Sunday, 16 August 2015

Stock Review – AJIYA (7609) (AJIYA BERHAD)

Bursa Malaysia - 7609
Bloomberg - AJY:MK
Yahoo - 7609 .kl
Webpage - http://www.ajiya.com/

Key Value Investor Criteria: -

Description
Value
Criteria
Point
Price to Tangible Book Ratio
0.71*
< 1
5/5
Stock Valuation
CAPM => 2.97%
Return (2008-2014) => 10.16%
Undervalue by 7.19%
CAPM < Return
3/5
Return on Asset
4.51*
> 0
4/5
Return on Common Equity
6.80*
> 0
4/5
Quick Ratio
2.13*
>1
5/5
Long term Debt / Total Capital
5.81*
<50%
4/5
Continue Dividend over Past 10 Years / Since Inception
Yes
Yes
2/2
Cash From Operation
Positive > 5 years
Positive
5/5
Total Point


32/37
Note:
 *            Data obtain from Bursa Marketplace on 10/8/2015
  *            To understand more about the financial analysis ratio kindly visit my hubpages.

By scoring 32/37 (86.5%), we will look into the annual report and the latest quarterly report of AJIYA before making the decision to buy the stock.
By comparing the CAPM method and the average return of AJIYA from the year 2008 to 2014. AJIYA undervalue by 7.19%. From 2008 to 2014 AJIYA is able to provide an average return of 10.16%.

However with such a good valuation and ratio, as a value investor we always look into the annual report, quarterly report and any announcement before making any investment decision.

Company Profile

AJIYA consists of two main business divisions as follows:
  1. Metals Products Operation
  2. Safety Glass Operation

1) Metals Products Operation

AJIYA starts with this operation since 1990 through Asia Roofing Industries Sdn Bhd (ARI), a wholly-owned subsidiary of AJIYA berhad. ARI manufactures of metal roofing system, metal frame products, structural products, light weight channel products, metal ceiling and sun shade product in Malaysia.

In 2014, AJIYA developed a new product is Mega Rib 30 PU PVC, a complete insulation system which able to reduced heat and noise. Besides that, AJIYA is also venturing into integrated industrial building systems (“IBS System”). IBS System is a new revolution in the construction industry, now most of the local council in klang valley want the Architect to ensure certain percentage of the building is build using the IBS system before the building plan approval.

In June 2014, ARI has enter a Memorandum of Understanding (MOU) with Gantan Beauty Industry Co. Ltd (GANTAN) to become sole and exclusive agents in Malaysia for Gantan’s product. In December 2014, new plant in Jalan Seelong, Johor was successfully commission which enable the AJIYA to capture the projects in Johor.

Projects undertook by these division are Tentera Udara Diraja Malaysia in Subang, Universiti Islam Antarabangsa Malaysia in Gambang, Langsat OSC Sdn Bhd in Johor and Kipmart Shopping Complex Kota Warisan Sepang.

2) Safety Glass Operation

This division start its operation in 1995 through Ajiya Safety Glass Sdn Bhd, a subsidiary of AJIYA. Its principle activity is manufacturing of curved and flat tempered safety glass, laminated glass, decorative glass and safety glass.

In 2014, AJIYA had expended the glass operation in Johor Bahru plant by addition of one unit of force convection tempering line.

The project which had completed by this division are KLIA 2, Menara JKR 2, Plaza Bank Rakyat, CIMB Tower, 2C10 Putrajaya and 4G5 Putrajaya.


PROS:

  •    Ventures into IBS system which local council in Klang Valley already enforced that new building must be build using IBS system. These will be enforced by other council in other states in Malaysia in near future.
  •   Enter an MOU with Gantan in June 2014 to become sole and exclusive agent of Gantan’s products in Malaysia. Gantan has 49 years in metal roofing industry.
  •     With the operation in Johor, AJIYA might able to cater the building material industries in Singapore since they have an agent office in Woodlands, Singapore.
  •     Having factory for both metal production and safety glass operation in Thailand, these can helps to hedged the weakening of ringgit.

CONS:

  •    In 2014 AJIYA has increase its capacity for metal products operation and safety glass operation in Johor this year there is a slow down in the construction industry in Malaysia especially in the Johor region. The plant might not able to operate at its full capacity.
  •      The safety glass business in Malaysia has intensified competition.
  •     Ajiya Safety Glass Sdn Bhd bought 2 vacant land and a factory lot in Ulu Langat, Selangor for RM 16,600,000.00 in 30 September 2014 announcement. The company haven’t decided the uses of the properties, it is either as short to medium term investment and/or may be utilized for future expansion.

Management & Shareholders

The founder of AJIYA Dato’ Chan is the managing director of AJIYA. This is good for AJIYA because he is the one who bring out AJIYA from scratch and he had proven his ability to lead AJIYA since inception into a company listed in Main Board.

Since May 2015, we had these two Singaporeans , Mr Yeo Seng Chong and Mdm Lim Mee Hwa together with their company Yeoman Capital Management Pte Ltd are start accumulating the AJIYA shares. Yeoman Capital Management Pte Ltd had almost 18 years’ experience in investing and had an absolute cumulative return of 853.39%. From Yeoman Capital Management Pte Ltdwebpages, there are focusing on long term investment style and these is what we want as a value investor.

PROS:

  • The managing director is the founder of the company.
  • Foreign institution investor which focus on long term investment (Yeoman Capital Management Pte Ltd) start buying AJIYA shares since May 2015.

Financial Statement

From the annual report 2014, AJIYA had 45% of account receivable which had been pass due and had impaired around 12.29% of the account receivable which had pass due.

By looking at the quarter report end 31 May 2015 AJIAYA cash and bank balance is capable to paid all the short term borrowing and debt. Despite implementation of GST, AJIYA still able to had higher turnover compared to preceding year corresponding quarter, since these quarter included March 2015 which is the month before GST we might need to wait for the next quarter to see the actual effect of GST to AJIYA.

CONS:
  • 45% of account receivable had past the due date.