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Tuesday, October 28, 2014

Daya Materials Bhd (Star)

10 stocks to watch in 2014

4. Daya Materials Bhd 

DAYA Materials Bhd was one of Bursa Malaysia’s outperformers last year. The stock was up 116% for 2013.

With an existing orderbook of RM1.5bil, there are possibilities for more contracts and record profits.

Daya created waves last year when it won two major charter contracts from Norway. The earnings from these contracts are set to be realised this year.

Executive vice-chairman and group CEO Datuk Mazlin Junid.

Based on consensus estimates, Daya’s net profit is set to scale new highs of RM29mil (44% jump) for the year ended Dec 31, 2013 (FY13), RM43mil (47% increase) in FY14 and RM49mil (15% increase) in FY15, fuelled by its orderbook of RM1.5bil and an expanding fleet.

Over the last decade, Daya has been more focused on the downstream oil and gas (O&G) segment. It chugged along, growing organically until 2013, when it entered the offshore construction segment.

It formed Daya Offshore Construction Bhd (DOC) in September 2012. The arrival of vessels Siem Daya 1 and Siem Daya 2 proved to be Daya’s inflection point.

On Aug 16, Daya clinched a seven year charter contract from Technip for the provision of a subsea construction vessel. This project will run for 100 to 175 days per annum commencing in 2014 with an estimated value of RM250mil to RM440mil.

On Sept 3, Daya won again with Technip, when it secured another three-year contract for a period of 100 to 175 days with an estimated value of RM100mil to RM176mil.

For the nine months to Sept 30, 2013, Daya’s revenue jumped 110% to RM373mil and net profit increased 26.74% to RM18.9mil.

However, contributions from the North Sea are set to climb starting from the first quarter of 2014, as contributions from Siem Daya 1 and Siem Daya 2 kick in.

CIMB estimates that Daya’s revenue could further increase should Reach Energy Bhd, in which Daya has made an investment as an initial investor, acquire O&G assets overseas.

Reach Energy is set to become Malaysia’s fourth special purpose acquisition company once it gains the approval for a listing from the Securities Commission.

Catalysts:

- Record profits.

- Orderbook of RM1.5bil.

- Potential contract wins from Petronas and Norway.

- Listing of Reach Energy Bhd.

Risks

- Failure to deliver on its contracts and replenish orderbook.

- Tough competition for the Malaysian RSCs.

– By Tee Lin Say

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 Markets.com 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.