net cash outflow is 97m. if just focus on operating cashflow, then capex cost will be ignored

puncak has 1.1b net cash at June. now they spend 270m here. first 6 months of the year net cash outflow almost 100m, annualised will be close to 200m. with planting capex will increase substantially, opex will also increase while income is minimal. if they just rely on existing loss making biz + new plantation biz, they could burn through the cashpile in less than 3 years time. so be careful with the net cash angle when investing in Puncak

another potential problem is timing. now CPO price is good, but market already talking about weaker CPO price by 2H next year after El Nino effect is over. so what will be the CPO price when Puncak's plantation matures? that's the huge risk there especially for commodities biz

prime plantation land can sell at >60k/hectare or 24k per acre. the problem is you have to first suffer 4 years of high cost no yield, then another 3 years of high cost low yield. it's an investment. it's not a get rich quick scheme, if not everyone will be planting oil palm and flipping for profit

not sure what's the market price for unplanted plantation land but doesn't look like Puncak is overpaying. advantage of planting by your own compared to buying mature plantation is the total lifecycle cost is likely to be cheaper but you will need to incur high capex and long waiting time.
such investment is good for long term but sucks for short to medium term. imagine the first batch of less than 5% of your trees will only produce fruits in 2-3 years time and peak in 5-6 years time. the management should balance short and long term performance even though they have huge cashpile to burn for years

the land value don't skyrocket just like that. major capex are required. planted land carry much higher value is after taking into account planting cost, maintenance cost (fertilisers, workers etc.) and your interest/opportunity cost over the years.

puncak buying plantation biz, 60% around RM270m. mostly unplanted land, those planted ones are mostly still immature so the biz is loss-making. earnings contribution will be minimal in near term so Puncak likely still have to look for other biz for income

triplc concession biz made RM16m net profit last year, with the RM600m construction contract at maybe ~8% net margin over 3 years, that's probably another RM16m per annum. A biz that could contribute ~RM30 a year would have been much better for Puncak shareholders at this stage. of course it will also depend on the pricing

at 1.80 or market cap RM120m, Triplc shareholders will vote a resounding no. Land value at least RM120m, receivables from Uitm net of borrowings at least RM80m, new contract RM600m. directors probably don't even dare to bring it up to shareholders

actually the acquisition is not expensive, RM446m for 43,000 hectares is around RM10k/hectare, although essentially it's mostly just plantation land instead of oil palm plantations. the problem is Puncak has no real biz right now and this acquisition will only contribute in few years time. imo not a good way to spend RM270m for their 60% stake

triplc deal will be a related party deal so shareholders will be wary. but at least that deal will be profitable from day 1 and deliver steady cashflow every year

really don't get Puncak, with so much cash should have targeted some ready assets. Out of the whole area, only 5% reach 18 months maturity. Palm oil only starts to bear fruit after 3-4 years and peak after 7 years. 18 months is still very young, not to mention those below 18 months or unplanted. It's gonna take at least another 2-3 years probably just to breakeven

there's a saying "put your money where your mouth is". of course one will promote what he owns. if he promotes something he doesn't own, would you trust him?

the headline pe is 10 because of the revaluation gain

fundamentally it can also be argued that these corporate exercises actually increase value by improving the liquidity of the counter. In valuation, a discount can be ascribed for lack of liquidity so improved liquidity actually improves valuation of illiquid counters.

that said, most companies that have these corporate exercises actually already have pretty good liquidity. so I agree with the views above that it is more of a market psychology thing, good counters will still shine with or without these exercises, the opposite is true for lousy counters.

one also cannot ignore the forces of traders who will buy up the shares when such exercises are announced and sell at a high. it is nothing more than another technical indicator for them. such traders will increase the price volatility and if the company has poor fundamentals, it will crash hard when it's under selling pressure

vivocom is only a construction player for housing projects, no track record in infra construction. only CIMB tried to sell the idea. so far all projects secured are related to housing

btw, Anasuria is in North Sea UK, the proposed acquisition is North Sabah Malaysia. couldn't be more different. pls fact check before making comments

hibiscus didn't disclose much details about the acquisition so we have to scavenge info from other sources.

1. production cost of the North Sabah oil fields "was reported" to be around $80bb. yes some of the costs may have came down but by how much? will it be as low as $50bb? if u read the other articles on EOR, the chemicals itself is said to add at least $20bb in cost so I won't bet on them being profitable at this point.

2. as I mentioned earlier, $0.80 per 2P reserves is extremely cheap even in this low oil price environment. could it be Shell being desperate to sell or Hibiscus buying and hope that oil price will rise? again I wouldn't bet on the former

overall my view on the acquisition is that it could be a good buy in the long term if oil price recovers but short term don't expect much incremental contribution from it.

Hibiscus is currently still unprofitable but as at an E&P company they are one of the immediate beneficiaries when oil price rises. I did mention in my blog few months ago that I expect Brent to be capped below $55 for this year but I'm not speculating on when or how much oil price will rise in the long term.

hibiscus should only be considered if you are bullish on oil and is not afraid to wait it out for long term as I don't see much immediate catalyst. that said, you should also consider if it is wise to hold on to O&G stocks when you could consider other sectors.

if touch wood, Puncak doesn't acquire the biz, price will fall as short term investors will exit. however long term the company is very solid, recommended for those who are in for long term investment but gestation period could be quite long

price has been trading sideways since it steadies after the land disposal was cancelled. breakup or breakdown after this will depends on the outcome of the HOA by 17 Nov

wow so the IC is real?

imo, kyy was sharing on stocks and doesn't own anyone anything. if you wanna blindly follow him then it's your own responsibility, and you can't expect him to tell you exactly when to buy, when to sell. but then again, publishing other people's details online is pretty messed up stuff and I think kyy is getting himself into trouble

btw, I bet you don't even know a company needs mandate from shareholders to do share buyback. in this case, I don't see any shareholder resolution approving share buyback. so Hibiscus is legally prohibited from doing that until they get approval

for the sake of other readers here, please look at the financial results.

PBT was RM23m, but this is after recognising negative goodwill RM229m and reversal of impairment for intangibles RM64m, net off against impairment in JV and associate RM229m, so net effect is PBT was boosted by RM64m.

RM23m - RM64m = -RM41m (in case you can't count)

stop confusing people with your half-cooked understanding of finance

@SmartyAlek wow for a moment I thought there's a real discussion. I think your statement just shows how poor your accounting understanding is.

1. I never mentioned anything between revaluation and cashflow. you are right that revaluation does not involve actual cashflow so their cash balance is indeed RM28m only. Even the proposed acquisition alone is more than RM100m, so the cash is really nothing

2. Increase in asset value is not a revenue but it is part of P/L. Non-cash items are recognised there as well such as you depreciation, impairment. Just in case you are still too blind to see, the impairment on investment, reversal of impairment, negative goodwill (revaluation of assets) all are in your P/L about RM64m. Without these, loss before tax is actually around RM40m.

3. the rumours I'm addressing is the acquisition, not the financial results. today people are buying/selling on the acquisition news, not on the results anymore.

careful, buy on rumours sell on news is mostly still very true in Malaysia

@SmartyAlek I'm not so sure about your theory. if you have seen enough, there are plenty of companies trading at more than 30% lower than NAV. theoretically no need to do share buyback, just privatise the company will do. plus 28m cash for capital intensive industry like Hibiscus is nothing. P/B is just one crude way of valuation

?? correct me if I'm wrong but isn't after taking out all the fair value gains and impairments, the company was still making losses?

if every company can be valued based on NAV, there are plenty companies trading at below 0.2/0.3 times NAV. Hibiscus is far from the lowest. btw they are still doing new placements which will dilute their NAV and the recent quarter is still operating losses, just one-off fair value gain

http://business.asiaone.com/news/more-layoffs-the-horizon-malaysian-oil-gas-sector

a more recent article on the north sabah oil field

seems like Hibiscus still loss making in the last quarter after stripping out the negative goodwil and impairments so the oil price still needs to be higher before it can make operating profit

it seems that factfinder's article may have a point. look at the second last paragraph, it did refer to Shell/Petronas and 4 oil fields North Sabah so high chances they are referring to the ones in the deal. yes the actual cost may not be USD80, but the point is the fields are under EOR and could have high cost.

piecing the info together, at USD25m for 50% interest, Hibiscus is paying less than USD1 per 2p barrel which simply doesn't make sense. recent o&g deals are more like USD3-4 per 2p barrel so there are only 2 possible explanations, Shell was really desperate/dumb to sell at that price or the oil fields are really not very profitable

base case I'm assuming Triplc will sell the concession and construction biz to Puncak at around RM145-180m or about RM2.08-2.58 per share. then they might distribute some as special dividend and retain the rest for property development. but these are just my assumptions based on the info available

I'm not against anyone promoting MBSB (I can't short it anyway). end of the day what is said and shared doesn't really matter as much as the actual profit from investing/trading. so if MBSB price go up from here and people make money then all is good.

I'm just clarifying why what some people thought were good fundamentals were not actually as good as they thought, especially when it comes to provisions and valuations because there seems to be a lot of misunderstanding on how financial companies are run compared to other industries

if someone has proper reasonings behind whether to buy/sell a company, there's no need to be afraid of constructive discussions. sometimes I may be wrong too but it's only through exchanging thoughts only everyone could learn

try to think why MBSB need this impairment program and why is it taking such a long time.

1. yes they want to evolve into a bank but banks recognise impaired loans after 3 months due. as far as I know other companies like Aeon Credit and RCE also recognise the same way. so was MBSB too aggressive last time? are they finally abiding with industry standards?

2. remember in the past few years there was a period when Aeon and RCE impaired loans went up? that's because BNM limited personal financing tenure to 10 years so suddenly a lot of borrowers repayment capability is in doubt. but looking at their trend, impaired loans peaked in a years time and slowly came off, why does MBSB has such huge amount to be cleared?

3. MBSB loans expanded from 18b in 2011 to 32b in 2013, a jarring 80% in 2 years and also scarily high in absolute terms. on hindsight, this should have been a huge red flag when a lending company expanded too fast. according to industry people I spoke to, MBSB was also one of the most aggressive when it comes to loan tenure and DSR which was why BNM had to impose some rules in 2013 to clamp down on the aggressive lenders like Bank Rakyat and MBSB. it was exactly during this period when huge amount of bad quality loans were racked up

4. but why need 2 years? well probably because one-off or few quarters' recognition could wipe off their entire retained earnings back then so it needs longer time to spread it over

@USApg MBSB has always been making provisions because it needs to as a lending company, there's no such thing as provision once in two years' time. I agree that provisions could be lower without the impairment program but that's because they had it easy last time when they expand without making sufficient provisions. therefore MBSB actually should trade at a discount to banks because their asset quality is lousier and their accounting and governance standards lower

the company is not very transparent. the commentary usually are as as well as no commentary. the past 2 quarters revenue has shot up, probably as a factor of both higher volume and CPO price. CPO price should not be too low for next quarter but volume is unknown since company does not really tell much.

btw, the company mainly sells crude palm kernel oil so I'm just talking on CPO price assuming kernel oil will track CPO price movement

stronger USD is good for the company. for the 6.3m profit last quarter, 1.4m is from forex gain. Oct USD may come off a bit but Aug-Oct USD overall should still remain relatively strong

IMO, the market price seems quite fully valued. based on the latest quarter, I think the fair price would be roughly RM2-2.20, not much upside left considering the risk as the company's track record was not very good. any earnings disappointment and you could be looking at a nasty selloff

price still below NA, but all estates were quite recently revalued so have been mostly priced in NA. 2000 acres plantation is considered very small plus average age at 14 is end prime and some may need replanting

1. it's better to compare CPO price this coming quarter compared to the last quarter to see if revenue will keep increasing

2. CPO production is expected to increase post-El Nino while US soybean production is also expected to be at record high next year. in fact, soybean over CPO premium has been declining over past few months, so it may be a bit simplistic to assume CPO price will remain or keep increasing from current level

current valuation is around 0.8x book (not 0.5x for those still looking at book value before rights), which is higher than Affin (0.5x), on par with Ambank (0.8x) and only slightly lower than RHB (0.9x). PE is even more damning where trailing 4Q Affin is 9.3x, Ambank 9.5x, RHB 15x while MBSB is 29x. even assuming RM200m annual profit also PE around 26x.

so the price may still go up but not because it's undervalued. in fact it's grossly overvalued compared to other financial peers. it's only good for speculation because it's a penny stock now

please read the quarterly results closer. the earnings improvement qoq was only due to higher provision in 1Q so 2Q looks better. operating profit without provisions was in fact weaker in 2Q. management also mention that provisions will be roughly the same amount as 2Q in the coming quarters up till end 2017. so the only possible improvement in profit is from the RM1.1b rights issue proceeds.

RM200m annual profit is not hard to achieve, because it would be one of the lowest in the last 5 years. but by today's share price, it is a RM5.3b market cap company, so are you happy with earnings yield of 3.8% or 26.5 times PE?

for dividends per share, please don't look at past years because number of shares has changed post rights issue. if full year profit RM200m, dividend by latest number of shares EPS is only around 3.5sen. so 3 sen is not impossible but that would need a very high payout. past 3 years dividend payout were ~30%, so if EPS 2016 around 3.5sen then dividend probably will be around 1-2 sen.

i understand that everyone has their own opinion, but please don't misread my comments.

IFRS 9 is scheduled to be implemented from 1 Jan 2018, which means non of the financial companies have complied or are complying with this standards yet (partly because the accountants are also still unsure how exactly to implement it). so MBSB's impairment program (2015-2017) is just to clean up their old books to get to the normal standards of a bank. when IFRS 9 kicks in, they will need to make new provisions again because of change in accounting requirements. non-bank lenders like MBSB, Aeon Credit etc. probably will get hit worse relative to banks because their portfolios are riskier.

hi wealthwizard,

1. you are correct. Duke 3 will take longer to construct so the interest cost won't appear in the 4 years period.

2. of course market decides the TP, I'm just using your calculations as an illustration. because when market looks at PE, they do look at EPS, which will be diluted when warrants kick in. just highlighting