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Sit On Your Ass Investing

Author: Mohamad Jeffrey Ismail   |   Latest post: Sun, 5 Mar 2017, 11:10 PM

 

Stock pick : Mikro MSC Berhad

Author:   |    Publish date:


 

Business overview

 

Mikromb is a small cap ACE listed company involve in designs, manufactures and sells Intelligent Electronic Devices (IEDs) which act to monitor and provide protection in electrical power systems. Its major products are protective relays, which prevent the electrical system from being damaged in the case of a sudden surge of current or a damaged cable. Their products are widely used locally including public infrastucture buildings, universities, shopping malls, as well internationally such as Bahrain F1 circuit, Singapore MRT and many more.

 

Mikromb close competitor are Mun Hean and Delab, both are also local player in this industry. Therefore, competition does arrise in terms of product quality and pricing. Yet Mikromb had managed to get over 50% market share, indicating its strong and leading position in the industry. 

 

Outlook

 

Mikromb planned to move their operation to new place, where they expect to ramp up production up to 5 times of their current capacity. Therefore, the company expansion mode in terms of production capacity and addition of more new products are expected to bring more fruits in near future. Meantime, Mikromb also looking to grow its overseas market due to slowing of demand from local market. 

 

Valuation

 

Mikromb is in growing phase of its life cylce. Therefore, I will assuming it to grow its revenue at 15% per year in supergrowth period and subsequently reduced to 5% as reaching to year 10. After that, the company will grow its revenue at 3% over its lifetime. 

 

Reinvestment rate = expected growth / ROC

 

Currently company has ROC of 20%, this translate to RR of 75% in supergrowth period and 12% RR in stable period, assuming its ROC will improve to 25%. I believe the company will get more profitable as it reach matured stable growth stage. For discount rate, I will go for 10% composed of 3.5% risk free rate and 6.5% risk premium.

 

My DCF is then computed as below :

 

 

From above calculation, I estimate Mikromb should worth around RM0.95 per share. Given current price of RM0.72/share, Mikromb is undervalued around 24%. Using reverse DCF, at current price, market expect the company to grow at 9%.

 

Bonus Issue

 

Recently, board director announced that they plan to issue bonus shares subject to shaeholder approval on next month's EGM. The bonus shares will be on basis of 2 shares on every 5 existing shares.

 

 

I would like to buy Mikromb for its i) Reliable management  ii) Strong financial, and iii) Foreseeable prospects.

 

 

Thank you and happy investing.

 

 

Jeff.

 

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Labels: MIKROMB

Related Stocks

Chart Stock Name Last Change Volume 
MIKROMB 0.44 +0.005 (1.15%) 1,452,200 

  3 people like this.
 
diehardunited All investors in i3, be careful. This stock is heading south. Selling will get intense. Fundamentally good for TP: 92sen, but why want to buy at expensive now while you can get at bargain around 67sen later!
20/06/2017 06:56
diehardunited Id rather promote this bullish stock, PUC Founder, so that all i3 investors can benefit! It is all the way bullish for now!

https://klse.i3investor.com/blogs/glorystocks/125733.jsp
20/06/2017 06:57
37forms @Mohamamad Jeffrey Ismail

The statement "brand like Schneider Electric and Siemens" was misleading. If you want to know what brands are acceptable in the local market. Please refer to JKR/Emal list as following : https://jmal.jkr.gov.my/emalv3/index.php?r=LBarang/adminutama&id=EE03120

Delab & Mun Hean are the close competitors. For Government related agencies project, non-Emal material approved list will not be accepted for construction material.
20/06/2017 07:20
Mohamad Jeffrey Ismail Thank you for correct my fact Yangstyle10forms.
20/06/2017 07:55
37forms @ Mohd Jeffry

You are welcome. I'm also still learning, paiseh paiseh. Second corrective statement "Its major products are protective relays, which prevent the electrical system from being damaged in the case of a sudden surge of current or a damaged cable."

Protection relays are for tripping of power source due to current leakages not over current, refer here https://en.wikipedia.org/wiki/Protective_relay.

The devices that protect over current are called circuit breakers, refer here https://en.wikipedia.org/wiki/Circuit_breaker

There are different type of circuit breakers ranging from MCB, MCCB, ACB etc.
20/06/2017 10:23
Mohamad Jeffrey Ismail Thank you for bring my attention again yangstyle10forms. It is interesting to discuss any misleading fact.

According to the wiki links about protective relay given above, there is said,
"An overcurrent relay is a type of protective relay which operates when the load current exceeds a pickup value."

Next, refer to their website, they products are the over current relay, earth fault relay, etc, which mostly are of protective relay.

They are designed to monitor and prevent damage to electrical equipment by isolating and tripping a circuit breaker when an electrical fault is detected, in the process allowing unaffected parts of the electrical system to continue to operate.
http://www.itmikro.com.my/Contents/view/9

I am not from electrical engineering background person, therefore I do not have specific information about these related things. But from what I read and understand, relay is a sensing device which is connected to power circuit and when any parameter of circuit crosses safe limits, it sends signal to the circuit breaker to break the circuit, while circuit breaker is the device that makes the circuit open/breaks when it receives the signal from relay. Some circuit breaker has its own sensing device.

I think it is clear now that Mikromb products are mainly protective relay, not circuit breaker.
http://www.itmikro.com.my/Contents/view/10
20/06/2017 17:53
37forms @Mohamad Jeffrey

"I think it is clear now that Mikromb products are mainly protective relay, not circuit breaker.
http://www.itmikro.com.my/Contents/view/10" - this statement is correct.

Protection relay is used to trip current leakages to prevent electrocution. Most of the time the current setting limit is very low.

"Its major products are protective relays, which prevent the electrical system from being damaged in the case of a sudden surge of current or a damaged cable" - this statement is not so correct in my opinion.

Sudden surge / damaged cable is term as over current = when current running in cable exceed the selected cable size / circuit breaker size. The over current protection normally is the function of the circuit breaker.

I'm also not an electrical engineer , I just listen to my friends story telling whenever I'm meeting them.
28/06/2017 15:28
Isaac320 http://www.differencebetween.com/difference-between-relay-and-vs-circuit-breaker/
google has the answer.
01/08/2017 19:12


 

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