Posted by R40s > 2016-06-20 08:37 | Report Abuse

The Company has expanded their production capacities in Malaysia and PRC in order to cope with key customers' order demands, see Kenanga Research report last July :

http://klse.i3investor.com/blogs/kenangaresearch/80382.jsp

The expansions was to be completed by end of Q3-CY2015 (Sept. last year), assuming that it took a few months for teething problems, new operators training, improving work efficiency, realization of new orders intake, etc., the full benefits of this capacity expansions should be captured in this Q3-FY2016 and the coming Q. The EPS not yet diluted by the new shares, plus the forex gain Q-o-Q that should also increase the NP Margins significantly, the coming Q3 results is expected to be good.

Posted by rayloo > 2016-06-20 08:47 | Report Abuse

In my portfolio stated 28 Cents. Guess the calculation is RM1.48 (Previous closed price) minus RM1.2 (Execution price) = RM0.28

Posted by R40s > 2016-06-20 08:50 | Report Abuse

I see, but in my portfolio it's stated Rm 0.001, but no worries, haha... :-)

Posted by Lcb Vanson > 2016-06-20 09:19 | Report Abuse

no power

Posted by rayloo > 2016-06-20 09:41 | Report Abuse

If really confident with the company, I guess sell warrant now and buy mother share more cheaper.

Posted by rayloo > 2016-06-20 09:42 | Report Abuse

Top Up about RM1000 instead of conversion RM1200, to get a mother share

Posted by rayloo > 2016-06-20 09:42 | Report Abuse

Further more, entitled for dividend

Posted by rayloo > 2016-06-20 10:41 | Report Abuse

Already sold all my warrants to buy mother share.

Posted by BoPoint > 2016-06-20 11:24 | Report Abuse

Every business has a cycle. To reap better returns, sell the warrants to get the mother share so that we can enjoy the dividends and capital gains. Value increases with time for mother share, while warrant declines due to decreasing time value.

*We've yet to fully value this stock, but will continue to monitor how RI and WA will affect the share price as well as issues affecting the business.

We are in the view that it is downtrending as its business is reaching maturity. Any expansion will take time, and within this period of time will see difficult period of high capex and low dividend yield. Please only enter at the end of this period and when the cycle turns to growth.

Posted by R40s > 2016-06-20 16:00 | Report Abuse

I think if really confident of the Company's expansion plan, it's better to keep the WA instead of switch to mother share, as the Gearing Ratio now is 146/48 = 3.05 times, means that for the price of 1 mother share, we can buy > 3 units of WA.

The power of 3x leverage will start to kick-in when the mother share prices start trending up, the WA's total gains should be at the rate of nearly 3-folds over mother's price gains. However, the reverse is true if the mother's price go down.

Posted by R40s > 2016-06-20 17:21 | Report Abuse

To say that Prolexus business has reached maturity and going downtrend, this view does not reflect the real situation. Prolexus is currently undergoing 2 stages of major expansion plans:

Stage-1: Last year saw their Malaysian factory increasing the sewing operators from 1,000 to 1,400 by adding night shifts, and their China factory to double their capacity, this was to meet increased demands from key customers, on urgent basis. The capacity should be increased to about 14 mil/year.

Stage-2: This year the RI exercise just completed has raised Rm56mil for building the new apparel factory in Vietnam by Sept.2017, and a new fabric mill in Johore by end of 2017. The new factories only take max 1 year to be fully operational, this is relatively rather short timeframe.

The Capex is derived from the RI and internal funds, given that Prolexus' Net Cash with small borrowings, it's financially undemanding to this well managed fundamentally solid company. As for dividend yields, don't expect a high growth company to give up high dividends in their expansion period, as their profits would be reinvested instead of distribution to shareholders.

Posted by R40s > 2016-06-20 17:36 | Report Abuse

The mother's price is holding up quiet well, absorbing the extra free floats from the new RI shares. Some buyers accumulate ahead of Q3 good results maybe.

Posted by BoPoint > 2016-06-20 18:20 | Report Abuse

You mentioned this in 9th of June
"Another point on Prolexus' expansion plan, they have stated in their RI's Prospectus that their factories are currently running at full steam, operating at more than 90% capacity (technically, 90~95% is as good as Full Capacity, because of inevitable machinery downtimes and workers stoppage)".

As you understand, we don't wait till 100% capacity to call it matured. We mean now, at current level. Full capacity contributes to maturity in terms of production, but after our analysts checked around with the number of clients, we're set about putting this company's at business maturiy.

We don't see any high growth element in Prlexus (based on financial reports and production level). Hence, without it, we compare this stock to its peers like magni who is generous in divident (again due to business nature).

Expansion plan is a tough time as it is enduring tough economic climate. What if Nike is reducing orders after factory is built?

Posted by rayloo > 2016-06-20 21:55 | Report Abuse

BoPoint, so you mean the next cycle begins when new factory start operation ? Provided orders still being made.

Posted by R40s > 2016-06-21 01:15 | Report Abuse

Thanks for clarifying what you mean by business maturity and down-trending.

But my take is, it's the opposite, the business is deemed as still growing when the productions cannot cope up with increasing demands despite running at full capacity. This is a production bottleneck issue, a good / happy problem to solve, not a bad / sad problem. When a business is having redundant capacity due to insufficient and dwindling demands, then it is deemed as matured and down-trending.

In the case of Prolexus, the former case is happening now, their key customers are enjoying good sales and projecting higher sales in the coming years, so Prolexus underwent a fast-track Stage-1 expansion, by adding 40% more operators and working extra shifts, to cope up with the immediate rising orders instead of turning down orders and risk losing the key customers. Their China factory also undergoes expansion plan to double it's production in 5 years, so that it will eventually add 50% more capacity to the group. As for the longer-term demand increase, a new factory will be built in Vietnam, which will initially add 30% more to the group's total capacity from 14M to 18.5M apparels/year. The time to fully commission the factory is only 1 year, that's quite a short time, more like mid-term period for an investor.

Consider the fact that Prolexus is Nike's "Designated Supplier" since 30 years ago, it is not to Nike's interests to lose a reliable and high quality supplier, they would rather have long-term working partnership with such a supplier, by giving them their projected increase in demands and tell them to get ready for it, not to play out their good suppliers by dumping them when their new factories are ready to execute the extra orders from them. They prefer Win-Win partnerships.

Posted by R40s > 2016-06-21 01:32 | Report Abuse

When you say you checked around with their no. of clients, do you mean their Malaysian clients or international clients? Please bear in mind that Malaysian market merely make-up about 3% of their total sales, so it's insignificant, if Malaysia's economy goes down, it's not going to affect Prolexus, their major markets are in US and EU, where consumer spendings are increasing as their economies are recovering now.

Also, do take note that Prolexus don't have many clients, because they are supplying to just a few key customers who are well-known premium brands, like Nike, Asics, Under-Armour, etc., so your analysts need to call these people in order to get more accurate feedbacks.

Posted by rayloo > 2016-06-21 05:53 | Report Abuse

Guess BoPoint trying to emphasize the company has reached its bottle neck to collect further profit growth in the near few quarters, due to full capasity of its production, regardless how strong the demand is, if there still is. Better to wait until the new factory operates to begin another cycle of growth before entering for investment.

Posted by BoPoint > 2016-06-21 09:11 | Report Abuse

Hi rayloo, yes you understand how we relate bottleneck in production to business maturity (in whole business cycle). We wouldn't say wait till the operation of new factory to begin another cycle, but based on current business model, it is one huge factor. Perhaps, new models, new customers, or new economic environment ( like e-commerce in China) would be strong catalysts.

Hi R40s, we do get accurate info on the number of clients. I'll just be straight to the point, that this firm relies heavily on a single client (pretty sure you know who). And that's what we meant, particularly how much revenues is derived from them. Good day! :)

Posted by R40s > 2016-06-21 10:08 | Report Abuse

Good morning BoPoint, thanks for the info. The coming Q3-FY16 should be able to confirm whether their Stage-1 expansion have resulted in more business or not, let's wait and see. Btw, their Q3 results are usually weaker than other Qs, so we will compare Q-o-Q.

Posted by rayloo > 2016-06-21 10:22 | Report Abuse

Q3 result on this Thursday ? Their liking habit on 23rd

Posted by jyneeng > 2016-06-21 10:51 | Report Abuse

How and when will we get the refund of the rejected excess RI subscription?

Posted by R40s > 2016-06-22 23:44 | Report Abuse

Brexit fears will be like Grexit last year, it's over-hyped?

https://euobserver.com/tickers/133924

Greek prime minister Alexis Tsipras said Grexit was a stupid idea.

Posted by sunday > 2016-06-23 19:01 | Report Abuse

Refund shall be despatched to the applications within 15 market days from the last day for excess application and payment by ordinary post.

Posted by shareinvestor88 > 2016-06-24 17:27 | Report Abuse

Latest quarter result out

Posted by R40s > 2016-06-24 18:08 | Report Abuse

Revenue up +9.3% and Net Profits up +64.5% Q-o-Q, this result is considered good. Hope it can help to neutralize the BREXIT impact and price can recover next week.

Posted by rayloo > 2016-06-24 19:04 | Report Abuse

Profit earnt at the rate below 1usd =rm4. Next quater expected even more. Although not mainly due to currency advantage.

Posted by rayloo > 2016-06-24 19:21 | Report Abuse

I noticed the profit this quarter significantly benefited from tax relief and incentive. And quite large portion of profit written off by unrealised currency loss.

Posted by shareinvestor88 > 2016-06-25 01:06 | Report Abuse

.Q-on-Q comparison - revenue n profit dropped

Posted by shareinvestor88 > 2016-06-25 01:07 | Report Abuse

Last 3 quarter shows drop in revenue n profit

Posted by shareinvestor88 > 2016-06-25 01:16 | Report Abuse

3450 net profit is excluding forex loss

Posted by rayloo > 2016-06-25 12:04 | Report Abuse

Anyway, it is fair to emphasize that usually 3rd quarter profit is fhe lowest comparing to other 3 quarters.

Posted by shareinvestor88 > 2016-06-25 15:30 | Report Abuse

My 2c opinion - results not good.
Drop in revenue n profit over last 3-4 qtr.
Will need a boost from new factory in Vietnam - funds raised from RI meant for this

Posted by R40s > 2016-06-25 20:07 | Report Abuse

shareinvestor88, how did you get that their revenues n profits drop over the last 3-4 Qtrs? See this tabulation from MalaysiaStock.biz :

http://www.malaysiastock.biz/Corporate-Infomation.aspx?type=A&value=P&securityCode=8966

Compare Q-o-Q, the last 4 Qtrs shows increase in revenues n profits, by +0%, +43%, +2% n +64%, care to share your findings for the benefits of Prolexus investors here?

Posted by BoPoint > 2016-06-25 20:47 | Report Abuse

Why is the company experiencing forex loss?

Posted by rizerlee > 2016-06-26 00:34 | Report Abuse

IMO

competition is nothing to worry about .
But competing with a super cash rich company in an industry with quantity games is something need to worry about

When all region player is expending capacity , most likely there are only 1 result - Oversupply

Even crude oil which daily usage is able to slip below breakeven point
Garment industry might face same issue .

2016 demand will still holding by demand due to few world class sport event .
2017 won't be so positive and by the time all new expention or new factory are just starting produce .

Posted by kwang2209 > 2016-06-26 13:11 | Report Abuse

Did you all take note about PRLEXUS this quarter INVENTORIES?

Posted by R40s > 2016-06-26 16:46 | Report Abuse

Correct me if I'm wrong, I think the forex losses was due to RM strengthened from 4.2 to 3.9 over the Q3 period, the apparels production costs was based on mainly above 4.0 rates, and then sales based on mainly below 4.0, so forex losses incurred by the forex differences between the costs and sales time window.

Posted by R40s > 2016-06-26 16:56 | Report Abuse

As for Inventories up by Rm10 mil, it could be due to more apparels produced with their increase in production capacity after the Stage-1 expansion, in order to ramp up production to meet more orders, more raw materials were purchased and kept as inventories, and the increased quantity of products not yet shipped out to customers, would have to be accounted as inventories.

Posted by R40s > 2016-06-26 17:23 | Report Abuse

Also, have you all noted the Rm15.7 mil invested in "Property, Plant & Equipment", up from Rm8.9 mil in the proceeding period. This should be due to the investments for Stage-1 expansion carried out in this period.

This show that Prolexus should be ready for higher orders from clients in the coming 1 to 2 years, by then their Stage-2 expansion plan should be completed, with the Vietnam apparel factory and Johor's Fabric mill become fully operational.

The Company expect the current year's prospects to remain stable, particularly for the next Q. Assuming no major hiccups in the US economy, and that the EU survive through the Brexit impact, Prolexus should have good potentials in the near futures.

Posted by R40s > 2016-06-26 17:36 | Report Abuse

The "Trade Receivables" dropped from Rm55 mil to Rm40.7 mil, it's converted to cash received, and the "Cash & Bank Balances" increased from Rm23.5 mil to Rm42.4 mil, their cash have increased significantly, it shows a very healthy cash flows now.

Posted by R40s > 2016-06-26 17:39 | Report Abuse

Anybody good in accounting can verify these?

Posted by BoPoint > 2016-06-26 18:07 | Report Abuse

Hi R40s, I also wonder about the forex losses but I can't seem to find any plausible explanations. I certainly hope "apparels production costs was based on mainly above 4.0" is not the case. It will be tormenting and disastrous.

Posted by kwang2209 > 2016-06-26 18:28 | Report Abuse

R40s , i agreed what u said

Posted by iloveshare128 > 2016-06-27 15:56 | Report Abuse

after the right issues, the total shares will be increased from 108.349million to 170.881million shares... if u take a close look at last quarter earning RM3.450million... adjusted EPS is only about 2sen... and let's say Q3 is the weakest quarter per record of past 3 years... and assume Q4 improve slightly...they made RM4.5million net profit... full year EPS = (18.195+4.5million)/170.881milion = about 13sen full year EPS... but dun forget they did underperform in Q4 too (in 2012, Q3 result > Q4)... if Q4 is weaker than Q3 2016, u will get less than adjusted 13sen EPS... so it is not trading at low PE.. (many may be misled as they forgot the latest quarter still showed the total shares before the right issues)... and do not forget about the "so-called" free warrant yet....

having said so 13sen EPS is the "optimistic" number.. and at current price of RM1.40.. PE is about 11 (optimistic)... if anything goes wrong to Q4... price will drop further... just my 2 cents sharing...

Posted by R40s > 2016-06-27 16:37 | Report Abuse

BoPoint, no need to worry too much on this Q's Forex losses, if you look at the USD/RM chart, the USD was gaining strengthen from at the year's lowest in April month, and should go higher after the Brexit event and also US FED's determination to hike their interest rate this year, that means their new purchases of raw materials would be cheaper in terms of RM, and their sales of Q3's inventories should be at higher prices in terms of RM, this would neutralize their earlier Forex loss.
Since Prolexus is more of a Fundamental counter, not suitable for short-term-traders, we should look at their longer term prospects, or at least mid-term.

Posted by R40s > 2016-06-27 16:55 | Report Abuse

Hi iloveshare128, see the following Bursa announcement dated last Monday, there are only 56.8M new shares, not 62.5M, this is because the Company holds a few million "Treasury Shares" which did not subscribe the RI, so the new total shares should be about 165M :

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5127953

The new shares did not appear in Q3 because it's issued in June, whereas Q3 closed in April.

Posted by chonghai > 2016-06-27 18:19 | Report Abuse

R40s, what iloveshare128 trying to point out here was that with 165M share in total, EPS of PROLEXUS is actually just about 2 cents. Assuming PROLEXUS managed to double EPS　of the other 3Q, total EPS is only 14 cents. PE　is　not low at all.

Posted by itlim67 > 2016-06-27 18:59 | Report Abuse

syf

Posted by kwang2209 > 2016-06-27 21:34 | Report Abuse

Please don,t only look on next quarter or next 2 quarters , look on expansion plan and company future

Posted by shareinvestor88 > 2016-06-27 22:30 | Report Abuse

Dear R40s pls see the revenue n profit column n the trend