Stock Review – WTK(4243) (WTK HOLDING BERHAD)

Bursa Malaysia - 4243
Bloomberg - WTKH:MK
Yahoo - 4243 .kl
Webpage - http://www.wtkholdings.com/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.52*	< 1	5/5
Return on Asset	1.36*	> 0	3/5
Return on Common Equity	3.11*	> 0	3/5
Quick Ratio	1.61*	>1	3/5
Long term Debt / Total Capital	25.13*	<50%	3/5
Continue Dividend over Past 10 Years / Since Inception	Yes	Yes	1/1
Historical Dividend Yield	2.1%	>3%	0/2
Cash From Operation	Positive > 5 years	Positive	5/5
P/E	18.25	10	0/2
Total Point			23/35

Note:

 *            Data obtain from Bursa Marketplace on 14/2/2016

Company Profile

WTK had four major business segments as follows:

1)   Timber (80.92% of 2014 revenue)

2)   Manufacturing and trading (17.96% 0f 2014 revenue)

3)   Plantation (0.56% of 2014 revenue)

4)   Offshore Support Vessel (new business)

1) Timber

This division extract and sale timber, manufacture and sale plywood, veneer and sawn timber. This division have log pond, sawmill in Sarawak. This division start in 2007 and contributed the most revenue to the company in 2014. The top three country which this division export round logs to are India (73%), China (15%), Vietnam (8%). While the major plywood products were Japan (81%), Taiwan (18%).

PROS:

WTK export most their timber product the depreciation of Ringgit Malaysia might benefit the company.

CONS:

WTK export most of the plywood product to Japan. The economy slowdown in Japan might affect the sale of plywood to Japan.

2) Manufacturing and trading

This division manufacturing and trading of aluminium foil. This division just upgraded to comply with FSSC 22000 quality certification for food product packaging this might attract more customers to do business with WTK. The lower on demand for foil and flexible packaging will affect the revenue of the company.

PROS:

WTK is now complied with FSSC 22000 quality certification

CONS:

Lower demand in foil and flexible packaging

3) Plantation

WTK had 11,800 hectares of oil palm plantation but only 1,300 hectares are matured in 2014 annual report. Due to the low FFB and palm oil price these division is making loss in 2014 and up to 3^rd quarter of 2015.

PROS:

WTK have large palm oil plantation which is not mature yet once mature these will increase the revenue of these division.

CONS:

Lower oil price will decrease the demand of oil palm as alternative fuel hence these will decrease the price of oil palm.

4) Offsore Support Vessel

This is a new business for WTK which operating in 2014. From the 3^rd Quarter 2015 financial report. This investment has contributed profit to the company.

CONS:

Lower oil price will affect the customer of this division mainly on Oil and Gas (Petronas).

Financial Statement

From the annual report 2014, WTK had increase the investment in associate from RM 0 to RM 70,377,000. Of the RM 70,377,000, RM 53,465,000 is Goodwill. In the 2014 report there is an increase in other investment from RM 1,312,000 to RM 12,752,000. This is mainly because there is an increase in investment in preference share.

Base on 3^rd Quarter 2015 report, current borrowing for WTK is RM 203,259,000 however WTK had enough cash reserve to cover these borrowing and loan.

PROS:

WTK had enough cash reserve to cover the current borrowing and loan.

CONS:

RM 70,377,000 investment in associate of which Rm 53,465,000 is goodwill.

Director and Shareholder

WTK is a family business run by the Wong family who lead by Pemanca Datuk Wong Kie Yik. Pemanca is a title given by the State Government of Sarawak as a leader just below the Temenggung. He is actively involves in the Malaysia Timber Industry and Chairman of Sarawak Timber Industry.

PROS:

Pemanca Datuk Wong Kie Yik, chairman of WTK is actively involves in the timber industry in Malaysia where the most of revenues of WTK come from.

Summary of Stock Reviews

Stock Review – FIAMMA (6939) - 4 (FIAMMA HOLDING BERHAD)

Bursa Malaysia - 6939

Bloomberg - FHB:MK
Yahoo - 6939 .kl
Webpage - http://www.fiamma.com.my/

Recommendation: -

Date	Status	Price	Current Price (RM)	Accumulate Dividend (RM)	Gain / Loss (%)
28/6/2015	BUY	1.81	1.70	0.00	-6.08%
11/12/15	SELL	1.70	2.31	0.00	+35.88%

On 7 January 2016, FIAMMA prices shot up almost 26 % and continue to 13% the next day make a total of almost 43% in the two day. The sudden spike of the price is most probably the proposal of bonus issues.

Let us look into the bonus issues announcement on 6 January 2016 and the annual report 2015 announce on 29 January 2016 to check whether the sell called still maintain.

Announcement on 6 January 2016

Let look into these multiple proposal which cause the price of FIAMMA spike up. In the announcement there are multiple proposal which going to be table for voting in the EGM on 23 February 2016 after the 33^rd AGM. Let look into the proposal one by one and what is the effect:

i)                  Proposed share split (2:1 share split)

If this proposal is pass, FIAMMA share will split from RM 1.00 to RM 0.50. These will cause more liquidation in FIAMMA stock as the share outstanding double. The stock split will make FIAMMA price cheaper and affordable to small investor.

Some investor will think the drop of the share price after the stock split is a good time buy the stock and wait for it to rise back to the price before split. However this will not the case, the stock price drop to half after the stock split because the company is shares between more people after stock split (double the number of outstanding share 1:2 stock split). In actual this does not increase the value of the FIAMMA shares.

ii)               Proposed bonus issue (1 bonus share for every 2 shares owned)

Bonus issue is another way a company can gives back to their investor. If this proposal passes, the investor who has 100 shares in FIAMMA prior to the AGM will have 300 shares (100 shares from stock split and 100 bonus shares).

This will cause the treasury share of FIAMMA decrease and more share outstanding in the market. These will dilute the earning per share.

iii)            Proposed ESOS (Employee Stock Options)

ESOS will only benefit to FIAMMA employees and directors. If this proposal passes, option will distributed to FIAMMA employees and directors.

They (employees and directors) are eligible to exercise the option 20% per year up to 5 years if they exercised their option the stock price will be dilute.

CONS:

Bonus issue is similar to dividends issue in term of financial. Bonus issue will reduce the Earning per share of the company. ESOS will not benefit financially to normal investor. It might dilute the share if the employees and director exercise their option.

Exercise of 800,000 Warrants on 6 January 2016

This exercised of 800,000 warrants will dilute the shares outstanding. However some investor did not realised these and push the shares price up after the proposal of bonus issue which announce on the same day. The proposal had not approved yet if the EGM vote no for the proposal there will not be any bonus issue.

CONS:

Exercise of warrant will dilute the share.

Annual report 2015

From the annual report 2015, FIAMMA had a loan of RM 168,245,00.00 to be settle in one year time and FIAMMA does not had enough cash to pay the debt base on the annual report.

The diluted earning per share for 2015 increases from 27.34 sen to 36.75 sen. However there is RM 24,838,000 gain in fair value of investment properties which is just paper asset. If we removed the RM 24,838,000 from 2015 earning, the diluted earning per shares is 20.61 sen which is lower that 2014.

2015 annual report showed there is a negative operating cash flow which is not a good sign for a company. The finished good in 2015 had increase compared to 2014 while the work in progress good is reduced significantly in 2015. These might be a sign that FIAMMA inventory is obsoleted.

CONS:

There is large amount of loan to be settle in these financial year The increase in EPS for 2015 is cause by increment of fair value of investment properties which is just paper gain. Operating cash flow is negative for 2015 FIAMMA goods might be obsoleted as the finished good increase and the work in progress good reduced significantly.

Summary of Stock Reviews