Stock Review – AJIYA (7609) - 4 (AJIYA BERHAD)

Bursa Malaysia - 7609

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

Company Profile

AJIYA started as manufacturing metal roll products in 1990 and ventured into safety glass productions in1996. AJIYA holds 19 factories / warehouses with office throughout Malaysia and Thailand.

Geographical Location

AJIYA operated in two countries Malaysia and Thailand. Base on 2016 annual report, most revenue are coming from Malaysia operation which is 93.05 %.

The operation in Thailand did not do as well compared to Malaysia as report in 2016 Annual report operation in Thailand had asset turnover ratio of 0.53 compared to operation in Malaysia which had asset turnover ratio of 0.89.

CONS:

è Operation in Thailand had low asset turnover ratio

Financial Statement

AJIYA annual report show that an increase in other investments from RM 205,149 in 2015 to RM 5,069,571 in 2016. This is due to increase in investment on the trust fund of RM 4,914,987 in 2016.

There is an decrease in the amount due from subsidiaries from RM 53,346,219 to RM 31,781,230 in 2016. This is due to the settlement of RM 13,972,818 which carry an interest of 2.90% per annual.

Although the inventories had drop from RM 80,829,535 to RM 70,926,380, there is an increase of work in progress inventories which mean the company is expecting high sales in 2017. The work in progress inventories had increase from RM 352,625 to RM 720,990 in 2016. Besides that, the raw material cost had reduced from RM 71,262,606 to RM 62,695,916.

AJIYA trade receivable past due also had reduce from RM 56,510,388 to RM 48,629,683.

During the financial year, two subsidiaries of AJIYA had enter a sales and purchase agreements for the sales of lands and building for total consideration of RM 13,876,000 which stated in 2016 annual report as asset held for sales of RM 6,895631.

PROS:

è Work in progress inventories had increase by 104.46 % è Raw Material cost had reduce by 12.02 % è Trade receivable past due had reduced by 13.94 %

CONS:

è RM 4,914,987 had invest in a trust fund

AJIYA loan and borrowing had reduce from RM 29,959,973 to RM 9,667,968 in 2016.

PROS:

è AJIYA loans and borrowings had reduced by 67.73 %

Financial Ratio

Description	2016	2015	Different
Gross Profit Margin	0.20	0.21	-0.01
Net Profit Margin	0.05	0.07	-0.02
Interest Coverage Ratio	27.68	18.80	+8.88
Effective Tax	0.22	0.17	+0.05

Warrant

In 2016 AJIYA had issue free one warrant to every 2 shares with the exercise price of RM 0.92. The warrant can be exercised at any time on or after 1^st September 2016 until 2021. As of 21 February 2017 157,292,242 warrant is available.

PROS:

è AJIYA warrant is way out of money compared to current price of RM 0,68.

Dividend and Bonus Issued for the past five year

AJIYA had constant dividend for the past five year from 2012 – 2016 with the average dividend of RM 0.01 after adjustment (2016 stock split) with the dividend yield of 1.47 %.

CONS:

è AJIYA had dividend yield of average 1.47 % for the last five year which is lower than fixed deposit rate of 3 %

Peers

1) CHINHIN

2) ENGTEX

3) WTHORSE

4) SEACERA

5) ASTINO

6) KIMHIN

7) GBH

8) SCBUILD

9) SKBSHUT

10) WOODLAN

Summary of Stock Reviews

Stock Review – HEXZA (3298) HEXZA CORPORATION BERHAD

Bursa Malaysia - 3298
Bloomberg - HEX:MK
Yahoo - 3298 .kl
Webpage - http://www.hexza.com.my/

Company Profile

HEXZA had involved in property development and manufacturing of chemical product. HEXZA had manufacture formaldehyde resins, ethyl alcohol, natural vinegar and beverage (Enchante).

Major Product:

HEXZA revenue mainly come from one major product which is formaldehyde based resin and ethanol. These product contributed 91.66 % of HEXZA revenue.

Financial Statement

Base on 2016 annual report, HEXZA had increase in other investments from RM 46,824,851 in 2015 to RM 63,725,550 in 2016. The major change in other investments is contributed by share quoted outside Malaysia which is RM 22,295,885 compare to RM 2,540,847 in 2015. Other investment in Myanmar experience delays in lease rental collection.

Besides that, in 2016 HEXZA reported RM 26,787,284 in finance lease receivable. These is due to a sale & purchase and leaseback agreement to acquire part of the equipment for a 8 MW heavy fuel oil power generator system worth USD 6,000,000 (RM 24,168,000) from Tembusu Industries Pte Ltd. The lease commencing on July 1 2015 with a period of 10 years and monthly lease rental of USD 130,205 (RM 524,466).

HEXZA had other receivable which had past due more than 120 days of RM 54,537.

There is decrease in other asset from RM 20,014,468 in 2015 to RM 357,579 because in 2015 there is progressive payment made by Tembusu Industries Ptd Ltd to acquired 8MW heavy fuel oil generator which is RM 19,671,600.

Although the cash and cash equivalent had decrease from RM 62,150,011 to RM 51,417,413, HEXZA managed to increase the interest for the cash and cash equivalent which are:

1) Fixed and Short term deposit from 1.20% - 3.60% in 2015 to 2.25% - 6.00% in 2016

2) Money market fund from 2.82% - 5.05%  in 2015 to 2.75% to 5.55% in 2016.

PROS:

è HEXZA receive monthly rental of USD 130,205 from Tembusu Industries Pte Ltd until 2025 for leasing of 8 MW generator. è HEXZA manage to increase the interest rate for cash and cash equivalent.

CONS:

è 36% increase in other investments contributed by share quoted outside Malaysia. è Other investment in Myamar experience delays in lease rental collection. è HEXZA capitalise the rental receive from Tembusu Industries Pte Ltd which woud overstated it asset. è Having other receivable which had past due more than 120 days of RM 54,537.

HEXZA had no borrowing as of 30 June 2016

PROS:

è HEXZA had no borrowing

Dividend and Bonus Issued for the past five year

HEXZAhad constant dividend for the past five year from 2012 – 2016 with the average dividend of RM 0.046 with the dividend yield of 4.81 %.

PROS:

è HEXZA had average dividend yield of 4.81 % over the 5 year period which is higher than fix deposit

Summary of Stock Reviews

Stock Review – FAVCO (7229) (FAVELLE FAVCO BHD)

Bursa Malaysia - 7229
Bloomberg - FFB:MK
Yahoo - 7229 .kl
Webpage - http://www.favellefavco.com/

Company Profile

FAVCO comprise of two international brands, Favelle Favco and Kroll. FAVCO focus on cranes products such as Tower Cranes, Offshore Cranes, Crawler Cranes and Wharf Cranes. FAVCO engaged in designing, manufacturing, supply, servicing, trading and renting of cranes.

FAVCO has seven operating facilities which are Malaysia, Australia, Denmark, USA, China, Singapore and UAE.

Geographical Segments :

FAVCO only split into two geographical segments:

1) Inside Malaysia – 48.47% of 2016 revenue

2) Outside Malaysia – 51.53% of 2016 revenue

Financial Statement

From 2016 Annual Report, FAVCO intangible asset had decrease from RM 1,273,000 in 2015 to RM 323,000 in 2016. From contract work in progress and inventories in 2016, FAVCO is expecting a decrease a sales in near future compared to the 2016.

Of the RM 366,837,000 of cash and cash equivalents, only 30.42% of the cash is kept as cash and bank balance compared to 87.42% in 2015. These might indicated that management might not want to use the money in the near future. Besides that, the fixed deposit in bank is at lower rate in 2016 (0.76% - 1.70% per annum) compared to 3.25% per annum in 2015.

PROS:

è Intangible asset had reduce by 74.62%

CONS:

è Decrease in contract work in progress and inventories for the year 2016. è Large cash place in short term investment and fixed deposit which had low interest rate.

FAVCO had reduces it borrowing from RM 64,011,000 in 2015 to 26,043,000 in 2016. These had brought the interest coverage ratio for 2016 increase to 29.32 from 13.85 (in 2015).

PROS:

è FAVCO borrowing had reduce by 59.31% è FAVCO interest coverage rato have increase by 111.70%.

Dividend and Bonus Issued for the past five year

FAVCO had constant dividend for the past five year from 2012 – 2016 with the average dividend of RM 0.102 with the dividend yield of 3.6 %. Besides that in the past 5 years, FAVCO had constantly increase it dividend pay to investors.

PROS:

è FAVCO had average dividend yield of 3.6 % over the 5 year period which is higher than fix deposit è FAVCO had constantly increase it dividend pay to investor.

New Issue of Securities

FAVCO had implemented new share up to 10% of the total issued shares for eligible directors and employees.

CONS:

è New shares insurance to directors and employees would dilute the share of FAVCO

Market Research

MIDF Research (6 October2017)

Price Target : 2.92

• FACVO intends to acquired 70 % stake in:

a)    Exact Automation Sdn Bhd

Providing integrated industrial automation solution of plant instrumentation and maintenance services.

b)   Sedia Teguh Sdn Bhd

Trading of specialised equipment in oil and gasindustry.

c)    Exact AnalyticalSdn Bhd

Providing related engineering services

d)   Exact Oil & Gas Sdn Bhd

Trading and engineering of specialise item used in oil and gas industry. Awards license from PETRONAS.

MIDF Research (25 August2017)

Price Target : 2.92

•   Lower cost of sales and lower tax rate
• Decreasing orderbook

MIDF Research (30 June2017)

Price Target : 2.92

• Decline in demand for offshore cranes is cushions by increasing demand in tower cranes
• Should there any M&A exercises which involves cash, lower dividend payout ratio might be expected.

Summary of Stock Reviews