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Jaks Resources

Author: DK66   |   Latest post: Mon, 11 Feb 2019, 12:56 AM

 

Jaks Resources - My opinion

Author:   |    Publish date:


Jaks Hai duong thermal power plant is not far from completion, but Jaks' share price is still lackluster after falling from RM1.84 since early 2018. Why?

There has been too many bad news surrounding the stock. 

  1. 3 fund raising exercises over the last 2 years with the most recent warrant rights undersubscribed by 68%, and disposal of properties to raise funds. Hence, perceived cash flow problems,
  2. The dispute with The Star where Jaks paid RM50m Bank Guaranteed performance sum,
  3. The delay in Pacific Star construction,
  4. The latest Q3 results in red due to continuing losses from property segment and the slow recognition of profit from Vietnam EPC,
  5. Mr. Koon completely disposed his 30% shareholdings in jaks due to margin calls, leading to share overhang,
  6. Huge portion of LTIP was awarded to the CEO by way of RSP (given free), leading to criticism and call for inquiry.

These factors have done great harm to Jaks causing its price to fall from RM1.84 to RM0.50. Investors fled from Jaks largely due to poor management factor.

 

The biggest fall in prices was seen during the warrant right issue exercise. Personally, I agree with the two articles written by David Tan which might correctly speculate what happened.

https://klse.i3investor.com/blogs/financialpedia/185815.jsp

https://klse.i3investor.com/blogs/financialpedia/186535.jsp

 

The most recent decision by the LTIP committee to award a huge portion of RSP was not well received too but it didn’t cause the share price to fall. Why?

I have commented in I3 that the timing of RSP is good for both the company and the employees. I repost the comment here;

"In June 2016, the EGM approved the 5 years LTIP, which may be extended for another 5 years, comprising of Share option and SGP (RSP and PSP). The later are given to employees for FREE, provided that the FREE portion shall not exceed 60% of the total allocation under the LTIP. The maximum number of shares to be allotted under the LTIP is 15% (not 30% as alleged by hng33) of share capital at any given point in time during the LTIP period.  

In May 2017, 24,500,000 shares were granted under the share option at RM1.40 exercise price. 12,000,000 of which were allotted to directors and has been exercised entirely.  

Accounting standard IFRS 2 requires an entity to recognise share-based payment transactions (such as granted shares, share options, or share appreciation rights) in its financial statements, including transactions with employees or other parties to be settled in cash, other assets, or equity instruments of the entity.  

Therefore, investors would have already factor in the potential charges to P&L from the LTIP as determined by the market price and the quantum of the grant.  

In this case, a very large portion of the LTIP was granted by way of RSP. Around RM19m (38m x RM0.51) will be charged to P&L in Q1 2019. The amount is not spread over a certain number of periods as all RSP are fully vested on 8 Feb 2019. This is an unusual practice as RSP usually has multiple vesting periods to encourage employees to stay longer. Why?  

Andy gets 2 out of 3 shares granted, and his family members probably get majority of the balance.  

I m not here to discuss ethical issues. Personally, I feel that the RSP has deviated from the purpose and intent of the LTIP which is to motivate “employees“ not bosses.  

Back to the point why now and in such hasty manner? The answer, of course, lies in the benefits of such doing.  

From the company’s stand point, it gets to charge off the entire RSP at around RM0.50 in one go. Otherwise, it needs to estimate the future value of the RSP which should be higher and apportion the higher charges over the vesting period causing lower profit in future financial reporting.  

From recipients’ (Andy and family) stand point, the RSP grants will attract personal tax based on the market value of the grants at the point of vesting. It is likely that the grants will be valued around RM0.50, hence much lower personal tax charges compared to early 2018 when the share price was around RM1.80. If the RSP has multiple vesting periods, the recipients will have to pay higher taxes for portions vested at higher market prices in future. Thus, higher personal taxes.  

Conclusion : The timing of the grant at current low price regime benefits the company in term of lower charges to P&L. It benefits the employees in the form of lower tax liabilities.  

Why has Andy decided to grant a very substantial portion of RSP with just 8 days SINGLE vesting period? ..... logical thinking … Is Andy expecting the share price to continue moving higher from hereon thus taking advantage of current low price to minimize his tax payments on his RSP? "

 

Jaks has been very dramatic since the emergence of a substantial shareholder, Mr. koon Yew Yin who has aggressively acquired over 30% control of the company in a very short period. Mr. Koon has vast experience in coal power plant and Jaks’ power plant was the sole reason of his investment in Jaks. However, when Jaks’ share price dropped, he was forced to sell out completely due to margin calls. This has created massive share overhang and the effect is still felt today. Mr. Koon cited huge debts, poor results, and poor management as reasons for exit. He opines that jaks will continue to report losses until the power plant commences operation.

Indeed, the only thing that is keeping investors interested in Jaks is its power plant in Vietnam.

While the Vietnam power plant could be a game changer for Jaks, lack of transparency and guidance from management is keeping the investors at bay.

I have provided some information on the power plant in my previous post “Understanding Jaks Hai duong thermal power plant in Vietnam”

https://klse.i3investor.com/blogs/Jaks%20resources/189891.jsp

However, there wasn’t enough data to answer the million dollars question; “How much profit can Jaks Hai Duong power plant contribute for the 25 years after the plant commences operation?”

 

So, to Buy or Not to Buy? Buy now or later?

My friend told me there is too much risk now and I should wait for more clarity before buying. A classic kind of advice we will get when we ask for opinion on an out-of-favor stock. 

At this juncture, the power plant in vietnam should be more than 50% completed, but Jaks is still only RM0.50+.

Jaks Hia Duong power plant. Picture taken in January 2019

Most retail investors are not capable of doing analysis by themselves. Their judgement normally follow the movement of the share price. That's herd mentality. Prices are often volatile, which means they are not likely to fully realise their investment potential and often caught in panic selling.

To be successful in investment, one must be confidence, must be patient, must not be afraid of volatility, must have a big heart for giant profit, and must not be afraid of losing money.

The management, maybe for tactical reason, has been very tight lips on the potential of the vietnam power plant. I hope after the exit of Mr Koon, conclusion of warrant exercise, and the grant of RSP, the insiders have taken the opportunity of fallen prices to secure their objectives. 

Recently, Management was proactive in providing "clarity" to investors through public media.

JAKS expects its profit growth in the next two years to be “very significant” as it recognises construction earnings from the engineering, procurement and construction (EPC) contract for its coal-fired thermal independent power plant project in Vietnam, according to the group’s chief financial officer Steven Ang Si Eeng.

http://www.theedgemarkets.com/article/jaks-anticipates-very-significant-profit-growth-next-two-years

Andy Ang Lam Poah has, in a recent interview with The Edge, mentioned that the entire Pacific Star project will be completed in June 2019 and will not engage in property development in near future. He also confirmed that the construction segment is doing well. The company is tendering for RM500m infrastructure works in Sarawak. The US$454m Vietnam EPC contract has contributed RM600m and RM140m revenue and profit respectively until Sept 2018.

https://www.youtube.com/watch?v=qC6x8XqPEdo

However, nothing was mentioned on the potential earnings of the power plant.

Without this piece of information, fundamental investors won't dare to touch it. Most, if not all, current financial ratios of the company are poor. You need some reliable data on the Vietnam power plant to build your case against the sell calls. So far, available information on the Vietnam power plant hinges on the structure of the concession. No information on the concession payment is available.

It will be a lot easier to just wait for the earnings from the power plant before making your decision, but you may miss the first few hundred percent returns.

 

For those who wish to BUY NOW, see if the following thoughts make business sense to you;

1,200MW Power plant costing RM8 billion is too big for a company the size of Jaks. It certainly requires very large capital and cash flow to bring the power plant online. Somehow, Jaks owns 30% and gets it off the ground with just RM200m initial capital outlay with balance capital requirements to be satisfied by the construction profit of the power plant. Chinese partner CPECC handles everything from construction to the cash flow management. It wasn’t a smooth journey for Jaks at all. Please read my previous post “Understanding Jaks Hai duong thermal power plant in Vietnam” to know why I said so.

A 1,200MW power plant can power up 1.2m homes satisfying the need of 6m people which is almost the population of Selangor state. At RM300 per household, it is a RM4.32billion per annum business! Definitely a big business to be reckoned with.

CPECC was willing to take full responsibility of the power plant project and let Jaks owns 30% now with option to purchase additional 10% at cost, all for just RM200m. The potential returns from the power plant must be very attractive to get CPECC interested to be a partner.

The loan tenure is 18 years and is non-recourse. Meaning the bankers cannot pursue against its borrowers should the loan defaults. The bankers must have examined the PPA to ensure that the project is profitable and able to generate sufficient cash flow to meet its loan obligations.

At present, all large-scale power plants projects in vietnam are undertaken by foreign entities. Vietnam could not have attracted so many multi billion global companies unless its terms are favorable and profitable. These projects require huge sum of capital and borrowings, the earnings must be very substantial to attract these multi-national companies.

At RM0.50 Jaks is worth less than RM300m, an amount CPECC certainly willing to pay to fully own the power plant. Jaks’ total investment in the power plant will eventually be around RM800m for 40% ownership for which Jaks only needs to pay half the sum.

Conclusion, all you need to know is that Jaks’ Hai Duong power plant is a huge project and its potential earnings must be very big. Otherwise, CPECC will not be interested. At RM0.50, Jaks is worth less than RM300m. Upon successful commencement of power plant operation, Jaks could be a potential 10 beggar investment! For now, Jaks is haunted by the property business but will be blessed with 25 years future earnings from the vietnam IPP.

As investors normally shy away from stocks which have fallen a lot, this article hopes to differential Jaks from the mass. Readers are advised to seek independent opinion before making decision. To BUY or NOT to BUY is entirely your own decision. Nothing is risk free.

 

Thanks for reading

DK66

 

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JAKS 0.555 +0.005 (0.91%) 9,545,900 

  4 people like this.
 
DK66 Sarifah, Icon8888 has done a good article on this already.

https://klse.i3investor.com/blogs/icon8888/185277.jsp

--------------------

SarifahSelinder DK66

As u noted...


For now, Jaks is haunted by the property busines...


So why don't u take the bull by the horns and buat analisis on wat maximum damage the property business can do on Jaks in d near future
11/02/2019 21:16
SarifahSelinder No jgn malas go do it
11/02/2019 21:16
SarifahSelinder It is not fully addressed sbb tu la masih haunted
11/02/2019 21:18
SarifahSelinder Lebih lebih lg now ada new information
11/02/2019 21:19
lizi fuiyoh, boss sudah order, just do it...lol

SarifahSelinder No jgn malas go do it
11/02/2019 21:16
11/02/2019 21:24
SarifahSelinder DK66 'yang go do it la 'yang

Property business tu perlu ada closure
11/02/2019 21:26
SarifahSelinder Perlu closure baru can move forward
11/02/2019 21:27
SarifahSelinder Emm... apa pulak.. mcm mana tu came out wrong a bit
11/02/2019 21:31
DK66 I scare nanti kena Tembak lagi tembak by Ks55
11/02/2019 21:31
SarifahSelinder x takut la 'yang we adopt polisi transparent
11/02/2019 21:32
SarifahSelinder Klau x closure hantu kak limah asik asik dtg balik munjur munjur lg
11/02/2019 21:34
david_tan DK66,

Thank you for referencing my articles in your write-up.

I do believe that Jaks is a counter with potential for a handsome return.
11/02/2019 21:37
SarifahSelinder Yg sekelian perlu bear in mind klau ada impairment tu pun jz one off

Lg lg taksiran Sarifah byk mesin mesin property bines boleh diambilalih construction business
11/02/2019 21:43
Icon8888 This world is full of people with negative energy

They are stifling

But we have no choice. God makes the world imperfect so as to train us to be stronger and kinder



Posted by DK66 > Feb 11, 2019 09:07 PM | Report Abuse

Icon8888, I don't mind listening to criticism so long as there are logical and sound. However, some just carry too much hatred and attack. Some getting personal. I didn't just came out from the sky and ask people to buy. I merely shared my research and knowledge. I lay down information and data so that readers can perform their own analysis and make their own decision.
11/02/2019 21:47
Icon8888 Mudajaya fails because of Indian factor

Nobody ever makes a sen from India

If like that also cannot understand, how to survive in stock market ?

That is why I said the old cynic has no feel
11/02/2019 21:52
Icon8888 If you have ever followed mudajaya’s project in India, you will know how much hell they have gone through due to bureaucracy. Indian government delay delay delay. One delay after another until mudajaya vomit blood

Vietnam so far has a much much better track record as far as foreign businesses are concerned.

If like that also don’t know better shut up loh
11/02/2019 21:56
SarifahSelinder Satu lg to bear in mind i con projected Vietnam IPP EPC ada lg on purata 163m profit for 12 mths
11/02/2019 21:57
deMusangking people with negative energy
WILL NEVER WIN!!!!!!!

so never mind the weather
as long as we are together
to see the wild west show!!

haha
11/02/2019 21:58
pang72 Musang, today I know you well!!
people with negative energy
WILL NEVER WIN!!!!!!!

so never mind the weather
as long as we are together
to see the wild west show
11/02/2019 22:01
Kukuman Yes. Please continue verbal fighting. Freedom of speech. Pleae lay bare all the facts and emotions.. Those with the most convincing of all win the cat over
11/02/2019 22:06
amet2017 Winner will get bonus shares
11/02/2019 22:21
KLCI Going Heaven amet will go to hell hahaha
11/02/2019 22:23
ks55 Blog: Jaks Resources - My opinion



Similarly KYY now forming new opinion on prospect of Jaks.
Why kiasu kiasi cannot take opinion of others if not aligned with theirs?

Scared newbies come to know they are misleading in order to profit from the ignorant ????????
12/02/2019 00:34
ks55 Stock: [JAKS]: JAKS RESOURCES BHD

Mar 7, 2018 10:29 AM | Report Abuse

Buying Jaks is easy.
Just keep on buying till 160m and you will jack up the price.

With average volume 3-4 million a day, you will need to be net seller for 40 market days at 4m each day.
Can you do it without depress its share price?

If you cannot run with F1 speed, can you beat Donald Duck tsunami 2018?
OPM really kill.
It kills all those greedy and daredevil, regardless you are big shark or small shrimp...........





Check how much was Jaks then.
Conmen were promoting non stop at that time, now lost all their pants.

They are coming out to cheat you again and again just like how they promote HYR in Dec 2017........

You should know who are the conmen I referred to...........
12/02/2019 00:41
ks55 Putting up articles after articles to lure you into their traps.

Not surprising they will again come out with few more articles to reinforce each other's believe so as to influence you to help support Jaks share price.
12/02/2019 00:46
ks55 Don't fall into booby traps set by the conmen.

Jaks is at best worth only 40 sen.

Which self enrichment scheme by Andy Ang, TP is further reduced to 20 sen by end of 2019.........
12/02/2019 00:50
Icon8888 LOL really packed full with negative energy

His entire universe is filled with conman , lies, tricks, etc
12/02/2019 05:40
DK66 I wonder if he will apologize to the readers here when Jaks becomes a star, or he will just disappear.

It is easy to blame everything on conmen and lies when you can't find anything to substantiate your negative views.
12/02/2019 09:16
Ricky Kiat Agree
12/02/2019 09:32
qqq3 perfect contrarian stock and every thing that has happened happened for a reason.....every thing makes sense.....

this is the kind of share can buy a lot and make a lot of money.....from 50 to now......and this is only the beginning......
12/02/2019 10:13
newbie8080 Correct me if I'm wrong, 1,200MW power plant can only power 10,000 homes only
---------------------------------------------------------------------------------------
A 1,200MW power plant can power up 1.2m homes satisfying the need of 6m people which is almost the population of Selangor state. At RM300 per household, it is a RM4.32billion per annum business! Definitely a big business to be reckoned with.
12/02/2019 11:43
DK66 Megawatt: One megawatt equals one million watts, or 1,000 kilowatts, roughly enough electricity for the instantaneous demand of 750 homes at once. That number fluctuates (some say one megawatt is enough for 1,000 homes) because electrical demand changes based on the season, the time of day, and other factors.
Megawatt - California Energy Commission
https://www.energy.ca.gov/glossary/ISO_GLOSSARY.PDF
12/02/2019 11:50
qqq3 https://www.google.com/search?q=average+household+consume+electricity&oq=average+household+consumption+of+electricity&aqs=chrome.5.69i57j0l5.26129j1j7&sourceid=chrome&ie=UTF-8

don't use California as average la.
12/02/2019 11:57
DK66 Based on 3500kwh per household per year, 1200MW can power 3m homes.
12/02/2019 12:08
qqq3 buy for good results also good enough reason to buy....> 75 sen....with better image, more clarity, > 75 sen is easy....
12/02/2019 12:14
newbie8080 https://minh.haduong.com/files/HaDuong.ea-2017-VEAM17presentation.pdf
13/02/2019 10:26
DK66 Jaks Hai Duong power plant is capable of producing over 8,000,000,000kwh of electricity per year. I suppose each of you can work out for yourself how many household it could supply for their power needs depending on your own estimates.
13/02/2019 10:59
newbie8080 Should be able to generate approximately USD680 mil worth of electricity annually for Vietnam scenario at 80% utilisation.
J@k$ holds 30% of the amount at this moment.
13/02/2019 12:46
Nicholasming91 Vietnam market is recovering so fast , definiteyly will be good for jaks
13/02/2019 12:51
qqq3 no one can call himself a contrarian without some Jaks......
13/02/2019 12:54
DK66 Yes, while this amount gives an idea of the size of Jaks Hai Duong power plant, it actually represents the potential revenue to be generated by EVN from Hai Duong plant. EVN will pay JHDP according to the PPA which includes capacity and Energy Charges.
13/02/2019 13:06
DK66 The Capacity Charge is a fixed payment that is paid each period for each kilowatt of available (not dispatched) capacity. It is payable regardless of plant utilisation. It includes fixed charges involved in the construction, operation, and maintenance of the power plant, including charges for: – Repayment of the principal and interest of the debt used to construct the facility – Return on equity capital invested – Fixed operation and maintenance (O&M) costs that are independent of the amount of energy generated (e.g., staffing costs, administrative expenses, operator fee, insurance premiums, etc.) – Possible fixed costs related to fuel supply and transportation, such as demand or through-put charges, or minimum take-or-pay obligations. It aims to reduce the investment risk of the operator and to increase earnings visibility to win approvals from bankers.

The Energy Charge is paid each period for each kilowatt hour of energy dispatched and delivered at the agreed delivery point during that period. It includes variable costs involved in the generation of the energy delivered, including charges for: – Commodity charges for each unit of fuel used, including the cost of fuel and its transportation to the plant – Variable operation and maintenance costs (e.g., spare parts, lubricants, and other consumables) – A major maintenance sinking fund to cover the costs of required turbine maintenance based on usage.

The Supplemental Charge covers other costs not included in either the Capacity or Energy Charges, including:
– The costs of start-ups beyond an agreed number each year reflecting the cost of fuel per start-up and likely a contribution to the major maintenance sinking fund
– The costs of ancillary services provided if such services are included in the scope of the PPA
– Any supplemental charges for repairing damage to the facility as a result of a Force Majeure event if such repair is the responsibility of buyer.
13/02/2019 13:25
Kukuman What for write long post. All forumers here are gambler. They just want hot tip when to buy and sell faster than the fart come out their arse
13/02/2019 14:26
DK66 I just hope there are some with longer views.

--------------------
Kukuman What for write long post. All forumers here are gambler. They just want hot tip when to buy and sell faster than the fart come out their ars
13/02/2019 14:42
Ron90 when this author still believing that uncle Koon sold all his stock due to margin call... i started to doubt his knowledge and intention.. its an open secret la, there are more than just margin call..and that one only idiots believe la.. WTF margin call excuse coz sale until zero share?? ..could be that Ang and famaily, together with that mamak penang already planning an exit strategy..get all the money while still can before letting this company down into the abyss, pn17 or for sale. ..anyway, price should go up la, so invest wisely..hehe
13/02/2019 23:27
DK66 Ron90, is it so important to you why Mr Koon sell out ? I merely took what he said on face value.
14/02/2019 09:16
DK66 Then, do you believe Mr koon has sold out completely and will never come back ?
14/02/2019 09:53
DK66 Why vietnam continued to opt for coal power ...........

Truong Duy Nghia, chairman of the Vietnam Thermal Science and Technology Association, said that the advantages of coal-fired thermal power is low investment cost of some US$1,500 per KWh and cheap sale price of about US$0.7 per KWh, which are lower than hydro, solar, wind and nuclear power.

In addition, Nghia said, coal-fired thermal power plants are capable of generating large amount of power and do not rely on natural factors as some other clean power sources.

Nguyen Minh Due, chairman of Vietnam Energy Science Council, said that many countries in the world have no tendency to develop coal-fired power anymore because it is out of potential and especially polluting the environment. Meanwhile, Vietnam still has to base on the power source as it is very difficult for the country to meet the energy security in the current context when nuclear power projects have been stopped while wind and solar power capacity is small and depends on weather conditions.

https://english.vietnamnet.vn/fms/business/207797/chinese-investments-flowing-in-vietnam-s-thermal-power-plants.html
14/02/2019 11:12
Jarklp ALP is a crook lah, why bother investing in his company? Look at how he rewards himself through LTIP. Nobody knows the details of the Vietnam project and the arrangements with the banks. KYY claimed that "it is too good to be true" (really?). The management's execution is poor judging from previous projects. You can expect more surprises along the way. You need a big heart for this stock.
19/02/2019 00:22
DK66 Jarklp, human are greedy and selfish. Put anyone in ALP's shoes will probably do the same thing. Why would ALP pay personal tax on the LTIP, if Jaks is unworthy?

There are 2 ways to find out Whether the Vietnam IPP is too good to be true. Either You wait for the results after it started to generate electricity or you use all means to research on the project and find out all you can.

If you are risk adverse, I reckon it is always safer to wait for the results.
19/02/2019 09:52


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