Highlights

JAKS Resources - A Bright Future Ahead

Author: Zyke42   |   Latest post: Tue, 1 Dec 2020, 4:25 PM

 

JAKS - A Great Long Term Choice

Author:   |    Publish date:


The infamous stock of the old times
As many people say, we must not put emotion and failure as a priority, as it will cloud our best judgements. Regardless of any outside influence, if the company fundamentals can improve, they can always turn from failure into growth. JAKS is a very good example of company, turning failure into a new beginning. Bad luck is just a delay of the of the positive inevitability.

Vietnam Power Plant


Jaks Hai Duong Power Plant (JHDP) which comprise of two 600MW units, which will bring generation of 1200MW, According to the rights issue. This plant will earn up to RM 300mil in annual profits over the span of 25 years, guaranteed. JAKS also has the option to increase the shareholding to 40% which will further increase the EPS of the share.

They are also candidates for our government's LSS Projects and at the same time searching for suitable locations for a third plant, which will bring much more expansion and growth in the coming future.

The Calculations:

I have always believed strongly and applied the FPE (Forward Price) Ratio.
It is very straightforward and clear cut to the most important question we all ask, which is, the Future Price.

Formula: No. of Shares / PAT =( EPS *4) * FPE (x)

1,755,000,000 No of Shares (Ex-Rights) / 73.5m (or 82.25m)

30% = RM981m x 30% = RM294m  / 4 (QR) = 73.5m

40% = RM981m x 40% = RM392m  / 4 (QR) = 82.25m

Taking into consideration:

30% Share:
FPE 10 - RM 1.68 (147.05%)
FPE 15 - Rm 2.51 (269.11%)

40% Share:
FPE 10 - RM 1.87 (175%)
FPE 15 - RM 2.81 (313.23%)

Assuming 30% safety of margin


FPE 10 - RM 1.68 x 70% = RM 1.176, which is compared to 68 cents (current price), JAKS still has a minimum upside potential of 72.94%.

 

Additional insights:

We can use MFCB as a comparison, their powerplant is located in Laos.

Whereas JAKS is in Hai Duong, Vietnam.

 

Whereas JAKS is in Hai Duong, Vietnam.

GDP wise:

Laos recorded an annual GDP of $17bn, with a growth of 6.2% as compared to Vietnam's which recorded an enormous GDP of $245.2bn, with a growth of  7.1%

This shows that Vietnam is growing at a faster rate and with higher GDP means that more infrastructure, business and overall upgrades on advancement of the country. As a country is progressing with fast development, more expansion and power is required which will be extremely beneficial to JAKS as their power plant will be fully utilize to 100% of their operation speed and capacity to meet with expectations and demands.

Vietnam is also a US favoured country, yet neutral towards the US-China Trade war. This means that Vietnam benefits from businesses around the world and many companies have started expanding their coverage to areas such as Vietnam, Thailand and Laos. Vietnam is also considered COVID-19 free due to their relatively small number of infection rate, which acts as a catalyst for maximum output and improvement of money flow as there is near to no usage of medical expenses to mitigate the pandemic.

As for Laos, it is one of the world's few remaining communist sates and one of East Asia's poorest countries. But despite economic reforms, the country is still heavily dependent on foreign aid. Most of their citizens live in rural areas with 80% working in agriculture, mostly growing rice. 

By comparing both countries, we can easily see that Vietnam is a much more favourable area for investors to expand their business as compared to Laos.

 

In conclusion :
JAKS would be much more favourable as compared to MFCB due to:

  • Jaks is current price undervalued, therefore providing greater chance for capital upside.
  • Vietnam is a high potential growth country with very hardworking citizens
  • MFCB's story has been repeated countlessly and have been valued correctly.
  • MFCB's plant is located in Laos, which is barren and does not bring much future growth

This is my first post, there might be slight inconsistencies towards any information I have provided. Constructive criticism is greatly appreciated.

Thank you.

 

Disclaimer : This is based upon personal opinion and is in no way meant to influence decision making . Final decision to buy/sell any shares is at your own discretion.

:diamond_shape_with_a_dot_insi

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Labels: JAKS

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Chart Stock Name Last Change Volume 
JAKS 0.675 +0.02 (3.05%) 17,461,100 

  9 people like this.
 
Musangfoxk1ng Do you consider the dilution of the warrants?
01/12/2020 5:21 PM
Sslee Do you consider the dilution of the free grant LTIP and the leakage from all other JAKS business?
02/12/2020 11:16 AM
Zyke42 No, this is just basic valuation of the power plant and its future prospects. The one off gain from disposal of its subsidiary also helps mitigate cashflow problems.
02/12/2020 11:42 AM
Sslee One off gain from disposal of JIC did not involved any cash flow just accounting gain but need to provide for write off of doubful debt.
02/12/2020 11:55 AM
Sslee By the way it do prevent JAKS accounting of 51% future loss in JIC
02/12/2020 11:59 AM
dannysky12 Thank you for sharing
03/12/2020 8:23 PM


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