Disappointing Profit - Recommending sell first thing in the morning.


My valuation based on PE 12 is 17.5 Sen and a PE 15 would be 22 Sen. However, if you sturbbornly valued it with PE 30 because of high tech counter. Good luck to you
.

Disappointing result reported with a Q4 net profit of RM1.831 mil with EPS of 0.32 Sen. Thus for the full year FY 2018 a net profit of RM8.01 mil with a EPS of 1.46 sen

At closing of 44.5 Sen, it is trading a PE 30.7. The market capitalisation of Co is RM 230 mil. In comparison to FY2017, the Co has no growth in turnover and net profit had declined from by 20% from RM10.1 mil to RM8.0 mil. Even if I added back the share based expenses of RM 1.1 mil, net profit still decline by 10%. Will investment communtity give it a valuation of PE 30.7 with a declined in turnover and profit.

I would sell

https://youtu.be/SdEs5bN_j_I

Astino is another boring and undervalued stock recommendation ignore by the market. I am accumulating

HISTORY to Recap
In 2017 from 24 March, share price from low of 75 Sen (after reporting an impressive Q2 2017 EPS for the Qtr of 4.42 Sen with a net profit of RM12.2 mil and giving a 1H 2017 YTD of 6.46 Sen with a net profit of RM17.7 mil, on 27 March 2017 it share price opened with gap up at 85 Sen and closed at 82 Sen). Following 2017 Q3 continue good result with an EPS 4.28 Sen and a net profit of RM11.7 mil (with 2017 YTD Q3 EPS of 10.7 Sen with a net profit of RM29.4 mil) it ran to a high of 129 Sen on 21 July 2017. At 129, it was trading at PE 9 with my estimated full year 2017 EPS to be 14.3 Sen.
However, share price started gap down from 113 to 105 and close at 103 after reporting a disappointing Q4 result of EPS 1.85 Sen with a net profit of RM5.1 mil with the FY 2017 EPS of 12.6 Sen and a net profit of RM34.4 mil.
The lower Q4 2017 net profit of RM5.1 mil was due to an impairment of raw material of RM5 mil otherwise Q2 to Q3 trend would be maintained


UNDERVALUATION BASED ON FY 2018 EARNING POTENTIAL

Valuation based on PE8 to PE 10 with my estimated FY2018 EPS of 12.9 would range from 103 to 129. Current price

In Q3 2018 Astino reported an EPS of 3.21 Sen with a net profit of RM8.6 mil and with a 9 mth YTD 2018 EPS of 9.68 Sen with a cumulative net profit of RM 26.4 mil. I am projecting its Q4 net profit to be around RM 8.8 mil (average of 3QTRs) with an EPS of 3.23 Sen. Thus giving me a projected FY 2018 net profit of RM35.2 with an EPS of 12.9 Sen. My valuation based on PE 8 to 10 range from 103 to 129

Its Q4 result is due by end September. It share price recent low is 76 on 7 July. From 1 Aug at 80 Sen, it has moved up to 86 Sen on 9 Aug closing with a high volume of 711K shares traded. The vol of shares traded is highest since 4 April 2018.

Chan Yee Fong's comment on while Dufu is wrong --- " Which brings me to DUFU because if you all read companies annual reports including the management reports you will find that DUFU is the only HDD maker in Malaysia making Helium Filled HDD drives. Hence their earnings have been great compared to other HDD makers in Malaysia."

Dufu manufacture spacer ring and spinner which cater to all types of HDD. Just that the bigger Neraline HDD used more pieces of spacer rings. For Nearline Hdd, with 8 disc in a HDD, Dufu now supply 7 pieces of spacer ring instead of 1 spacer ring compared to small HDD. Agreed that the Nearline HDD is the growth area arising from expansion of IOT, Cloud, Server storage.

Copied from Annual Report of Dufu

Looking Ahead 2018
We expect to achieve our goals through our continued focus on driving profitable volume performance, applying pricing
discipline and controlling costs. We still believe in driving a profitable volume growth. Despite the declining unit sales
of global shipment of Hard Disk Drives (“HDD”), the demand for HDD storage has not. In fact, total capacity shipments
continue to set records with average capacities of HDDs have almost been skyrocketing in recent years. The long-term
future of HDDs likely rests with high capacity HDDs, especially in data centers and in particular for the growing mass
content in the clouds. Today, the robust growth in the net storage capacity for high capacity HDDs that serve primarily the
cloud storage applications is made possible by adding the number of disks and heads.
This bodes well for Dufu considering that the anticipated volume
growth of HDD spacers correlates with the trends in number of
disks required in a single HDD.

I did not see your name appearing in shareholder list holding of 1 mil shares unless you held thru nominees.

I have written of Dufu undervaluation but noone believe until now

Q1 Dufu had reported a decent result despite a RM 2 mil forex loss. It reported a PBT of RM7.63 mil and net profit after tax of RM5.76 mil with a EPS of 3.5 Sen.

DUFU

Share Buyback (total number since Dec 2017 till yesterday was 3.259 mil price range 108 to 120)

TOTAL NUMBER OF SHARES IN TREASURY SHARE 12.233 Mil out of the total shares issued of 175.47 mil.

Directors had also bought total of 1.178 mil share from 1.11 to 1.159

The Company has sent a strong statement to the Mr Market that it is not please with its current share price and did substantial share buyback to support share price on the following dates

7 May Purchase 125,000 shares at price range 105 to 108

27 April Purchase 182,000 shares at price range 110 to 114

18 April Purchase 182,000 shares at price range 110 to 114

17 April Purchase 113,000 shares at price range 110 to 113

16 April Purchase 81,000 shares at price range 108 to 112

6 April Purchase 82,000 shares at price range 99 to 102

5 April Purchase 70,000 shares at price range 100 to 100

4 April Purchase 66,000 shares at price range 98 to 100

2 April Purchase 90,000 shares at price range 108 to 108

29 March Purchase 60,000 shares at price range 107 to 107

28 March Purchase 232,000 shares at price range 107 to 108

22 March Purchase 254,000 shares at price range 108 to 112


6 March Purchase 208,200 shares at price range 113 to 118

14 Feb Purchase 287,100 shares at price range 111 to 120

6 Feb Purchase 291,500 shares at price range 110 to 115

5 Feb Purchase 350,000 shares at price range 112 to 120

29 Jan Purchase 116,900 shares at price range 117 to 120

22 Jan Purchase 216,800 shares at price range 116 to 120

Directors buying shares (since 1 March 1.178 mil shares)
8 March Yeoh Beng Hooi bought 30K at about average price of 1.11
7 March Yeoh Beng Hooi bought 30K at about average price of 1.11
5 March Lee Hui Ta bought 671K shares at about average price of 1.159
2 March Lee Hui Ta bought 222K shares at about average price of 1.1578
1 March Wu Mao Yun bought 225K at about average price of 1.153 Sen

MMMSV obtained trf to Main Board approval

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5755789

The Co response to UMA on 14 March is as follow:

Whether you are aware of any other possible explanation to account for the trading activity?

~ The construction of the gold mining processing plant is near completion and Bahvest Group is expected to start producing gold by the 2nd quarter of calendar year 2018 as mentioned in the last quarterly report as at 31 December 2017 and it’s also consistent with the disclosure in our circular to shareholder dated 17 July 2017.

Please go to the Co website and see the progress of the mining activitiy by seeing the site pictures
https://www.borneoaqua.com.my/photogallery/mining.html

You would be impressed

DUFU

We should not give up on Dufu given its strong performance and directors purchase of shares and share buyback.

It is likely that the price is being surpressed by operators. Knowing Directors and sharebuyback is being consistenlt done fron 111 to 120,

WHY WOULD INVESTORS CONTINUOUSLY QUEUE BIG VOL SALES AT 113 TO SURPRESSED THE PRICE? These Investors could wait for better sentiment to exit


Directors buying shares (since 1 March 2018 is 1.178 mil shares)

8 March Yeoh Beng Hooi bought 30K at about average price of 1.11

7 March Yeoh Beng Hooi bought 30K at about average price of 1.11

5 March Lee Hui Ta bought 671K shares at about average price of 1.159

2 March Lee Hui Ta bought 222K shares at about average price of 1.1578

1 March Wu Mao Yun bought 225K at about average price of 1.153 Sen

Share Buyback (total since Dec 2017 1.916 mil price range 111 to 120)

The Company has sent a strong statement to the Mr Market that it is not please with its current share price and did substantial share buyback to support share price on the following dates

6 March Purchase 208,200 shares at price range 113 to 118

14 Feb Purchase 287,100 shares at price range 111 to 120

6 Feb Purchase 291,500 shares at price range 110 to 115

5 Feb Purchase 350,000 shares at price range 112 to 120

29 Jan Purchase 116,900 shares at price range 117 to 120

22 Jan Purchase 216,800 shares at price range 116 to 120

17 Jan Purchase 161,000 shares at price range 118 to 120

14 Dec Purchase 285,000 shares at price range 119 to 120

We can infer that, the Co is willing to support share price below 120 by exerting share buyback mandated by shareholders.

Do not give your shares to operators collecting it cheap

Directors buying shares

6 March Wu Mao Yun bought 225K at about average price of 1.153 Sen
5 March Lee Hui Ta bought 222K shares at about average price of 1.1578

Share Buyback
The Company has sent a strong statement to the Mr Market that it is not please with its current share price and did substantial share buyback to support share price on the following dates

6 March Purchase 208,200 shares at price range 113 to 118

14 Feb Purchase 287,100 shares at price range 111 to 120

6 Feb Purchase 291,500 shares at price range 110 to 115

5 Feb Purchase 350,000 shares at price range 112 to 120

29 Jan Purchase 116,900 shares at price range 117 to 120

22 Jan Purchase 216,800 shares at price range 116 to 120

17 Jan Purchase 161,000 shares at price range 118 to 120

14 Dec Purchase 285,000 shares at price range 119 to 120

Prospects Statement by Board of key players in MMSV Industry

Penta

Current Year Prospect
The Group expects 2018 to be another good year with the continued strong demand from our customers as evidenced by the secured orders received up to 31 December 2017 that is expected to be delivered in 2018. With such volume of secured orders, the Group intends to further strengthen its market position and expand its business by keeping abreast of the latest technological trends and requirements relevant to the industry and increasing its presence in key geographical markets such as the Greater China region and the United States of America as well as diversifying into other high growth potential industries such as automotive, healthcare equipment and medical devices to broaden its customer base and revenue.

Vitrox

Prospects for the financial year ending 31 December 2018 The Board is optimistic on the business prospect for the financial year 2018. The Group will continue to focus on market expansion activities, customer relationship building and product innovation to grow our business further in the new financial year. Besides that, the Group has taken steps to minimise its net monetary assets in order to mitigate the financial impacts arising from currency fluctuation.

Elsoft

Barring any unforeseen circumstances, the Board is optimistic on the Group’s prospects for the coming financial year.

Visdynamic

Worldwide semiconductor sales increased in 2017 as compared to 2016 and the latest industry forecast (by WSTS - World Semiconductor Trade Statistics) was revised upward and projects annual global market growth of 20.6 percent in 2017 and 7.0 percent in 2018. Coupled with the introduction of new product models, the Company is confident of the business prospects for the following financial year.

How I look at MMSV

In the Prospects Statement for Q4 reporting, the management represented
“In a rapidly changing tech sector, new products would come into market place and this will present new opportunities for the Group. Among the many products, we are exploring sensor and IOT related products while smart devices, automotive and general lighting remain our main stay”.
There is a big market in the sensor and IOT related products which the management is exploring. It is important for MMSV to get on the Approved Vendor List of big players to grow with the industry.

Though Q4 result could be disappointing, though earlier management had given guidance it would be better than Q1 net profit of RM4.1 mil but instead reported a profit of RM2.7 mil. As nature of the industry is always cyclical and depending on orders received

However for the year turnover had increased by 112% to RM75.6 mil from RM35.6 mil and net profit had increased by 121% to RM21.05 mil from RM 9.52 mil. The Gross profit margin had increased to 34.57 compared to 2016 and 2015 of 32.59 and 32.38 respectively

I would say it is a great performance if not for the Q4 dropped in top and bottom line. Earlier management had also explained you cannot look at Q2 as a base to compare to Q3 and Q4 as it was an exceptional good qtr. As MMSV had made in road to new customers and expanded its sales in 2017 reflected by the result.

We need to observe its next qtr performance to confirm it business is intact. The industry is still uptrend based on comment on prospect below by similar player in the industry. The catalyst would be its transfer to Main Board

At today closing of 160, it is trading at PE 12.24 compared to Vis PE 12, Penta 21.39, Vitrox 36.81 and Elsoft 23.41

Goldfish, if a Co deliver RM26 mil profit and EPS of 15.6 and giving 4.5 Sen Dividend is not good result, pls go and find other counter. If share price do not move, there is nothing much investor can do. At least my guidance on result is relaible.

Do not be personal, when i call MMSV, it was much lower than 1.6X. Yes result for Q4 was below expectation.

DUFU

A Gem to buy before Mr Market rerate it after Q4 announcement on 28 February 2018 given another 4.5 Sen of Dividend is being proposed.

FY 2016
In Q4 2016, it reported for the qtr a PBT of RM19.9 mil. Included in the PBT is non-operating exceptional income of RM10.0 million which comprised
1. RM3.7 mil gain on dissolution
2. RM2.3 mil reversal of non-trade impairment
3. RM1.2 mil claim on CBT
4. RM2.8 mil impairment on receivables (which were provided in Q2 & Q3) no impact for the FY

For the Year FY 2016, it reported for the year a PBT of RM35.3 mil. Included in the PBT is non-operating exceptional income of RM6.1 million which comprised
5. RM3.7 mil gain on dissolution
6. RM1.2 mil reversal of non-trade impairment
7. RM1.2 mil claim on CBT

After adjusting for the above non-recurring income, the adjusted operating FY 2016 PBT is RM 29.2 mil

FY 2017
For FY 2017 Dufu reported a PBT of RM 32.8 mil (RM 3 mil more than FY 2018 adjusted PBT of RM29.2). The PBT for Q1, Q2, Q3 and Q4 is RM8.2 mil, RM 9.2 mil, RM8.2 mil and RM 7.1 mil respectively.

In Q4 2017 Dufu reported a PBT 7.1 Mil and a net profit of RM 6.4 mil with an EPS of 3.9 Sen for Q4 2017 and for the year the net profit is RM26.0 Mil with a EPS of 15.6

Prudently I am giving it a PE 9 to 10 and its valuation would range from RM1.40 to RM1.56 compared to its closing price of RM1.14, a potential gain of 23% to 37%

Dividend
A Dividend of 4.5 Sen is being proposed for shareholders’ approval. A single tier interim dividend of 2 sen in respect of the financial year ending 31 December 2017 has been declared on 28 August 2017 and paid on 12 October 2017. Thus in aggregate Dividend for FY 2017 would be 6.5 Sen.

Waseong is a BUY

In Q4 it reported a profit before tax of RM64 million and after tax of RM114.6 mil with a EPS of 8.54 Sen. After taking away exceptional profit on disposal of land and building of RM27.4 million and equivalent of EPS 3.5 Sen, it still achieved an operating EPS for Q4 of 5.04. The EPS of FY 2017 after adjusting for the gain disposal is 11.13 Sen instead of 14.63 Sen reported inclusive of the gain on disposal.

At 170 it is trading at historical operating PE of 15.27 based on operating EPS of 11.13. Given the positive sector, the Q4 operating EPS of 5.04 should be growing (Note that Q3 EPS was 3.97 Sen). I would project the FY 2018 EPS to be 20.16 without growth in profit.

At FY 2018 with a projected EPS of 20.16, its forward PE at 170 is 8.43. It is attractive if you factor in the growth in profit in view of the buoyancy of the industry.

I have posted that MMSV is just a 3 mths Fixed deposit and can redeem at end Feb. I belive it will have a good set of number

Given Dufu Dividend policy of paying 50% of it net profit, with estimated EPS of 15.6 Sen for FY2017,we can expectidividend to be in region of 7 Sen. At 117, its dividend yield is 6%

FY 2016

In Q4 2016, it reported for the qtr a PBT of RM19.9 mil. Included in the PBT is non-operating exceptional income of RM10.0 million which comprised

1. RM3.7 mil gain on dissolution
2. RM2.3 mil reversal of non-trade impairment
3. RM1.2 mil claim on CBT
4. RM2.8 mil impairment on receivables (which were provided in Q2 & Q3) no impact for the FY

For the Year FY 2016, it reported for the year a PBT of RM35.3 mil. Included in the PBT is non-operating exceptional income of RM6.1 million which comprised

1. RM3.7 mil gain on dissolution
2. RM1.2 mil reversal of non-trade impairment
3. RM1.2 mil claim on CBT

After adjusting for the above non-recurring income, the adjusted operating FY 2016 PBT is RM 29.2 mil

FY 2017

For 9 mths to 30 Sept 2017 Dufu reported a PBT of RM 25.7 mil (88% of Financial Year 2016 PBT). The PBT for Q1, Q2 and Q3 is RM8.2 mil, RM 9.2 mil and RM8.2 mil respectively. Thus I expect FY 17 PBT to be better than FY2016 PBT after excluding non-operational income.
I am projecting for Q4 2017 the PBT to be in region of RM8 mil to RM 9 mil (the average qtrly PBT for the first 3 qtr is RM8.6 mil) and a net profit in region of RM 6.5 mil with an EPS of 3.9 Sen for Q4 2017.

Thus adding on and projecting FY 2017, my estimated for FY 2017 PBT is RM 33.7 mil to RM34.7 mil. My FY 2017estimate net profit is RM 26.1 mil with a EPS for the Year FY 2017 to be about 15.6 Sen.

Prudently I am giving it a PE 9 to 10 and its valuation would range from RM1.40 to RM1.56 compared to its closing price of RM1.17, a potential gain of 19.6% to 33.3%

Notion vol would not flow to Dufu. Notion fire does not affect HDD business. Performance would be better in view of the growth in HDD by Seagate and Western Digital. Dufu 70% of income is from HDD based on last year annual report.

AEMULUS

The Co recently announced its Q1 2018 with a net profit of RM RM1.022 Mil with Q1 2018 EPS of 0.23 Sen (note that FY2017 full year net profit of RM 7.551 Mil with its Q4 2017 EPS of 0.48 Sen for the Qtr and FY 17 of EPS of 1.42 Sen), a drastic dropped of 52% compared to Q4 2017.


At 51 Sen closing today, with FY 17 EPS of 1.72 Sen, it is trading at PE 29.7. The forward PE is 24.7 based on my below aggressive assumption a growth of 20% in net profit compared to FY 2017. Its market Capitalisation is RM 223.8 mil for a Co making net profit of RM 7.551 mil.

Conclusion
Overvalued and no proven deliveries since 2012. If you are buying this Co, will you pay RM223.8 million (its market capitalisation) based on closing price of 51 Sen.

Assumption for Projected 2018

When I used the FY 2017 EPS of 1.72 with a 20% growth (an aggressive projection) to get my projected FY 2018 EPS of 2.06 Sen . Thus the forward PE of 24.7 based on aggressive growth of 20% from FY 2017 net profit of RM7.551

Historically, the Co maximum net profit was RM 9.067 Mil in 2015. In my view a growth of 20% in Net profit is also a long shot.

Please do your own analysis and trade accordingly.

Foundpac or FPGroup reported a flat top and bottome line. Current qtr EPS is 0.33 Sen which is lower than Q1 EPS of 0.45 Sen. The YTD EPS is 0.78 Sen. Given that since Q3 2017, its top and bottom line has been declining, for my estimate of FY 2018 EPS, I took 1H times 2 to give my FY2018 estimatedEPS of 1.56 Sen.

Thus at 32 Sen closing today, it is trading at PE of 20.5 based on my estimated 2018 EPS of 1.56 Sen. At historical FY 2017 EPS 2.09, it is trading at PE 15.34.

FPGroup is overvalued, i would give it a maximum PE12 with a fair value 17.7 Sen.

its declining profit did not warrant such high PE. Divest the share.

Prospect for Q4

Dufu’s Board Statement on Prospects in Q3 announcement

We expect sales to continue to remain favorable towards end of 2017 as our major product is driven by the growth in high-capacity nearline HDDs as well as stabilization of client storage demand (Note that BOTH SEAGATE AND WD HAD 37.9% and 12.5% growth in high capacity nearline HDD in qtr announced recently).

The long-term future of HDDs are likely rests with high capacity HDDs, particularly in data centers serving cloud storage applications. The demand for high capacity storage drives, enhanced performance, and lower storage cost is set to rise. Global internet penetration, the rise in e-commerce in emerging markets, and the current trend for high-resolution media standards are the likely drivers for the continuing rise in global data storage demand. Nevertheless, the Group will continue to improve its operational efficiency and keep a tight rein on costs to ensure price competitiveness on its products. The Group is also working closely with existing and new customers in creating value to their supply chain, and will continue to seek opportunity to venture into new business segments that can synergizes with the Group’s current business model. With this in place and considering the continuing stable demand based on the current market trend and assuming that there is no volatility in the United States Dollar (“USD”) currency against Ringgit, the Group is optimistic about its earnings and growth in the coming quarters.

Basis of Valuation

For Q3 Dufu reported a net profit of RM 6.4 mil with an EPS of 3.8 Sen and for the year to date to 30 Sept a net profit of RM 19.6 mil with an EPS of 11.7 Sen. The net profit would have been higher if not for the Forex loss of RM577K in Q3 and total of RM2 mil for YTD.

Given the strong positive statement by Dufu’s Board on its prospects for remaining qtr (see below extract), I have estimate Q4 EPS to be 3.8 Sen (same as Q3. Note that the average EPS for last 3 qtrs is 3.93 Sen) to give me an estimated FY 17 EPS to be 15.5 Sen.
Dufu in FY16 Annual Report disclosed that 70% of its income is from HDD. Seagte and WD is its main customer
.
The expected strong performance is supported by information from Seagate Q2 result showing an increase in HDD shipments capacity (EB) from 70.3 to 87.5 an increase of 24.5%, average capacity per drive (TB) had increased to 2.1 from 1.9. Both Co have performed better than market expection

Similarly at Western Digital Q2 result is also showing an increase in HDD shipments capacity (EB) from 87.4 to 97.3 an increase of 11.3%, average capacity per drive (TB) had increased to 2.1 from 1.9.

Dividend Policy

The Co has a policy of paying 50% of its net profit. Thus with an estimated EPS of 15.5 Sen, I would expect the FY 17 Dividend to be about 7.5 Sen. An interim Dividend of 2 Sen was paid in Oct 2017.

A Gem to buy before Mr Market rerate it upon Q4 announcement on 28 February 2018.

It is trading at historical (FY 16) PE 7.3 and estimated FY 2017 PE 7.4 with an estimated Dividend payment of 7.5 Sen giving a dividend yield of 6.5%

My target valuation is using my projected FY17 EPS of 15.5 Sen with a PE 10 to PE 12 is RM1.55 to RM1.86.
If your entry price is 115, the potential gain would range from 40 Sen to 71 Sen, a gain of 34.8% to 61.7%

I would cut loss at 105. Your risk is 10 Sen and your reward can range from 40 Sen to 71 Sen

DUFU
Share Buyback Continuously buy in decent Volume
The Company has sent a strong statement to the market that it is not please with its current share price and did substantial share buyback to support share price on the following dates

6 Feb Purchase 291,500 shares at price range 111 to 115

5 Feb Purchase 350,000 shares at price range 112 to 120

29 Jan Purchase 116,900 shares at price range 117 to 120

22 Jan Purchase 216,800 shares at price range 116 to 120

17 Jan Purchase 161,000 shares at price range 118 to 120

14 Dec Purchase 285,000 shares at price range 119 to 120

We can infer that, the Co is willing to support share price below 120 by exerting share buyback mandated by shareholders.

https://www.seagate.com/files/www-content/about/investors/_shared/documents/fiscal-q2-2018-supplemental-information.pdf

https://www.seagate.com/as/en/about-seagate/news/seagate-technology-announces-preliminary-financial-information-for-fiscal-second-quarter-2018-and-completion-of-long-term-nand-supply-agreement-with-toshiba-memory-corporation-pr/

http://files.shareholder.com/downloads/WDC/5688369754x0x969592/8D95D50E-2ACE-4234-B376-C442CEECE505/QFSforQ2FY2018.pdf

https://www.wdc.com/about-wd/newsroom/press-room/2018-01-25-western-digital-announces-financial-results-for-second-fiscal-quarter-2018.html

Dufu Q4 Outllook

Givent the positive results and increased in HDD shipments by both Seagate and Western Digital in Q2 2018 released, we can expect Dufu Q4 sales trend to be inline with its two key customers. Note that 70% of Dufu sales is from HDD. Barring any negative surprise, Dufu Q4 sales would be up. I am estimating the Co would be at least maintaining its Q3 earnings of 3.8 Sen for Q4 plus minus 10% variance.

Dufu 9 mth EPS was 11.7 Sen. thus Dufu FY 2017 EPS would be in the region of 15 Sen. Prudently, using PE 10, it can carry a valuation of RM1.50 compared to its current share price of RM1.20. A 25% upside to its current valuation.

Share Buyback

The Company has sent a strong statement to the market that it is not please with its current share price and did substantial share buyback to support share price on the following dates

22 Jan Purchase 216,800 shares at price range 116 to 120

17 Jan Purchase 161,000 shares at price range 118 to 120

14 Dec Purchase 285,000 shares at price range 119 to 120

On 18 Jan the Co did a share buyback of 161,000 shares ranging from 118 to 120 reflecting the undervaluation of its share

Most tech companies in manufacturing also have very high import cost components, so the forex issue is there, but should be manageable. Still, for tech companies, they had been doing very well the past several years not bcos of forex gains, but bcos of increased sales from global tech sector upcycle... and this up cycle is still strong.

So, for Dufu, Forex should still be manageable... If you recall Q1 16, RM appreciate from 4.30 on 2 Jan 16 to 3.89 to mid-April 16 and at 30 Sept was 4.125 and Dufu was profitable for the 9 mths in 2016. If you take Q3 16, the RM to USD range from 4.00 to 4.125 and in Q3 16, and Dufu made a net profit of RM7.36 mil in the quarter. Hope this allay your concern

A Gem to buy before Mr Market rerate it upon Q4 announcement in February 2018.

My target valuation is using my projected FY17 EPS of 15.5 Sen with a PE 10 to PE 12 is RM1.55 to RM1.86.

Compared to closing on 9 Jan of RM1.25, the potential gain would range from 30 Sen to 61 Sen, a gain of 24% to 48.8%

Treat your Dufu shares as a 45 days Fixed Deposit and on maturity you would have above gain

Dufu Prospects Statement in Q3 on Q4 is now supported by Seagate Preliminary Result announced on HDD industry and demand

18. Prospects
We expect sales to continue to remain favorable towards end of 2017 as our major product
is driven by the growth in high-capacity nearline HDDs as well as stabilization of client
storage demand. The long-term future of HDDs are likely rests with high capacity HDDs,
particularly in data centers serving cloud storage applications. The demand for high
capacity storage drives, enhanced performance, and lower storage cost is set to rise.
Global internet penetration, the rise in e-commerce in emerging markets, and the current
trend for high-resolution media standards are the likely drivers for the continuing rise in
global data storage demand.
Nevertheless, the Group will continue to improve its operational efficiency and keep a
tight rein on costs to ensure price competitiveness on its products. The Group is also
working closely with existing and new customers in creating value to their supply chain,
and will continue to seek opportunity to venture into new business segments that can
synergizes with the Group’s current business model. With this in place and considering
the continuing stable demand based on the current market trend and assuming that there is
no volatility in the United States Dollar (“USD”) currency against Ringgit, the Group is
optimistic about its earnings and growth in the coming quarters.

Key take home of Seagate preliminary informations having indicatios of coming Dufu Q4

The strength in the Company’s revenue and gross margin for the quarter was driven primarily by better-than-expected demand for the Company’s HDD mass-storage solutions portfolio and operational execution.

“Our revenue growth and strong portfolio profitability in the December quarter reflect solid demand for high-capacity mass-storage solutions, particularly for our cloud-based environments,” said Dave Mosley, Seagate’s chief executive officer. “Availability of our cloud and edge portfolio remains constrained with broad-based customer demand globally and we are looking forward to planning discussions with a significant number of customers at CES this week,” said Dave Mosley.

Due to industry forecasts for explosive data creation and next-generation workloads over the next decade and beyond, the storage industry anticipates an increase in global storage needs for existing and new markets. To address these needs, Seagate has developed and invested in building a robust digital storage portfolio to provide customers with solutions that fit their dynamic storage needs, including HDDs, SSDs, and hybrid solutions.

DUFU

Sales for Q4 is expect to increase inline with Seagate Q2

Based on preliminary Q2, Seagate expects to record 88 exabyte shipments with about 40M drive shipments and an average capacity per drive of 2.2TB in Q2. In Q1 2018, the shipments were 70.3 EB averaging 1.9 TB.. Increase in shipments in Q2 of vol of HDD shiped when you look at above table and graph.

Seagate is one of Dufu largest customers and Dufu revenue would increase in this Q4 compared to Q3 based on abover Seagate increase in shipments.

This is consistent to my information from what I have just seen in a non listed key HDD business player (who is also a key industry player with more than 50% global market share dealing with Seagate and WD) for its Dec 17 closing and Q4 17 and found it to be stronger than Q3 17 and Q4 last year. For both its Malaysian and Thailand operations. Dufu business performance for Q4 should be inline relatively to this Group. My source who deals with Seagate and WD in US Corporate had also invested in Dufu

Above is Seagate Preliminary Q2 Announcement for 31 Dec 2017

https://www.businesswire.com/news/home/20180108006816/en/

Co=Dufu

Dufu

Dividend Paid for FY 2015 3.1 Sen , FY 2016 4.5 Sen and FY 2017 interim Dividend 2 Sen paid on 12 October.

Investors overlooked it Dividend Policy (Paying at least 50% of PAT) per Annual Report FY2016

Dividend

For FY2016, the Board is pleased to recommend a final
single-tier dividend of 3.5 sen per share for the approval
of our shareholders at the forthcoming Annual General
Meeting (“AGM”). If approved, coupled with the first
interim single-tier dividend of 1 sen per share paid out on
10 October 2016, the total dividend for this financial year
will be 4.5 sen per share which is higher than the total
dividend of 3.1 sen per share paid in respect of FY2015.
The dividend payout for FY2016 is consistent with the
Company’s Dividend Policy whereby at least 50% of the
Company’s Operating Profit After Tax (PAT) will be paid as
dividend to shareholders after taking into consideration of
the Company’s retained profits, cash flow as well as the
funding requirement of the Group.

As at 30 Sept the EPS is 11.7 Sen. We would expect payment of more than 5.5 Sen at minimum. Thus it is a Dividend yield stock. With projected net profit of 15.5 Sen, we can expect 7.5 Sen payout

As Dufu is in a mature HDD industry where the CO command about 40% of market share (source from CO, its growth is in region of 8% in line with Seagate and WD annual growth. 70% of its income came from 3 customers (very likely all from HDD). I would not Duf a PE greater than 15 inview of the its current mature business with organic growth. I would be conservative to give it a PE 10 to PE 12 with a valuation range RM1.55 to RM1.86

Any valuation by Mr Market of more than 12 is a bonus..

It is having resistance at 127. Dufu was Ooi Teik Bee counter previously. When it price dropped below 200 MA, OTB divest Dufu and his followers who panic follow suit and their volume could have be disgested in the market by now. I think OTB would regret when it moves

The price went down after Q3 announcement as operators flush it down to 102 to collect it.

I have also analysed in details for MMSV, patience shareholders are being rewarded now

You may be concern of the strengthening of Ringgit which could affect Dufu profit margin.

Most tech companies in manufacturing also have very high import cost components, so the forex issue is there, but should be manageable. Still, for tech companies, they had been doing very well the past several years not bcos of forex gains, but bcos of increased sales from global tech sector upcycle... and this up cycle is still strong.

So, for Dufu, Forex should still be manageable... If you recall Q1 16, RM appreciate from 4.30 on 2 Jan 16 to 3.89 to mid-April 16 and at 30 Sept was 4.125 and Dufu was profitable for the 9 mths in 2016. If you take Q3 16, the RM to USD range from 4.00 to 4.125 and in Q3 16, and Dufu made a net profit of RM7.36 mil in the quarter. Hope this allay your concern

9 mths YTD to 30 Sept 2017 vs 9 mths YTD 2016 (See attached Excel Table below)

1. Sales increase by RM8.3 mil or 6.8%


2. Gross profit margin increase by 7.1% from 25.3% to 32.4% (an increase of 28.1%)

The increase in GP margin is due to management restructuring its operation for improvement in its efficiencies and cost control measure implemented.

3. PBT had increased by RM10.2 mil from RM 15.5 mil to RM25.7 an increase of 66%

In 2016, there were two expenses not relating to operation, which I adjust to add back to my adjusted PBT so we are comparing apple to apple.

There was a Criminal Breach of trust expense of RM 2.7 mil (this was subsequently recovered in Q4 2016) and a NON TRADE LOAN impairment of RM1.2 mil. Total adjustment is RM3.9 mil


4. When comparing with 2016 ADJUSTED PBT, PBT had increased by RM6.298 mil from RM 19.378 mil to RM25.7 an increase of 32.5 % (highlight in Yellow in Excel Worksheet)



5. Net profit had increased by RM 7.7 mil from RM11.9 mil to RM19.6 mil.

6. The EPS for 9 mths YTD 2017 is 11.7 Sen compared to 2016 EPS of 6.95 Sen


7. For 9mth ended 30 Sept, the Co has net cash generated from operation of RM46.3 mil (2016 RM 25.8 mil ) For FY 2016 the cash generated from operation was RM46.5 mil (FY 2015 RM25.8 mil) Thus it has strong cash flow generated from operation,


8. At 30 Sept 2017, its net cash is RM30.745 mil (equivalent of 18.5 Sen per share)


9. Dufu has strong Balance Sheet with zero net gearing.

Prospect for Q4

Dufu’s Board Statement on Prospects in Q3 announcement

We expect sales to continue to remain favorable towards end of 2017 as our major product is driven by the growth in high-capacity nearline HDDs as well as stabilization of client storage demand. The long-term future of HDDs are likely rests with high capacity HDDs, particularly in data centers serving cloud storage applications. The demand for high capacity storage drives, enhanced performance, and lower storage cost is set to rise. Global internet penetration, the rise in e-commerce in emerging markets, and the current trend for high-resolution media standards are the likely drivers for the continuing rise in global data storage demand. Nevertheless, the Group will continue to improve its operational efficiency and keep a tight rein on costs to ensure price competitiveness on its products. The Group is also working closely with existing and new customers in creating value to their supply chain, and will continue to seek opportunity to venture into new business segments that can synergizes with the Group’s current business model. With this in place and considering the continuing stable demand based on the current market trend and assuming that there is no volatility in the United States Dollar (“USD”) currency against Ringgit, the Group is optimistic about its earnings and growth in the coming quarters

Basis of Valuation
For Q3 Dufu reported a net profit of RM 6.4 mil with an EPS of 3.8 Sen and for the year to date to 30 Sept a net profit of RM 19.6 mil with an EPS of 11.7 Sen. The net profit would have been higher if not for the Forex loss of RM577K in Q3 and total of RM2 mil for YTD.

Given the positive strong statement by Dufu’s Board on its prospects for remaining qtr (see below extract), I have estimate Q4 EPS to be 3.8 Sen (same as Q3. Note that the average EPS for last 3 qtrs is 3.93 Sen) to give me an estimated FY 17 EPS to be 15.5 Sen.

DUFU

A Gem to buy before Mr Market rerate it upon Q4 announcement in February 2018.

My target valuation is using my projected FY17 EPS of 15.5 Sen with a PE 10 to PE 12 is RM1.55 to RM1.86.

Compared to closing on 5 Jan of RM1.25, the potential gain would range from 30 Sen to 61 Sen, a gain of 24% to 48.8%

If you like my analysis posted do look at my Dufu posting