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 – 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