Posted by miketyu > 2013-12-15 22:58 | Report Abuse

Can anyone clarify if the depreciation of ringgit and strengthening of USD will erode the future earnings of Hexza?

Posted by ahloong > 2013-12-20 17:32 | Report Abuse

Possible....noted majority of their raw materials are imported in USD terms. While they sell locally in RM

Posted by AyamTua > 2013-12-30 02:02 | Report Abuse

the dividend alone is attractive :-)

Posted by Moon Ng > 2014-01-07 20:50 | Report Abuse

Hiddengem, glad to c u here!

Posted by bcshee > 2014-01-08 12:24 | Report Abuse

very undervalued stock..

Posted by sephiroth > 2014-01-08 15:13 | Report Abuse

suddenly green liao

Posted by AyamTua > 2014-01-26 10:51 | Report Abuse

one of the best purchase i made and still stays with it - graham net net

Posted by miketyu > 2014-01-26 11:58 | Report Abuse

How much is 10% div? 10 sen per share?

Posted by AyamTua > 2014-01-26 18:59 | Report Abuse

10,000 unit = $6xx if not mistaken

Posted by Joyce > 2014-01-26 19:04 | Report Abuse

Ayam yang tak guna. Ayam Penipu hahahaha

Posted by AyamTua > 2014-01-26 19:24 | Report Abuse

tipu what? if counter dont go up even though we praise it night and day not tipu lah ..
compare csl and hexza .. hexza is a graham net net mah ..
anyway its ok 2014 resolutions - being more patient and less "fighting" hahahaa

Posted by AyamTua > 2014-01-26 19:53 | Report Abuse

@hiddengem - my boss and official caretaker for Hexza hehehe - thanks for welcoming me home! yes, home sweet home!

Posted by tjhldg > 2014-02-05 02:25 | Report Abuse

kikikii ... um .. sephiroth , hiddengem , AT all here , tj tak naik boat pun tak boleh lah

Posted by AyamTua > 2014-02-05 02:32 | Report Abuse

tjhdlg: hexza like ASB year end only ..10% dividend , negative enterprise
value and graham net net .. investment grade

others good dividend and growth counters

ntpm (14.5%)
hexza (10%)
willow (30%)

Posted by tjhldg > 2014-02-05 23:48 | Report Abuse

kikikii

Posted by AyamTua > 2014-02-06 03:53 | Report Abuse

negative enterprise value , a graham net net qualifier, with good nta - ding dong ding dong .. anytime true value can be "unlock" - as prudent investors, we are here not to be a "kaki lima fortune teller" but more of "fortune-telling" secara berhemah ... kikiki

hexza - a high yield dividend play , if put in 100 units based on current dividend pay out one can easily get MYR $600+ ... dont forget his moat, sustainability and pretty strong fundamental as growth stock .. negative enterprise value coupled with sustainability is a rare hidden gem "undervalue" stocks in the present market ...

Posted by calvintaneng > 2014-02-07 23:03 | Report Abuse

YES! HEXZA IS AN EXCELLENT RECESSION PROOF STOCK! GIVING A DECENT DIVIDEND YEARLY AND BACKED BY HIGH NTA. BUY! BUY! BUY!

Posted by AyamTua > 2014-02-07 23:08 | Report Abuse

Calvin - appreciate the good job! hihihihi

Posted by m8829 > 2014-02-08 16:41 | Report Abuse

Charts are firming up, looks like next week is 'go time'

Posted by AyamTua > 2014-02-08 17:37 | Report Abuse

thanks

Posted by mikekong55 > 2014-02-08 17:38 | Report Abuse

ayamtua/hiddengem. both also into this counter.

Posted by Christine Goh > 2014-02-09 12:29 | Report Abuse

:)

Posted by AyamTua > 2014-02-09 19:50 | Report Abuse

:-)

Posted by FreeThink > 2014-02-09 19:53 | Report Abuse

no vol...

Posted by tjhldg > 2014-02-09 22:50 | Report Abuse

hi hiddengem .. few day liau tj not yet buy 1 .. monday will try to grab ..

Posted by tjhldg > 2014-02-09 23:00 | Report Abuse

bo beh koh leh hiddengem ... mana aer sai .. ai siew tampok la this 1 .. aer siew aeh , hor koi fd la ... kikiki

Posted by AyamTua > 2014-02-09 23:15 | Report Abuse

tjhldg: if tj grab 100u keep it till end of year .. AT at 0.771 :-) TJ still can make money with 10% dividend ... Hexza like marco good high yield dividend play ....

Posted by tjhldg > 2014-02-09 23:20 | Report Abuse

hehee ... tj lau liau , bo tah liau ... mu kah sailang on any cuonter liau , teng teng wan sek suda la ... kikiikikiii

this 1 a bit like kuchai la hiddengem and AT , push up 10 cents also cannot get 1 m shares for sure .... kikikii

Posted by AyamTua > 2014-02-09 23:25 | Report Abuse

tjhldg: pls put hexza on ur sailang and teng teng wan list ... kikiki think hexza , think of house with hidden treasure underneath (graham net net)

Posted by tjhldg > 2014-02-09 23:32 | Report Abuse

bye bye ... kuchai if tomorrow got vol sure tj hantam kasi dia 9696 .. takut dia back to sleep shj .. like tj punya kawan every day up but no chance to tambah ... sian !

Posted by AyamTua > 2014-02-11 10:49 | Report Abuse

moving a little .. just to update lah .. kikiki

Posted by AyamTua > 2014-02-11 17:23 | Report Abuse

+0.010

Posted by AyamTua > 2014-02-11 20:08 | Report Abuse

i really believe

Posted by m8829 > 2014-02-11 20:09 | Report Abuse

get ready, steady...and go this weeeek

Posted by AyamTua > 2014-02-11 20:11 | Report Abuse

Posted by m8829 > Feb 11, 2014 08:09 PM | Report Abuse

get ready, steady...and go this weeeek

- any good news? hihihi kasi chance for people to say something lah

Posted by AyamTua > 2014-02-12 14:59 | Report Abuse

hiddemgen: graham net net ... macam itu gigi geraham.... tunggu lah.. lubang sana , lubang sini... nanti kasi tampal lah itu gigi geraham..... kikiki

Posted by AyamTua > 2014-02-12 15:07 | Report Abuse

hiddemgem: apa hal tiba tiba ni? demam kah?

Posted by AyamTua > 2014-02-12 16:07 | Report Abuse

yesssss

Posted by houseofordos > 2014-02-13 00:22 | Report Abuse

Guys, I m also holding this stock, since the price is not moving much and the stock is not so hot yet, I d like to share my view on the intrinsic value of Hexza which I have studied.

kcchongnz has already done a most conservative valuation on Hexza using Graham net net as shown in this link, A Graham net net valuation is most suitable for a company that has a high amount of quality assets. Hexza has a whole load of that with its excess cash of RM0.65 per share.

http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/40677.jsp

From his analysis, Hexza is worth at least RM0.81.


Hexza is no doubt in tough period with the chemical industry going through some consolidation However, take note the its depreciation charges is high (around RM5-6mil per year) relative to earnings. Since depreciation is a non-cash expense, Hexza actually generates very high amount of free cashflows from its business (15% of total revenue last year) even though EPS looks poor. If Hexza were to be valued based on PE ratio, its PE would be 15.5x whereas if we look at Hexza from enterprise value perspective its EV/EBIT ratio its only 2.3x based on closing price of RM 0.655. No wonder nobody is looking at this stock ! Everyone is so focused on PE ratio.

As Hexza is consistently generating high free cashflows in bad and good times, lets take a look at Hexza's valuation using a Discounted cash flow method :-


Table 6.1: Assumptions
Current stock price $0.66
Share outstanding (Mil) 200380
This year FCF $12,726
Next year's FCF (mil) $13,362
Growth for the next 5 and 10 years 5.0% 5%
Teminal growth rate, g 3.00%
Discount rate, R 15.0% 10.0%

PV of FCFF of core operations $124,000
Non-operating cash $129,290
Investment properties $0
Interest in associates $0
Debts $0
PV of FCFE $253,290
Less minority interest ($11,607) 4.6%
FCFE $241,683
Number of shares 200380
FCF per share $1.21 84% higher than = $0.66
MOS 46%

Using a FCF base of RM12.7 mil (average from 6 years since last year's FCF was exceptionally high), and using a discount rate of 15%, Hexza's valuation based on the assumption of 5% growth in FCF for the next 10 years and 3% thereafter. is RM1.21 which presents a 46% margin of safety.

What is the market expectation of Hexza's cashflow growth based on its current price. The fact that Hexza holds so much excess cash per share, Hexza's FCF would have to decline by a rate of 50% per year for the next 10 years to justify its share price at current levels. We should ask ourselves if this is a realistic scenario thus presenting how undervalued this stock really is.

Posted by bigFAT > 2014-02-13 00:39 | Report Abuse

at least worth 81 cents? now 65.5? not much exciting lo

Posted by sense maker > 2014-02-13 00:47 | Report Abuse

Concerns at a glance:
1) 3% terminal growth rate assumed is too optimistic given its flat earnings performance in the past 3 years.
2) 6% dividend yield is not bad but that is all. It gives all earnings as dividends. That means little upside on dividend payout.
3) High depreciation charge results or comes from high capex outlay, which alarmingly has only generated lower sales each year since 2009 crisis.

A clean balance sheet is a plus and is its high cash per share. But they may stay that way without capital distribution longer than you can wait. Provided you have faith in the resilience of its biz, you may treat Hexza like a quasi- or leveraged deposit.

Posted by houseofordos > 2014-02-13 08:07 | Report Abuse

sensemaker
1. Earnings was flat or declining for past 5 years but FCF was still healthy and even expanding due to the dep
2. Dividend payments are supported by FCF. If business turns around, it can afford to pay more.
3. Hexza does not incur high capex for the past 5-6 years averaging about RM2-3mil. Eventually Hexza may need to replace its PPE, however as long as no major damaging acquisition is made, its cashflows should remain healthy.

Hexza is not a growth stock. It is a run down stock operating in a difficult environment, The investment thesis of investing in Hexza its limited downside due to its balance sheet strength and strong cash generation capabilities.

Posted by sense maker > 2014-02-13 09:13 | Report Abuse

Market cap over FCF is 11 times. It is not cheap. Accounts Receivable are 75 days old on average- evidence of its weak pricing power and potential credit risk. Personally speaking, Hexza is not a buy at the current market price.

Posted by houseofordos > 2014-02-13 09:47 | Report Abuse

sense maker, why do you only look at market cap over FCF instead of enterprise value over FCF ? Think about it. Market cap only considers share price but Hexza has tons of excess cash and zero debt making its enterprise value very low.

Enterprise Value = Market Cap + Debt - Excess Cash

Posted by sense maker > 2014-02-13 09:56 | Report Abuse

Good cash balance is shock absorber, a safety net to me, and a guarantee of sort of persistent dividend payment into foreseeable future.

I do not consider EV because I do not have control over it as I am not acquiring the controling interest.

Take out the Accounts Receivable and most of Property Plant and Equipment, and the net asset backing will shrink dramatically.

Posted by houseofordos > 2014-02-13 10:12 | Report Abuse

"I do not consider EV because I do not have control over it as I am not acquiring the controling interest."

That 's the whole idea of valuation in my opinion. Acting like business owners. Think about how attractive the price to privatize Hexza is with its excess cash already close to share price. The owner would be able to privatize for almost free after deducting excess cash and minority interests.


"Take out the Accounts Receivable and most of Property Plant and Equipment, and the net asset backing will shrink dramatically."

You re assuming that Hexza will not be able to collect any receivables and its PPE is worthless... all this by just looking at account receivables being 75 days old ? A bit too far fetched in my opinion. Have you actually seen evidence of significant bad debts being written off in the cashflow to make this claim ? How about other companies in similar industry. I m interested to know as well. The fact that its CFFO is positive for all these years already tells me that this is quite unlikely ?

Anyway, its good to hear your opposite views to keep my optimism in check.

Posted by OneMillion > 2014-02-13 10:21 | Report Abuse

Posted by sense maker > Feb 13, 2014 09:13 AM | Report Abuse

Market cap over FCF is 11 times. It is not cheap. Accounts Receivable are 75 days old on average- evidence of its weak pricing power and potential credit risk. Personally speaking, Hexza is not a buy at the current market price.

Agreed, well said sense maker, houseofordos, you are a bit optimistic, anyway, good comments, smile : )

Posted by kcchongnz > 2014-02-13 10:25 | Report Abuse

I have invested in Hexza too because of its Graham net net stock as its cash alone less liabilities per share is more than its share price. It is in fact a negative enterprise value company if you consider some value in its PPE which is appropriate as a major portion of it is land and building.

Very rarely we see a Graham net net company is also a cash generator (instead of cash burner) like Hexza. This good cash generation also provides the ability for Hexza to give good dividends, twice the amount you can get from fixed deposit. Hence the risk of investing in Hexza is very low. It is an excellent defensive investing strategy which could be a more appropriate strategy in the present environment.

I fully agree with you that as Hezxa has huge amount of cash and cash equivalent, enterprise value is a more appropriate metric than market capitalization.

I opine that Hexza' business will still last for some time, but definitely not a growing business, unless something changes. If I were to value Hezxa using earnings based valuation, I would use the conservative EPV method at best.

Posted by houseofordos > 2014-02-13 10:48 | Report Abuse

KC,

Thanks for your comments. I used DCF method in view of the high free cashflows generated by Hexza. Even assuming very low growth or no growth I still found a large margin of safety from investing in it.

Posted by bugle > 2014-02-13 11:56 | Report Abuse

bought Hexza long time ago, few years back, still holding and adding more. Have been holding all good fundamental stocks like PBA, EKSONS, GUH, LCTH, CSCSTEL, PTARAS, PCHEM, GTRONIC, HIL, SHL, PLENITU, MFCB mostly for dividends. and one common thing of all, cash rich!