Weekly Review – 29 October 2017 to 4 November 2017

KIMHIN(5371)

Affin Hwang Capital (3 November 2017)

Price Target : 1.73

• Australia moderate property market recover could drive higher ceramic demand
• Plan for upgrading existing plant for RM 10,000,000
• Domestic revenue share growth to 25% in 2016
• A recovery in property transaction volumes and more active secondary home market potential drive higher ceramic demand in FY 2018
• Second largest ceramic manufacturer behind White Horse by domestic revenue.
• Use RM 9.8 Million to purchase a penthouse at Melbourne Square Project
• Top 4 ceramic player

o   White Horse

o   Yi Lai

o   Seacera

o   Kim Hin

HOMERIZ (5160)

The Star (1^st November 2017)

Target Price : 1.18

• Improve cost through effective trainings for workers and continue seeking for automation opportunities.

Dividend payment (30^th October 2017)

• 2.2 sen, subject to the approval of HOMERIZ shareholders
•  Bring total dividend of 4.2 sen for the financial year end 31 August 2017.

Quarterly Report for the financial year end  31 August 2017 (30^th October 2017)

• Current year quarter had 19.2 % profit margin compared to last year 14.48 %. Cumulative quarter profit margin for these year is 21.02 % while last year profit margin is 20.42 %.
• Current year quarter effective tax rate is 19.37 % which is higher than last year quarter which is 17.31 %.  However cumulative quarter effective tax rate for these year is 21.05 % which is lower than last year 22.51 %
• There is an increase of company asset in term of property plant and equipment  by 10.02 %, inventories by 23.92 %, trade and other receivable by 23.56 %, and deposit, banks and cash balances by 6.60 %. These make the total asset increase by 12.40 % for the year
• HOMERIZ liability is increase by 4.26 % for the year 2016.
• HOMERIZ had net placement of RM 16,000,000 for the year 2016

LIIHEN (7089)

Hong Leong Investment Bank (30 October2017

• Price Target : 5.04
• Fire broke out in LIIHEN second premise of one of its subsidiary
• 4 out of 8 blocks production line are affected
• The lines affected are mainly old line cater for small quantity orders
• According to management the fire could affect 5 – 10 % of the November production
• In 2014, fire occurred in LIIHEN main factory and production is able to resumes in 3 days time.

Extraordinary General Meeting (1^st November 2017)

• The EGM had pass the proposal to acquisition of Domain Partners Sdn Bhd.

CHINWEL (5007)

Annual report 2017 (30 October 2017)

• Total asset for 2017 had increase by 1.77 % mainly contributed by inventories increase by16.39 % and trade receivable increase by 3.03 %. There is decrease in property, plant and equipment by 2.25 % and cash and bank balance by 14.33 
• There is increase of share capital by RM 28,162,800 due to new Companies Act 2016. No increase of number of outstanding share.
• The total liabilities had reduce by 17.45 % in 2017, which mainly contributed by other payables and accruals by 40.27 % and borrowing by 20.27%
• The profit margin had decrease from 21.10 % in 2016 to 17.60 % in 2017
• Effective tax rate had increase from 15.28 % in 2016 to 18.13 % in 2017
• There is significant increase in indirect material by 166.96 % in 2017
• Lesser inventories written off in 2017 which is RM 467,551 compared to RM 8,857,230 in 2016

Summary of Stock Reviews

Stock Review – KIMHIN(5371)-2 (KIM HIN INDUSTRY BERHAD)

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

Annual Report 2015

From 2015 KIMHIN annual report, KIMHIN operates in four countries as follows:

1)  Malaysia – 68.48 % of revenue

2) China – 17.61% of revenue

3) Australia – 15.95% of revenue

4) Vietnam – 0.2% of revenue

KIMHIN earning per shares for 2015 is 24.50 sen compared to 17.03 sen reported in 2014. Besides that, KIMHIN had RM 12,058,000 classified as foreign transaction gain in the others comphensive income due to depreciation of Ringgit Malaysia against Australia Dollar and China Renminbi in 2015. In 2015, KIMHIN cash and cash equivalent had increase from RM 43,654,000 to RM 56,749,000 and the total debt had reduce from RM 10,173,000 to RM 9,208,000.

PROS:

è KIMHIN cash and cash equivalent had increase by 30%. è KIMHIN total debt had reduce by 9.49%

CONS:

è KIMHIN had RM 12,058,000 gain due to the depreciation of Ringgit Malaysia in 2015. Which is not sustainable because early 2016 Ringgit Malaysia had strengthen.

Quarterly Report for First Quarter 2016

As these report out on 26^th May 2016, KIMHIN stock price fall 10% on the next day. The main reason is these quarter KIMHIN had make a lost of 0.48 sen per share. These had scared some investor panic and start selling the shares at low price.

KINHIM had expenses of RM 8,339,000 stated as other expenses which is higher than KINHIM other expenses for the entire year of which are RM 7,280,000. Although the quarterly report did not state clearly what are the other expenses, in accounting other expenses included the operational and non - operational cost such as depreciation, discontinued operations expense , maintenance cost of fixed asset and ect.

On 17 December 2015, KIMHIN entered an SPA agreement to buy the ceramic tar manufacturing factories from Johan Ceramic. The factories had stopped operation hence I believe some of the cost required to expense during 1^st Quarter of 2016 to start back the operation of the factories which KIMHIN had reported as other expenses. If I am correct the other expenses will be one time payment and it does not affect KIMHIN future earning.

Besides that, the appreciation of Ringgit Malaysia on the first quarter of 2016 had decrease the earning of KIMHIN oversea operation when the convert the fuctional currency to presentational currency using temporal method. KIMHIN recorded comprehensive lost of RM 7,193,000 for these quarter due to currency exchange.

CONS:

è KIMHIN had report earning of -0.48 sen per share mainly due to other expense which it did not stated clearly. è The strengthening of Ringgit Malaysia in first quarter 2016 had decrease KIMHIN profit from its oversea subsidiary.

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