Under the announcement made by LIONFIB today, only RM58.00 million (i.e. at RM0.25 per ordinary share) will be distributed to its shareholders from proceeds received from the sale of its Malaysian tyre business, the entitlement date for which shall be determined after the completion date of sale.
This is a huge disappointment, indeed. Under the circumstances, we would recommend a HOLD or CUT LOSS & BUY LATER AT LOWER PRICE.
We believe that there is still upside upon announcement of the entitlement date after completion of sale in early 2011. However, the quantum is significantly lower than we anticipated.
We note that RM200 million is earmarked for investments to be identified and RM141.57 million will be for LIONFIB's working capital in its principal activities in the trading of building materials and steel products. In the event there is any change in part of the proceed's usage to capital distribution to the shareholders, there may then be further upside on this counter.
Monday, November 22, 2010
Sunday, November 21, 2010
HOVID - TRADING AT A BARGAIN DUE TO PN17 STATUS
HOVID BHD
Primary Symbol & Exchange: HOVID
7213 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 19/11/2010 RM:0.15
Mkt Cap RM’m : 114.31
Shares (m): 762.08
Par RM: 1.10
SECTOR CLASSIFICATION
MSEB: Consumer Products
Fox Capital: Chemicals
Executive Chairman: Ho Sue San @ David Ho Sue San
Managing Director: Ho Sue San @ David Ho Sue San
KNOWN MAJOR SHAREHOLDER(S) (as at 7/10/2009)
Ho Sue San @ David Ho Sue San 49.57%
Tel: 05-5060690
Fax: 05-5061215
7803 1126 Fax. No.: (603) 7806 1387
BACKGROUND
Founded some 70 years ago and famous for the natural herbal beverage Ho Yan Hor Herbal Tea which is a concoction of 24 herbs, Hovid has established itself as the leading manufacturer of pharmaceutical and herbal products in Malaysia. Besides manufacturing its own products under the Hovid brand name, the group also manufactures products on contract manufacture basis for private labels.
Besides being involved in pharmaceutical activities, Hovid is also involved in the commercial extraction of nutrients from palm oil fruits through a patented procedure as well as biodiesel through its previously 58.2% owned subsidiary – Carotech Bhd (listed on the ACE Market – previously known as the Mesdaq exchange). Carotech’s focus is currently on the phytonutrients side of its business as the high CPO prices do not promote palm biodiesel as the renewable energy fuel. Carotech’s 3 main phytonutrients products are tocitrienol products marketed under the brand name Tocomin, carotene products marketed under the name Carimin, and phytosterol products, its 2 co-products are palm fatty acid methyl ester and crude glycerine.
LATEST DEVELOPMENT
Hovid was placed under PN17 after its subsidiary, Carotech Bhd, triggered GM3 status on 23/10/2010 when the latter’s auditor expressed a disclaimer opinion on its financial statements for the FYE 30/6/2010. (On 1/7/2010, Carotech triggered GN5 status after it defaulted on the loan repayment due FY2010).
Hovid’s share price has been bashed down as follows:-
Closing price as at 29/10/2010 = RM0.185/share
Closing price as at 1/11/2010 = RM0.135/ share (high = RM0.14 low = RM0.12)
Latest closing price as at 19/11/2010 = RM0.15/share
POTENTIAL PRICE CATALYST
The main obvious price catalyst is exit from the PN17 classification which may help it to retrace its price before being placed under PN17:
Last closing price as at 19/11/2010 = RM0.15/share
Targeted price (i.e. last closing price before announcement of being classified PN17 status) = RM0.185/share
Potential capital gain = RM0.035/share or 23.3%
Hovid and Carotech were among investors’ favourites in 2007 and 2008. At that time, Hovid hit a high of RM0.53/share.
Hovid had taken steps to exit the PN17 classification & to prevent the company from being impacted by the financial problem faced by Carotech as follows:-
1) Sell down its stake in Carotech (some 180 million shares in batches) from almost 60%, previously to 38%-45%. During this period, Lembaga Tabung Haji nearly doubled its interest in Carotech to 9.12% comprising 83.24 million shares from 46.24 million shares in August 2010.
2) Waiting for Q2 financial results to help it achieve its plan to exit PN17 status. Hovid went into PN17 classification due to the impact from financially-troubled Carotech because the latter was then a subsidiary, even though the group’s pharmaceutical business was doing well and growing. The pharmaceutical business makes about RM15 million to RM20 million profit on its own.
By selling down its stake in Carotech to 38%-45%, Carotech become an associate of Hovid instead of subsidiary, and this development will expedite the lifting of the PN17 classification.
Unlike being a subsidiary where all its financial results including the debt will have to be incorporated into the group’s balance sheet, Hovid will now have to take care only of its share of profit or loss in Carotech, and will not be worried by the huge debts of Carotech, estimated to be about RM260 million.
Carotech is no longer a substantial part of Hovid group (with the selldown since August 2010). As a result, Hovid’s gearing has been reduced to 0.5x or about RM50 million from 2.5x when Carotech was a subsidiary.
Hovid’s current investment in Carotech is only RM27 million in the book. Assuming even the worst case scenario where Hovid write off the whole investment of RM27 million in Carotech, this will only involve the book cost and has no impact on the cash flow. Moreover, Hovid has not given any guarantee on Carotech’s operations.
Assuming Hovid make RM18 million in profit and based on an industry price/earnings multiple of 12x, the share price should be higher than the current level i.e. at 28 sen.
BRIEF INFORMATION ON CAROTECH
Carotech’s financial problem was due to external factors beyond its control like the high crude palm oil (CPO) price and soaring oil prices in 2008 and the recession in the United States and Europe at that time. Carotech had also over-expanded when raising its output capacity by some 300% whereas the rise in demand during the recession period was only 15%.
There may be demand in Carotech’s business, which will be driven by phytonutrients if it can successfully restructure its debts. Carotech has sought assistance of the Corporate Debt Restructuring Committee to restructure its debt.
Potential for Carotech’s nutrient products like tocotrienols is tremendous, given the rising demand for natural and beneficial ingredients in therapeutic and beauty products nationwide.
Primary Symbol & Exchange: HOVID
7213 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 19/11/2010 RM:0.15
Mkt Cap RM’m : 114.31
Shares (m): 762.08
Par RM: 1.10
SECTOR CLASSIFICATION
MSEB: Consumer Products
Fox Capital: Chemicals
Executive Chairman: Ho Sue San @ David Ho Sue San
Managing Director: Ho Sue San @ David Ho Sue San
KNOWN MAJOR SHAREHOLDER(S) (as at 7/10/2009)
Ho Sue San @ David Ho Sue San 49.57%
Tel: 05-5060690
Fax: 05-5061215
7803 1126 Fax. No.: (603) 7806 1387
BACKGROUND
Founded some 70 years ago and famous for the natural herbal beverage Ho Yan Hor Herbal Tea which is a concoction of 24 herbs, Hovid has established itself as the leading manufacturer of pharmaceutical and herbal products in Malaysia. Besides manufacturing its own products under the Hovid brand name, the group also manufactures products on contract manufacture basis for private labels.
Besides being involved in pharmaceutical activities, Hovid is also involved in the commercial extraction of nutrients from palm oil fruits through a patented procedure as well as biodiesel through its previously 58.2% owned subsidiary – Carotech Bhd (listed on the ACE Market – previously known as the Mesdaq exchange). Carotech’s focus is currently on the phytonutrients side of its business as the high CPO prices do not promote palm biodiesel as the renewable energy fuel. Carotech’s 3 main phytonutrients products are tocitrienol products marketed under the brand name Tocomin, carotene products marketed under the name Carimin, and phytosterol products, its 2 co-products are palm fatty acid methyl ester and crude glycerine.
LATEST DEVELOPMENT
Hovid was placed under PN17 after its subsidiary, Carotech Bhd, triggered GM3 status on 23/10/2010 when the latter’s auditor expressed a disclaimer opinion on its financial statements for the FYE 30/6/2010. (On 1/7/2010, Carotech triggered GN5 status after it defaulted on the loan repayment due FY2010).
Hovid’s share price has been bashed down as follows:-
Closing price as at 29/10/2010 = RM0.185/share
Closing price as at 1/11/2010 = RM0.135/ share (high = RM0.14 low = RM0.12)
Latest closing price as at 19/11/2010 = RM0.15/share
POTENTIAL PRICE CATALYST
The main obvious price catalyst is exit from the PN17 classification which may help it to retrace its price before being placed under PN17:
Last closing price as at 19/11/2010 = RM0.15/share
Targeted price (i.e. last closing price before announcement of being classified PN17 status) = RM0.185/share
Potential capital gain = RM0.035/share or 23.3%
Hovid and Carotech were among investors’ favourites in 2007 and 2008. At that time, Hovid hit a high of RM0.53/share.
Hovid had taken steps to exit the PN17 classification & to prevent the company from being impacted by the financial problem faced by Carotech as follows:-
1) Sell down its stake in Carotech (some 180 million shares in batches) from almost 60%, previously to 38%-45%. During this period, Lembaga Tabung Haji nearly doubled its interest in Carotech to 9.12% comprising 83.24 million shares from 46.24 million shares in August 2010.
2) Waiting for Q2 financial results to help it achieve its plan to exit PN17 status. Hovid went into PN17 classification due to the impact from financially-troubled Carotech because the latter was then a subsidiary, even though the group’s pharmaceutical business was doing well and growing. The pharmaceutical business makes about RM15 million to RM20 million profit on its own.
By selling down its stake in Carotech to 38%-45%, Carotech become an associate of Hovid instead of subsidiary, and this development will expedite the lifting of the PN17 classification.
Unlike being a subsidiary where all its financial results including the debt will have to be incorporated into the group’s balance sheet, Hovid will now have to take care only of its share of profit or loss in Carotech, and will not be worried by the huge debts of Carotech, estimated to be about RM260 million.
Carotech is no longer a substantial part of Hovid group (with the selldown since August 2010). As a result, Hovid’s gearing has been reduced to 0.5x or about RM50 million from 2.5x when Carotech was a subsidiary.
Hovid’s current investment in Carotech is only RM27 million in the book. Assuming even the worst case scenario where Hovid write off the whole investment of RM27 million in Carotech, this will only involve the book cost and has no impact on the cash flow. Moreover, Hovid has not given any guarantee on Carotech’s operations.
Assuming Hovid make RM18 million in profit and based on an industry price/earnings multiple of 12x, the share price should be higher than the current level i.e. at 28 sen.
BRIEF INFORMATION ON CAROTECH
Carotech’s financial problem was due to external factors beyond its control like the high crude palm oil (CPO) price and soaring oil prices in 2008 and the recession in the United States and Europe at that time. Carotech had also over-expanded when raising its output capacity by some 300% whereas the rise in demand during the recession period was only 15%.
There may be demand in Carotech’s business, which will be driven by phytonutrients if it can successfully restructure its debts. Carotech has sought assistance of the Corporate Debt Restructuring Committee to restructure its debt.
Potential for Carotech’s nutrient products like tocotrienols is tremendous, given the rising demand for natural and beneficial ingredients in therapeutic and beauty products nationwide.
Saturday, November 20, 2010
POTENTIAL BUMPER SPECIAL DIVIDEND FOR LIONFIB SHAREHOLDERS
LION FOREST INDUSTRIES BHD
Primary Symbol & Exchange: LIONFIB
8486 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 19/11/2010 RM:2.44
Mkt Cap RM’m : 562.10
Shares (m): 230.37
Par RM: 1.00
SECTOR CLASSIFICATION
MSEB: Consumer Products
Fox Capital: Trading/Services
Executive Chairman: Tan Sri William Cheng Heng Jern
Managing Director: -
KNOWN MAJOR SHAREHOLDER(S) (as at 30/9/2009)
Amsteel Mills Sdn Bhd + 53.67%
Lion Industries Corporation Bhd 19.56%
+ 99% owned subsidiary of Lion Industries Corporation Bhd (effective combined interest at ~ 73%)
BACKGROUND
LIONFIB’s prime asset used to be it 97.8% stake in Sabah Forest Industries (SFI) until its disposal in FYE 2007. The disposal for SFI for USD261 million (or RM945 million) cash in FY 2007 altered the profit structure considerably in FYE 2008. Some 45% (or RM421 million) of the hefty cash proceeds was utilized for subsequent capital repayment to the shareholders at RM2.00 each. Part of the proceeds was also utilized to expand its presence in tyre manufacturing. On 28/11/2008 (or 2QFY2009), LIONFIB acquired Silverstone via issuance of 19.93 million new shares which lifted the capital base by 9.4% in FY 2009.
LATEST DEVELOPMENT
Lion Forest Industries Bhd (LIONFIB) is selling local tyre business, Silverstone Bhd, to Toyo Tire & Rubber Co Ltd, Japan’s fourth largest tyre manufacturer, for RM462 million. The Japanese tyre maker will buy over a 100% equity stake in Silverstone Bhd. Lion Forest Industries Bhd (LFIB) owns an 84.16% stake in Silverstone. The deal values Silverstone at 1.62 times its consolidated net assets of RM285.67 million as at June 30 2010, and 13.76 times its net profit of RM33.57 million. It is learned that Silverstone has minimal borrowings of about RM20 million.
The proposed divestment is expected to boost LIONFIB’s cash pile to RM869.4 million, or RM3.77 gross cash per share. LIONFIB’s share price closed at RM2.44 on 19/11/2010 which gave the company a market value of RM562.1 million. Its net asset per share was RM4.68 as at June 30 2010. LFIB was holding RM407.38 million in cash as at June 30 2010, against total borrowings of RM36.58 million.
Nonetheless, a portion of its current cash pile is being held in an escrow account as a contingency fund for the claims sought in several legal suits filed over the timber concession it held previously in Sabah.
For LIONFIB, the proposed deal is expected to result in an estimated gain of about RM140million for FY2011 ending June 30, which translates to an increase in earnings per share of about 60 sen.
“The Silverstone deal is Toyo Tire’s first ever cross-border acquisition. The timing was right for the company to expand its reach with the strengthening of the yen,” said a source close to the deal.
On the use of the “Silverstone” brand by LFIB’s tyre manufacturing operations in China, the source says Toyo Tire would work out a separate arrangement with LFIB on the matter. LFIB’s tyre operation in China is held under a different subsidiary,
Shandong Silverstone LuHe Rubber & Tyre Co Ltd. The China business is not a part of Silverstone that is being sold to Toyo Tire.
Both LFIB and Toyo Tire expect the Silverstone deal to be completed by the end of January next year.
Following the disposal of Silverstone, LFIB will be left with its tyre manufacturing operations in China, trading and distribution of building materials such as steel bars, cement, roofing and wall tiles, and distribution of petroleum-based products and automotive components.
LFIB posted a net profit of RM163.75 million or 65.38 sen a share for FY2010, on revenue of RM873.62 million.
POTENTIAL DISTRIBUTION OF SPECIAL DIVIDEND OR CAPITAL REPAYMENT
Recent examples for share price boost after announcement of distribution of Special Dividend:
1) Eurospan Holdings Bhd (Eurosn) - 7094
- Surprise of a special single-tier dividend of 40 sen/share given its strong cash hoard of RM30.5 million or 75 sen/share @ August 2010.
Announcement date: 25/10/2010
Ex date: 6/1/2010
Pay out date: 24/1/2010
Closing price as at 25/10/2010 : RM1.16
Closing price as at 26/10/2010: RM1.41 (open: RM1.50, high: RM1.50, low: RM1.39)
Gain: 25 sen/share or 21.6% from previous closing price
2) Fraser & Neave Holdings Bhd (F&N) - 3689
- Announcement of special dividend of RM1.10/share + final single tier dividend of 38 sen. The proposed special dividend payment arose from sale of its glass container business – Malaya Glass Products Sdn Bhd that boosted its cash coffer to > RM1 billion.
Announcement date: 8/11/2010
Ex date: 8/12/2010
Pay out date: 6/1/2010
Closing price as at 8/11/2010 : RM14.62
Closing price as at 9/11/2010: RM15.70 (open: RM15.30, high: RM16.00, low: RM15.30)
Gain: RM1.08/share or 7.39% from previous closing price
Per OSK Research’s analysis, potential special dividend is at RM1.38 per LFI share. In order to gauge the potential dividend payout by LIONFIB, we must first compute the potential net cash proceeds that LFI may receive upon completion of the disposal. SCB has issued bonds, for which the Net Present Value (NPV) stood at approximately RM320m and are currently fully owned by LIONFIB. Thus the bond will obviously be redeemed prior to any cash distribution by SCB.
The remaining cash will also be used to pay for advisory fees and other expenses before being distributed back to its shareholders. Adding the proceeds from the bond redemption by SCB to LIONFIB and a 84% share of the balance, the possible amount available for distribution would be about RM400m.
Tracking the disposal of Sabah Forest Industries SB (SFI) by LFI in 2007, the subsidiary made a total dividend payout of RM2 per share, or 78.8% of the total proceeds, after excluding the RM363.4m set aside in an Escrow account for the litigation claims against SFI.
Assuming a payout of 80% from the cash proceeds received from LIONFIB, the special cash dividend may come to RM1.38 per share, with a dividend payable to Lion Industries of as much as RM233.6m. The remaining 20% will likely be retained for SCB and LIONFIB to search of a new core business as the group will left with its tyre manufacturing operation in China and trading of building material plus petroleum based products, which only generate nominal earnings.
Taking the similar positive effect on Eurosn & F&O after announcement of special dividend payout, LIONFIB share price is expected to achieve gain of at least RM1/share if special cash dividend of RM1.38/share is declared
Primary Symbol & Exchange: LIONFIB
8486 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 19/11/2010 RM:2.44
Mkt Cap RM’m : 562.10
Shares (m): 230.37
Par RM: 1.00
SECTOR CLASSIFICATION
MSEB: Consumer Products
Fox Capital: Trading/Services
Executive Chairman: Tan Sri William Cheng Heng Jern
Managing Director: -
KNOWN MAJOR SHAREHOLDER(S) (as at 30/9/2009)
Amsteel Mills Sdn Bhd + 53.67%
Lion Industries Corporation Bhd 19.56%
+ 99% owned subsidiary of Lion Industries Corporation Bhd (effective combined interest at ~ 73%)
BACKGROUND
LIONFIB’s prime asset used to be it 97.8% stake in Sabah Forest Industries (SFI) until its disposal in FYE 2007. The disposal for SFI for USD261 million (or RM945 million) cash in FY 2007 altered the profit structure considerably in FYE 2008. Some 45% (or RM421 million) of the hefty cash proceeds was utilized for subsequent capital repayment to the shareholders at RM2.00 each. Part of the proceeds was also utilized to expand its presence in tyre manufacturing. On 28/11/2008 (or 2QFY2009), LIONFIB acquired Silverstone via issuance of 19.93 million new shares which lifted the capital base by 9.4% in FY 2009.
LATEST DEVELOPMENT
Lion Forest Industries Bhd (LIONFIB) is selling local tyre business, Silverstone Bhd, to Toyo Tire & Rubber Co Ltd, Japan’s fourth largest tyre manufacturer, for RM462 million. The Japanese tyre maker will buy over a 100% equity stake in Silverstone Bhd. Lion Forest Industries Bhd (LFIB) owns an 84.16% stake in Silverstone. The deal values Silverstone at 1.62 times its consolidated net assets of RM285.67 million as at June 30 2010, and 13.76 times its net profit of RM33.57 million. It is learned that Silverstone has minimal borrowings of about RM20 million.
The proposed divestment is expected to boost LIONFIB’s cash pile to RM869.4 million, or RM3.77 gross cash per share. LIONFIB’s share price closed at RM2.44 on 19/11/2010 which gave the company a market value of RM562.1 million. Its net asset per share was RM4.68 as at June 30 2010. LFIB was holding RM407.38 million in cash as at June 30 2010, against total borrowings of RM36.58 million.
Nonetheless, a portion of its current cash pile is being held in an escrow account as a contingency fund for the claims sought in several legal suits filed over the timber concession it held previously in Sabah.
For LIONFIB, the proposed deal is expected to result in an estimated gain of about RM140million for FY2011 ending June 30, which translates to an increase in earnings per share of about 60 sen.
“The Silverstone deal is Toyo Tire’s first ever cross-border acquisition. The timing was right for the company to expand its reach with the strengthening of the yen,” said a source close to the deal.
On the use of the “Silverstone” brand by LFIB’s tyre manufacturing operations in China, the source says Toyo Tire would work out a separate arrangement with LFIB on the matter. LFIB’s tyre operation in China is held under a different subsidiary,
Shandong Silverstone LuHe Rubber & Tyre Co Ltd. The China business is not a part of Silverstone that is being sold to Toyo Tire.
Both LFIB and Toyo Tire expect the Silverstone deal to be completed by the end of January next year.
Following the disposal of Silverstone, LFIB will be left with its tyre manufacturing operations in China, trading and distribution of building materials such as steel bars, cement, roofing and wall tiles, and distribution of petroleum-based products and automotive components.
LFIB posted a net profit of RM163.75 million or 65.38 sen a share for FY2010, on revenue of RM873.62 million.
POTENTIAL DISTRIBUTION OF SPECIAL DIVIDEND OR CAPITAL REPAYMENT
Recent examples for share price boost after announcement of distribution of Special Dividend:
1) Eurospan Holdings Bhd (Eurosn) - 7094
- Surprise of a special single-tier dividend of 40 sen/share given its strong cash hoard of RM30.5 million or 75 sen/share @ August 2010.
Announcement date: 25/10/2010
Ex date: 6/1/2010
Pay out date: 24/1/2010
Closing price as at 25/10/2010 : RM1.16
Closing price as at 26/10/2010: RM1.41 (open: RM1.50, high: RM1.50, low: RM1.39)
Gain: 25 sen/share or 21.6% from previous closing price
2) Fraser & Neave Holdings Bhd (F&N) - 3689
- Announcement of special dividend of RM1.10/share + final single tier dividend of 38 sen. The proposed special dividend payment arose from sale of its glass container business – Malaya Glass Products Sdn Bhd that boosted its cash coffer to > RM1 billion.
Announcement date: 8/11/2010
Ex date: 8/12/2010
Pay out date: 6/1/2010
Closing price as at 8/11/2010 : RM14.62
Closing price as at 9/11/2010: RM15.70 (open: RM15.30, high: RM16.00, low: RM15.30)
Gain: RM1.08/share or 7.39% from previous closing price
Per OSK Research’s analysis, potential special dividend is at RM1.38 per LFI share. In order to gauge the potential dividend payout by LIONFIB, we must first compute the potential net cash proceeds that LFI may receive upon completion of the disposal. SCB has issued bonds, for which the Net Present Value (NPV) stood at approximately RM320m and are currently fully owned by LIONFIB. Thus the bond will obviously be redeemed prior to any cash distribution by SCB.
The remaining cash will also be used to pay for advisory fees and other expenses before being distributed back to its shareholders. Adding the proceeds from the bond redemption by SCB to LIONFIB and a 84% share of the balance, the possible amount available for distribution would be about RM400m.
Tracking the disposal of Sabah Forest Industries SB (SFI) by LFI in 2007, the subsidiary made a total dividend payout of RM2 per share, or 78.8% of the total proceeds, after excluding the RM363.4m set aside in an Escrow account for the litigation claims against SFI.
Assuming a payout of 80% from the cash proceeds received from LIONFIB, the special cash dividend may come to RM1.38 per share, with a dividend payable to Lion Industries of as much as RM233.6m. The remaining 20% will likely be retained for SCB and LIONFIB to search of a new core business as the group will left with its tyre manufacturing operation in China and trading of building material plus petroleum based products, which only generate nominal earnings.
Taking the similar positive effect on Eurosn & F&O after announcement of special dividend payout, LIONFIB share price is expected to achieve gain of at least RM1/share if special cash dividend of RM1.38/share is declared
Monday, November 1, 2010
HWGB - Speculative buy due to bullish tin prices
Ho Wah Genting Bhd (HWGB) [9601] (RM0.36 sen/share @ 1/11/2010) which is involved in mining activities saw its share price surging by 80% to 36 sen on November 1 2010 from 20 sen at the start of the year.
Recently, its unit HWG Tin Mining Sdn Bhd was awarded a 10-year mining lease in 2008 to mine tin and other minerals on a 202ha in Pengkalan Hulu with a potential for a further 202ha as work on the initial area progresses.
According to the Companies Commission of Malaysia, HWG Tin Mining is 51% owned by Ho Wah Genting, 35% by Jiwa Seribu Sdn Bhd, 10% by Majuperak Holdings Bhd and 4% by Multi Prolific Sdn Bhd. A check by StarBiz revealed that the Perak royalty directly owns a 35% stake in HWG Tin Ming through Jiwa Seribu Sdn Bhd,which is a 100% wholly owned subsidiary of Ras Sdn Bhd.
HWGB also has 35% stake in a magnesium company called CVM Mining which is listed in HKEX and is worth at about RM110m. The current market cap of HWGB is worth less than this sum (~ RM99m). Thus, its 100%-owned factory in Indonesia producing copper cable/wire and 100%-owned HWGB Tin Mining company as well as some properties coupled with tour bus business are not priced into its share price yet. In other words, if you buy its shares at 36 cents, these businesses are basically free!!
Nonetheless, aside from this, the main impetus is actually tin mining. The boss said that it has reserve of 50,000 ton of tin which is worth about 50,000 x RM 80,000/ton = RM4 billion at current price of tin. But how true the statement is remains unknown. Assuming that it's half true, the tin beneath could worth RM2 billion which is shocking.
Recently, its unit HWG Tin Mining Sdn Bhd was awarded a 10-year mining lease in 2008 to mine tin and other minerals on a 202ha in Pengkalan Hulu with a potential for a further 202ha as work on the initial area progresses.
According to the Companies Commission of Malaysia, HWG Tin Mining is 51% owned by Ho Wah Genting, 35% by Jiwa Seribu Sdn Bhd, 10% by Majuperak Holdings Bhd and 4% by Multi Prolific Sdn Bhd. A check by StarBiz revealed that the Perak royalty directly owns a 35% stake in HWG Tin Ming through Jiwa Seribu Sdn Bhd,which is a 100% wholly owned subsidiary of Ras Sdn Bhd.
HWGB also has 35% stake in a magnesium company called CVM Mining which is listed in HKEX and is worth at about RM110m. The current market cap of HWGB is worth less than this sum (~ RM99m). Thus, its 100%-owned factory in Indonesia producing copper cable/wire and 100%-owned HWGB Tin Mining company as well as some properties coupled with tour bus business are not priced into its share price yet. In other words, if you buy its shares at 36 cents, these businesses are basically free!!
Nonetheless, aside from this, the main impetus is actually tin mining. The boss said that it has reserve of 50,000 ton of tin which is worth about 50,000 x RM 80,000/ton = RM4 billion at current price of tin. But how true the statement is remains unknown. Assuming that it's half true, the tin beneath could worth RM2 billion which is shocking.
TASCO - A STILL LOWLY VALUE COMPANY
TASCO BHD (formerly TRANS-ASIA SHIPPING CORP BHD)
Primary Symbol & Exchange: TASCO
5140 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 1/11/2010 RM:1.35
Mkt Cap RM’m : 135.00
Shares (m): 100.00
Par RM: 1.00
SECTOR CLASSIFICATION
MSEB: Trading/Services
Fox Capital: Transport-Logistic
Executive Chairman: Tan Sri Datuk Asmat bin Kamaludin
Managing Director: Lee Check Poh
KNOWN MAJOR SHAREHOLDER(S) (as at 14/04/2010)
Nippon Yusen Kabushiki Kaisha (direct & indirect interest) 61.32%
Tan Sri Datuk Asmat bin Kamaludin 37.23%
Lee Check Poh 9.83%
BACKGROUND
Tasco Berhad (TASCo), formerly Trans-Asia Shipping Corporation Berhad, is a Malaysia-based total logistics solutions provider. The Company offers logistics solutions covering air, sea and land transportation. It has categorized its services into international logistics solutions and domestic logistics solutions. International logistics solutions provide air freight services, sea freight services and buyer consolidation services. Domestic logistics solutions provides custom clearance, haulage transportation, warehousing services and warehouse inplant services, through forwarding division; car carrier and pre-delivery inspection, through auto logistics division, and domestic trucking and cross border trucking, through trucking division.
TASCo has nine subsidiaries, including Baik Sepakat Sdn Bhd, Tunas Cergas Logistik Sdn Bhd, Emulsi Teknik Sdn Bhd, TASCO Express Sdn Bhd and Maya Kekal Sdn Bhd, among others.
TASCo's domestic operation and global alliance with NYK (a Global Fortune 500 company which is listed on the Tokyo Stock Exchange, Osaka Securities Exchange and Nagoya Stock Exchange) has made it one of the largest total logistics solutions providers in Malaysia.
WHY WE FEEL TASCO IS UNDERVALUED?
1) For 1H10, the earnings of TASCo have jumped by threefold to RM10.96 million on the back of an almost 78% increase in sales revenue to RM203.37 million. The 1H10 sterling sales revenue & earnings performance was primarily due to the recovery from the adverse global financial crisis in 1H09.
The 1H10 EPS soared to 10.96 sen (1Q: 4.14 sen & 2Q: 6.82 sen) from 2.74 sen (1Q: 0.39 sen & 2Q: 2.35 sen) in 1H09.
2) Summary of EPS since 1Q09 is as follows:-
1Q09 0.39 sen
2Q09 2.35 sen
3Q09 9.56 sen
4Q09 4.22 sen 16.55 sen
1Q10 4.14 sen
2Q10 6.82 sen
3Q10 ?
4Q10 ?
Per estimation/forecast by Dynaquest in view of the higher-than-expected 1H10, the following are forecasted:-
a) Full year EPS: 18.5 sen
b) DPS: 6.00 sen nett (CY09: 4.00 sen nett)
3) At the current price of RM1.35/share, TASCo is considered lowly valued based on the following commonly used yardsticks:-
a) Prospective PER: < 8x
b) Above average Dividend Yield: 4.44% nett
c) Only 0.67x its NTA of RM2.02/share as at 30/6/2010
Key developments for TASCO
TASCO Berhad expected to report Q3 2010 results on November 16, 2010. We envisage the results to be superlative.
Primary Symbol & Exchange: TASCO
5140 - Ordinary Shares - Malaysian Stock Exchange
Price/share @ 1/11/2010 RM:1.35
Mkt Cap RM’m : 135.00
Shares (m): 100.00
Par RM: 1.00
SECTOR CLASSIFICATION
MSEB: Trading/Services
Fox Capital: Transport-Logistic
Executive Chairman: Tan Sri Datuk Asmat bin Kamaludin
Managing Director: Lee Check Poh
KNOWN MAJOR SHAREHOLDER(S) (as at 14/04/2010)
Nippon Yusen Kabushiki Kaisha (direct & indirect interest) 61.32%
Tan Sri Datuk Asmat bin Kamaludin 37.23%
Lee Check Poh 9.83%
BACKGROUND
Tasco Berhad (TASCo), formerly Trans-Asia Shipping Corporation Berhad, is a Malaysia-based total logistics solutions provider. The Company offers logistics solutions covering air, sea and land transportation. It has categorized its services into international logistics solutions and domestic logistics solutions. International logistics solutions provide air freight services, sea freight services and buyer consolidation services. Domestic logistics solutions provides custom clearance, haulage transportation, warehousing services and warehouse inplant services, through forwarding division; car carrier and pre-delivery inspection, through auto logistics division, and domestic trucking and cross border trucking, through trucking division.
TASCo has nine subsidiaries, including Baik Sepakat Sdn Bhd, Tunas Cergas Logistik Sdn Bhd, Emulsi Teknik Sdn Bhd, TASCO Express Sdn Bhd and Maya Kekal Sdn Bhd, among others.
TASCo's domestic operation and global alliance with NYK (a Global Fortune 500 company which is listed on the Tokyo Stock Exchange, Osaka Securities Exchange and Nagoya Stock Exchange) has made it one of the largest total logistics solutions providers in Malaysia.
WHY WE FEEL TASCO IS UNDERVALUED?
1) For 1H10, the earnings of TASCo have jumped by threefold to RM10.96 million on the back of an almost 78% increase in sales revenue to RM203.37 million. The 1H10 sterling sales revenue & earnings performance was primarily due to the recovery from the adverse global financial crisis in 1H09.
The 1H10 EPS soared to 10.96 sen (1Q: 4.14 sen & 2Q: 6.82 sen) from 2.74 sen (1Q: 0.39 sen & 2Q: 2.35 sen) in 1H09.
2) Summary of EPS since 1Q09 is as follows:-
1Q09 0.39 sen
2Q09 2.35 sen
3Q09 9.56 sen
4Q09 4.22 sen 16.55 sen
1Q10 4.14 sen
2Q10 6.82 sen
3Q10 ?
4Q10 ?
Per estimation/forecast by Dynaquest in view of the higher-than-expected 1H10, the following are forecasted:-
a) Full year EPS: 18.5 sen
b) DPS: 6.00 sen nett (CY09: 4.00 sen nett)
3) At the current price of RM1.35/share, TASCo is considered lowly valued based on the following commonly used yardsticks:-
a) Prospective PER: < 8x
b) Above average Dividend Yield: 4.44% nett
c) Only 0.67x its NTA of RM2.02/share as at 30/6/2010
Key developments for TASCO
TASCO Berhad expected to report Q3 2010 results on November 16, 2010. We envisage the results to be superlative.
TSM proposing a one-for-one bonus issue
TSM GLOBAL BHD ("TSM") surged to a high of RM4.20/share in the morning session today after it proposed a one-for-one bonus issue.
At close of market, it was unchanged at RM3.93/share.
Although bonus issue is merely an accounting entry involving moving cash from "reserves" to "equity capital" in balance sheet of the company, it helps to improve liquidity and more importantly, it gives the "feel good effect" to its shareholders as a form of "reward to its shareholders".
Hence, its price has rose 22.8% from our initial recommended price of RM3.20/share.
We reiterate that investors may consider to take profit due to the steep rise in such a short period even though the fundamentals of this company is still intact.
At close of market, it was unchanged at RM3.93/share.
Although bonus issue is merely an accounting entry involving moving cash from "reserves" to "equity capital" in balance sheet of the company, it helps to improve liquidity and more importantly, it gives the "feel good effect" to its shareholders as a form of "reward to its shareholders".
Hence, its price has rose 22.8% from our initial recommended price of RM3.20/share.
We reiterate that investors may consider to take profit due to the steep rise in such a short period even though the fundamentals of this company is still intact.
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