Stock Review – ORIENT(4006) (ORIENTAL HOLDINGS BERHAD)

Bursa Malaysia - 4006

Bloomberg - ORH:MK
Yahoo - 4006 .kl
Webpage - http://ohb.com.my/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.78*	< 1	5/5
Stock Valuation	CAPM => 3.04% Return (2008-2014) =>9.13 % Undervalue by 6.09%	CAPM < Return	3/5
Return on Asset	3.83*	> 0	4/5
Return on Common Equity	6.72*	> 0	5/5
Quick Ratio	3.36*	>1	4/5
Long term Debt / Total Capital	0.03*	<50%	5/5
Continue Dividend over Past 10 Years / Since Inception	Yes	Yes	2/2
Cash From Operation	Positive > 5 years	Positive	5/5
Total Point			33/37

Note:

 *            Data obtain from Bursa Marketplace on 13/12/2015

By scoring 33/37 (89.19%), we will look into the annual report and the latest quarterly report of ORIENT before making the decision to buy the stock.

Company Profile

ORIENT had four major business segments as follows:

1)   Plantation (50.38% of 2014 segment profit)

2)   Investment Service and Financial Service (22.89% of 2014 segment profit)

3)   Automotive and Related Product (16.54% of 2014 segment profit)

4)   Hotel and Resort (9.16% of 2014 segment profit)

1) Plantation

This division is planting and manufacturing oil palm. This division is generating 50% of ORIENT income for year 2014. Base on annual report 2014 ORIENT consists of 28,051 hectare of plantation in Malaysia and Indonesia. ORIENT able to produce 513,407 MT out of 654,478 MT (78.45%) of oil palm from its own estate in the year of 2014. However the lower price for oil palm in the year 2015 might affect the profit of this division.

2) Investment Service and Financial Service

This division invest in shares and bonds, letting of property and leasing company. In 2014 this division contributed 22.89% of the profit. These division had investment in Singapore and Mauritius.

3) Automotive and Related Product

This division distribute Honda car and motorcycle in Malaysia and Singapore. Although it does not contributed the largest profit for ORIENT in 2014, this division consists of the largest asset for ORIENT 38% of 2014 asset. From January 2015 to September 2015 these division contributed the largest profit based on ORIENT Q3 2015 report. However 2016 might see a slowdown in automotive industry.

4)   Hotel and Resort

Finally the fourth largest division in ORIENT is the hotel and resort division. ORIENT operate hotel and resort in a few country such as Australia, New Zealand, Singapore and etc. The depreciation of Ringgit Malaysia might help ORIENT to gain some profit in term of foreign currency conversion gain.

PROS:

ORIENT operate hotel and resort in foreign country which might help ORIENT to hedge the depreciation of ringgit Malaysia.

CONS:

The lower price of oil palm might affect the revenue of plantation division which contributed the largest profit to ORIENT. 2016 might be a tough year for Automotive industry.

Financial Statement

By looking at the annual report 2014, the property, plant and equipment of ORIENT is still using the valuation in 1976 & 1978 and depreciated over the last 30 years. I can safely assume that the PP&E of ORIENT report in the annual report is way undervalued.

Besides that, the cash and cash equivalent at September 2015 increase by 15.6% compared to 2014 audited report. Although there a large increase in loan and borrowing in September 2015 compared to 2014 audited report an increase of 67.7%, with the loan and borrowing total of RM 1,109,430,000 it is still manageable for OREINT because it had free cash reserve of RM 2,494,585,000 which is able to pay of all the debt at once. The increase of loan and borrowing mainly because ORIENT loans are mainly in Japanese Yen and Ringgit Malaysia is depreciating.

PROS:

PP&E of ORIENT are valuated in year 1976 & 1978. Had enough free cash reserve to cover all debt

CONS:

Loans mainly in Japanese Yen.

Management

The key person running ORIENT will be Datuk Loh Kian Chong who was redesigned as Chairman in 1 January 2015. Datuk Loh Kian Chong is just 39 years old he required some time to prove to himself to the shareholders that he can run ORIENT as smooth as his aunt who had run the company from 1987 till 2014.

Besides Datuk Loh KC, the other key personal is Dato’ Robert Wong Lum Kong who had been with ORIENT since 1972. Dato’ Robert Wong currently is the Group Managing Director. Held the same position with Dato’ Robert Wong is Dato’ Seri Lim Su Teng who currently in charge in the plantation and property division. These plantation and property division might be the division ORIENT is going to focus the most in the future.

Besides these three personal, ORIENT had directors in the field of lawyers, accountants and from HONDA who are there to manage the company.

PROS:

Having director in many fields that are there to give advice. Having Honda representative as a director.

CONS:

Datuk Loh Kian Chong had to prove himself since he just took over the helm of ORIENT from his aunt.

Major Shareholder

OREINT mainly owned by Boon Siew Sdn Bhd who owned 43.00% of direct shares. Boon Siew Sdn Bhd is the company owned by Datuk Loh Kian Chong and family. Besides that, there are many others major shareholder from institutional investors such as EPF, TOKIO MARINE LIFE INSURANCE, value funds, emerging fund and etc.

However recently, Mitsubishi UFJ Financial Group, Inc and Aberdeen Management PLC had disposed their shares. On the other hand, EPF is acquired more shares.

PROS:

ORIENT mainly owned by Datuk Loh Kian Chong and family Many other institutional investor. EPF is acquiring more shares.

CONS:

Mitsubishi and Aberdeen is disposing shares.

Summary of Stock Reviews

Stock Review – FIAMMA (6939) - 3 (FIAMMA HOLDING BERHAD)

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

Fourth Quarter End 30 September 2015

For these quarter FIAMMA had increase their profit by increase the fair value of their fair value of their investment property by RM 24,838,000. These is what we always say paper gain not until FIAMMA sell their investment properties these profit is just on paper and FIAMMA had to paid income tax with the money they do not earn.

FIAMMA also recorded a higher asset compared to previous year. However by looking at the fourth quarter report these is just paper gain on their asset such as property, plant and equipment, investment properties and land held for development. FIAMMA had reduce their cash and cash equivalent holding by 19.61%.

Besides that, FIAMMA increase their non current borrowing by 22.6 times and current borrowing by 40%. FIAMMA also had negative operating cash flow in year 2014 and positive financing cash flow. These means that FIAMMA is getting their cash from debt than their operation.

CONS:

Profit mostly from increase in fair value of investment property. These are just paper gain. FIAMMA do not had any profit in reality until they sell the investment properties. The increase in asset on 2015 is just paper value and FIAMMA cash and cash equivalent reduce by 19.61%. Increase of current and non-current loan and borrowing Having negative operating cash flow and positive financing cash flow.

Share Buy Back

Lately FIAMMA start to accumulate its own stock, in the month of August and September FIAMMA had brought back RM 269,364.12 worth of shares which is 172,300 shares. As of 10 December 2015 FIAMMA owned 8,721,000 of treasury shares or 6.02%. They can buy back the share until it reach 10%. I personally do not see any point for FIAMMA to buy back their shares at the moment. FIAMMA share buy back is maintaining their stock price at RM 1.60 – RM 1.8 level for the past few months. 

With share buy back FIAMMA should has negative financing cash flow however the financing cash flow for 2015 is show otherwise. These mean FIAMMA is borrowing more money and only buy back some of their stocks. Instead of share buy back FIAMMA might use the money for other investment and borrow less money.

CONS:

Share back back recently but increase their borrowing.

Summary of Stock Reviews

Stock Review – HIGHTEC(7033) (KUMPULAN H & L HIGH-TECH BERHAD )

Bursa Malaysia - 7033

Bloomberg - H&L:MK
Yahoo - 7033 .kl
Webpage - http://www.hlhightech.com/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.57*	< 1	5/5
Stock Valuation	CAPM => 2.94% Return (2008-2014) =>2.12 % Overvalue by 0.82%	CAPM < Return	0/5
Return on Asset	2.16*	> 0	3/5
Return on Common Equity	8.56*	> 0	5/5
Quick Ratio	4.67*	>1	4/5
Long term Debt / Total Capital	8.35*	<50%	5/5
Continue Dividend over Past 10 Years / Since Inception	Yes	Yes	2/2
Cash From Operation	Positive > 5 years	Positive	5/5
Total Point			29/37

Note:

 *            Data obtain from Bursa Marketplace on 14/11/2015

By scoring 29/37 (78.38%), we will look into the annual report and the latest quarterly report of HIGHTEC before making the decision to buy the stock.

Company Profile

HIGHTEC has four major operating segment which are:

1. Manufacturing and Trading (23.44% of 2014 profit)
2. Investment (72.56% of 2014 profit)
3. Plantation (-4.12% of 2014 profit)
4. Joint Property Developer (8.12% of 2014 profit)

1)   Manufacture and Trading

HIGHTEC start with manufacturing precision engineering plastic mound and precision metal product in 1976 under the name of Hup Lee Enginnering Work. HIGHTEC now operating in three location, two in Sungai Buloh Malaysia and one in Thailand.

HIGHTEC has serves into various industries such as Automotive, Electrical, Industrial and Medical. HIGHTEC has their product export to various country such as Australia, China, Indonesia, Japan, UK, US and etc.

2)   Investment

This division is where HIGHTEC got most of their profit from in 2014 (72.56%). This division rent out factories and warehouse to others.

HIGHTEC has five number of factory units in Taman Mayang and one number of warehouse in Shah Alam are currently rented out.

3)   Plantation

HIGHTEC start into palm oil plantation in mid 2013 where they signed rental agreement with various native to convert the land in Bintulu Sarawak into oil palm plantation.

The rental agreement allows HIGHTEC to use the land rental free for three and the half year from execution of the rental agreement which mean until 2017 for 60 years.

Some of the oil palm tree starts bearing fruits since first half of 2015.

4)   Joint Property Developer

In 2014, HIGHTEC has 3 plot of lands held for property development which are one in Ipoh and two in Kuala Selangor.

In 2014, this division just got the revenue from the 66 units of houses sold.

PROS:

The depreciation of Ringgit Malaysia might increase the profit of HIGHTEC due to foreign currency exchange gain. Rent our factory units and warehouse space will be passive income for HIGHTEC which the management able to use to cover the operating cost of HIGHTEC. Some of the oil palm tree start bearing fruit since first half of 2015.

CONS:

The Automative industry may slowdown next year which might affect the revenue of HIGHTEC

Financial Statement

By looking at the quarterly report for the period ending 31 JULY 2015 HIGHTEC has low amount of borrowing RM 7,224,000 compared to their cash equivalent in hand which is RM 15,070,000. Besides that the operating cash flow also increase compare to the previous year.

PROS:

HIGHTEC had low amount of borrowing. Increase operating cash flow.

Summary of Stock Reviews

Stock Review – KIMHIN(5371) (KIM HIN INDUSTRY BERHAD)

Bursa Malaysia - 5371

Bloomberg - KHI:MK
Yahoo - 5371 .kl
Webpage - http://www.kimhin.com.my/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.57*	< 1	5/5
Stock Valuation	CAPM => 2.99% Return (2008-2014) =>3.82 % Undervalue by 0.83%	CAPM < Return	2/5
Return on Asset	2.19*	> 0	3/5
Return on Common Equity	5.33*	> 0	5/5
Quick Ratio	2.17*	>1	4/5
Long term Debt / Total Capital	1.88*	<50%	5/5
Continue Dividend over Past 10 Years / Since Inception	Yes	Yes	2/2
Cash From Operation	Positive > 5 years	Positive	5/5
Total Point			31/37

Note:

 *            Data obtain from Bursa Marketplace on 14/11/2015

By scoring 31/37 (83.78%), we will look into the annual report and the latest quarterly report of KIMHIN before making the decision to buy the stock.

Company Profile

KIMHIN is focusing manufacturing and sales of ceramic tiles. KIMHIN had manufacturing plants in Seremban (Malaysia), Kuching (Malaysia) and in China. Currently KIMHIN had operation sets up in four countries which are:

1. Malaysia – Manufacture and sales (51.44% of 2014 profit)
2. Australia – sales (30.47% of 2014 profit)
3. China – manufacture and sales ( 18.88% of 2014 profit)
4. Vietnam – sales

In May 2014, KIMHIN had acquired 100% equity interest of Norcos Industry Pty Ltd and change it to Kin Him Australia Pty. Ltd. With the acquisition, KINHIM is able to expand in Australia and New Zealand market. Besides that, KINHIM also obtain royalty – free licence to use the trademark of “Johson Tiles” for fifty year, a well-known ceramic tile name in UK. 

PROS:

KIMHIN had expand the market to Australia and New Zealand by acquired Norcos Industry Pty Ltd. With the trademark of “Johson Tiles” which is a premium product selling at higher price. KINHIM might increase their revenue.

Financial Statement

By looking at the financial statement for the 2015 annual report and for the quarter ending 30 June 2015, KIMHIN has low amount of borrowing RM 9,696,000 compared to their cash equivalent in hand which is RM 47,922,000.

Besides that the operating cash flow generated for the first 6 months in 2015 (RM 31,373,000) is almost the same as the cash flow generated throughout the whole financial year of 2014 (RM 32,879,000).

PROS:

KIMHIN had low amount of borrowing. Cash flow generated within the first 6 months is almost the same as the cash flow generated for the financial year 2014.

Shareholder

Besides Kim Hin (Malaysia) Sdn Bhd which owed 61.45% of the shares. KIMHIN also manage to attract foreign investor such as China Cruise Company Ltd (1.841%) & Yeoman 3 Rights (1.782%). If you guys follows my blog, you guy would notice Yeoman 3 Rights very familiar. Yes Yeoman 3 Rights bought AJIYA before the price shoot up 60%.

PROS:

KIMHIN able to attract foreign investor

Summary of Stock Reviews