IVKLS Annual Report 2015

Introduction

It had been 6 months since I started these blog (IVKLS – I Value Kuala Lumpur Stocks). Within these 6 months these blogs had around 12,000 page views. I will like to take this opportunity to thanks the loyal readers of these blog and for those who shared their personal opinions on the stock review.

This blog is started with just only one objective which is to shares my personal stock research to other fellow Malaysia’s Investor. It glows beyond expectation as many emails had been received from the readers as far as from Australia.

Now let sum up the stock reviews for the year 2015.

1) YTLREIT (5109) - YTLREIT:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
21/6/15
SELL
1.03
1.04
0.04
+5.09%
31/8/15
SELL
-
-
-
-

During the year 2015, two stock reviews had been done on YTLREIT. Both of them are on a SELL call.

YTLREIT is 70% owned by YTL Berhad and its subsidiaries. Besides that some of the hotel operators of the hotel owned by YTLREIT are also the major shareholder of YTLREIT which will cause conflict of interest when renews of the new hotel lease term.

One of the reasons for these sell call because there is a RM 1,610,290,000 loans of which RM 821,800,000 is supposed to paid by 23 November 2017 (bullet payments) while the rest will be on June 2020.

YTLREIT had once again postponed their share placement for 800,000,000 new units currently to 29 June 2016. This share placement suspected to be used to pay the loan on 23 November 2017. Once this share placement is executed YTLREIT share will be diluted.

In conclusion, the SELL called in maintained.

2) FIAMMA (6939) - FHB:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
28/6/15
BUY
1.81
1.70*
0.00
-6.08%
23/8/15
HOLD
-
-
-
-
11/12/15
SELL
1.70
1.70
0.00
0.00%
* Price last traded during the change of recommendation.

On 28 June 2015, a buy recommendation had make for FIAMMA at price of RM 1.81. The Buy recommendation is called because expecting of increment of sales for the home appliances traded by FIAMMA. Besides that, the property division of FIAMMA is looking good at the time which had many lands in Kuala Lumpur.

However the continue of depreciation of Malaysia Ringgit and the increase of interest rate by FED had cause trouble to FIAMMA. On 11 December 2015, the recommendation for FIAMMA had change from BUY to SELL.

The reasons for the change of recommendation are as followed:
  1. FIAMMA had increased their non current borrowing by 22.6 times and current borrowing by 40% as compared to 2014.
  2. FIAMMA currently having negative operating cash flow
  3. FIAMMA cash and equivalent had reduce by 19.61% as compared to 2014
  4. FIAMMA shares price currently is maintain by share buy back.

In conclusion, the SELL recommendation will be maintained.

3) MFCB (3069) – MFCB:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
12/7/15
SELL
2.27
2.49
0.00
+9.69%

On 12 July 2015, SELL recommendation was called on MFCB. MFCB main business is on power plants operation. It operates 2 power plant, one in Tawau, Malaysia and one in China.

With the action of devaluing the China Renminbi by the Chinese authority this will affect the revenue of MFCB since it operated power plant in China. Besides that, the contract of operation for both the power plant will be end in 2017.

In 15 October 2015, a subsidiary of MFCB (80% owned) had entered into EPCC contract with Sinohydro Coporation Ltd for the development of Don Sahong Hydropower Project over a period of 50 months with a contract sum of USD 320 million. If these project continue smoothly, these will contributed revenue to MFCB besides the two power plants which revenue of MFCB currently mainly depend on.

MFCB is also planning to issued right and warrant which will dilute the shares of MFCB.

Although MFCB seems to be an undervalue company, however these is not a company to be invest by long term investor because the future of the company after 2017, the end of power plant contract,is still uncertain at the moment. Hence the SELL call still maintains.

4) FIMACOR (3107) – FMB:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
27/7/15
SELL
2.38
2.28
0.12
+0.84%
20/9/15
SELL
-
-
-
-

On 27 July 2015 and then on 20 September 2015, sell called are make for FIMACOR. FIMACOR involve in two type of business, printing of security documents and oil palm plantation.

FIMACOR mainly focus on printing on Malaysia currency notes which means their largest client is from Government of Malaysia.  FIMACOR has almost 70% or RM 128,527,000 of the trade receivable had past due and mostly from the Government of Malaysia. The management of FIMACOR can impaired the trade receivable that past due any times.

The oil palm CPO price is also at low level almost the same level with Jan 2009 and is about 50% lower than its peak at beginning of 2011.

In conclusion, the SELL call is maintained.

5) AJIYA (7069) – AJY:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
16/8/15
BUY
2.46
3.95*
0.00
+60.57%
24/10/15
BUY
-
-
-
-
27/10/15
SELL
3.95
4.40
0.00
+11.39%
* Price last traded during the change of recommendation.

On 16 August 2015, a buy recommendation had make for AJIYA and on 27 October 2015 the recommendation had change to SELL. For the reader who followed this recommendation had made a return of 60.57% in 3 months.

According to AJIYA financial report as at 31 August 2015 AJIYA net asset is RM 4.01 per shares (base on 69,223,821 ordinary shares before share placement). On 30 November 2015 AJIYA manage to complete the share placement of 6,922,300 new shares of RM 1.00 with the price of RM 4.20 with this share placement the AJIYA shares had diluted as the earning need to shares with more ordinary shares.

In conclusion AJIYA current is overvalue hence the SELL call is maintained.

6) APM (5015) – APM:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
23/9/15
SELL
4.02
3.85
0.00
-4.23%

On 23 September 2015, a sell call had been recommended for APM.

APM is mainly focus on automotive part with the slow down on the automotive industry mainly after the implementation of GST the revenue of APM might effect.

In 2015, APM seem to go very aggressive to acquired company in the international market. With the slowing down of automotive industry and the competitive from the china market, APM might not able to fully utilise the manufacturing plant.

In conclusion, the SELL call will maintained.

7) CHINWEL (5007) – CWH:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
26/9/15
HOLD
1.40
2.10
0.04
+52.74%

On 26 September 2015, HOLD recommendation had been recommended for CHINWEL.

CHINWEL mainly focus in the Euro market, the depreciation of Ringgit Malaysia recently had benefit CHINWEL. Besides that CHINWEL current move toward the DIY industry which had shown some good result.

Since the economy in the Euro market still uncertain for these coming year and CHINWEL is moving into new industry (DIY industry), focus on retail customer instead of large manufacture, the HOLD recommendation will be maintained.

8) GUH (3247) – GUH:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
10/10/15
BUY
0.975
1.02
0.00
+4.61%

In 10 October 2015, a Buy recommendation is called for GUH.

Based on 2014 annual report GUH had 44 % of account receivable in Renminbi and 30% of account receivable in US Dollar. With the depreciation of Ringgit Malaysia, GUH will have foreign currency gain. GUH currently focus on PCB board manufacturing which receive strong competition from China.

GUH power concession in Cambodia had end in May 2015 and there is no sign of renewal. These had cost GUH to lost around RM 1,4000,000 profit per quarter or RM 6,000,000 per year. However GUH had increased it PCB board manufacturing revenue. As of 30/9/2015 GUH do not have any borrowing.

In conclusion the BUY recommendation is maintained.

9) IGB (1596) – IGB:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
1/11/15
SELL
2.45
2.30
0.00
-6.12%

On 1 November 2015, a SELL recommendation had made for IGB.

On of the main reasons that the SELL call was made because IGB have large amount of loans (RM 1,256,267,000) is due this year and IGB does not had enough cash reverse to paid the loan. If IGB want to roll over the loan, the interest rate had been increase since the FED had increase the interest during December 2015.

In conclusion, the SELL call is maintained.

10) KIMHIN (5317) – KHI:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
14/11/15
BUY
1.89
2.28
0.00
+20.63%

On 14 November 2015, BUY recommendation had made for KIMHIN.

KIMHIN had diversified into Australia and New Zealand market which had some benefit from depreciation of ringgit Malaysia. Besides that, KIMHIN had low amount of borrowing. Other than that, KIMHIN able to attracts foreign institution investors to invest into the company.

On 15 December 2015, KIMHIN had sign SPA to acquired ceramic manufacturing plant from Johan Ceramic Berhad, a subsidiary of Boustead Holding Berhad.

Hence, the BUY recommendation is maintained.

11) HIGHTEC (7033) – H&L:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
24/11/15
BUY
1.16
1.65
0.00
+42.24%

On 24 November 2015, BUY call had make for HIGHTEC.

HIGHTEC had rented out some factory unit and warehouse space, these will be the passive income for HIGHTEC. Besides that, HIGHTEC had low borrowing.

HIGHTEC had start diversified into oil palm plantation industry by signing a rental agreement with some native in Bintulu, Sarawak for 60 years in 2013.

In conclusion, the BUY recommendation is maintained.

12) ORIENT (4006) – ORH:MK

Date
Status
Price
Last Price 2015 (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
13/12/15
BUY
7.00
6.95
0.00
-0.71%

On 13 December 2015, BUY call is made for ORIENT.

ORIENT operated hotels on the foreign country which might benefit from depreciation of Ringgit Malaysia. Besides that, the main reason for the BUY called is because of the PP&E for ORIENT had not been revaluated since 1978. These mean the value of the PP&E in the balance sheet is undervalued. ORIENT can sell the PP&E at high price and make a significant gain.

Hence, the BUY call is maintained.

Conclusion

In this half year of 2015, 12 companies listed in Bursa Malaysia had been reviewed. Some of the recommendation had made significant gain while some had make some lost.

In 2016 more companies will be reviewed. The objective of these blog will remain the same which is reviewed undervalue stocks and share them with fellows reader. This blog is targeting value retail investors.
Feedbacks from you guys are much appreciated. Kindly share your view on the stock review.


HAPPY NEW YEAR & HAPPY INVESTING

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