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.