Author: DoggieInvestor   |   Latest post: Thu, 29 Aug 2019, 6:37 PM


DRB-Hicom: Down 17% in 5 Trading Days

Author: DoggieInvestor   |  Publish date: Thu, 29 Aug 2019, 6:37 PM

In my earlier post on DRB-Hicom, i explained why the market had become overhyped on DRB-Hicom on ongoing Proton turnaround.


The share price had surged 50% from May to RM 2.95 historical high in a short span of 3 months. It is true that Proton turnaround is like a 99% likelihood event. But many investors forget the fact that DRB-Hicom is a large conglomerate with huge debt piles sitting on its balance sheet. Proton turnaround is already happening but it also takes time for traditional business like automobile manufacturing to show strong earnings growth. It also takes times to restore consumer confidence in its products. There is no doubt that DRB-Hicom will be worth a lot more once Proton regains its long-lost No.1 market share in Malaysia automobile market. 

However, investors must not forget the fact that global economy is in escalating trade war between the two largest economies in the world. Any decelerating growth rate will trigger a rippling effects across the global economy. 

Crude oil price has already declined to US$60 per barrel level, that is US$10 per barrel below Malaysia government fiscal budget. 

Any more negative macro news is going to put a dent Malaysia economic outlook, and hence affecting the automobile sales in the country. 

Investing is a very complicated game as there are simply too many variables involved that cannot be measured accurately using any mathematical formulae. 

Some sell side analysts raised their target price to above RM 4.00 level and immediately lower it back to RM 3.00 after seeing the sharp decline in share price over the past week. 

Well, predicting share price in the near-term is impossible. Maybe it is wiser to think longer-term. 



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PunTatBerSiul China (Geely)partnership may end.
29/08/2019 9:17 PM
Taehyung Too much dependent on Geely..
29/08/2019 9:25 PM
DoggieInvestor Geely invested 49.9% in Proton. how will the partnership end anytime soon>?
29/08/2019 10:41 PM

DRB-Hicom: Reaching 5-Year New High @ RM 2.84

Author: DoggieInvestor   |  Publish date: Mon, 19 Aug 2019, 7:18 PM

In my earlier post, i wrote about DRB-Hicom, with a focus on Proton turnaround. 

Few weeks have past, many local investment analysts have all upgraded their target price with the highest TP @ RM 4.00 and above. 

According to management discussions with the investment community, Proton's automobile sales market share has reached 14%+, slightly lagging behind Honda in Malaysia. 30 years ago, Proton once had a market share of well above 40%. I believe everyone has already seen the aesthetically designed Proton X70 on the road. The CKD model of X50 will be made available for sales in 2020. 

By now, it finally becomes very clear to every investors in Malaysia that DRB-Hicom will finally turnaround, thanks to its JV with Geely. Proton also signed an Intellectual Property sharing agreement with Geely for Proton to leverage on Geely's automobile manufacturing technology for its Proton production line in Shah Alam. Geely, being the largest, majority owned by Chinese automaker in China, is undoubtedly has pretty efficient automobile manufacturing technology. Not to mention that Geely is also the front-runner in launching their first Full Electric Vehicle model in China. 

There is little doubt that DRB-Hicom's share price will continue to do well going forward. But do note that Bank Mualamat's CEO had recently resigned and Bank Mualamat accounts for ~30% of DRB-Hicom RNAV. 

Despite Proton's turnaround is already a done deal. Investors are also snapping up DRB-Hicom shares in anticipation of huge increase in earnings from Proton's contribution going forward. Bank Mualamat will remain an overhang for DRB-Hicom overall Group's performance and Net Asset Value. 

Some sell-side analysts valued DRB's 50.1% stake in Proton at a paltry RM 450m - RM 500m. They had been all proven WRONG. By raising their TP to RM 4.00, the implied valuation on Proton has gone up from RM 500m to RM 1,500 million; we factor in 30% RNAV discount on DRB-Hicom as it is a very large conglomerate. 

Automobile company usually trades at 10x forward P/E. Market has already factored in a RM 150m net earnings from Proton's 50.1% stake. This is saying that Proton will make RM 300 million in the foreseable future. 

Assuming Proton has a Net Margin of 7%, Proton needs to achieve RM 4.3 billion of sales per annum. If the ex-factory price of a X70 is RM 110,000 (pure guessing here), Proton needs to sell 39,000 units of X70 every year. While it is not unachievable in our view, we do believe the market expectation is definitely on the high side. Malaysia's automobile market is 600,000 units a year. To sell 39,000 units of X70 means ONE single model accounts for 6.5% market share. We believe it's achievable but not sustainable in the long run. 

Anyway, good news have been priced in. Our humble opinion. 

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POS Malaysia CEO Interview with The Edge Malaysia

Author: DoggieInvestor   |  Publish date: Thu, 1 Aug 2019, 11:32 AM


Special Report: Three years to deliver Pos Malaysia turnaround



This is a very interesting article everyone who invests in POS Malaysia must read. The CEO has been hiding behind his CEO office since he took over in October 2018. 10 months on, he finally broke his silence and lays out his restructuring plan for POS Malaysia. 

According to the article from The Edge Malaysia, POS Malaysia has 530k parcels processing and delivery capacity in Malaysia today. POS Laju (the courier service) is processing and delivering 500k parcels a day. It is a well-known fact that e-commerce penetration will only keep going up over the next 3 - 5 years. The CEO is targeting to increase their courier services daily processing capacity to 1 million a day, once their digitalisation upgrades completes by Mid-2020. 

Many investors would take his statements negatively towards the share price given that he only expect POS Malaysia to turn profitable by 2021. Do note that he also mentioned that POS Malaysia has already embarking on a transformation plan since last year by upgrading its IT system to digitalise every process and the new system will be ready by mid-2020, which is 10 - 12 months away. 

If you have even studied the meteoric rise of China Logistics Industry since early 2010's, you would know for a fact that losing money for any logistics company in the early days is a very POSITIVE signal. Building up logistics network not only requiring CAPEX investment into more warehouses, distribution centers, it also requires the company to expand their workforce to cater to rising parcels delivery volume. There is no way you can grow your logistics business and at the same time not losing money. 

SF Express is one of the largest courier delivery company in China. The company now owns a fleet of airplane to help shorten the delivery time. During its aggressive expansion period by buying many airplanes to facilitate its parcel delivery business 5-10 years ago, the company barely make decent profit margin. If you study the history of FedEX and DHL, both companies went through the painful process of invest first, make money later process. 

When DHL founder came out with his brilliant business idea of setting up premium courier delivery services, his idea was laughed by many business school professors. 50 years later, DHL founder has the last laugh. 

Let me tell you why i think POS Malaysia is so valuable. It is impossible for any of its 100+ courier services competitors to replicate POS Malaysia's extensive distribution network in Malaysia. 

POS Laju has 78 offices across Malaysia. POS Malaysia, the dwindling traditional mail services has over 700 postal offices in Malaysia. Assuming the 700 postal offices cost RM 1 million each to build a new one, and the 78 POS Laju offices costs RM 2 million each to build a new one. The total CAPEX requires to build up an extensive coverage network would be RM 856 million. 

POS Malaysia has 23,000 workforce natinowide. Assuming POS Malaysia pays them RM 1,500 a month, your annual salary for these 23,000 hardworking delivery staff would be RM 414 million. Just imagine you have RM 2 billion in your bank account and you want to invest all of it into building a logistics services provider to serve the largest e-commerce platforms in Malaysia. First year, you would need to spend RM 856 million in CAPEX and spend another RM 414 million to hire employees to run the operation. Then you are left with RM 700 million to pay for other IT system, or cloud computing based logistics monitoring system. Of all the basic necessities i mentioned above, i have not included the two sorting centers POS Malaysia already has. One in Shah Alam and another one in KLIA 2. Are you able to purchase another piece of land to build sorting centre in KLIA 2???

To replicate POS Malaysia delivery business, it takes billions of Ringgits to do it. 

No doubt POS Malaysia had many troubling past since 2011. But, bear in mind that POS Malaysia Market Capitalisation is only RM 1.3 billion. 

All financials are very bad. No doubt about it. What is not reflected in the financial statements is the economic moats POS Malaysia business has built over 100 years period. 

US Postal Services is one of the largest delivery service provider to Amazon. If that model can be replicated in Malaysia, i can't see why POS Malaysia will not be the biggest e-coomerce delivery service provider in Malaysia in the long run. 

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DRB-Hicom - Reaching an Inflection Point?

Author: DoggieInvestor   |  Publish date: Tue, 30 Jul 2019, 2:43 PM

Many may not realize that DRB-Hicom share price has surged over 200% in the last 3 years. In July-2016, DRB-Hicom's share price hit a bottom of RM 0.86 and today it is back to RM 2.63, an increase of 200% in 3-year, a compounded annual return of 45%. DRB-Hicom should be one of the best performing stocks on Bursa Malaysia. 

DRB is a big conglomerate in Malaysia. Its businesses emcompass financial services, automobile assembly and manufacturing (Proton), and also a substantial stake in POS Malaysia. 

Below is the segmental breakdown of DRB-Hicom Quarterly Results for 4Q19 ending 31st March 2019. 

What is interesting to note is that Automotive Segment Revenue grew 30.6% YoY, mainly fuelled by strong Proton X70 sales. According to the company Presentation Deck, Proton delivered 14,000 units of X70 in 4QFY19. The average Retail Selling Price (RSP) of X70 is about RM 120,000. Assuming auto dealer takes a 10% cut form the RSP, Revenue from X70 sales in 1QFY19 amounted to RM 1.5bn, or about 73% of DRB-Hicom Automotive revenue. 


There are already a lot of speculation that Proton will launch a new model, X50, within the price range of RM 90k, to compete with Honda HR-V and Mazda CX 3. In case you don't know, Geely China, the largest domestic automaker in China, owns a 49.9% stake in Proton. The X50 model will use Geely China BinYue model. If you go to China social media, WeChat or Weibo, you will see China YouTubers test driving BinYue model on the road. BinYue model is equipped with Level 2 ADAS. The car will automatically push the brake for the driver when the sensors detect obstable in front. It also features Lane Departure Warning System to sound the alarm to the driver when the car veers off its lane. 

There is even more bargains for the BinYue customer. Geely's cars use Baidu Map, which also has voice command function to navigate on the road, using your voice, and keeping your eyes on the road. If you ever visit a Proton showroom, X70 also comes with a free 4G sim card, embedded in the car, giving you 1GB of free data every month to listen to FREE Cloud Music platform. 

Geely has brought a whole lots of new automobile technology to Proton. If you monitor China autonomous driving technology, you will know that sooner or later, our car will be equipped with a super computer that drives by itself. 

Baidu has already made many announcements with China domestic auto makers to bring their Apollo self-driving technology to automakers in the foreseable future. 

It will not be long until we see Proton's Car drive by super computer on the road, in Malaysia. 

Bad news is that Global Automakers are pretty much pessimistic about 2H19 global auto sales. That's pretty much due to the on-going trade spat between the world's largest economies. 

If history is any good guide into the future, global economy will always grow in the long run. It may not be the best time to buy DRB Hicom, given that the stock has gone up 200% in the last 3 years. What is clear to us now is that Proton is going back to its glory days in the near future. 

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michaelwong So how can you you proof your points beyond doubts where certain stocks like G3 stock price has shoot beyond an imaginary doubts where there's no strong signed to support its near fundermentals growth as compared to DRB ?
30/07/2019 11:35 PM
ChoCho in stock market, write based on hindsight won't make money. Please analyse foresight instead.
31/07/2019 12:28 AM
DoggieInvestor just go and check Geely annual car sales volume in China in the last 10 years. Proton X70 is using Geely technology and Geely acquired Volvo back in 2010. I don't like to give stock recommendation. I believe investors should learn enough and make their own decision. It's quite clear from DRB Hicom PPT deck that they are expecting a strong turnaround at Proton by end of 2019. That's why the share price surged >50% YTD. If you bother to visit any Proton 4S shops in Malaysia, you will learn so much more than the average sell side analysts are writing in the reports, which is simply converting financial numbers into texts.
31/07/2019 1:28 AM
DoggieInvestor @michaelwong: Good Investors make the most money from the market when they see through how a business will evolve and progress into the longest possible predictable path. If you can't see the fundamentals improvements of Proton business, it's either i am wrong or you couldn't see what i see.

Sell-side analysts have been mostly bearish on DRB Hicom in the last 3 years and yet the stock is up 200% in the last 3 years.
31/07/2019 1:32 AM
DoggieInvestor Technical Analysis is an very old tool.....people used it before the great depression in 1929.
01/08/2019 10:49 AM
DoggieInvestor DRB-Hicom -> RM2.80
19/08/2019 7:04 PM

POS Malaysia - Tariff Hike in the Making???

Author: DoggieInvestor   |  Publish date: Tue, 30 Jul 2019, 1:20 PM

POS Malaysia, being a household brand in Malaysia for the longest time, has suffered from declining mail volume as almost everything is going digital. Today, we no longer open our mailbox everyday since our banks will send us the monthly statements all in digital format. 

With the rise of internet, we live our everyday life pretty much on internet. We go into office desk, we open our email, we extract work documents from our office PC, and we conduct our work on internet for the next 8 hours. Tell me if you know any jobs today doesn't need to use internet for the good 8 hours. 

Declining mail volume is an inevitable trend. Just like how fixed line telephone has been going through since the rise of SMS some 20 years ago and now the cheap 4G mobile data that propels our daily communications all on internet. 

That being said, do you know that POS Malaysia has over 700 postal offices across Malaysia? Yes, it's over 700 of them. Some of them are too small in a small town and it is operated by the villager. If you want to deliver a courier, you may not choose POS Malaysia, as there are a few alternative out there such as GDEX, City-Link, TNT Malaysia and many other smaller players. 

However, none of the courier service providers has an as extensive network as POS Malaysia. 

e-Commerce penetration in Malaysia currently stands at 5% in 2018, according to various estimates. Do bear in mind that there is no way to track the "REAL e-Commerce" penetration rate as you simply can't track C2C transaction on Facebook and other platforms. 5% penetration is a very low number if you compare that to South Korea and China, which have above 20% of e-commerce penetration in total retail sales. On top of that, the 20% e-commerce penetration also does not take into account of various business activities conducting online such as Uber, Grab, Grab Food and etc. 

The potential of 3rd Party Logistics industry in Malaysia is humongous. Just take a quick look at China. SF Express it the largest delivery company in China with a market value of RMB 160bn (US$23bn). And SF Express is not the only big player in China. There are JD Logistics, YuanTong, ShenTong, ZhongTong and YunDa logistics. If you add up the combined market value, it's in the hundreds of Billions in RMB. 

Yes, China's GDP is about 40x of Malaysia. Theoretically, the logistics industry should also be much more smaller as compared with China. Remeber Malaysia e-Commerce penetration is only 5% while China is already well above 20%. A quick and dirty calculation would lead one to conclude that China logistics industry, right now, is at least 160x larger than Malaysia. 

Today, POS Malaysia's market value is a mere RM 1.35bn, or RMB 2.25bn, a fraction of the China 3rd Party Logistics Companies combined market value. 

If history is any good guide towards the future of 3rd Party Logistics industry in Malaysia, it's not hard to imagine that logistc service indsutry in Malaysia is set to grow many folds over the next 5-10 years. As long as consumer continues to go to e-commerce platforms like Lazada, Shopee to buy products. 

If rising e-commerce penetration is an inevitable trend, i believe POS Malaysia will eventually be the biggest player in Malaysia. Simply because the company already owns the widest coverage of Point of Distribution. Its unit cost is going to be the lowest in the country, once the business is managed diligently. 

Tariff hike or not, to me, is not an important factor. For sure, a tariff hike would give POS Malaysia more profits to fund the growth of new logistic services in Malaysia. In the long run, i firmly believe that it is very difficult for its competitors to build up an extensive logistics network like POS Malaysia. The intangible assets POS Malaysia has, is simply too expensive to replicate. 

We shall see...........

Labels: POS
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speakup nobody sends letters anymore. sunset industry
30/07/2019 10:09 PM
shareinvestor88 Land bank , postal bank , e commerce
30/07/2019 11:18 PM
DoggieInvestor POS Laju is one of the biggest e-commerce logistics providers in Malaysia !
31/07/2019 1:28 AM

Media Prima - A Sunset Industry????

Author: DoggieInvestor   |  Publish date: Tue, 30 Jul 2019, 12:38 PM

We live in a very different world today as compared with 10 years ago whereby Malaysia internet broadband speed is crawling slowly, testing our patience to watch videos online. Since 2018, broadband speed in Malaysia has improved quite signficantly as the biggest internet broadband provider - Telekom Malaysia - aggressively cutting prices and increase the internet speed for its customers. 

Against this backdrop, there are never-ending talks about the Death of Free-to-Air (FTA) TV. It is particularly true in Malaysia given that Nielsen data showed that Malaysia ADEX has been on a down trend in the last 5-6 years. News reporters have had this rhetoric of FOREVER declining ADEX on traditional FTA networks. It is true that Media Prima, along with other traditional newspapers publishers in Malaysia are not able to counter the digitalisation trend. 

However, i believe many market observers are forgetting a very simple fact in the media industry. Let me explain this as simple as i can. 

First of all, Netflix is no doubt the global online video streaming platform. For RM 33 a month, you get to watch all sorts of drama, movies, documentary, variety shows. Assuming you do not need to work, you won't be able to watch even 1% of the video contents on Netflix. There are simply way too many contents on Netflix platform. 

Netflix's share price has gone up fro $16 in Sept-2011 to currently $330, up 20x in a short span of 8 years. Why is the share price performed so well in the past decade? 

If you read some of the investment banks research reports online, you would realize that those professional stock analysts are valuing Netflix not simply based on the 150m active subscribers that they have, but also valuing the intangible values from Netflix's content creation. Netflix spends at least US$12bn - US$15bn a year in producing contents. That number makes Netflix the world's largest Studio. To give you some perspective, filming Avengers End Game costs about US$356m and the Movie is a global phenomenon that raked in US$2.7bn in box office. 

So, Netflix's annual budget for content creation (US$15bn) is equivalent to creating 41 Avengers End Game. Assuming these 41 versions of Avengers End Game would each rake in US$2.7bn in box office, that translates to US$110.7bn in gross revenue from the 41 Avengers End Game. 

Of course, in reality, there isn't 41 Stan Lees to create 41 great movie of all times like the Avengers Series. The point i would like to make here is that content creation is the linchpin of all video broadcasting platforms, be it FTA networks, Cable TV or online video streaming services. 

Media Prima owns the top 3 most popular TV Channels in Malaysia, TV3, NTV 7, 8TV, and viewers in Malaysia will never subsitute these three TV channels for alternative, simply because there is no alternative local video contents providers. 

Even if you look at the meteoric rises of Facebook, Google and Youtube in U.S. internet in the past decade, major news outlets such as CNN, CNBC, Fox News, never get displaced. Their top News Hosts are still making tens of millions in salary every year. 

If you read enough news articles on internet, you would have known that Media Prima is the largest digital platform in Malaysia, surpassing Facebook and Google by a tad. Yes, Media Prima is the largest because it owns way too many digital platforms in Malaysia. In aggregate, its number of active users is higher than Google's platforms and Facebook. 

Anyway, i don't believe that FTA TV will disappear over the next 5 - 10 years. On the contrary, i believe traditional media outlets will benefit greatly from the digitalisation of media contents. Simply because internet allows media company to better target their audience with their customers' favourite contents. Meanwhile, advertisers are also able to maximize their profit from limited Ads budget. It's actually a win-win situation for everyone. 

The question is, does the traditional media top management willing to bear the brunt of losing more money in the short-term, eyeing for bigger gains in the long run???

Labels: MEDIA
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speakup nowdays ppl watch youtube, not RTM not TV3 not NTV7
30/07/2019 10:09 PM
DoggieInvestor FTA TV in Malaysia is going Digital in 3Q19. MYTV has distributed 2mil digital set-top box. NTV 7, 8TV may one day become Video on Demand and appears in your TV screen.
31/07/2019 1:30 AM

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