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Friday, October 24, 2014

IFCA MSC regains upward momentum (Edge)

IFCA MSC Bhd will stand to gain from companies’ rush to be goods and services tax (GST) compliant, and its warrant regain upward momentum.

The stock, the second most actively-traded counter on Bursa Malaysia, hit an eight-year of 55.5 sen today. Meanwhile, IFCA-WA — the third most actively-traded with 58.16 million units changing hands — was up 6.25% to 42.5 sen, after it hit an intra-day high of 45 sen. At the last traded price, IFCA MSC-WA traded at a 5.41% discount to its mother share. The warrant has a strike price of 10 sen and will expire on Feb 15, 2016.

IFCA was featured as one of today’s The Edge’s Stocks with Momentum.

When contacted, Ken Yong, IFCA’s chief executive officer and Chairman, told TheEdge that IFCA is set to release the financials of its third quarter ended Sept 30, 2014 (3QFY14) on Nov 5.

While he could not divulge any details of the net profit growth, Yong said he was happy with the 3QFY14 numbers.

“Besides, we’ve been really busy recently, with holding meetings with fund managers and analysts. There were even fund managers from Singapore who came to see us. I believe they’re excited with our business outlook and growth prospects,” Yong elaborated.

Recently, CIMB Research also initiated coverage on IFCA — which has been heavily touted as one of the biggest beneficiaries in the process of the country’s migration to the goods and services tax (GST), with a target price of 78 sen per share.

At the last traded price, IFCA’s mother share would still have an implied upside of 34 sen or 61.11%. Assuming the shares reached CIMB’s target price, IFCAMSC-WA would still have an upside of 49%.
“The company dominates in the domestic property sector, with around 70% market share. Most of the major domestic property developers such as Sime Darby Properties Bhd, S P Setia Bhd, Eco World Development Group Bhd, and Mah Sing Group Bhd, are IFCA’s customers,” said CIMB analyst Nigel Foo in the Oct 10 note.

CIMB’s calculations projected IFCA’s three-year net profit compound annual growth rate would be 228%, said Foo. Subsequently, the profit margins would expand, as well as revenue growth from the domestic and China markets are expected to accelerate, he added.

“China and the domestic software migration from Windows-based to web/mobile platforms, should keep the company busy after the completion of the GST jobs. IFCA is also looking to expand its regional reach. Markets [which] the company is targeting, include Japan, the Middle East and Thailand,” Foo added.

Thursday, October 16, 2014

YFG’s unit bags RM36.72m MRT underground works package (Edge)

YFG Bhd ’s wholly owned subsidiary, YFG Engineering Sdn Bhd (YFGE), has been appointed as the nominated sub-contractor for a Klang Valley mass rail transit (MRT) underground works project worth RM36.72 million.

In a filing with Bursa Malaysia today, YFG announced it has accepted the appointment from MMC-Gamuda KVMRT (T) Sdn Bhd on Oct 7 for the project known as “Projek Mass Rapid Transit Lembah Kelang : Jajaran Sungai Buloh – Kajang Underground Works Package for the Mechanical & Electrical Works For Package 3 (Stadium Merdeka Station)”.

It forms part of the main sub-contract for the construction, completion, testing, commissioning and care of the works – which includes the Pudu launch shaft but excludes the diaphgram wall.

“YFGE shall within 21 days from the date of acceptance, enter into a nominated sub-contract with CEC International Malaysia Sdn Bhd, the main sub-contractor for the project,” said YFG.

It added that the commencement date of the project will be advised by the main sub-contractor.

YFG expects the contract to contribute positively to future earnings and net assets per share of the group.

The electrical and mechanical engineering services provider closed at 8.5sen, for a market capitalisation of RM57.86 million.

Stocks With Momentum: Minetech Resources (Edge)

Minetech Resources Bhd started as a drilling and blasting service in 1977, and has since become one of Malaysia’s largest aggregate mining companies with revenue of over RM200 million, although it has a small market capitalisation of RM49.9 million.

Minetech currently operates a network of nine quarries, from which aggregates are produced. The company has expanded into synergistic and related products such as the production of bituminous products and premix products that cater largely for earthworks and road construction. It also has a civil engineering and construction arm, as well as a property development unit in Perak.

The company’s revenue has been moving up consistently over the past five years, rising from RM126.4 million in 2009 to RM201.4 million in 2013. However, its profitability track record has been patchy, with the company posting net losses in three of the last five years. In 2012 and 2013, it posted net loss of RM9.2 million and RM8.3 million, respectively.

Even in years when the company was profitable, net profit was small at only RM2.2 million in 2010 and RM1.2 million in 2011.

It is worth noting that last year’s losses were largely due to write-offs as the company appeared to have undertaken a balance sheet clean up exercise. Impairment losses by subsidiaries and losses on investment in subsidiaries totaled RM7.8 million while a further RM4.8 million was written-off for obsolete inventories and aging fixed assets.

However, 1H2014 saw revenue declining 23.5% to RM76.0 million, with a net loss of RM0.6 million compared with net profit of RM1.6 million a year ago. Minetech has a low net gearing of 8.6% and has not paid any dividends for the past five years. The stock is currently trading at 1.03 times its net asset value of 14.6 sen as at 30 June 2014.

Wednesday, October 15, 2014

Opensys executive director Tune acquires more shares (Edge)

Opensys (M) Bhd Executive Director Tune Hee Hian has acquired 1 million shares or a 0.45% equity interest in the company, for RM333,684 from the open market recently.

In an announcement with Bursa Malaysia today, Opensys, a financial software and system solutions provider, said that Tune has acquired 368,400 shares on Oct 10 at 34 sen apiece, and an additional 631,600 shares on Oct 13 at 33 sen per share.

Following the acquisition, Tune owns 2.98 million shares or 1.34% direct interest in the company, and 1 million or 0.45% indirect stake in the company.

After climbing to an intraday high of 32.5 sen earlier, Opensys closed unchanged at 30 sen today, with some 2.88 million shares changing hands. Its market capitalisation was at RM70.38 million.

It was earlier reported that Opensys has a deal with OKI Japan, to sell the latter’s cash recycling machines (CRM) in the country. CRM refers to more advanced ATM that allows bank customers to deposit, as well as withdraw cash on the same machine.

Stocks with likelihood of Corporate Exercise: HIL Industries (Edge)

HIL Industries Bhd (HIL) is principally involved in producing injection moulding products for the automotive, electrical and consumer industries.

Despite declining revenue and net profit from 2010 to 2013, HIL seems to have rebounded strongly in 2014, with revenue rising 53.7% y-o-y to RM56.6 million in the first half of 2014. Net profit for the six-month period was RM6.7 million, already more than double 2013’s full-year net profit of RM2.8 million.

At 73 sen, HIL is trading at a 28 sen or 27.7% discount to its book value of RM1.01 with trailing 12-month P/E ratio of 21 times. The company has large net cash of RM101.7 million as at 30 June 2014, which translates to 36.8 sen per share — or a significant 50.4% of the current share price.

Free-float for HIL seems to be on the low side, as its two major shareholders, Dalta Industries Sdn Bhd and Datuk Ng Boon Thong @ Ng Thian Hock owns a total of 65.9% of the company.

Should Dalta and Datuk Ng opt to privatise the company, it will cost them nothing in cash. At current prices, it would only cost RM68.9 million to acquire the remaining shares they do not own, all of which can be recouped from the company’s cash on hand. Interestingly, an attempt was made to privatise HIL previously in 2006.

With such a large cash pile and the stock trading well below book value, it remains to be seen if HIL undertakes more value-enhancing acquisitions, returns more cash to shareholders or becomes a potential privatisation candidate.

Bio Osmo raises RM8.66m (Edge)

Bio Osmo Bhd ( Financial Dashboard) has placed out 43.3 million placement shares to identified investors in five tranches, raising a total of RM8.66 million.

This follows the listing of the final tranche of its 11.5 million placement shares on the Main Market of Bursa Malaysia. “The board does not intend to place the remaining placement shares to potential investors. As a result, the private placement is deemed completed today (yesterday),” said Bio Osmo in a filing with Bursa.

Bio Osmo had earlier planned to place up to 48 million shares, constituting up to 10% of its issued base to third-party investors in an effort to raise funds for the firm’s working capital needs.

This article first appeared in The Edge Financial Daily, on October 15, 2014.

A 2011 correction in the making (Edge)

By Benny Lee / Jupiter Securities Sdn Bhd   | October 15, 2014 : 10:35 AM MYT  
The market continued to stay in its bearish mode. The selling pressure remained as the volume was firm but the index was declining. Technically, the FBM KLCI is strongly bearish as the short-term 30-day moving average has fallen below the long-term 200-day moving average. The last time this happened was in 2011 where the index fell 16% in two months from the then historical high. So far, the index has fallen only about 5% from the historical high, and 16% from the current historical high is roughly at about 1,600 points.

Momentum indicators like the RSI and Momentum Oscillator continue to indicate strong bearish momentum, similar to the decline in 2011. Furthermore, the FBM KLCI continues to trade below the bottom band of the Bollinger Bands and this indicates strong bearish momentum. We may expect some technical rebounds because of the market being oversold in the short term but these may be dead cat bounces as the market is still bearish.

If history does repeat itself, then we may expect a year 2011-like correction. With the current pullback, there is still room for the index to fall lower. The next technical support level would be at 1,750 points based on a 50% Fibonacci retracement level of the uptrend that began in early 2013 and a 23.6% Fibonacci retracement from the uptrend that began in late 2011. We could expect the index to trend lower unless there is a strong rebound, and that is if the index is able to climb above the 1,820 points support-turned-resistance level.