Mr. Action vs Mr. Procrastinate

I think many of us understand the power of compounding effect. The compounding refers to generate earnings on top of previous earnings. The two paramount elements in this concept are time and annual return. 

I always put the numbers into an excel file and see how far or how close I am toward my goal. Let's take a comparison between two people,

Mr. Action who started to invest at the age of 25 and invest an annual amount of 3,600 for 10 years and consistently achieved a return of 10% each year. 

Mr. Procrastinate who only started to invest 10 years after Mr. Action started, at the age of 35 and invested a double amount of 7,200 annually for an even longer period of 15 years. He was able to achieve a return of 10% each year consistently too. 

At the age of 55, Mr. Action is still richer than Mr. Procrastinate even though Mr. Procrastinate invested triple amount of what Mr. Action did, but just 10 years later. 

Of course the annual return can play a role here. Mr. Procrastinate can easily surpass Mr. Action if he able to achieve a higher annual return. 

But I think it's easier to start invest early rather than to achieve high return, right? 

Let's compare with another two people with Mr. Action who invested the same amount and begun at the same time but with higher annual return rate than Mr. Action.

Mr. Smart who able to generate a 15% annual return has around 1.3 millions at the age of 55 while Mr. investor who able to generate a great 20% annual return has around 4.3 millions at the age of 55.

See the difference between Mr. Action and Mr. Investor. A 10% difference in annual return is what it takes for Mr. Investor to have ten times more money than Mr. Action at the age of 55. Of course, it's not easy to achieve 20% return consistently for 30 years. 

So, the annual return does has a greater impact than time. But I think we can easily manage our time better than the annual return. 

3,600 annually, 300 per month, RM10 per day. 

RM10 per day, a 15% annual return and you can be a millionaire in 30 years time. I think you can fork out RM10 per day, right?

So, do you want to be Mr. Procrastinate or Mr. Action or Mr Smart or the great great great Mr. Investor? 

Perhaps we can start with Mr. Action today :)

Put this at your note, Procrastination is the thief of dreams!! 

~ Protasco Berhad 富达 (PRTASCO) AnAlysIs ~

Protasco Berhad is a 20-plus-year company which involves in few business segments. Apart from the core business which is construction & maintenance segment, the group also has engineering service, construction material trading and education & training. Apart from that, the group also ventured into property segment since year 2008. 

The group's core business, construction and maintenance segment involves in construction of new road, buildings and bridges as well as maintenance works. The group has two 15-year federal road maintenance concessions and three 7-year contracts for the maintenance of state roads in Selangor, Perak and Terengganu. Besides, the group also has road maintenance jobs in Libya.

So perhaps next time when you see some foreign workers filling up some porthole or doing road construction, take a look on their uniforms or badges whether they’re from Protasco or not. So if you own a share in Protasco, then you will know that your workers are doing their job properly under the hot sun :)

Based on the past 7 years result, the group able to record a CAGR of 5.7% in terms of revenue. Due to the nature of its business & contracts, not much growth would be seen from its core business. That’s why the managing director once said before that the group need to venture into other segments like property and oil & gas business in order for the company to grow faster as the growth to construct new road and maintenance is quite slow.

Throughout the years, the group able to record a gross profit margin of around 25% but it turn out to have a poor net profit margin of around 5%. Special thanks to its high administrative cost and other expenses as well as high non-controlling interests in its construction & maintenance subsidiary as you can see from the table, the non-controlling interest percentage range from 26-47%. This causes the group a little bit of inconsistency in its net profit.

Else way, the group is good at giving out dividend which has a dividend payout ratio of 60-70% at which there was a special dividend last year as well. Not expect there will be another special dividend this year as the group need some cash for its property development and acquisition.

From the balance sheet, Protasco maintains a net cash position and a gearing ratio of below 0.2 all this while which is quite good. Trade receivable turnover at around 4 months. Isn’t so hard to collect money from the government? :)  

Poor thing of Protasco is the group does not reach the benchmark ROE of above 15% all this while. 

In terms of cash flow, the group consistently spent around RM21m annually for capex, which gave positive free cash flow every years. This explains why the group had much spare cash left and paid out dividends to its shareholders. Owner’s earnings/sales averagely stood at 5%, which is slightly stood at the benchmark.

Above table shows the operating profit breakdown of the group’s segment for the past few years. Construction and maintenance acts as the back bone and generate recurring income for the group. Big drop in revenue and net profit in year 2012 for the engineering services department was due to higher provision for doubtful debts and expiry of government concession in 2011. Drop in revenue and net profit in year 2011 was due to losses incurred in Libya and higher construction material costs. Both education and trading segments were showing some downward trend in contributing to its group revenue even the education segment had been upgraded to university status in FY2011.

It’s all still depends on the property segment for future growth. The De Centrum City in Kajang has a master plan of GDV of RM4.5billion with development period of 10-15 years which the management targets the property alone to contribute at least quarter of the group's operating profit by 2015. For the 9 months period of FY2013, the property segment already recorded around RM4.7m operating profit. In addition, the group just received a contract of RM578m to construct apartments in Oct 2013 for a 24 months development period.

The group managing director, Dato Ir Chong Ket Pen and ex-deputy chairman, Dato Ir Hasnur Rabiain bin Ismail (resigned in 2012) co-founded the company in 1991. Both graduated as civil engineer and began their career as road design engineer at PWD and JKR respectively. Both involved in R&D extensively throughout their career and having extensive experience in design, maintenance of road pavement. 

Some additional notes are, 

1. The group perform share by back every years but the quantity become lesser in FY2011 & FY2012. But the company did purchase back twice with huge amount each which total up to 17.3 millions shares being purchased in March 2013. 
2. Changed much of the board members in FY2012,
3. LTH was once the substantial shareholders but just ceased of the status last month and Fong SiLing becomes one of the shareholders with 1.5million shares in annual report FY2012.
4. 2 private placement with a total of 27.4m ordinary shares were listed in 2013 that raised around RM30m. No. of shares increase by around 9.2% as a result of these private placement. EPS probably will be diluted a bit.

Overall, it’s a mediocre company for me. Perhaps the ROE will improve once there is bigger recognition from the property segment and push up the earnings as well. Regarding the planned acquisition of PT Anglo Slavic in Indonesia for about USD55m which open yet another segment for the group, I’m not good enough to comment about this as the acquisition cost consider quite big as it covers almost half its shareholders equity and there is not much info declared.

Well, just continue monitor and see the outcome. 

XiDeLang Holding (XDL) 喜得狼 Right Issue

Whenever a company wants to raise fund for development, the owners list their companies if possible while still retain control of the company because the fund raised would be interest free

Whenever a listed company want to raise money, they take loans from banks, issue bonds or issue right issue to take money from the shareholders. The latter option is favourable because the money raised would be interest free too to the company. However, not many investors are fancy of right issue unless there is good prospect and transparent growth of the respective company. 

XiDeLang Holdings just announced days ago a right issue of 4 right shares together with 3 free warrants AND 3 bonus shares for every 12 existing XDL shares held before 23 Dec 2013. It may looks good because it gives you freebies of 3 warrants and 3 bonus shares if you subscribe it. 

But before that, take a look at the company. XDL is a China company who manufactures a variety of shoes. I guess you already feel suspicious when you come across a China company. Why they want to list their companies here instead of their motherland in the beginning prompt possibilities that they failed the requirement to be listed in China exchange. let's take a look on the group's latest balance sheet.

As at the date of 30 Sept 2013, the group has RMB323 million cash in hands with only RMB10 million borrowings. With a high amount of cash in hands, why they still need to take money from the shareholders?

Let's take a look on the utilisation of the proceeds from the right issue. 

Assuming a maximum scenario, the group able to raise around RM110 millions and intend to use it all for the construction of the second stage of the group's new building. Reason given to build this building is after taking practical and strategic consideration in planning for its future business needs. Sound so professional :) Bear in mind that the building consists of 21 levels .... with some levels would be leased out to generate rental income .. what the heck is the management thinking? 

If you look back on the group's earnings for the past few years, their performances keep on deteriorating since listing until today. So, why on earth they still want to expand?

Don't play play .. Stay away from this company, I suggest. 

Scientex Berhad (SCIENTX) 森德综合 Q1FY14 Result Update

Scientex Berhad just released its latest Q1 report for calendar year 2014 this afternoon after the AGM. 

Year on year, revenue and net profit improved due to the contribution from the GW Plastic and increase sales of its stretch film. The group able to record EPS of 13.27 cents. Gross profit margin and net profit margin showed a downward trend after the the GW Plastic acquisition as its net profit margin is around 5%.  

However by compare quarter to quarter, there was a marginal drop in revenue and net profit due to lower contribution from the property segment. 

From the report, it mentioned upon the completion of the 3 cast stretch film lines, the group will continue to focus to achieve better operational efficiency. Hopefully they will able to increase the manufacturing operation profit margin to above 7.0. In addition, the installation of the blown film files are target to be operational by mid 2014. Thus, the result of these new machines will only be reflected by Q4FY14 and so on. 

Biggest setback for me for this latest quarter is the property segment which recorded a weak profit margin. The report did not provide any explanation for this, perhaps some mix houses and condo or industrial that yield lower margin. The report did point out due to recent Budget announcement on imposition of real property gains tax, increase in levy to foreign purchasers and implementing of goods and services tax, all these cooling measures might slightly affect and dampen sentiments in the overall property sector. Must take attention on this as the property segment is the bigger profit contributor to Scientex group compared to manufacturing segment.

In terms of balance sheet and cash flow, operation cash flow dropped a lot for this quarter compared with preceding year due to increase in inventories and payable. Net gearing ratio increased to 0.38 from 0.29 due to lower cash in hands. Management did point out before their comfortable region is below 0.5. Thus, it's not in alarming zone yet. 

Assume the average EPS 13.5 cents excluded any growth, total EPS for FY14 will be 54 cents. PE will be around 10.4 based on today price of RM5.61. I will continue to hold until next quarter report release barring any unforeseen circumstances. 

Oh ya, the CEO did mentioned yet again to double the market capital in 5 years time. Remember he mentioned in year 2011 to reach RM1b revenue and RM1m net profit by year 2013 and they really did it in last calendar year. Hopefully they can make it this time too, double in 5 years time will need a CAGR of around 14.4% :)

Enquiry to Scientex Berhad (SCIENTX) 森德综合 on tariff hike

Our beloved Ah Jib Gor announced that electricity tariff will be up by average 15% in Peninsular Malaysia starting from Jan next year. 15% increase is no joke. I also wish that my salary will increase by 15% next year but I don't think it will happen :(

For households, I do think it will affect quite a lot. For a normal monthly usage of around RM200++, they need to fork out probably RM40 more every months. When the GST implementation comes on April 2015, probably will be RM50++ extra compared to now. Both tariff hike and GST charges will not affect those usage below 300kwh.

For manufacturing, the tariff hike will increase the operating cost as well, which in turn reduce the gross margin and net profit. I dropped an email to Scientex Berhad's investor relation to ask about the effect of the tariff hike one week ago and she replied me one day after. 

She mentioned that the electricity cost represents approximately 4% of the packaging operating cost and there will be some impact of the profit margin for the packaging section. 

So just make a rough estimation. 
Let's say the operating cost is RM100 and the electricity cost which is 4% of the operation cost will be RM4. 
A 15% increase on tariff will cause the electricity cost increases to RM4.6 while other costs remained. 
Thus, total operation cost will increase to RM100.6
So, (100.6-100)/100 = 0.6%
Thus, there will be a rough 0.6% increase in operation cost as a result of 15% tariff hike assumed the electricity usage remained same.

0.6% is small but not negligible since the gross profit margin of Scientex's packaging segment is only in the region of 6.2% based on 2013 annual report. The effect of tariff hike will probably reflected in Scientex FY2014Q3 and so on. Let's see what happen next. 

Money management

During the millionaire mindset intensive seminar, they taught about how to manage your money as well. Wealthy people aren't any smarter, they just have better money management habits. Poor people always complaint that they have no money, so no need to manage money. It's wrong because you become rich by manage your money, not manage your money when you're rich.

The most important part of money managing is separating your income into different accounts for specific purposes. Their method divides it into 6 sections which are as below, 

55% = necessities 

10% = Financial freedom account

10% = Long term savings for spending

10% = Education

10% = Play 

5% = Give

The first account is necessities, you use this account to pay your rental, daily expanses, food, insurance and transport etc. This account contributed maximum 55% of your income. If you cannot meet 55%, try to simplify your lifestyle. Wealthy people think long term while poor people think short term. Sacrifice a bit now to grow your trees and enjoy the fruit in later stage. 

The second account is Financial Freedom Account. This idea of this is to create your golden goose in order for it to generate golden egg for you to spend in later stage. Remember the ultimate goal is to become financial free when your passive income able to overcome your expanses. When you stop working, you get to spend the eggs but never the goose. This contributed 10% of your total income. 

Third account is account for long term savings for spending. This account helps you to save for one time off spending like marriage, house down payment, car, etc. This account contributed 10% of your income. 

Fourth account is for your education purpose which contributed 10% of your total income too. They kept emphasize the important of education no matter how old are you. You stop growing when you stop learning. And the moment your stop growing, you're dying. Education is important no matter whether in financial field, money management, health nor in science. Ben Franklin once said that If you think education is expensive, try ignorance. 

The fifth account is Play!! Time for relax. Play without guilt. Take time to enjoy while striking toward your goal. This account contributed 10% of your total income. 

And the last account is Give which contributed 5% of your total income. Give back to the society. Remember there is always someone having a situation worse than you no matter how bad the situation you are having with. Be blessed. You will understand and remember what your goal is when you have the willingness to give. 

I did my part and separated my expenses from my total income into few sections and summarized it as above photo. I spare an exact amount for my travel every months and it takes around 4% of my total income which still lower than the 10% "Play" account. Besides that, I have an insurance plan and a saving plan which total contributed 9% of my income. Insurance is for my protection and saving plan is just an alternative retirement plan as I do not contribute any income into CPF or EPF account while working in Singapore here. I able to keep my expenses at around 35% and if add on with the insurance premium, it will be a total 45% of my income, still slightly lower than the 55% benchmark taught in the seminar. 

The rest will goes to investment and saving account. I do not own any property right now as I still haven't make up my mind where to settle down. In addition, being working in Singapore, it's kinda hard for me to look for property for investment in Malaysia since it will involve a lot of travel. So, I believe my current situation is to maximize my return through equity investment rather than through property. Once my saving reach a certain amount, I will distributed more into investment section. 

I do not donate currently. I always think to do that but it's always still down to thinking with no action being taken. I need to further look into this. Besides, I do not spare any amount monthly for my self education purpose. All this while, the seminar, online course and books I bought were all from my savings section. I probably will keep continue doing in this way rather than spare 10% for it monthly.

Lastly, I strongly believe a good money management is essential. There is countless reading material stating that by keep track of your spending, having a comfortable debt/income level,  future planning and ways to improve your situation will help you to manage your money very well. You will know where your money goes to and what is the progress in moving towards your goal/target. 

So, did you do yours? 

Cook the books 做假帐

Recently, there are some comments and posts talking about some fraudulent activities. It may not be true yet there is some parties who support it while there are some who were against the statement. All this while, I didn't put much efforts on this kind of knowledge. It's a learning lesson for me as I'm more focus on the fundamental of the company for my investment all this while. So, if the management of the company is so freaking bad that make a 假帐 at the financial report so that his group performance looks good, hit the earnings benchmarks and the price forever at the up trend. I may be fooled by it and lost my hard earn money in the worst case.

I googled some info about this and found out that 假帐 actually is called Cook the Books in English. Cook the book? Sound funny, haha. Based on investopedia, it refers to fraudulent activities performed by corporations in order to falsify their financial statements. Typically, cooking the books involves augmenting financial data to yield previously non-existent earnings. Examples of techniques used to cook the books involve accelerating revenues, delaying expenses, recording debt payments as sales, moved debt into Special Purpose Entities (SPEs) while retained earnings in the mother company and implementing synthetic leases.

There is 2 case studies provided in this website, in fact it was really happened before for these 2 companies. Both companies also in the Fortune 500 Companies list that time. The first one is Enron. Enron's case is quite complicated. They're allowed to count projected earnings from long term contracts as current income. So, the revenue was inflated by manipulated projections for future revenue and appeared as the management was doing the good job in increasing the company performance years after years. Once the fraud being discovered, the group filed bankruptcy in Dec 2001 and its share price fell from $86 to 30 cents .... 开开开完笑. $86 to 30 cents wo... How many times is that?

The second case is WorldCom. WorldCom used the method of classified the operating expenses as long term capital investment and Capex so that the bottom line of its profit & loss statement looked good due to higher gross margin. 

There were some other fraud cases like Healthsouth & Qwest communications who manipulated their respective companies' earnings. 

Back to the quote, investment is simple but definitely not easy. I'm better equip myself for a better tomorrow. 

The Fall of SKP Resources 星光资源

SKP Resources Berhad was once one of my favourite companies as I wrote a post about the group before. But that's not the case anymore with the group recent performance as it's today. 

Above table copied from malaysiastockbiz which in my opinion is quite good as it provides the major fundamental statistic but some of the data is incorrect like for this case, the group declared dividend for its latest quarter but the the table shows zero. But overall, it's good platform that provides a quick glance through.

Back to the post, the revenue and net profit for the group for the last 4 quarters were not as good as it was earlier. (p/s: Do not look at the EPS column as the group had a bonus issue at Q4FY12). One of the poorest thing about the management team is that they did not provide much reason why their revenue was deteriorating. I looked back on the 4 quarter reports and almost all the comments were basically the same as below. 

Q3FY13: The revenue had reduced by 25.3% from RM121.17 million to RM90.47 million. Mainly due to lower sales orders from customers during this quarter. However, the Group recorded higher profit margin due to different products mix. Both revenue and profit are sustainable mainly due to continued demand for certain manufactured plastic products and components.

Q4FY13: The revenue had marginally reduced by 2.6% from RM90.47 million to RM88.11 million. Mainly due to reduction in sales intake by customers during the festive season as well as the increase in labour costs as a result of implementation of minimum wage policy during this quarter.

Q1FY14: The revenue had increased by 22.9% from RM88.11 million to RM108.29 million. Mainly due to increase in sales intake by customers during the period.

Q2FY14 (latest): The revenue had reduced by 2.0% from RM108.29 million to RM106.15 million. Mainly due to drop in revenue during the period as well as different products mix.

Lower revenue because of lower sales orders. Bloody hell I also know that lower revenue of course was due to lower sales recorded, but what the investor want to know is why. Is it due to quality problem or lost the business to competitors. No idea and no answer. There is rumours that its main customer, Dyson is not doing well in China which indirectly affect the group business, but nobody can confirm with that.  

One thing for sure is its operating cost is getting higher due to the minimum wages implementation that reduced its profit margin. If the tariff hike really comes by next year, its profit margin probably being squeezed further. However, it still remains debt free and in net cash condition. ROE still able to stay above ten, amid in deteriorate trend. 

Furthermore, if you look at the insider trade. You will found out that the managing director and some of the executive directors quite actively deposed and acquired their company shares in market. If they are really that free, it's better for them to use it to look for ways to improve the company performance. 

Back to quote from some investment guru, you really need a good management to run the company even it's just a mediocre company. And being a shareholder, one need to evaluate the company performance from time to time, at least look through its quarter reports once in 3 months. 

Perhaps one day, the group's performance improves and back to its best. Who knows. 

Millionaire Mindset Intensive

Do you who is T.Harv Eker? 

Did you come across the his revolutionary book, Secrets of the Millionaire Mind? 

I had a chance to attend one of its seminar called Millionaire Mindset Intensive in Singapore here several weeks ago. It was Mr. Robert Riopel, the assistant trainer who taught and shared the principles during the 2 full days event. I glad to say that I learnt a lot from the seminar and it did change my mindset a bit and focus on my goals. 

I tried to summary some of the key points here

1) How to win the money game so that you never have to work again. 

The no.1 reason most people don't get what they want is because they don't know what they want & why they want it. First thing need to do is to clarify it and write them down. Clarity leads to power and power is the ability to do or act. The essence of winning the money game comes from financial freedom. I think everyone of you know what financial freedom is. You will become financially free when your passive income exceed your expanses. 

2) The world's easiest and most effective money management method

The method separates your total income into 6 specific accounts as below. 

55% = necessities 

10% = Financial freedom account

10% = Long term savings for spending

10% = Education

10% = Play 

5% = Give

Will further elaborate on next post as I want to compare my financial status with it.

3) Recondition yourself for automatic and natural success. 

The only reason you believe what you believe is because it had credibility from past information and programming. Your beliefs are not based on actual experiences, but rather on your personal interpretations or mis-interpretation or assumptions of those experiences. Sit back and think back money, wealth and rich people you heard as a child. Something like "Study hard and get a good job; Investment is risky; save for the rainy days" will come into your mind. So, are they true? Think about it again. Often some assumptions keep inside our mind far too long that we thought it's indeed true. Do not let it be a barrier for you to succeed. You never do it before, what stop you. The idea is to re-examined your beliefs based on who you are today and who you want to be tomorrow. 

4) How to master money and relationships with spouses, business associates and kids

If your relationship with money is full of anger, fear, guilt, shame or sadness, it will have a negative effect on your money. You automatically bring your feelings and emotions to all your actions and decisions around money. Get rid all of the negative feeling and thinking. Learn to forgive. Remember, forgive someone does not matter to that person, it's only matter to you! Think of who going to make a loss in the end. It takes a lot of energy to hate someone.

5) The power of action

If you read the book, you definitely come across this. Action is the bridge between your inner world and outer world. What usually holds people back from taking action is fear. Poor mind's favourite phrase is "What If". "What if this happen?" ; "What if he found out?''; "What if I made a lost?" etc. You can simple observe your mind and say "Thanks you for sharing", and take necessary action to grow and succeed. The secret to success is to learn to act in spite of fear. Successful people have fear, they just don't let it stop them.

Remember, the only way to permanent change your outer world is to first change your inner word. Your inner mind create your outer world. 

The process of Manifestation: Thought -> Feeling -> Action = Result

If your want to change the fruits (result), you have to change the root (mind). Everything starts from your mind.If you think you're going to fail or could not make it, you definitely going to fail eventually as your negative mind keep dragging you down. Overcome the negative mind side of yours. I bet everyone has this thinking before when you want to exercise, the negative mind would keep telling you that "Argh looks like it's going to rain, not enough time, I'm tired etc .. " , but these thinking would vanish while you stepped out and took a sweat. 

So, make a change! The only thing that is constant is change

Group photo after broke down the stick

Scientex & Prestariang CEOs' 的宏志 !!

Last week, coincidently there were two separate interviews with Prestariang Berhad's CEO, Mr Abu Hasan Ismail and Scientex Berhad's CEO, Mr. Lim Peng Jin which caught my attention. Both aim to double their respective companies' market capital in few years time!!

Based on the interview and news, Mr Abu Hasan Ismail aims to reach market capital of RM1billion in 3 years time. Prestariang current market capital is around RM545m. That's  double of what it's now to reach RM1b status. By using simple Rule 72, the group need to achieve annual growth of around 24% for 3 consecutive years in order to reach this figure. The group's growth strategy lays on its newly oil & gas segment which currently as he mentioned only contributed around 4% to the group's revenue. The group is looking to secure more contracts in this field. Apart from that, he also aims to recognise revenue streams from talent management and UniMY segments. 600 students are what they need to break-even for its UniMy business at this stage. So, 3 segments, 3 growth engines to double its market capital in 3 years time. Go for it ~

Another interview is from Scientex Berhad's managing director, Mr. Lim Peng Jin. Scientex berhad is far older company than Prestariang berhad. In fact, the group celebrates its 45 years old anniversary this year by distributed special dividend too. He aims to double the group's market capital in 5 years time. (p/s: Scientex's size is double of Prestariang currently, growth may not be so extensive as the latter.) Scientex's growth of course lays on its 2 core businesses, manufacturing and property segment. Under industrial packaging, its stretch film production is the world third largest in terms of production capacity. For its consumer packaging, the group is undergoing extension expansion via acquisition and capital expenditures to increase the output. For its property division, the remaining RM5.2b GDV can last for 10 years with 60% of it targets at affordable homes while the remaining at high end housing segment. Everything put into the plan, Scientex growth is more focus on organic growth rather than diversify into new segment. 

So, both CEOs have their minds set for growth. Sometimes, it's really hard to evaluate the management team of one company on paper. On paper, we may only evaluate them through share buy back, decision they made in big occasions, their salaries and their statements in annual reports. But as a shareholder, of course you want to invest in companies where the management team able to produce fantastic result and bring a decent returns to the shareholders years after years. 

In Scientex & Prestariang, I'm happily invest my money on them and have a good sleep every nights knowing they will work hard to produce good result years after years for the company. Of course as a shareholder, you need to evaluate the company performance every quarters to check whether the progress in on par on what you expected. Take a bold decision to sell it if the performance against what you expected. Never fall in love on them :)

Prestariang 柏斯達亮 Q3FY13 High High High

Prestariang Berhad just released its latest quarter report this evening and guess what? It records all time high quarter result in terms of revenue and net profit. That's really high man .. 

In terms of revenue, the group records similar result with corresponding quarter last year. But in terms of profit before tax, the group records a 26% improvement, that's the group highest record so far. This boast its quarter EPS to 5.61 cents too. The increase is mainly caused by increase revenue from its ICT training & certification which help to offset the lower revenue from its software license distribution. 

On the other hand, the education segment as expected is still suffering loss close to RM2m. Anyhow, it's still in initial stage and it's a long term project to bring recurring income to the group in future. 

By comparison with preceding quarter, both segments also record improved result. Management team stated that this was due to higher amount of classes being conducted during the quarter for 3P program. Furthermore, the training and certification carry higher gross profit margin if compared to license distribution, this caused a higher bottom line result. But, they did specify that the 3P and IC Citizen program have seasonal factor as the execution of the programs are based on pre-schedules and will experience peak during the semester breaks. This will probably cause certain low in some quarter due to lower class conducted which in turn lower revenue recorded during the respective quarter. 

In terms of balance sheet, due to the light asset nature, ROE for the group remains high. Low borrowings and high cash in hands. Retained earnings are almost 3 times of share capital. Perhaps a chance of bonus issues to increase the share liquidity? Little bit greedy since the management is quite generous on giving dividend already :)

Apart from that, the group also has RM26m short term investments. Based on my email enquiry to them earlier, it's the group's investment in 2 asset management and the objective of this is to maximize the company's profit and avoid from idle cash. That's a good move to avoid to just let the cash sit comfortably inside the bank. 

Glad to see that 9months EPS is 14.25 cents compared to 12.22 cents last year. Assume a full year EPS will be around 19 cents, this applies a PE of 13.15 based on RM2.5 share price. I foresee limited growth unless revenue from the oil & gas training and university segment become more certain and valid. But it's still good as the group diversify into new business. 

Else way, the management did not provide any update on the 2 newly development programs Smartgreen (green IT principles) and PREC (English language training). Perhaps still in the progress on marketing. 

3.5cents dividend is declared. Another quarter dividend like an income received every 3 months

Matrix Concepts 财神爷

Matrix Concept just released its third quarter report today and it turned out to be just another nice result for the group. 

For the third quarter, the group recorded a turnover of RM127m and net profit of RM36m with a net profit margin of 28.41%. 

If compared with preceding quarters, there is a sign of revenue drop as management indicated that it's due to higher revenue recognition of the residential properties sold during preceding quarters. Good point is the margin for this quarter is better due to higher sales of industrial properties that carry higher margin. 

For the 9 months period, group earning per share is around 37.3 cents based on the no of shares of 300.7m. Let's assume a full year EPS for year 2013 be around 50 cents, current PE is around 6.48 based on today closing price of RM3.24. There is still room to advance for its share price if compared with Tambun and Huayang. 

For year 2012, the group recorded revenue of RM456m and net profit of RM103.5m. It will be a good year for the group as the group already reached similar revenue and net profit as it was last full year with just 9 months period. 

In terms of balance sheet, there is nothing much to highlight as the group has net cash and good current ratio. Based on the net asset per share of RM1.80, estimated ROE for year 2013 will be around 27 which is quite good. Hopefully the management team able to continue producing a good return to the shareholders. 

In addition to the announcement, there are still a couple of corporate proposals are undergoing by the groups. 

1. Acquisition of land in Section 46, KL for RM43.6m
2. Acquisition of land at Mukim of Labu for RM47.5m
3. Acquisition of land in Mukim of Rasah for RM59.3m

If all this acquisitions are funding internally, the group is still in net cash position.

In addition to the quarter result announcement, the group also declared third interim dividend of 5 cents along with Speeeeecial dividend of 5 cents too. This sum up a total of 30.5 cents dividend declared for this year excluded tax ( 13.5 + 7 + 5 + 5 cents dividend). Based on my purchase price, the dividend yield is 11.8%. And what's more, the management team mentioned they will continue to maintain quarterly dividend payout as part of its 40% dividend policy. So, expect another dividend payout at 4th quarter. 

For this case, Matrix Concept is really dividend king, really is 财神爷

Go go go Matrix 

Prestariang new acquisition and new contract

Prestariang made a headline on last Thursday by making a double announcements. 

The first announcement was the acquisition of Time Out Skills Academy Sdn Bhd at a 80% equity interest with total purchase consideration of RM0.64m. The purchase is to be wholly funding by cash. With a cash balances of RM34m at the date of 30th June 2013, the group will have no problem for this internal funding. According to the announcement, the acquisition is to help the group focus on providing skills training programs to the oil & gas industry. Finally, the group has officially has the capacity and medium to provide training to the oil & gas industry. 

It was followed by a contract by the Yayasan Peneraju Pendidikan Bumiputera to provide skills training certification for 240 students. The total programme cost is around RM2m with a training period of 2 years. More importantly, it also stated that the contract is subject to ANNUAL renewal for future intakes, subject to satisfactory performance. Thus, there will be more contracts and higher students intake if the programme performance is good. This will provide a recurring income to the group in future. Given the turnover of around RM110m recorded in FY2012, the RM2m contract will marginally increase the group's revenue for this coming 2 years. But, it's always a good start since this is a new segment for the group. 

It's believe that the group is going to announce its 3rd quarter result on this coming Thursday (20th Nov). The revenue probably still count on its core business of ICT training and software license distributor. Its new segment of university business probably still incurs some loss after spending around RM2.0m on marketing expanses to promote its newly launched university at H1FY13 and it turned out to have low students intake. Management team still have lots of things to do to improve the situation

Anyway, it's good that the group is diversify its business into university and training platforn for oil & gas industry apart from its core business to further enhance shareholders' value :) 

Prestariang, go go go 

Scientex Berhad 森德综合 latest acquisition of Seacera Polyfilms

At first glance of the announcement, I have no idea who and what Seacera is doing. But I always think it's good when you acquire somebody rather than being acquired by somebody, right? Haha 

Okay, back to the acquisition. Scientex Berhad announced at thurs that the group is going to acquire the entire equity interest in Seacera Polyfilms and the total purchase consideration amount is RM40.0m. A quick check on the latest annual report of Seacera group found that Seacera group has 3 business segments which is tiles, plastic packaging and property division. 

Seacera Polymer manufactures highly technological products known as BOPP films used for item requires great barrier from water and oxygen which highly used in F&B industry. Based on the annual report of Seacera of year 2012, the chairman stated that the production lines were fully utilised and also implement some cost reduction programme which resulted in lower operation cost compared to previous year. In addition, the chairman also stated that the group was installing additional manufacturing line and the progress is still on-going. Scientex probably will keep the expansion going after the acquisition. 

Seacera group's business segments result (Annual report 2012)

Seacera Polymer packaging recorded a net profit of RM2.8m in year 2012 with a net profit margin of 6.2 which similar to Scientex plastic manufacturing segment. Based on the acquisition price of RM40.0m, it implies a PE of around 14.3. The PE Scientex offered is similar to the offer of GW Plastic acquisition earlier. But Seacera Polymer is way far smaller compared to GW Plastic. So I think the offer price is little bit high, probably Scientex want to make it fast without giving second thought by the Seacera's shareholders :).

Scientex plastic manufacturing segment recorded a operation profit of RM56.9m in year FY2013. So the profit contribution from Seacera Polymer to Scientex in future is quite small consider Scientex overall net profit is RM112m in FY2013, perhaps around 2-3%. Unless Scientex give it a go to further expand its manufacturing line to increase the production output in future. 

Based on the announcement, the proposed acquisition is by internally generated fund. Even with borrowings, it will increase Scientex net gearing ratio from 0.28 to 0.35. 

As at 31/7/2013 balance sheet, 

RM152m (cash) - RM335m ( borrowings ) - RM40m (addition borrowings for Seacera acquisitions) = -RM223. 

So, net gearing is RM223m/628.6m = 0.35.

The net gearing consider okay as the management indicate the comfortable level is between 0.25-0.5x. 

Furthermore, with a net operating cashflow of RM209m recorded at the end of FY2013, Scientex will have no problem to settle the net borrowings of RM223 with probably 1 year plus. 

Coupled with this acquisition with the RM50m capex spent on new 5 renowned blown film lines in GW Plastic which announced earlier, Scientex should able to record better profit in FY2014 along with the usual good contribution from the property segment which focus on building affordable houses in Iskandar region. 

Scientex contributed around 25% of my portfolio and I see no reason to sell it by now. Let my portfolio grows along with Scientex expansion plan.