Malton, Linked To VVIP?

Office tower, under construction project 

Malton Berhad, a property  company which has two main business namely;

• Property development
• Construction and project management

Historically, the company having completed a number of project worth more than RM1.3 billion as well  managed and completed projects with contract value more than RM2.0 billion.

Previously, there was a gossip which linked Malton to “Datin Sri” who is a wife of senior government  leader, therefore it is good to buy. But difficult to confirm how far the truth of  the “gossip”, but I remain agree with the point of view saying Malton is “good to buy”. My judgment based on fundamental factors instead of “Datin Sri” factor as below;

1)  Financial Strengths

a.  Financial report ended 30 June 2011 has shown, Malton was in a good cash position and very low debt level as illustrated  by current ratio which equal to 1.65 times and debt to equity ratio which only 0.23 times.

b.  Actual value illustrated by NTA stands at RM1.22 meanwhile the price was trading at RM0.73 in stock market on 7 Dec 2011 meaning that  Malton’s  price is undervalued. Price to NTA ratio (P/NTA),  was only 0.6 times. Therefore if investors  buy Malton at RM0.73, it will cost them  only 60 percent of actual value. In other word, investors  buy at  40 percent discount.

c.  PE ratio was 4.3 times. It  is very low compare to 11 times, a ratio that acceptable by most investment experts in stocks purchase. The lower PE ratio the better but please bear in mind that negative PE ratio is not good.

d.  Recent Return On Equity (ROE) was 14.28% which close to 15.0%. Great investor like Warrant Buffet will only invest in company with ROE of 15.0% or above. ROE is a ratio which measures the capability of generating  profit for every share. The higher the better.

e.  Value investors always pay attention to shares with the above criterias.

2)  Profit

Malton has recorded losses as much as RM4.66 million in financial year 2008 but in the following years, it  has shown a tremendous improvement in net profit and jumped to RM72.70 million for financial year 2011 ended on June 30th. The improvement can be seen as below;

                Financial Year (ended 30 June 2011)                        Net Profit (RM million)

2007                                                                   3.40

2008                                                                  -4.66

2009                                                                   6.64

2010                                                                 22.07

2011                                                                 72.70

Note: Net profit for financial year 2012 is estimated at RM80.0 million.

3)  Current And Future Projects

a.  Malton currently has six under construction projects consisting of two terrace houses projects, three luxury residential projects and one office tower project. The value of project is estimated not less than RM1.5 billion.

b.  There are also five future projects to be undertaken by Malton consisting of terrace houses, bungalows, retail lots and shop offices in Penang and Selangor. It is  estimated not less than RM1.0 billion.

4)  Will Malton Be A Privatised?

a.  major shareholder of Malton is also major unitholder of newly listed RIET i.e. Pavillion REIT which listed on last 7^th December 2011. There was an article  reporting,  Malton will be privatized after the listing of Pavilion REIT . Undervalued price is a main reason of privatization plan.

b.  very sure the truth of the news, but if the plan is materialized, I  expect the price may go up as happened to the previous privatization cases as major shareholder normally will offer higher price to lure minority shareholders accepting the privatization offer.

c.  It is a normal to see the price react positively when the privatization is suggested. Nevertheless,  it depend on the offer price of privatization.

5)  Target Price From Local Research House

On 17^th November 2011, a research house has set the target price at RM1.60.

The article above is only my personal view.

- Sabri Jalil

January Effect, Will Appear Again?

Every month of January, our stock market index goes up or higher than previous month (December of previous year) despite there are no positive events which push the stock price up.

This such a sentiment is said as natural, unless if there are serious negative events occurred then the market sentiment will be different.

How true this point of view? The statistic below will give you the answer.

The table below presents the five years KLSE index which comparing highest and lowest index between January (current year) and December (previous year).

                          

                                    Table 1: KLSE Index For January & December

                                    Begin              Highest           Lowest            End

Dec 04             919.17             919.17             897.34             907.43

Jan  05             903.84             937.56             902.49             916.27

Dec 05             887.80             900.49             885.48             899.70

Jan  06             897.13             914.01             901.32             914.01

Dec 06             1080.11           1098.59           1060.36           1096.24

Jan  07            1117.09            1189.35           1106.06           1189.35

Dec 07             1419.34           1447.04           1391.61           1445.03

Jan  08             1435.68           1516.22           1354.48           1393.25

Dec 08             848.43             876.75             835.17             876.75

Jan  09             894.36             927.62             873.41             884.45

Dec 09             1266.71           1272.78           1255.66           1272.78

Jan  10             1275.75           1308.36           1259.16           1259.16

            Source: http://finance.yahoo.com

What are the findings from the figures above?

Highest index of January always higher than highest index of December and lowest index of January always higher than lowest index of December except January 2008.

When highest and lowest index are higher in the following month, it shows that market is

uptrend. Therefore, the statistic has concluded that from year 2004 to year 2010, index of  January was always higher than December (except January 2008)

Since every January the market is uptrend, therefore,  we call this phenomenon as “January Effect”.

It can be a guideline for investors. Investors should buy stock in December (of course fundamental stock) and sell it in January.

Will there be January Effect next year (2011)?

Supported by the historical statistics, from my point of view  “January Effect” will appear again in year 2011.

- Sabri Jalil

Take Over Plan, Will KFC Go Up Further?

As reported by most main media on 20^th November 2010, Tan Sri Halim Saad has made offer to takeover KFC Holdings Berhad (KFC) by purchasing QSR Brand Berhad (QSR) shares from Kulim Berhad.

Kulim Berhad is the company owns 59.58% shares in QSR and QSR in turn owns 50.3% shares in KFC. As known by public KFC is the operator of international well known brand outlets in Malaysia (a part from Singapore, Brunei, Cambodia and India) namely KFC Restaurants and Pizza Hut outlets. Apart from that KFC is also the owner and operator of Ayamas outlets.

Since the takeover involving three public listed companies, what is the effect over the share price of those companies?

From my point of view, the news of takeover which believed to be materialized will give negative effect to QSR price  but positive effect to Kulim and KFC price based on the following analysis.

QSR

A report says that, QSR price offered by Halim Saad to Kulim will be RM5.18 namely two times than book value of RM2.59 as at end June 2010. Meanwhile the market price of QSR before suspension on 19 November 2010 was RM5.76.

Since the market price is higher that offer price, it will make the price of QSR unattractive and investors will sell QSR shares instead of buying, therefore QSR price will down once  it is resume trading in the market next week

KULIM

Five years ago, Kulim bought 43% QSR shares for RM3.20 per share. If Kulim agree with Halim Saad’s offer i.e RM5.18 per share, Kulim will gain RM1.92 per share or 60% capital gain for five years investment. As an effect Kulim will receive a lot of cash from this take over and therefore the price may go up.

KFC

Readers can refer to my previous article in this blog. KFC price was RM3.63 when I made the analysis and recommend to buy based on fundamental. Few weeks later the price was above RM4.00 i.e short term target. Since KFC has very good fundamental strengths as written in my previous article, I believe that KFC price can go higher in mid and long term even before news of takeover published.

No matter either the takeover will be materialized or not, KFC is still a good investment. Takeover plan by former influential billionaire who want to make a comeback will support and make KFC shares more attractive as well as  speed up the upward movement. Nevertheless, I do not deny should the takeover fail, the KFC price will move to the south but only in short term.

The above analysis is my point of view only.

- Sabri Jalil

 

Will Price Of KFC Go Up?

After corporate exercise (bonus issue and share split) on 8 Sept 2010, the price of KFC Holdings was adjusted from 22.12 to 2.81 and it looks more attractive and cheaper thereafter. 

KFC Holdings is owned by Johor Corporation which controlling 50.04% of shareholding via QSR Ventures Sdn Bhd and QSR Berhad.

Buy opportunity for KFC Holdings. Why?

1. Strong financial position

KFC Holdings is a company which has good financial position as follows;

a.       Current ratio is 1.22 which mean strong cash position.

b.      Gearing ratio is 0.6 which mean  very low debt.

c.       ROE measures the capability of making profit. Benchmark of ROE is 15% as recommended by Warrant Buffet where as the latest KFC Holdings ROE was 16.47 and for  4 years average ROE, it  was 17.42. Both are higher than Warrant Buffet’s benchmark.

2. Good dividend payment

Since year 2005, lowest dividend paid was 16 sen. The highest, in turn, was 26 sen which paid this year and before the corporate exercise. The par value was RM1.00 before corporate exercise. It is mean that, based on par value KFC Holdings has paid dividend ranging from 16% to 26% to shareholders since year 2005 and it was lucrative dividend.

3. Growing net profit.

The net profit growth of KFC Holdings (in million) can be seen as follows;

            Year                            Net Profit (RM million)

           

            2005                            -31.50

            2006                            99.05

            2007                            104.27

            2008                            118.54

            2009                            130.40

            2010                            140.00 (expectation)

The statistic above shows the growing pattern of KFC Holdings net profit.

4. Expanding business – local and oversea.

In term of business networks, company currently has  495 outlets nationwide (32 of them are drive-thru outlets).

In year 2011, KFC Holdings will expand their business locally and abroad.

As for local expansion plan, the company will open another 20 outlets (12 of them are drive-thru outlets) nationwide.

As for overseas business operation, as well as Cambodia, KFC Holdings has started operation in Mumbai India. KFC Holdings has been appointed as master franchisee by master franchisor in USA namely Yum! Brand Inc. As a master franchisee, KFC Holdings has a right to open outlets throughout India.

At the moment, the company has 7 outlets and in year 2011 they will open another 17 outlets. We believe that the business expansion in India will be supported by the growing middle income group in tandem with  encouraging economic growth which expected to grow at 9 to 10 per cent annually.  

KFC is the world class brand.

We can follow Warrant Buffet way who always prefer to invest in well known brand company like Coca Cola.

- Sabri Jalil

Titan's Take Over, Target Price RM2.35

It has been reported that, a second largest ethylene maker from Korea, Honam Petrochemical Corp,  will buy 72 per cent stake in Malaysia's Titan Chemicals Corp Bhd where a prominent  Malayisia’s investment agency namely Permodalan Nasional Berhad (PNM) is a one of the major shareholders.

Report also says 72 per cent stake that to be taken over by Honam are combination shares which owned by PNB, Amanah Raya Trustees Bhd and The Chao Group (a Taiwaineese company).

By acquiring 72 per cent stake from those vendors, it will enable Honam to proceed unconditional take over offer for the shares which not owned  by them especially from the minority shareholders as the objective of Honam is to fully control Titan.

The price to be paid by  Honam is RM2.35 per share. The closed price of Titan was 1.83 before suspension last week and the NAV, in turn, is RM2.42. It is still good buy for Honam as the purchase price still lower than NAV.

We expect that,  the shares of Titan will be requoted next week and the offer price by Honam (RM2.35) will be a target market price.

Titan is recommended to buy, but the question is at what price should investors buy?

It is difficult to determine the specific price to buy as we expect the price will move fast or jump. Nevertheless, investors can buy as long as the price is below than RM2.35 and if investors think that the differences  is worthwhile.

Investors will gain by reselling via open market or by accepting the unconditional take over offer from Honam.

- Sabri Jalil

Sime Darby Crisis, Any Purchase Opportunity?

                                                                   

13 May 2010 was a bussines tragedy. Investors has been surprised by the news of Sime Darby which has been reported making losses due to cost overruns  for Bakun and a petroleum project in Qatar. The amount of losses was RM1.6 billion and first big financial crisis since merger in November 2007. In 2008 and 2009 Sime Darby has made net profit of RM3.5b and RM2.2b respectively.

As an effect of the losses, share price plunged and in May 26, the price closed at RM7.60, lowest since 10 months. Based on 52 weeks highest price i.e. RM9.24, it was 21.6% drop.

Some investors raised question, can we buy the Sime Darby share at the moment?  The following  questions will help you to make decision.

As an investor, the most important thing should you bear in mind is the future of the company.

Is the existing management which led by new Acting CEO will do something to turn Sime Darby into the earlier business or financial position?  Any hope for Sime Darby to be turned around?

Are you willing to follow Warrent Buffet’s principle? “There is an opportunity in the crisis”. He spent billion dollars by buying Goldman Sach shares when it plunged in 2008 which caused by Goldman Sach financial situation.

The last, know your self  before you buy Sime Darby. Are you trader or investor?

Get an opinion from your remisier or advisor.

- Sabri Jalil

GTRONIC, Can Buy?

Low debt company with debt-equity ratio and current ratio is 0.32 and 1.93 respectively as of December 2008

Company is under electronic sector which  produces microchips and LED(light-emitting diode). Demand for microchips increases in tandem with increases in global demand.

As for LED, it contribute 20% to the company’s income and  the demand by 2012 is projected to reach USD10b with average annual growth 20-25% as LED is cost effective, longer lifetime and environment friendly light unlike the ordinary light.

Global economic recovery will support the demand of both products.

Stable net profit from 2004 to 2008 namely RM22m to RM30m, except 2009 where profit dropped but has showed the uptrend from quarter to quarter to make up RM15.9m.

Net profit in first quarter 2010 was RM6.2m compare to only RM204,000. Therefore, result for financial year 2010 is expected better.

Two goverment agencies has a big number of shares in Gtronic namely EPF which has more than 25 million shares and Tabung Haji more than 16 milliom shares.

Share price started moving up since 19 April 2010 which closed at RM1.47 and by 23 April 2010 closed at RM1.68.

 Technical target by Maybank, ranging RM2.03 to RM2.40  

- Sabri Jalil