Stock Review – CHINWEL(5007)(CHIN WELL HOLDINGS BERHAD)

Bursa Malaysia - 5007

Bloomberg - CWH:MK
Yahoo - 5007 .kl
Webpage - http://www.chinwell.com.my/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.9*	< 1	4/5
Stock Valuation	CAPM => 2.93% Return (2008-2014) =>13.00 % Undervalue by 10.07%	CAPM < Return	5/5
Return on Asset	6.42*	> 0	4/5
Return on Common Equity	9.85*	> 0	4/5
Quick Ratio	2.01*	>1	5/5
Long term Debt / Total Capital	-*	<50%	5/5
Continue Dividend over Past 10 Years / Since Inception	No. 2009 no dividend paid	Yes	1/2
Cash From Operation	Positive > 5 years	Positive	5/5
Total Point			33/37

Note:

 *            Data obtain from Bursa Marketplace on 27/9/2015

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

Company Profile

CHINWEL has two major business segment:

1)   Fastening Products (97.22%)

2)   Wire Products (3.58%)

1)   Fastening Products

These is where the most revenue of CHINWEL come from 97.22% of 2014 profits. This division had a subsidiary in Vietnam a joint venture. This division manufacture and trade scres, nuts, bolts, and fastening product.

In 4^th February 2015, 27,000,000 new CHINWEL shares is issued to acquired Asia Angel Holding limited which holds  40% of the Chin Well Fasteners (Vetnam) Co. Ltd. With these purchased Chin Well can fully recognised the profit from the Vietnam manufacturing plant.

2)   Wire Products

These is the second largest division of CHINWEL however its only contribute 3.58% of the 2014 profit. This division manufacture of precision galvanized wire, annealing wire, bright wire, hard drawn wire, PVC wire, bent round bar and grill mesh.

PROS:

è By acquiring Asia Angel, CHINWEL able to recognised the 40% of profit which control by the NCI last annual report. (RM 8,789,262.00 from 2014 annual report)

CONS:

è  Acquiring Asia Angel through addition of issued shares had dillute the share price of CHINWEL.

Geographical Segments

From the annual report 2015, we can understand CHINWEL obtain most of its revenue from the EURO market (57.79%) followed by (23.61).

Since CHINWEL focus much on the Euro market the economy in Euro zone will affect the revenue of CHINWEL. According to economist .com the second quarter (March – June 2015) of Euro has slowed down from 0.4% (previous two quarter) to 0.3% despite the European Central Bank doing quantitative easing. These is mainly due to the falling of energy price and slowdown of Chinese market.

The depreciating of Ringgit Malaysia to Euro (13% since June 2014) and US Dollar (32.4% since June 2014) since June 2014) will help to improve the revenue of CHINWEL since they account receivable from 2014 annual report is based in US dollar (47.56%), Euro Dollar (16.78%).

However the depreciation of Ringgit Malaysia to Vietnam Dong (32.45%) might increase the expenses of CHINWEL because they have operation in Vietnam. 55% of the trade payable from the 2014 annual report is in Vietnam Dong.

PROS:

è The depreciation of Ringgit Malaysia to Euro and US Dollar might help to increase the revenue of CHINWEL.

CONS:

è Despite the European Central Bank doing quantitative easing. The Euro zone for second quarter 2015 is slowed down. è The depreciation of Ringgit Malaysia to Vietnam Dong might increase CHINWEL expenses.

Director of the company

CHINWEL is owed and manage by Tawainese family, the Tsai Family. Tsai Yung Chuan is the fouder and the managing director of the company. The company Chairman, Mr Lim Chien Ch’eng start to acquire the company shares from total shares of 7,626,664 (direct and indirect) 214 annual report to 7,667,964 (direct and indirect) since last purchase in 19 August 2015.

On 22 Jun 2015, the CHINWEL major shareholder (indirect) and one of the founder, Mr Tsai Yung Yu had cease all his shares. These is because he sold the 32.6% of his shares in Benua Handal, which owned 58.9% of CHINWEL to his brother Mr Tsai Yung Chuan according to The Star. These might not cause major effect to CHINWEL since Mr Tsai Yung Yu is not the active in the company.

PROS:

è The managing director of the CHINWEL is also the founder of the company in 1989. He had proven himself by managing CHINWEL for 26 years. è CHINWEL chairman Lim Chien Ch’eng acquired more shares meant he is confident on these company.

Financial Statement

Based on the unaudited report for financial ending 30-06-2015, CHINWEL has increase its cash equivalent balance from RM 47,934,000 to RM 55,164,000. Besides that, CHINWEL also manage to reduce the borrowing from RM 73,138,000 to RM 53,011,000.

The net cash from operating activities is also increase from RM 53,923,000 to RM 60,572,000.

PROS:

è The increase of cash equivalent and reduction of borrowing shows the company is in good financial health.

Summary of Stock Reviews

Stock Review – APM (5015) (APM AUTOMOTIVE HOLDINGS BERHAD)

Bursa Malaysia - 5015

Bloomberg - APM:MK
Yahoo - 5015 .kl
Webpage - http://www.apm.com.my/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.68*	< 1	5/5
Stock Valuation	CAPM => 3.21% Return (2008-2014) => 20.93% Undervalue by 17.72%	CAPM < Return	5/5
Return on Asset	5.54*	> 0	4/5
Return on Common Equity	7.97*	> 0	4/5
Quick Ratio	2.55*	>1	5/5
Long term Debt / Total Capital	-*	<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			35/37

Note:

 *            Data obtain from Bursa Marketplace on 21/9/2015

By scoring 35/37 (94.59%), we will look into the annual report and the latest quarterly report of APM before making the decision to buy the stock.

Company Profile

APM consists of three main business segment as followes:

1. Interior and plastic – 61.8% of total profit (2014 Annual Report)
2.  Electrical and Heat Exchanger – 17.4% of total profit (2014 Annual Report)
3.  Suspension – 15.0% of total profit (2014 Annual Report)

1)   Interior and Plastic Division

These division is the largest division of APM, it consists of 3 major subsidiary; Auto Parts Manufactures Co Sdn Bhd (Train Seats,  Ferry Seats, Industries Seats, Bus Seats & Cinema Seats), APM Plastic Sdn Bhd (Interior Plastic Part, Exterior Plastic Part, Extrusion Component & PU Padding) and Fuji Seats (Malaysia) Sdn Bhd (Vehicle Seats)

2)   Electrical and Heat Exchanger

There are two subsidiary in these division; APM Auto Electrics Sdn Bhd (Starter Motor, Alternator, Wiper Motor, Electronic Control Unit) and APM Climate Control Sdn Bhd (Air Conditioning System, Radiator)

3)   Suspension Division

These are the third largest division of APM. It consists of 3 subsidiaries: APM Shock Absorber Sdn Bhd (Shock Absorber and Gas Spring), APM Spring Sdn Bhd (Leaf Sping and Parabolic Spring) and APM Coils Spring Sdn Bhd (Coil Spring). APM Spring Sdn Bhd had plant in Ho Chi Minh, Vietnam.

PROS:

Rapid KL is planning to have 120 buses hitting the street in September 2015 these might increase the sales of APM bus seats.

CONS:

The downturn of automotive industry in Malaysia especially after the GST might affect the profit of APM since the company is manufacturing automobile products and most selling to Malaysia automotive manufacturer. The new KTM ETS train model KTM class 93 from CSR Zhuzhou is reported imported all its components from China these will cause APM to lose their business on the train seats and hence the revenue will decrease.

Operation outside Malaysia

APM currently have three manufacture plants outside Malaysia which are Indonesia (automotive interior product, coil springs and seats), Australia (Radiator), Vietnam (Spring). With the uncertainty of Malaysian Ringgit currently, it might be good to operations outside Malaysia to prevent the drop of Malaysian Ringgit.

Currently APM had two plants building at the same time in Thailand and Indonesia (complete end 2015). With the current slow down of automotive capacity, these might not be the best time to have the manufacturing plant completed. APM might not able to fully utilised these manufacturing capacity due to market slow down.

PROS:

Operation outsides Malaysia help to prevent lost from devaluing of Malaysian Ringgit.

CONS:

Completion of Indonesia manufacturing plant in Indonesia end of these year might not be fully utilised by APM because the slow down of automotive industry.

Financial Statement

The property, plant and equipment (PPE) of APM increase by 73.46% or RM 171,980,000 compared to year 2013 (restated). However there is a revaluation surplus of RM 115,928,000 from level 3 revaluation based on estimation.

From the 2014 annual report, the  acquisition of McConnell Seats Australia Pty Ltd which cause trademark of RM 4,313,000 and goodwill of  RM 6,696,000 and had increase the loan and borrowing from RM 12,847,000 (2013) to RM 39,228,000 (Jun 2015)

CONS:

RM 115,928,000 from level 3 revaluation is fully based on estimation. The PPE might not price at the prices. Trademark of RM 4,313,000 and goodwill of RM 6,696,000 which the managements able to impaired anytime.

Summary of Stock Reviews

Stock Review – FIMACOR (3107) -2 (FIMA CORPORATION BERHAD)

Bursa Malaysia - 3107

Bloomberg - FMB:MK

Yahoo - 3107 .kl

Income Statement

Despite higher revenue, the higher expenses has bring the net profit after tax decrease from RM 71,994,000 to RM60,305,000. Besides that, there is a revaluation of property, plant and equipment of RM 18,884,000 state for other comprehensive income which does not stated in the income statement for previous years. If these money is remove from the income statement, FIMACOR earning per shares for the year ending will be must lower compared to previous year.

CONS:

• Decrease of net profit despite higher revenue.
• RM 18,884,000 stated in other comprehensive income.

Financial Statement

The revaluation surplus on FIMACOR leasehold land is RM 25,144,000 which is 83.21% of the 2014 leasehold land value. The valuation method use comparison of the recent asking price which is less accurate, reference to bidding price or transaction price are better estimation of the land current value. Besides that, the valuation of land uses annual inflation of 7% - 14% while data from the world bank show that Malaysia inflation rate is 3%.

There is  increase of Goodwill on consolidation from RM 510,000 to RM 6,200,000 and the cash equivalent decrease to RM 172,640 to RM 195,204,000.

Although there is an increase in the trade receivable from RM 105,071,000 to RM 182,856,000, but the trade receivable from the biggest customer (Malaysia Government) is also increase from RM 75,980,000 to RM 146,673,000 and the trade receivable past due from RM 52,831,000 to RM 128,527,000. Other than that, the trade payable for FIMACOR also increase from RM 72,887,000 to RM 127,887,000. Finally the Operating cash flow of the company is also decrease from RM 62,998,000 to RM 32,666,000.

CONS:

• The leasehold land revaluation use the asking price as a reference which is less accurate, bidding price or the transaction price are the more conservative method.
• The discount cash flow method for leasehold land valuation assume inflation rate of 7% - 14% while the world bank data show inflation rate in Malaysia only around 3%
• Increase of Goodwill to RM 6,200,000 which the management able to impair anytime.
• Decrease on the FIMACOR cash equivalent.
• Trade receivable which had past due had increase from RM 52,831,000 to RM 128,572,000 (143%)
• Trade payable increase from RM 72,887,000 to RM 127,887,000 (75.46%)
• Operating cash flow decrease from RM 62,998,000 to RM 32,666,000

Summary of Stock Reviews