Last Train ......

This will be the last time I post something on Jaya Tiasa until it goes to RM13.00 cum basis or RM4.50 on an ex-basis. Naturally Jaya Tiasa is on a 15 year high, and naturally investors are loathed to buy at current levels. So, you have to do your own research and decide. 

To me, this is the easiest, no-brainer, for an easy 50% within a short period of time. Possibly the best recommended stock in my 6 years of blogging.


You already have the convincing comparison to Rimbunan Sawit. Now, lets compare to another very attractive counter, IJM Plantations.

IJM Plantations is a 55%-owned subsidiary of IJM Corporation. The principal activities of the group are the cultivation of oil palm, investment holding and provision of management services to its subsidiaries. The group had planted area of 30,528 hectares, of which 77% was matured. It presently owns and operates 11 oil palm estates, complemented by four palm oil mills.
IJM Plantations' market cap is RM2.65bn. Jaya Tiasa's at RM2.7bn. Jaya Tiasa has 5 mills.

IJM Plant 3 most recent quarters saw net profit hitting RM150.4m. If we just add another RM55m for the last quarter = full year should be RM205.4m. Jaya Tiasa is slated to make RM240m in 2012. 
240/205.4 = 1.17
1.17 x 2.65  = RM3.09bn
RM3.09 / 2.7 = 1.14 x 9.56 = RM10.90
Jaya Tiasa has a base valuation at RM10.90.
 
If you look at the plantation hectarage, IJM Plant's 30,528ha compared to Jaya Tiasa's 61,000ha. If you use that, Jaya Tiasa's valuation should be doubled that of IJM Plant alone. Mind you, that is on hectarage of palm oil, not even counting the 700,000ha of timber concessions under Jaya Tiasa. Of course Jaya Tiasa's plants are a lot more youthful, but it only takes another 3-4 years to catch up.

So, 2.65 x 2 = RM5.3bn
RM5.3bn / 2.7 = 1.96 x 9.56 = RM18.70

The figure RM18.70 is just on palm oil alone. We did not calculate the timber concessions which is almost 10x the size of Singapore.

Naturally, you seem to have to hit people on their heads to see the gross under valuation. A share will re-rate on a gradual basis, not overnight. As mentioned before, the recently announced exercised is single most important catalyst that will bring up the valuation of Jaya Tiasa. With sufficient liquidity, comes proper valuation.

Then again, there are many friends who would suggest 5 other palm oil counters to me when I said Jaya Tiasa. You know, the TDMs, Kretams, etc ... They are all good, but none will have the upside of Jaya Tiasa.
 
For a sustained run in a small to mid-sized palm oil counter, you need:

a) Capital - for clearing, planting and also acquisition of more plantation land (who do you think wins this, with the 15% new share placement, Jaya Tiasa will be raising almost RM400m cash)

b) Land Acquisition Strategy - There should be a prolonged plantation land acquisition strategy. Again, which small-mid sized company you think has a huge leg up on the rest? Its the Tiong family we are talking about

c) Strategy To Be #1? - Most small mid sized counters are caged in that category as they do not have the "vision", leadership or ability to take the company to be the top 3 players in the industry. Knowing Tiong for how he does business, the deliberate way the family went about moving into palm oil, do you think they will stop at 70,000ha?
 
NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. I may already have positions in the above mentioned counter. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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Something's Brewing In Notion Vtec

OK, the Nasdaq has gone to an 11 year high. More localised news, the Thailand floods wreaked havoc on the HDD and related components supply chain. While this blog picked it up at 50 sen, JCY's current price and dramatic change in fortunes seems implausible 2 months back.



If you look at the recovery in Notion Vtec, it was OK but nowhere as spectacular as some of the rest in the same industry. There is still a lot of unknowns and uncertainty as to who are the real winners and losers from the Thailand floods.





While JCY did not see any of their factories affected, and they benefited from strong additional clients. I think some investors still think Notion Vtec came off from the floods worse than before. Management has guided analysts that 1Q2012 will see revenue declining 40% q-on-q. However, there are strong newsflow from the industry that Notion Vtec actually benefited significantly from the floods as well. Apparently their Thai factory which was affected only contributed a small portion of revenue.



If one were to dig deeper, fortuitously, they have excess capacity in Klang, and it appears that they have ramped up production there owing to the fact that they have secured 3 new big clients owing to the redirection of logistic supply chain away from the affected areas in Thailand.


Some are hinting that profits and revenue are even higher now than their results prior to the floods. If that is going to be the case, then the share price should be closer to RM2.40-2.50 and not dawdling below RM2.00.



Notion Vtec mother share price and volume:

03/02/2012	1.97	1.91 - 1.97	1.91	-0.06 (3.05%)	506,800
02/02/2012	1.96	1.94 - 1.99	1.97	+0.01 (0.51%)	175,800
31/01/2012	1.94	1.92 - 2.03	1.96	+0.02 (1.03%)	1,654,800
30/01/2012	1.84	1.82 - 1.94	1.94	+0.10 (5.43%)	890,800
27/01/2012	1.83	1.80 - 1.84	1.84	+0.01 (0.55%)	270,000
26/01/2012	1.82	1.82 - 1.86	1.83	+0.01 (0.55%)	305,300
25/01/2012	1.85	1.82 - 1.86	1.82	-0.03 (1.62%)	189,300
20/01/2012	1.84	1.84 - 1.85	1.85	+0.01 (0.54%)	45,000
19/01/2012	1.86	1.83 - 1.86	1.84	-0.02 (1.08%)	93,100

However, if you want to spot something brewing, the sharp uptick in the warrants and volume as well over the past few days may indicate some substantive good news or corporate developments to follow soon.




NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. I may already have shares in the above mentioned stock/s. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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Understanding Hibiscus

Some investors are still in a maze with regards to Hibiscus. Yes, you have the oilfields now, but don't you still have to get some oil? I approached the company with as much cynicism as the next guy. I have met the top 3 management team and grilled them, looked over their decision making process and the oilfields they ended up with - I came away feeling optimistic. 



They have parlayed their expertise, and basically partnered with a much sought after group (who have recently ventured on their own - they actually created a unique way of locating "decent oilfields" by way of analysing gravity and matter in the prevailing seabed). Did you know that the sea levels are not the same all over the world? 


Thats because the gravity differs, in India it could be 30m-50m higher than somewhere else. The scientist team deciphered that that can be traced to the the kind of seabed underneath which gives rise to "potential for locating oil resources"). Their technology was highly sought after and they sold their company, but was barred from doing similar work till now, so they are striking out on their own. The fact that Hibiscus team got to work with them was a stroke of confluence of events, they needed the funding and oil price was weaker in the first half of 2011.



Hence you can say their jv with Lime was a pretty good move. There will be three catalysts coming for the stock:
1) the upcoming acquisition of anoedther significant oilfield
2) the listing of Lime on London exchange, which in effect allows buyers of Hibiscus to be in the position of pre-IPO investors at a good price, likely to be done sometime June 2012
3) actually striking oil, which I think is highly  likely than not base don the available data and pre-selection process by the Lime group (the Lime group had their pick of whichever oil fields they wanted based on their reputation and technology expertise in the past)


That is why I think, as some who know more about what they are doing, Hibiscus is a pretty good thing. I keep seeing initial big shareholders loading up more shares and the entry of a couple of significant new shareholders as well from Singapore. Suffice to say, I am pretty confident that the share should be closer RM1.00 by year end, just based on the above fundamentals.


Hibiscus : Adding some zest    (RHB Research)                                                                                                    
Visit Note 
-          Hibiscus announced its “qualifying acquisition” (QA) involving a 35% equity stake in an early-stage exploration company called Lime Petroleum with three assets in the UAE and Oman for a total cash consideration of US$55m (or RM172.1m). The proposal – subject to approvals from Securities Commission and shareholders (excluding management’s 20%) – is expected to be completed by 1HCY12. 
-          After the QA is approved, we believe Hibiscus’ higher risk profile comes with potential significant upside arising from the development of Lime’s estimated 200.7mmboe risked recoverable resources. Other than E&P risks, other risks include: 1) Rex’s (Lime’s originator for the Middle East assets) proprietary exploration technology is commercially unproven; and 2) Lime’s funding for its work plan is sufficient only for FY12. 

-          We estimate Hibiscus’ 35% stake could be worth RM1.01-1.33/share based on the successful 50% commercialisation of resources from the four wells to be drilled in 2012 work programme and the implied NAV/boe range of US$4.9-6.5/boe. This implies 33.2-76.1% upside to Hibiscus’ current share price. 
-          Hibiscus’ proposed QA is exciting on two counts: 1) the significant risked resources identified relative to the size of the company; and 2) the relatively inexpensive entry cost into the assets vs. its potential value (based on NAV/boe). There are also the potential upsides from new concessions to be acquired in the future, including the Fujairah block in 2012. 
 
NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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JCY, Every Dog Has Its Day In The Sun

I am serious, I was writing about JCY at 10am, still gathering information and the stock is running as I write. So I have to be very quick on this. Sometimes you can be so bad, or your price is so bad, that you can be good for a while. The stock should be running based on two major factors:



a) Privatisation - If you remember their IPO price, it has lost more than RM1.10-1.20 from its IPO levels. VCs have been knocking on their doors, especially over the last few weeks as the Euro crisis hit its peak bringing JCY to below 40 sen albeit briefly.

 HDD players valuations as follows:

Notion at 1.3x P/B;

Dufu at 0.5x; and

JCY at 1.3x P/B.

Historical M&As for HDD Component Manufacturers
Acquiree		Acquirer		Date		USD (m)		P/B
Unisteel		KKR		Jun-08		785.0		6.1
Seksun		Supernova		Oct-07		295.0		2.1
Magnecomp		TDK		Aug-07		166.0		1.8
Amtek		CVC		May-07		353.0		1.7
MMI		KKR		Apr-07		666.0		4.0
Brilliant		Nidec		Nov-06		195.0		1.9
							Avg	2.9

The Notion deal was scuttled as owners were rightly asking for a better valuation. The average done deal was 2.9x P/B although most were done prior to the subprime implosion. However, profits are profits. Notion had a strong case as its not a pure HDD player anymore, with better margins coming from their camera business and a strong link up to Nikon. Naturally, JCY has the right size to be an attraction to big VC players in HK.


A privatisation deal could be easily agreed as the controlling shareholders has 74% (YKY).


b) Supply chain disruption - This has more credence. I had been asking around for the past few hours and the Thailand flood situation is very bad. At first, most thought that it was a minor thing and any interruption would be temporary. As you dig deeper, you will find that the situation is quite bad. In fact, anecdotal comments has it that the situation was a lot worse for HDD players operating there than the impact from the nuclear/tsunami in Japan.


I am very shocked that no analyst had grabbed onto the situation and analyse further. The worst affected is Western Digital. This is critical as the affected supply of HDD is enormous. Apparently early estimates had it that Western Digital will be writing off RM6bn-RM8bn from the Thailand situation.


Put it in a more meaningful context: a huge portion of the production of HDD is located in the very area worst hit by the floods in Thailand. Industry sources indicated that at least 30%-35% of the GLOBAL PRODUCTION of HDD has been halted ... I will give you 10 seconds to re-read the last sentence again.


As with the headline, JCY's Thai operations was not affected, in fact, they now have ample spare capacity to take up some of the slack. Players have indicated that customers are now "scrambling madly" for their orders to continue at premium prices. JCY is a prime beneficiary.



Notion's Thai factory is affected but thankfully its Klang operations has some spare capacity plus their camera side is still doing well. Eng is badly hit, insurance does not cover profits lost.


c) Circumstantial positives - JCY should start to benefit from a gradual improvement in volume from its two major customers ... wait for it, yes its Seagate and Western Digital. Western Digital's recent merger with HGST and Seagate's merger with Samsung actually now propels JCY onto the "gap to be filled". JCY's teething problems with their Guangdong now looks to be a huge blessing for JCY.


d) Out of the Loop - Look at the factors surrounding JCY ... its a totally different element when you look around you: Euro-crisis, China slowing, ECB stalling, Fed not knowing what to say, Malaysia GE13, etc... JCY is in the "zone" as they say, untouchable (for now..lol).





Look at the chart, the stock has not seen daylight ... ever. The recent whack down from 55 sen to below 40 sen was thanks to the Euro situation. Even the Thailand floods did NOT see any strong buying .... TILL TODAY. I guess I am not the only one digging deep enough. 60 sen-66 sen seems easy.



NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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Boon Koon Should Be On Investors Watch List

The aftermath following the Budget. In short, its expected and is an election budget. We still did not have a good plan to reduce the deficit appreciably over the next couple of years. The growth estimates were quite overly bullish. Back to the markets, in low volume days, it is easier to spot stocks making a move. Boon Koon falls into that category. 





Boon Koon Group Berhad (BKG) is an investment holding company engaged in the provision of management services. BKG operates in four business segments. The commercial vehicles and bodyworks segment is engaged in the manufacturing and trading of rebuilt, reconditioned and new commercial vehicles, and the manufacture of bodyworks and their related services. 


The insurance and financing segment acts as an insurance agent and is engaged in the provision of hire purchase financing and its related services. The rental and fleet management services segment is engaged in the rental of commercial vehicles, provision of fleet management and other related services. The others segment is engaged in investment holding and the provision of management services. 


On May 22, 2008, BKG acquired additional interest in BK Fleet Management Sdn. Bhd. (BKFM), which increased its interest in BKFM from 70% to 89%. On February 4, 2009, BKG acquired the remaining 49% interest in BK Continentals Vehicles Sdn. Bhd.< They are one of the select few to be making positive net profits and higher q-on-q for the past 4 quarters. 3Q2010 RM327,000 / 4Q2010 RM653,000 / 1Q2011 RM1,029,000 / 2Q2011 RM1,779,000.








Its about to break its 4 month high and going past the 40 sen would see 44 sen as the resistance, which would still see the company decently valued.


NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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Papa Said There Will Be Times Like These

Some have written to say why no updates ... markets like these what to write home la ... Nothing good to say, say nothing la. One thing is clear, its very difficult for markets to rise but when they fall, its very quick indeed. All I can say is that the sharper and faster the falls, the more pressure is put on EU to come up with a thorough solution. Till now, much of it have been band-aid types.

Following on before when I said EU will not let Greece default, well, now after thinking through, I think it will be best to let Greece default. However, before they do that, they MUST do a backstop for other troubled nations like Italy, Portugal, Spain ... You know that when Greece defaults, the contagion effects will paralyse the markets even more ... I am sure the EU knows that. Hence a super fund must be established to soak up all the next in line PIIGS sovereign bonds, provide sufficient funds to stave off any potential bank runs in PIIGS.


Currently the EU has set aside only 440bn euros to do that. Maybe enough for Greece but not the contagion effects. The rescue fund would now have to morph into a US TARP like fund, whereby in the event Greece defaults, the PIIGS can tap the fund to soothe fears.


Greece will have to be allowed to default because the political scene is not encouraging to push through the needed austerity measures. By means of a default, it just means allowing the country to negotiate a huge haircut on outstanding bonds and loans. Most creditors took a small haircut already but obviously the repayment is still way too large, we should be looking at 60 cents to the dollar - only by lowering Greece outstanding would that come to some sort of workability.


A US style TARP for EU should be in the region of 1.5 trillion euros. Its now not a matter of how much resources you want to commit, its a matter of restoring confidence. Confidence can be bought but not in drips and trickle, it has to do with perception. Hence the TARP fund must be sizable, whether you end up using it is another issue.

The bear is growling very loudly, but thankfully for Asia and much of Latin America, its only in share prices and not (yet) into the real economy. We should be grateful and thankful that we are seeing a full blown global market correction but not devastatingly affected. However, we need to consider why we are not affected, LUCK? Are we doing things properly enough to minimise the next correction? What if the correction was in China?


As a small country, we are at the mercy of global and regional markets. All the more reason that we need to shore up our finances and reinvest properly. We all know that leakages and wastage in Malaysia over the past 30 years, if properly invested in people and industry, would have put us at least just beneath HK and Singapore. We are lucky enough that DESPITE the wastages and leakages, we are still around, dropping but still around.  How much longer can we still do that?

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Very Good Proposal By Bank Negara

There is apparently a proposal by Bank Negara to change the way mortgages are calculated, which will greatly reduce the amount the public can borrow. The computation is supposed to be based on net income and not gross. That could reduce the amount that can be borrowed by 37%.





I think its an excellent idea. The only people who think this is bollocks are those with 2 properties or more. The affordability ratio has gone through the roof. Some may argue that a hike in real property gains tax would be a better move - I think not as it takes more than lesser profits to calm the property markets.


Property rides on expectations. If everyone expects prices to rise in the foreseeable future, its get in now or forever they will be out of your reach. That is the dangerous potion brewing in Malaysia and many Asian property markets. That kind of expectation has be neutered.


When you take things too high, the fall be greater, remember 1993-1997, the swath of liquidity just kept getting bigger and bigger. Just remember that when liquidity is sucked out of the system, you get a corresponding deflating effect, in multiplier effect.


Why property prices needed to be eased down? A survey done by The Edge on housing affordability saw property prices increasing from 5.9x income in 1989 to 10.9x in 2010. Left unchecked, it will soon climb to 15x your annual income.


 


The Global Property Scam


 A massive transfer of income to the very rich has occurred while middle class real incomes stagnated. The middle classes only tolerated this because Central Bankers created housing booms to keep the impoverished middle classes borrowing and spending to give them the illusion of prosperity and stop them from revolting.

How do you do that? You do that by keeping interest rates very low, keep printing money, keep the system very liquid - some have gone to equities but by and large the biggest beneficiaries have been property markets throughout most of the world. Yes, you see obvious bubbles in Singapore, HK, parts of China, Canada, Australia and even certain places in Malaysia. We thank our lucky stars that our property markets did not go through the same correction as the major developed nations - but is that because we did not have a massive contraction in liquidity brought on by a financial scare?

How is this scam hurtful? Well, you propel property prices higher and higher with low interest rates and excess liquidity. It serves to fan the flames of property prices higher, causing a bull run for the prices, causing people to chase and get some action before its too late.
Its never a zero sum game. Much of the froth in pushing prices higher has to be in much much bigger mortgages that people are taking to participate in the run. As long as the public can pay down their mortgages, you won't see foreclosures or a major correction. You and I know that prices have basically gone out of reach of the young and working.



We must applaud Zeti to have the foresight and strategic thinking to tackle this before it gets out of hand. Property owners may sigh and bitch but seriously, there is a price for everything - imagine the price of sugar and flour rising 10x, putting them out of reach of at least half the population. Nothing good can come from that.


Its not that property prices cannot be rising, they are actually a critical wealth builder and saving device for many families. Ask most people, all they are looking for is a few percentage gain a year over the longer term - when its nearly double digits every year for a few years, you know something is out of whack.


While we cannot stop people punting and chasing for homes to buy, we can at least address the amount of leverage they get. If Malaysia's average credit card debt per household gets to the RM80,000 or RM100,000 level, you cannot tell me that is not a problem. Why is it when its property loans, its your business only and not the government?

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Flamengo 5 - Santos 4, What A Match!

Is this a genuine posting or just an excuse to feature Zhou Weitong again? Who cares? The match was brilliant. You can see the new blue yeyed boy of football Neymar doing his stuff scoring two goals for Santos. But you can spot the devious trick by Neymar when he comes in from the flank into the box - he will suddenly jibe into the box to trigger a foul to earn penalties. If you look at the run path of Neymar and the defenders in slow-mo, you can clearly see that its a good trick.



Ronaldhino showed that he is not over the whole hill yet. His free kick which gave Flamego the 4th goal was intelligent and well executed. ... and hey, Zhou Weitong also plays football in the mud!!!

RIO DE JANEIRO, July 28 — Ronaldinho scored a hat-trick as Flamengo overcame a three-goal deficit to beat South American champions Santos 5-4 away in an extraordinary Brazilian championship match.

The former Barcelona and AC Milan forward, leading scorer in the championship with eight goals, netted the equaliser and an 82nd minute winner as Flamengo fought back after Santos had raced to a 3-0 lead in 26 minutes.

Borges scored two goals for the hosts before Brazil’s teenage forward Neymar weaved his way past four markers to add a brilliant third in Wednesday’s match.

Flamengo pulled one back when Ronaldinho opened his account, taking advantage of a slip by Santos goalkeeper Rafael to score from close range, then Thiago Neves notched another for the visitors.

Brazil midfielder Elano missed a penalty for Santos before Deivid headed Flamengo’s equaliser from a corner, all before the end of the first half.

The drama continued after the break as Neymar put Santos back in front, before Ronaldinho took command, equalising with a free kick which went under the wall, then scoring the winner with an angled shot.

Flamengo are third on 24 points from 12 games, four behind leaders Corinthians. — Reuters

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