Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.

Friday, September 11, 2015

George Kent: 2 significant contracts

In the span of few days, George Kent announced 2 new contracts that probably will enhance its group's earning moving forward.

The first one was the LRT 3 contract awarded by Prasarana Malaysia Berhad. The group and their JV partner, MRCB are the Project Delivery Partner (PDP) to build the LRT 3 from Bandar Utama to Johan Setia.

Total development cost is around RM9 billion. Construction work will begin in early 2016 and expected to be completed in Aug 2020. The JV will get 6% management fees. So, George Kent probably will get around RM270 million for the whole project, which translated into around RM45 million annually.

I not sure whether this RM45 million is considered as operating profit or net profit. To recap, the group's net profit for the past 3 financial years was RM25mil, RM36mil and RM28 million respectively. Nevertheless, the annual RM45 million from the said project will contributed significantly to the group's bottom line.

The second contract was the delivery of 600k units of water meters to Water Supplies Department (WSD), Hong Kong over the next 2 years for a total sum of USD7.17 million which is roughly RM31 million.

From the press release, the group stated that this contract is the largest single order for the water meters division which further enhance their reputation in the meter industry. The meters will be delivered in 24 batches and the first shipment is in Oct 2015.

In another statement, the group anticipated the contract will contribute around 0.29 sen for financial year end 2016. That's 4 months contribution since the first batch is to be delivered in Oct.

0.29 sen is equivalent to RM871k in 4 months. So, estimate  the 2-year contract will contribute RM5.2 million to the group's bottom line assumed the delivery is constant throughout the years.

Ignore the USD fluctuation, profit margin will be 5.2/31 = 16.7%. Strengthening of RM against USD of course will affect the earning.

So moving into next year,earning will be quite certain unless there is delay in the construction work for the LRT 3 project. 

For the rest of the current financial year, do not forget the contribution from the Ampang extension line and the stable contribution from the meter division. 

Tuesday, September 8, 2015

OpenSys: Surprise bonus issue

OpenSys just announced its 2QFY15 result last week.

At first glance, it was a bit disappointed as I afraid the good performance recorded in the first quarter may be one time off did come true.

To recap, there was a jump in CRM machine sales in previous quarter.

It was a normal quarter for the group, just the selling and distribution costs increased 20% compared to previous few quarters. I have no idea about the spike. It may due to higher marketing activities to improve the sales during the quarter.

The main highlight is the group able to reduce its net debt/equity ratio from 23% in the previous quarter to 1.8% only this quarter thanks to better operating cash flow that resulted in higher cash balance.

From the segment reporting, it's good to see that the software outsourcing division was able to maintain above RM8 million revenue. Since the profit margin of the said division is much higher as well as the income is recurring in nature, the profit certainty and consistency are there.

Sale of machines is one time off and low in profit margin, but a small increase in net profit will help to drive up the EPS significantly like previous quarter.

The group also announce dividend and 1-3 bonus issue.

Is CRM still the key moving forward? I think so but the pace of converting it may not be that fast.

Recently few banks are implementing VSS to cut operating cost. So, hopefully they are going to replace the ATM with CRM and also outsourcing their cheque deposit machine to third party to reduce manpower costs.

Combine the quarter results and looking back at my buying price, it did not serve much margin of safety. I may wait until next quarter or dispose it to buy other counters when opportunity arises. Still tempting.

Friday, September 4, 2015

Aug 2015 Portfolio

August is a suffering month for me. 

The feeling is not good when you see so many counters in red color and you're having unrealized loss. 

So, it's better to stay away from it. Concentrate on finding the next stock :)

For local, I sold off PJDev and half of my holdings in Puncak and Gkent to reserve some cash. Others stay the same.

For Singapore, CES and HMI continued its slide in share price. Ho Bee still staying strong with some buy back from the company. All three companies reported satisfying quarter result last month.

For HK, share price of both China Saite and Welling Holding continue to drop. Both companies reported slight drop in net profit for the first half of the year.

Unrealized performance dropped into red zone, mainly due to CES and Welling Holding as their weight percentage are higher. Dividend yield is quite high given the share price now, but dividend declared by CES this year involved special dividend which may not sustain to next year.

Overall cash level is around 35%. I think I have to better utilize the cash in order to recoup the losses.

Meanwhile, learning some technical chart through OTB subscription and also study the companies recommend by him. Mostly export-orientated and technology company.

For HK stocks, still keep studying companies although the pace is not as fast as I wish. Sometimes kinda lazy and procrastinated.

Well, need to get more interaction with positive-minded people for motivation. Haha

Or back to the target list I set in the beginning of the year may help :)

Tuesday, September 1, 2015

PJDev: 4Q2015 Poor Poor Quarter

PJ Dev just announced its latest quarter report last week. I think its result disappointed many of us. And shock as well. 

There was a one-off gain of asset disposal at corresponding quarter last year. I just deducted it out at operating level and net profit level for comparison. So, probably would be slight difference in reality.

The group managed to record RM5.7 million net profit, poorest in 2 years.

Both revenue and operating profit margin also dropped.

Even worst is there was RM7.8 million loss in joint venture this quarter.

Net borrowings increased to RM362 million from RM135 million one year earlier. Net gearing ratio is around 0.3 which I think is still in comfortable horizon for a group whose main focus is in property development. Interest expenses increased two-fold from previous financial year. 

Cash flow without doubt was negative due to significant outflow for the increases in land held and property development costs probably for Yarra Park City project that caused the group to take up massive borrowings. 

Segment reporting provides some clues on the drops in performance. Found out that the group's account statement changed quite much after audited. Q4FY14 result released last year was quite different from the pass year result shown in Q4FY15.

Poor performance from the properties segment was due to delay in launching Cheras You City and Genting Windmill Upon Hills projects. But the group did mention that the take up rate in the respective Genting project was quite good after launched as well as voiced out concern regarding the slow down in the overall property market. 

Both cable and building material divisions recorded lower revenue and even worst was the hotel segment continued its loss from last quarter. 

Construction segment was the only bright spot. 

The group's prospect mentioned in the report doesn't sound quite good too. 

In another event, there was a statement stated that OSK Holding is deemed to have the control of the company even through OSKH has less than 50% of the voting right. But, the parent company probably will have more than 50% equity interest by the closing date. 

All in all, I probably will dispose my holdings in the group after some consideration. I think the share price will getting hard to reflect its high asset value after the acquisition/transfer end. It's such a waste as I owned it for a while and there was opportunity cost involved.