Quarterly Result released during afternoon break (MASTEEL, KURASIA and KPJ)

Some of the best trading opportunity are from the quarterly result released during the lunch time break (1230pm to 230pm). These can be found directly from Bursa Announcement. Reason? Because we can get the information ahead of the crowd and before any journalists or Research House reported it. I will briefly write what I feel on the result. Of course, those of you who are interested to know more can always go to learn more details from the announcement.

Here's the summary and my view
1. MASTEEL Q32010 result: Revenue RM285.03m, Net Income RM4.76m
(My view: Revenue grow 45.6% y-o-y but net income drop 64.3%, hmm.. seems like the net income margin is affected significantly. Does not look good from the 1st look... 

2. KURASIA Q32010 result: Revenue RM300.62m, Net Loss RM3.75m

(My view: Revenue grow 17.9% y-o-y but Company suffered loss this quarter vs. net income of RM32.22m in 3Q2009. Again, does not look good from the 1st look...)

3. KPJ Q32010 result: Revenue RM436.48m, Net Income RM30.23m, Gross Dividend of 3.5sen announced.
(My view: Revenue grow 20.7% y-o-y with net income rose 12.8% in 3Q2009. The numbers appears to be good. Being in the healthcare sector means KPJ business should be defensive. From demographic view, the aging population in the future should bode well for KPJ too...At the price of RM3.72, Historical PER = 20.28x. Since now ady 3Q, annualizing the 3Q result for FY2010 will give 21.6 sen EPS, meaning PER of 17.2x. My feel = Good Company but the price has already reflected the strong fundamentals of the Company. Good for Long Term investment but not for Short Term)

How do I see the market today? 29-Nov

US market closed lower last Friday. DJIA down 95.28p or 0.85% while S&P down 8.95p or 0.75%.

What's the latest development on Ireland?

According to Bloomberg website, it says "Ireland wins US$113 billion bailout as EU ministers seek to halt debt crisis" (Click on this link for the full news: Bloomberg Ireland News)

What's the latest development on North Korea and South Korea?

China has proposed a six-party talks but South Korea seems to resist it. According to Bloomberg website, "South Korea resisted China’s call to resume six-party talks with North Korea, as its navy began maneuvers with U.S. warships amid threats of a “merciless” response by Kim Jong Il’s regime."(Click on this link for the full news: Bloomberg Korea News)

My view:

Today it is harder to predict. The Ireland news is positive but I think the negative impact from conflicts between North Korea and South Korea should have greater impact. Thus, I guess market should start weaker but the impact should be minimal. (drop less than 10 points). However, any bad / good development from Korea should be watched closely.

Stocks that I still find attractive:

1. FPI (Attractive PER at less than 6x, dividend yield still looks good if the Company gives final dividend of 7 sen like last year)
2. Axiata (Proxy to growing Indonesia market, with stability in Malaysia Celcom, there has been talks that the Company will give out maiden dividend in 2011)
3. SP SETIA (Heard the rumours that the Company may be the next property stock to go through Corporate Exercise, biggest shareholder = PNB)

TM 3Q2010 Result

This is quoted from Business Times:

TM's net profit came in at RM438.5 million compared with RM179 million in the same period last year. Group revenue improved slightly to RM2.2 billion from RM2.1 billion before.

The fixed phoneline operator said it expects the business environment to remain challenging for the rest of the year given the "intense" competitive telecommunication (telco) landscape, and the lead time necessary to build its high-speed broadband (HSBB)-related businesses.

It, however, expects the broadband market to grow further as the country does more internet-based activities and transactions.

As at November 15 this year, the number of users for its HSBB service, known as UniFi, had exceeded 21,000, while premises passed had surpassed the 700,000 level.
By year end, UniFi coverage is expected to expand to 48 exchanges from 26 now, with 750,000 premises passed.

TM's data revenue in the third quarter increased by 25 per cent to RM440.9 million, while revenue from other telco-related services rose by 34 per cent to RM320.7 million.

It made a one-time gain of RM141.7 million from selling its 15.4 per cent interest in Measat Global, as well as RM160.9 million in foreign exchange gains.

Its net profit for the nine months so far stood at RM805.8 million, a 70 per cent increase from the same period a year ago. Revenue improved to RM6.5 billion from RM6.3 billion. - Business Times

My view:

1. Is the result good?
As mentioned above, TM net profit of RM438.5m included: i)RM141.7m from Measat sales and ii)RM160.9m forex gain. Roughly, core net profit is RM135.9m in this quarter for comparison purpose. In 3Q2009, core net profit = RM179.1m - RM45.5m (forex gain) = RM133.6m. Compare RM135.9 vs RM133.6m, it's only 1.7% increase in core net profit.

2. The growth opportunity is in High Speed Broadband. But the fixed line phone should continue to face pressure. It was reported that TM has 21,000 HSBB users as of 15-Nov-2010. How much does that mean in revenue contribution? TM has different kinds of package, with minimum RM149 to RM899. So, it 1 year, the revenue ranged from RM37.5m (149*12*21k) to RM226.5m. (meaning max it is still less than 3% of FY2009 total revenue). It remains to be seen how fast TM can grow its HSBB...

Package of HSBB can be found here:
https://occ.unifi.my/HSBBCustomerPortal/HSBBCustomerPortal.portal

3. Conclusion, TM remains good as dividend play. The Company paid 26 sen gross dividend in FY2009. For FY2010, 13 sen has been paid so far. But this stock is more of dividend play than growth story, thus it may not appear sexy to the retailers...

Petronas Chemical IPO

OK, lots of things has been said about Petronas Chemical IPO, so I only talk about 3 key points here:

i) Stock Code is 5183, Stock Short Name is PCHEM


ii) Target Price:
OSK Research says RM5.51
Affin Securities says RM5.70
JF Apex Securities says RM5.70

iii) My View:
From the prospectus, Net Income actually declined in the last 3 financial years.
Net Income: FY2008: RM4629m, FY2009: RM3449m and FY2010:2594m
Relatively high dividend payout ratio of around 50% shows that there might be minimal growth in the future.
Nevertheless, the flush of liquidity from foreigners should keep the momentum of the stock.

How do I see the market today?

US market was closed yesterday, so probably the best hint that I can think of is the European market. Overall, European market closed slightly higher with: i) FTSE (+41.83p or 0.74%), ii) CAC40 (+12.81p or 0.34%) and iii) DAX (+55.86p or 0.82%).

Why European market rose?

According to Bloomberg website, it says "European stocks rise as Deutsche Bundesbank President Axel Weber said the euro area rescue fund has sufficient capital to calm financial markets and as real-estate shares increased across the continent"

How about Japan and Australia market this morning?

Up slightly as of 8.12am... Nikkei (+30.44p), ASX (+13.20p).

My view:

Looks like Malaysia market shall open stronger today and retest the 1500 level. The Petronas Chemical listing today may provide some boost to the market as well.

DRB-Hicom 2Q earnings up 114% to RM132m - The Edge

Here's the report from The Edge:

KUALA LUMPUR: DRB-HICOM BHD []’s earnings rose 114% in the second quarter ended Sept 30, 2010 from RM61.74 million a year ago.


It said on Thursday, Nov 25 profit before tax increased nearly 143% to RM186.2 million compared with RM76.66 million.

Revenue rose 7.5% to RM1.647 billion from RM1.531 billion. Earnings per share were 6.84 sen compared with 3.19 sen.

My Comment:

1. DRB-Hicom is no longer an automotive stocks as the Company now has Property business, Puspakom, Modenas and other businesses. However, the Company's historical PER or "HPER" is comparatively low at 5.32x. For example, APM HPER = 14.07x, MBMR 10.8x while AUTOV (relatively small auto sector stocks) trade at 10.3x HPER.

2. Taking a 30% discount on MBMR and AUTOV HPER to reflect the Conglomerate discount to DRB-HICOM, we get 7.39x HPER. If the market agree to the 30% discount, then DRB-HICOM got potential to go to RM1.80.

3. The stock is linked to Syed Mokhtar Al Bukhary

4. The historical dividend is relatively low with 4 sen gross dividend given in Financial Year ending March 2010.

Hock Seng Lee 3Q2010 result

Quick summary of Hock Seng Lee 3Q2010 result:

3Q2010: Revenue at RM134.3m (+20.7% qoq, 32.1% yoy), net income at RM20.3m (+12.8% qoq, +31.2% yoy).
9MYTD2010: Revenue at RM338.0m (+29.2% yoy), net income at RM51.8m (+33.9% yoy).
Share dividend announced: 1 Treasury Share for every 50 shares owned, ex-date 13-Dec-2010.

The figure is showing that HSL is growing at double digit rate both qoq and yoy, thus making the stock still attractive. With Sarawak theme for investment become popular among investors, HSL may qualify as a good trading idea. Lastly, this stock is very dependent on news, thus it should benefit from future award of construction projects in Sarawak.

Target Price?
These three Investment Banks are giving BUY rating as of time of writing


Maybank : RM2.30
RHB: RM2.27
AmResearch: RM2.28


Please note that the target price and recommendation from them are subject to change. Information show are correct as of the time this blog is published.

Axiata 3Q2010 result

Axiata released its 3Q2010 result yesterday, the summary is as below:

3Q2010: Revenue at RM3.94b (+2.3% qoq), net income RM639m (+9.8% qoq)
9MYTD2010: Revenue at RM11.60b (+21.4% yoy), net income 2137.4m (+95.3% qoq)

Looking at the strong growth on the revenue and net income, Axiata seems to be still a good stock with strong fundamentals. Their subsidiary in Indonesia is making good money and even contributes more to Axiata Group than Celcom Malaysia from EBITDA view.

AmResearch (from AmInvestment Bank) is giving a BUY rating for Axiata with Target Price of RM6.40.

FBM KLCI recouped losses

FBM KLCI opened on a weak note and drop more than 10 points. However, the market seems to be resilient as it recovered to positive territory before 10AM. As of 9.55am, KLCI is now +1.34 points to 1488.87 points.

Top gainers: KULIM, JETSON-LA and YTL
Top losers: SOP, GENS-C4 and APM

Top 3 losers of the day (KULIM, UTDPLT, DIGI)

KLCI slumped 15.67 points today to 1487.53 points, aligned with major lost in Hong Kong and China. There are possibly 2 factors that lead to today massive drop: i) Concern about Ireland bailout may not contain the debt problem & ii) China more aggressive steps to control inflation. Listed below are the top 3 losers and some reasons why I think they drop:

1. KULIM - Drop 76 sen to RM11.90

Still the same "Buy on rumours, sell on news". But this time it is made worse with regional market suffering huge drop. To recap, KULIM announced takeover of QSR for RM5.60 and resumed trading at 230pm today. Yesterday, the stock already drop 88 sen.

2. UTDPLT (-40sen to RM17.30)

Aligned with lower Crude Oil price, CPO also face pressure on the downside with CPO drop RM26 to RM3158 as of 545pm). This is generally negative for Plantation stocks like United Plantation.

3. DIGI - Drop 38 sen to RM24.42

The stock was the top gainer (+RM1.10) last Friday, in the absence of any major announcement. Yesterday, it drop 80 sen and today drop another 38 sen. The entry of YES into Malaysia telco may have caused the pressure to DiGi share price.

Top 3 losers of the day (KULIM, BAT, DIGI)

KLCI drop 2.85 points today to 1503.20 points. Listed below are the top 3 losers and some reasons why I think they drop:

1. KULIM - Drop 88 sen to RM12.66
This is a typical "Buy on rumours, sell on news". After the announcement of KULIM takeover of QSR for RM5.60, KULIM resumed trading at 230pm today.

2. DIGI - Drop 80 sen to RM24.80
The stock was the top gainer (+RM1.10) last Friday, in the absence of any major announcement. Thus, even if the stock drop 80 sen today, net net it is still up 30 sen if you compare it with last Thursday close.

3. BAT - Drop 38 sen to RM45.16
This is an illiquid stock with only 39400 shares traded today. Thus, the share price can increase or decrease a lot (in absolute value). It is normal to see this stock either in top gainer or top loser of the day. Anyway, even with the 38 sen drop, it is just a 0.83% drop, very insignificant. However, the outlook for tobacco sector is also not that good as a pack of Dunhill 20s is now selling at RM10 (due to tax increase).

HUP SENG INDUSTRIES BHD

Key Points:


Price: RM1.88 (as of 19-Nov-2010) close

Historical dividend yield of 12.75sen or 6.8%. Dividend for this year likely to surpass last year level

At historical PER of 8.39x, it is comparatively low vs. other F&B player such as Apollo (11.15x) & Hwa Tai (11.81x)

Got potential to go up to RM2.24

Company Background

Based in Johor, HUPSENG manufactures, markets and distributes FMCG products locally and to over 40 countries. Established in 1958, HUPSENG has been a household name synonymous with quality biscuit manufacturing. Some of the Company’s main products include Ping Pong cream crackers, Marie biscuits, In-Comix instant coffee and Wang Wang series of biscuits.

Since listed on November 2000, the Kerk family remained as the main owners of the Company with 55.4% ownership as of 22 March 2010. This shows the commitment from the Management to continue to manage the Company.


Mr Keh (Kerk) Chu Koh is the Chairman of the Company. With his approximately 51 years of experience in the biscuits industry, he plans the Group’s strategic business development and production development which includes the installation of various production facilities in the Group’s factory and heads the research and development team which researches new varieties of biscuits.



Financials

FY2009 revenue is 3.1% lower vs. FY2008. However, profit before tax surged 67.8% to RM35.8m from RM21.3m. In the Company’s Annual Report Chairman’s Statement, it was mentioned that “The much improved performance was attributed to favourable key input costs and continued cost control measures.”

Current ratio improved from 2.31x in FY2008 to 3.14x as of 9MYTD2010 with net cash position of RM53.1m or 44.25 sen per share. The Company’s free cash flows jumped significantly from RM10.1m in FY2008 to RM30.7m in FY2009.

Lastly, HUPSENG has established dividend policy of paying at least 60% of its PAT on 11 Oct 2009.

3Q2010 Result Highlights :

• 9M2010 revenue increased 1.2% to RM161.1m with better gross profit margin and pretax profit margin

• 9M2010 pretax profit recorded healthy organic growth of 4.4%
• But q-o-q net income drop slightly due to lower sales and increase in certain material prices

• Dividend of 7 sen declared (vs. none in 3Q09). If you buy now, still entitled to the dividend.

• Balance sheet remained no gearing and cash per share surged to 44.25 sen per share (vs. 39.88 sen in 2Q10)
• In the Quarterly announcement, it was stated that “The Board is optimistic of the Group performance in the current financial year based on the underlying sustainability of economic recovery. Nevertheless, the Group is mindful of the recent increasing prices of certain raw materials and to a lesser extent, the foreign exchange volatility.”
My view:
• Usually F&B company which consistently deliver dividend year in and year out should worth at least 10x PER.

• If the market eventually price HUP SENG at 10x Historical PER, then market will price HUP SENG at RM2.24

Formosa Prosonics Industries (FPI) 2Q2011 Result

The summary of the result is shown above:





Positives:

• Revenue growing at double digit rate both qoq and yoy


• Gross profit also showing good growth (7.3% qoq and 4.1% yoy)


• The Company remained profitable despite lower earnings. The qoq and yoy drop is a fact but if you look throughout longer horizon, this quarter result is actually not bad. For example, this is the 4th highest net income recorded in the past 5 years.
  
• Balance sheet remained strong with net cash of RM81.42m or 33.14 sen per share.

Negatives:

• Pretax profit drop. In the announcement to Bursa, FPI has attributed this to rising material costs and weakening of US$ which resulted in forex loss


• In tandem, net profit to equity drop


• No dividend is announced this quarter (last year 3 sen dividend was announced)

My take:

Yeah, the 2Q2011 result seems bad, but if you look at the stock price it is only trading at around 6x PER, which means that the market maybe have given too much discount to this stock.

Fine, no dividend this time vs 3 sen dividend last year. Let say this Company only pay half of the amount of dividend paid last year, meaning only 5 sen for full year. Hey, this is still good as it translates into 5.3% dividend yield. Remember this is the worst case scenario that I am thinking of...

Conclusion, I think the recent drop maybe some knee jerk reaction...

Lastly, this stock is not covered by any Stockbrokers out there, thus it maybe have been overlooked by those investors out there...

Formosa Prosonic Industries

KEY POINTS:

• > 10% Dividend Yield (Historical)
• Significantly low PER of around 6x only
• Market price of RM0.93 (as of 16-Nov-2010) close

Company Background
Based in Port Klang, Formosa Prosonic Industries Bhd or “FPI” was established in 1989. The Company gained its listing status on Bursa Malaysia on 17 June 1994. From business point of view, FPI produces a variety of products which include Home Theatre Audio Systems, Satellite Speaker, High-End Audio Systems, AV Racks, WI-FI Internet Radio, WI-FI Internet Adaptor, Outdoor Speaker, Bluetooth Speaker, Receptor Radio, CD Radio & Car Speaker Series.

The Group’s manufacturing facilities are located in Port Klang (Selangor), Sungai Petani (Kedah) and Dongguan (Guangzhou, China). Overall, the Group owns 2,908,170 square feet in total of land area.

High-End Audio Speaker

AV Racks

Car Speaker Series


Bluetooth Speaker


Others



The Company deals mainly with Multi National customers with strong brand such as SONY, JVC, SHARP, BOSTON, AE, PANASONIC & KENWOOD. In short, FPI specializes in the speaker system technology and is often been consulted by its customers on every stage of development, from design, materials up to finished goods.

FPI's Clients

FPI also owns 26.12% or 46.44m shares of another public listed company called Acoustech Berhad which manufactures audio speaker systems, woofer, chemicals paints and electrical equipment. Using Acoustech’s closing price of RM0.78 as of 16-Nov-2010, the 26.12% stake translates into value of RM36.22m (or 14.76 sen per share).

Financials

• Net profit in FY2010 (ended March) jumped 175.13% y-o-y to RM36.11m despite lower revenue. The extraordinary result is achieved due to better product mix and plant use, cost control measures and greater efficiency.
• AV Racks business sales has grown 38% to achieve sales of RM108m in FY2010. In the 2010 Annual Report, FPI’s Chairman Mr Jhang Tzu Hsiong has expressed his optimism that AV Racks "would continue to receive good market response and its business volume to remain encouraging".
• Dividend almost doubled from 5.5 sen in FY2009 to 10 sen in FY2010. This translates into a very attractive historical dividend yield of 10.75%.
• Strong balance sheet with almost no gearing.
• Net cash swelled to RM89.9m in 1Q2011, vs. RM80.7m in 4Q2010.
• Healthy cash flow with positive free cash flow (Net CFO – Capex) of RM35.08m in FY2010.

Comments

• FPI seems very attractive based on its historical dividend yield of 10.75%. Honestly, there are not many (infact, almost none) stocks which can give such high dividend yield.
• FPI 1Q2011 result is also very encouraging with revenue growing at 51.8% q-o-q.
• 1Q2011 pretax profit surged 150.1% to RM14.9m.
• If 1Q2011 is sustainable in the remaining 3 quarters, annualized FY2011 net profit (equity) will grow 18.0%, with annualized FY2011 EPS at 17.34sen.
• How much PER are you willing to assign for Company which manufactures and sells speaker systems? Its associates Acoustech is trading at around 13x PER (market price 78 sen, 2010 EPS of 6.05 sen).
• Assume holding Company discount of 30%, FPI probably should worth 9x PER. Times that 9x PER to 2010 EPS of 15.42 sen…. I leave this part for those of you who know basic Maths. And please calculate the potential upside also, just in case you agree with the assumptions here…