How on earth GPM of 40% and NPM of 10% are considered "very low"?? They offer "free maintenance" in the first few years becoz maintenance expenses are already included in the selling prices. Sweetie, there is no free lunch in this world.

KK let me take a look. Yes, it's full of cash and it's cheap, but I feel a bit uncertain. Like others, my main concern would be the Mahathir factor/political risk, given that TM is a GLC: can TM bypass them to secure the cable/fibre?

On a side note, is it norm that people really copy & paste other people comments one more time, lest they delete their own comments??

When will they get the contracts?

Business doesn't seem to be doing so well but rich in assets.

SHARES of Pan Malaysia Corp (PM Corp) (fundamental: 1.5/3, valuation: 1.1/3) rose 5.2% to a one-year high of 30.5 sen on heavy volume yesterday. A total of 9.5 million shares were traded — 11.2 times its average daily trading volume.

PM Corp is primarily involved in the manufacturing of own-brand chocolate products as well as distribution of confectionery and beverages of third-party brands. The company is 27.5%-owned by Malayan United Industries Bhd and controlled by Tan Sri Khoo Kay Peng.

For 2014, revenue was down 12.1% to RM70.8 million from a year ago and it recorded a net profit of RM1.5 million. PM Corp attributed the uninspiring performance to lower domestic sales, heightened competition in the local chocolate market, and higher raw material costs.

For 9M2015, revenue increased 4.8% year-on-year to RM50.2 million while net profit jumped more than seven-fold to RM8.3 million, thanks to a foreign exchange (forex) gain of RM9.3 million. The company said the unrealised forex gain is mainly due to the depreciation of ringgit against Singapore Dollar on translation of amount owing by a foreign subsidiary.

With minimal borrowings, PM Corp is sitting on a net cash position of RM143 million. This is equivalent to 20.2 sen per share, or a substantial 70% of its market capitalisation.

On Nov 25, 2015, it proposed a reduction of par value and share premium to eliminate its accumulated losses as well as a capital distribution of RM56.7 million or 8 sen per share to shareholders. The proposals are subject to shareholders’ approval at forthcoming extraordinary general meeting on March 3 and expected to be completed by 2Q2016.

The stock is trading at a trailing 12-month P/E of 23.6 times and 0.57 times book value. Both trailing ex-cash P/E and trailing EV/EBITDA stood at 7.2 times. No dividend was paid for the past 10 years.

Is it a good business? Yes
Is it undervalued? Yes
Does it pay decent dividend? Yes

Is it a growth stock? This I have reservation coz earnings have been range-bound between RM25m-30m in the past 5 years. How so coz revenue have been growing from RM1.3b in 2010 to RM1.6b in 2014?? I think this is becoz this is an ultra competitive industry (IT products are getting increasingly commoditised) and they need to sacrifice margins to maintain market share. They need a different growth strategy other than just getting the distribution rights which will never be exclusive anyway.

TADMAX (fundamental: 2/3, valuation: 0.9/3) jumped 9.4% in active trade to end the trading session at 35 sen yesterday. Originally a Sarawak-based timber concessionaire, it has diversified into property development, construction, industrial supplies and oil palm development.

Tadmax was loss-making in the past five years and had a high net gearing ratio of 110% as at end-December 2014. However, it posted a net profit of RM71.6 million in its second quarter ended June 30, 2015 (2QFY15) after it disposed of 310 acres of land in Pulau Indah, Klang, to a subsidiary of 1Malaysia Development Bhd for RM294.4 million.

With the bulk of proceeds used to repay bank borrowings, Tadmax has successfully de-geared and is now focusing on its property development project in Labuan. For its 3QFY15, it reported a net loss of RM2.8 million due to site progress of the development works being hampered by the frequent rainfall.

Tadmax is currently in the process of disposing 60 acres of land in Pulau Indah for RM48.4 million.

Wow very informative thanks!

They invested a lot in production but sales didn't improve as much. As a result, earnings growth wasn't really fantastic until 2Q2015 when they finally reaped the benefits of their aggressive expansion of retail network. 2015 sure looks like a better year vs 2014.

Btw the 5% yield includes a special dividend declared for their 30th anniversary. Excluding that, normalised yield should be around 3-4%.

Agreed with speakup: weak domestic demand which reflected in their 3Q15 results.

"Attractive business model with some moat". Given that the margins have decreased from 2% to 1% over the years, what are the moats of this attractive business model?

That said, I would say this is a relatively safe company with good management. I'm just concerned with the deteriorating industry fundamentals and the throat-cutting competition.

I think the methodology of your study is a bit flawed because the time period you used is only 1 day. In the short term, stock prices move randomly, due to human emotions and market risks. I think The Edge articles are based on fundamental approach.

If you trade for a living, you should look at technical charts and monitor sentiments towards the broader markets, rather than looking at The Edge articles to form your trading strategy.

This is not a good counter: Eurospan will not benefit from the stronger USD as it hedges its forex exposure. Unlike the larger and leading furniture makers, it is loss-making and didn't pay any dividend since 2011. Moving forward, potential headwinds include higher production, operating costs and stiffer competition in the sector.

Good business no doubt. The only thing I'm concerned is price (valuation). Current P/E is about 21 times, what's the expected growth and forward P/E in the next 12 months?

Last week's The Edge article: MWE could be worth more

Businessman Tan Sri Surin Upatkoon, also known as KK Lau, finally made his move last week. He is offering RM391.4 million, equivalent to RM1.70 per share, to buy all the assets and liabilities of MWE Holdings Bhd.

The offer comes slightly more than two years after the company bought a 25% stake in highway concessionaire Kumpulan Europlus Bhd (K-Euro).

Upon completion of the disposal, MWE (fundamental: 0.55; valuation: 1.20) would distribute the cash proceeds to its shareholders, except for Surin and parties acting in concert with him. The company would then be delisted from Bursa Malaysia.

Through Pinjaya Sdn Bhd, Surin controls 32.62% of MWE — a company he has invested in for 39 years. But is the price of RM1.70 attractive?

Over the last 15 years, MVVVs share price had only traded above RM1.70 during a brief period in 2013 and 2014. So, the offer could provide minority shareholders with a fairly good exit.

However, MWE's net assets per share was RM2.42 as at Sept 30 — 42% higher than the offer price.

The company's jewel could be its 25% stake in K-Euro (fundamental: 2.40; valuation: 0.90). But its core earnings-generating asset is United Sweethearts Garment Sdn Bhd. It also owns MWE Golf & Country Club Bhd and MWE Properties Sdn Bhd, apart from a whole host of other assets.

As at Sept 30, MWE had cash balances of RM113.65 million, short-term borrowings of RM153.41 million and long-term debts of RM51.82 million. Its total assets amounted to RM842.73 million.

Based on last Thursday's closing, K-Euro had a market capitalisation of RM847.3 million, meaning that MWE's 25% stake is worth about RM211.82 million.

K-Euro has 80% equity interest in the RM6 billion West Coast Expressway (WCE), which spans 316km and links Banting in Selangor to Changkat Jering in Perak. Three months ago, the company's chief financial officer, Lyndon Felix, said WCE's revenue contribution to K-Euro would commence in 2018 but the full impact would only be seen in 2019.

Together with its 20% partner, 11M Corp Bhd, K-Euro has a 5o-year concession for the WCE and an additional 10 years if the targeted internal rate of return is not met. K-Euro also has the Bandar Rimbayu township development, which is located between Kota Kemuning and Bandar Saujana Putra. Measuring 1,878 acres, its total gross development value is about RM11 billion.

To put things in perspective, K-Euro will be worth mole once the WCE commences operations and earnings from Bandar Rimbayu start trickling in, which in turn would also increase the value of MWE's 25% stake in K-Euro.

According to a filing with the Companies Commission of Malaysia, MWE’s textile asset, United Sweethearts, reported a net profit of RM10.85 million on revenue of RM229.9 million for its year ended March 2015. The company had reserves of RM42.75 million for the year in review.

At MWE’s annual general meeting in September, United Sweethearts managing director Tang Chong Chin was quoted by the media as saying that the garment maker was eyeing an additional revenue of USS40 million (RM166.67 million at the exchange rate then) for the financial year ending March 31, 2017, from its new plant in Vietnam He said the plant is expected to commence operations in the middle of next year and start contributing to revenue in the 2017 financial year.

The Vietnamese plant will add 42 lines to Sweethearts’ current 26 lines, he revealed. The aggressive expansion plan augurs well for United Sweethearts’ future earnings.

As for MWE's plantation assets, about two years ago, Fauzi-Lim Plantation Sdn Bhd was pegged at a price of RM93 million when privately held Survival Access Sdn Bhd was keen to acquire it, but Yayasan Islam Kelantan scuttled the deal.

Meanwhile, MWE Golf & Country Club carried a net book value of RM43.89 million as at end-March. MWE also has at least two buildings in George Town, Penang, which collectively have a net book value of more than RM52 million.

For the six months ended Sept 30, the company suffered a net loss of RM52.2 million on revenue of RM174.38 million. The losses were due to an impairment loss of RM58.1 million provided for its investment in K-Euro, being the effect of the mark to market of its share price as at Sept 30 plus a one-off impairment of RM12.3 million for an overseas unquoted investment.

That said, MWE has been profitable in the past 10 financial years. Should things go well, FY2019 would be a robust year for the company once its associate, K-Euro, starts toll collections and its garment operation picks up.

Surin probably sees more value and growth potential in MWE's assets and liabilities than the company, which was founded by his father. MWE was listed in 1974 and Surin joined the board in July 1976 at the age of 28. Will his offer receive widespread acceptance?

The accounts are rather messy and the management don't really explain what happened. As a result, you have to plough through a lot of documents to find out what happened. I would personally give a huge discount to its valuation for the lack of transparency.

I thought you need to adjust earnings for any abnormal or non-recurring items to calculate your P/E? Both multiple or DCF methods need to adjust for extraordinary items and consider the earnings quality right.

For the current quarter ended 30 September 2015, the Group recorded revenue of RM571.6 million with profit before tax of RM97.0 million as compared with revenue of RM585.2 million with profit before tax of RM83.8 million in the preceding quarter ended 30 September 2014. The increase in profit before tax for the Group was mainly due to

(1) write back of provision for receivables after recovery of debts amounting to RM12m and
(2) revalued foreign exchange gain on US Dollar currency deposits amounting to RM25m.

This is mainly becoz they recognise the JQ project as revenue! They haven't even received the money from SBC yet!

Excluding this non-recurring income of RM112m from property development, 2Q15 is actually loss-making!

I think regular Edge (or any other financial press) readers would have the sufficient knowledge to tell whether this story is made up or not.