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Author: dollardollarbill   |   Latest post: Sat, 6 Feb 2021, 8:48 PM

 

ASIA FILE CORP BHD (7129) – well positioned to ride on the takeaway and food delivery tidal wave [$$bill]

Author: dollardollarbill   |  Publish date: Sat, 6 Feb 2021, 8:48 PM


ASIA FILE CORP BHD (7129) – well positioned to ride on the takeaway and food delivery tidal wave
 
Share price: RM2.22
Market cap: RM432mil
Shares outstanding: 194.76mil
 
 
1. F&B takeaway packaging – the growth driver and share price catalyst
 
 
Even before Covid-19 came about, food delivery services was already a growing sector.
 
However, due to Covid-19, the growth of takeaway and delivered meals have accelerated even more.
 
Malaysians have become accustomed to this new normal and this trend should continue to grow.
 
This phenomenon has led to a surge in the use of takeaway food packaging.
 
One publicly listed company that is benefitting from this new normal is Asia File, which ventured into takeaway food packaging not too long ago.
 
Most people I’ve spoken to are still unaware that Asia File started a business in takeaway food packaging. As such, I believe Asia File’s share price has not fully priced in the potential of this business.
 
The takeaway food packaging of Asia File is marketed under the ABBAware brand (www.abbaware.com)
 
 
 
 
A simple Google search for ABBAware shows these products are also being sold by distributors on online platforms including Shopee and Lazada. The products appear to be gaining popularity.
 
Interestingly, Asia File had for the first time disclosed this segment in its 2Q FYE Mar 2021 (called Consumer & Food Wares) as part as of its quarterly reporting.
 
The growth figures appear promising, albeit from a small base.
 
For the six months ended 30 Sep 2020, operating profit grew 144% y-o-y to RM1.8mil while revenue grew 98% y-o-y to RM10.0mil.
 
 
 
In its financial notes, Asia File had this to say about its food packaging business:
 
“The recyclable food ware segment has, however, shown a spike in demand with the rising popularity in food take away and delivery.”
 
“Our recyclable food ware products have also received positive responses as demand for takeaway food packaging went up considerably.”
 
Asia File also sounds like it's getting ready to go big into food packaging; this is what the company said in its FY20 annual report:
 
“In recognising the needs for the Group to go beyond its traditional filing business and to provide a healthy capital base for future expansion and diversification, the Group plans to conserve cash to take advantage of potential investment opportunities.”
 
Asia File seems more than well positioned to capitalise on the burgeoning food packaging sector as it will be able to leverage on its high net cash position of RM247mil – which is equivalent to 57% of its market cap!
 
 
2. Extremely undervalued = high margin of safety
 
(A) As of 30 Sep 2020, Asia File had cash of RM269.8mil against borrowings of RM22.7mil, translating into net cash position of about RM247mil.
 
(B) Asia File has an effective 20.03% stake (61,087,500 shares) worth about RM200mil in Muda Holdings Bhd (share price RM3.27).
 
Net cash + 20% stake in Muda = (A) + (B) = RM447mil (or RM2.33 per share)
 
Given Asia File’s market cap of RM432mil, buying the stock is akin to buying the company for FREE! (you pay RM432mil and get RM447mil).
 
Asia File’s strong net cash position is a result of its strong and consistent cash flow generation from its filing business.
 
 
 
3. Foreign investor gobbling up a hidden jewel
 
The attractiveness and potential of Asia File had caught the eye of Fidelity Investments, one of the world's largest asset management companies.
 
 
 
 
Fidelity has been actively accumulating the stock since it emerged as a substantial shareholder in Mar 2018.
 
Fidelity currently owns about 12.7mil shares or a 6.5% stake.
 
Asia File’s latest annual report shows three Fidelity funds among Top 30 shareholders, namely: Fidelity Series Intrinsic Opportunities, Fidelity Global Intrinsic Value and Fidelity Low-Priced Stock.
 
Seasoned investors may also notice some notable names among the Top 30 shareholders list.
 
 
Join my Telegram channel for random updates @worthystocks 
 
 
Disclaimer: All information here reflects the author’s personal views/thoughts and should not be considered as investment advice. It is very important to do your own analysis before making any investment based on your own personal circumstances. No content here constitutes - or should be understood as constituting - a recommendation to enter in any securities transactions.
 
#ASIAFLE
 
 

 

Labels: ASIAFLE

The MOST UNDERVALUED Malaysian bank could be UNLOCKING more than RM1BIL from its CROWN JEWEL [$$bill]

Author: dollardollarbill   |  Publish date: Fri, 4 Dec 2020, 3:50 PM


The most undervalued Malaysian bank could be unlocking more than RM1bil from its crown jewel

 

 

Affin Bank (5185) is looking to list its 63%-owned Affin Hwang Asset Management Bhd (AHAM), according to recent news. Affin Bank is said to be currently working with advisers on the listing.

 

This unlocking of value could be a near-term catalyst for Affin Bank (the most undervalued Malaysian bank, trading at about 0.3x P/BV).

 

The value to be unlocked will be the current value of AHAM minus the price that Affin Bank paid for it. 

 

Affin Bank purchased AHAM for RM282mil in 2014.

 

What could be the current value of AHAM?

 

Asset management companies are generally valued at market cap to asset under management (AUM), better known as price-to-AUM (P/AUM).

 

So, one way to gauge the value of AHAM is to look at its AUM, which is currently about RM67bil (as at 31 Oct 2020).

 

Let’s gauge…

 

If AHAM is valued at 4% of its RM67bil AUM, it could have a value of RM2.68bil. Affin Bank’s 63% stake would then be worth about RM1.69bil. Affin Bank would then be unlocking RM1.41bil (RM1.69bil value minus RM282mil cost), which is equivalent to 68 sen per share or 41% of its share price/market cap.

 

Affin Bank's current share price and market cap is RM1.64 and RM3.41bil respectively.

 

In Jan 2018, CIMB Group divested some of its stake in CIMB-Principal Asset Management and CIMB-Principal Islamic Asset Management at a valuation of about 4% of AUM.

 

Value Partners Group Ltd (0806 HK), a Hong Kong-listed asset management group is trading at a market cap of US$981mil vs. its AUM of US$11.6bil (as of 30 Sep 2020), or 8.5% of its AUM.

 

Value Partners was co-founded by Penang-born Cheah Cheng Hye, known as the “Warren Buffett of Asia" and who also ranks #30 on Forbes Malaysia's 50 Richest 2020 list.

 

AHAM has their own version of Cheah Cheng Hye. That person is Teng Chee Wai, the founder of AHAM, who has grown the company's AUM from RM20mil in 2001 to over RM67bil today.

 

Among Malaysian asset management companies, AHAM is famous for being the “crème de la crème” in the industry. Hence, I believe AHAM should be able to fetch a premium valuation.

 

Imagine if AHAM is valued at 8% of its AUM; the value that will be unlocked by Affin Bank would be RM3.1bil or 91% of its market cap!

 

 

Join my Telegram channel for random updates @worthystocks 

https://t.me/worthystocks

 

 

Disclaimer: All information here reflects the author’s personal views/thoughts and should not be considered as investment advice. 

 

 

#AFFIN

 

 

#AFFIN

 

Focus Point (0157) update – Bonus issue and newly launched hot selling FamilyMart confection [$$bill]

Author: dollardollarbill   |  Publish date: Mon, 30 Nov 2020, 11:17 PM


This is an update to my first Focus Point post (click here to view).

 

There is a saying that good things come in pairs. For me, it was two positive events that happened today evening.

 

Bonus issue – creating bullish market sentiment

 

The first was the announcement of the proposed 1 for 2 bonus issue. This was a pleasant surprise as it was just in July last year that a 1 for 3 bonus issue was proposed (and completed in Sep 2019).

 

As most would know, bonus issues usually create positive investor sentiment towards the stock.

 

Macarons – another hot selling goody

 

The second positive event for me today was the discovery that FamilyMart’s newly launched Macarons are made by Focus Point’s 100%-owned Multiple Reward Sdn Bhd and that the macarons sells out very quickly everyday.

 

I went to three FamilyMarts today morning to get my hands on the macarons. But to my surprise they were all sold out at three outlets.

 

When I asked a staff, I was told that the macarons have been selling out fast from the first day it was launched. I was advised by the staff to return around 6pm when the second batch of supply arrives.

 

 

 

After finally getting my hands on the macarons, my suspicion that it was made by Focus Point was confirmed. The label stated that it was manufactured by Multiple Reward Sdn Bhd.

 


 

Zooming in:

 

 

 



 

 

The macarons are priced at RM11.90 for a box of three. 

 

On FamilyMart’s social media, comments about the macarons are positive. Check out their instagram about the macarons at https://www.instagram.com/p/CIFA1keH_k_/

 

 


 

I’m glad to find out that the macarons have so quickly become another hot selling item.

 

A number of hot selling confections made by FocusP are also on the shelves of FamilyMart, such as Hanjuku Cheese, Cheese Pudding, Mochi Puff, Cream Puff, etc.

 

The future shines bright for both FocusP and FamilyMart.  

 

Join my Telegram channel for random updates @worthystocks 

https://t.me/worthystocks

 

#FOCUSP

 

Disclaimer: All information here reflects the author’s personal views/thoughts and should not be considered as investment advice. 

 

 

 

Focus Point (0157) – A strong recovery stock riding on the success of FamilyMart and MORE [$$bill]

Author: dollardollarbill   |  Publish date: Thu, 26 Nov 2020, 12:07 AM


 

Most people think Focus Point (FocusP) is a boring stock with an optical business. They’re wrong…

 

FocusP is the next F&B growth stock to keep an eye on.

 

FocusP F&B business can be categorised into two divisions:

1. Komugi bakery outlets

2. Komugi corporate sales

 

Investors need to focus on Komugi corporate sales division as this will be the growth driver.  

 

 

FocusP struck gold after its Komugi central kitchen was certified Halal in Jan 2018. Since then, it has scored big with corporate customers like FamilyMart. And there will be more big corporate customers soon once the new central kitchen starts in Dec 2020.

 

Many are unaware that several hot selling delicious goodies on FamilyMart’s shelves are made and supplied by Komugi.

 

 

 

 

 

Just check the label and you will see that they are manufactured by Multiple Reward Sdn Bhd (which is 100% owned by Focus Point).

 

 

 

 

Sales to FamilyMart have been surging. Sales per month is now RM1.2mil (vs. RM300k a year ago). Sales to FamilyMart is expected to reach about RM2mil per month in 1Q2021.

 

Sales will continue to grow as FamilyMart rolls out more Komugi products to more of its stores.

 

FamilyMart currently has around 200 stores in Malaysia (the opening of the first store in Penang in July 2020 marked the 200th outlet).

 

QL Resources, which owns FamilyMart, targets to open 300 outlets by 2022 and is eyeing for 1,000 outlets by 2025.

 

Just imagine the amount of sales FocusP would generate when FamilyMart has 1,000 outlets...

 

New central kitchen - the earnings kicker

 

The first Komugi central kitchen (CK1) can generate about RM2mil sales per month or RM24mil a year.

 

A new central kitchen (CK2) next to the existing one is scheduled to start operating next month in Dec 2020. CK2 can generate sales of RM4mil a month or RM48mil a year.

 

FocusP probably built CK2 knowing the capacity will be fully taken up by its new corporate customers.

 

An article by The Edge last week said FocusP recently signed a supply agreement with a major café chain. FocusP is also in talks with a Japanese retailer and a convenience store chain in Singapore.

 

CK1 + CK2 = RM72mil sales a year. Assuming 11% net profit margin, that’s about RM8mil net profit a year.

 

 

Optical division – steady pom pi pi

 

Focus Point is Malaysia's leading optical player. The optical division posted profit before tax of about RM14mil in 2019 (vs. RM11mil in 2018). I would safely assume this division to generate RM10mil net profit a year with decent growth.

 

 

The market for eyewear and contact lenses will probably grow as nearsightedness (myopia) is rising fast due to increasing digital screen time (computers, smart phones & tablets).

 

Nearly 50% of the world’s population is projected to be affected by myopia in 2050! (https://www.healio.com/news/ophthalmology/20201124/increasing-myopia-a-growing-public-health-concern).

 

Conclusion

 

(A) CK1 + CK2 could contribute RM8mil net profit

(B) Optical segment could contribute RM10mil net profit

(C) Komugi bakeries and other businesses - RM2mil net profit.

 

(A) + (B) + (C) totals to an annual net profit of RM20mil, which I’m assuming to happen in FY22 (to be conservative). The stock market is forward looking, so it could be as early as 1Q21 when FocusP stock reflects its future earnings of FY22.

 

If we peg a 18x PE (justifiable given strong growth prospects from F&B), FocusP could potentially be trading at a market cap of RM360mil or RM1.64 per share (about 140% upside to the current share price of 68.5 sen).

 

I believe FocusP will see a strong rerating once more investors find out about Komugi's relationship with FamilyMart, as well as the growth from new corporate customers. 

 

FocusP just announced a stellar set of 3Q20 results with a net profit of RM5.35mil (annualized RM21.4mil).  

 

4Q20 should be even stronger because 4Q is seasonally the strongest quarter for FocusP.

 

Join my Telegram channel for random updates @worthystocks 

https://t.me/worthystocks

 

#FOCUSP

 

Disclaimer: All information here reflects the author’s personal views/thoughts and should not be considered as investment advice. 

 

 

 

Labels: FOCUSP

KPS (5843) - The MOST UNDERVALUED EMS play

Author: dollardollarbill   |  Publish date: Tue, 27 Oct 2020, 2:30 PM


 

KPS (5843) - The most Undervalued EMS play 

 

 

Click link to enlarge above image: 

https://klse.i3investor.com/files/my/blog/img/bl6282_kps_5843__the_most_undervalued_ems_playpage001.jpg

 

Toyoplas and CPI full year revenue and net profit:

 

PDF file available on Telegram channel:

 

Join my Telegram channel for random updates @worthystocks 

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#KPS

Labels: KPS

KPS (5843) - A RM1bil EMS company in disguise [$$bill]

Author: dollardollarbill   |  Publish date: Tue, 20 Oct 2020, 1:49 PM


KPS (stock code: 5843) - A RM1bil [EMS] company in disguise? [$$bill dollardollarbill]

 

 

Kumpulan Perangsang Selangor (KPS)

 

The recent water cuts made me revisit Kumpulan Perangsang Selangor (KPS) since it once owned 30% of Syarikat Pengeluar Air Sungai Selangor (SPLASH) and currently owns Aqua-Flo and Smartpipe Technology which sells goods to Air Selangor (see pg. 278 of 2019 annual report).

 

Many expect KPS to benefit from Air Selangor now that the government should become very serious about tackling water issues (water pipe leakages, pollution, etc.) in Klang Valley, given how furious the public has become.

 

But water is not my purpose for writing this post. There’s way more value to KPS than that…

 

During my research, I found out that KPS is actually more into manufacturing, in particular plastic injection moulding/EMS like SKP, VS, ATA IMS, HIL and Luster.

 

I believe KPS makes a good proxy to plastic injection moulding/EMS players which have been quite bullish (see stock charts at bottom).

 

I discovered that KPS is actually attractively undervalued as a plastic injection moulding/EMS proxy and here’s why:

 

KPS has two 100%-owned integrated plastic injection moulding/EMS companies:

1. Toyoplas Manufacturing (Malaysia) Sdn Bhd - acquired in Aug 2019

2. CPI (Penang) Sdn Bhd  - acquired in Mar 2018

 

 

To know the net profit of these 2 companies, we need to dig deeper in the annual report.

 

Toyoplas recorded revenue of RM398.2mil and net profit of RM38.1mil (net profit margin 9.6%) in 2019 (pg. 195 of 2019 annual report).

 

CPI recorded revenue of RM169.3mil and net profit of RM26.8mil (NP margin 15.8%) in 2018 (pg. 201 of 2019 annual report).

 

When CPI was acquired, there was a net profit guarantee of RM25mil in 2018, and RM26mil in 2019. In 2019, CPI registered revenue of RM180.4mil. Although net profit was not openly disclosed, I believe 2019 net profit should be about RM27.0mil (assuming 15% NP margin, and considering the profit guarantee).

 

So in total, 2019 net profit of Toyoplas and CPI should be about RM38.1mil + RM27.0mil = RM65.1mil (12 sen EPS).

 

If we peg a P/E multiple of 15x to that RM65mil net profit, it will give KPS a market cap value of RM975mil. With shares outstanding of 537.4 mil, that translates to about RM1.80 per share! If we peg 20x P/E, it is about RM2.40 per share! How undervalued is KPS with its shares now trading at 75 sen? Current market cap is just RM403mil.

 

Just based on the net profits of Toyoplas and CPI, KPS is currently trading at only 6x P/E.

 

Compare this to the P/E of some plastic injection moulding stocks, taken from a CIMB analyst report dated 14 Oct 2020:

 

 

VS, ATA IMS and SKP are trading at current year P/E of more than 20x, and forward P/E of about 17x on average.

 

I think it’s fair to say that Toyoplas and CPI can recover and grow their earnings in 2021. This is expected from the likes of VS, ATA IMS, etc.

 

Another plus point is Toyoplas and CPI has high profit margins when compared to its peers.

 

KPS has made it well known that there will be synergies between Toyoplas and CPI. The plan is for the two companies to leverage on each other’s expertise, resulting in higher operational efficiency from economies of scale and integration. This would result in better capacity utilisation and ultimately higher revenue, as stated in their annual report.

 

Source: Annual Report 2019

 

It is worthy to note that in addition to CPI and Toyoplas, KPS has other good income generating businesses like 100%-owned Century Bond (RM201.7mil revenue), 60%-owned King Koil Manufacturing West (RM75.1mil revenue), 60%-owned King Koil Licensing Company (RM36.3mil revenue) and 51%-owned Aqua-Flo (RM117.4mil) and 51%-owned KPS-HCM (RM48.1mil).

 

Balance sheet wise, KPS gearing appears manageable. As of 30 June 2020, it had cash of RM251.4mil and total borrowings of RM563.7. Shareholders’ equity (book value/NTA) stood at RM956.2mil or RM1.78 per share.

 

Gearing should improve over time…

 

KPS has a 20% stake in SPRINT expressway (worth RM870mil) which is pending disposal. The 20% stake is worth RM174mil. (http://bernamamrem.com/viewsm.php?idm=34812)

 

From the sale of SPLASH in 2018 for RM765mil, KPS received RM570mil in cash and will be receiving additional RM195mil in nine annual instalments (equivalent to RM21.7mil per year) (pg. 34 annual report 2018).

 

KPS has also put up for sale its Plaza Perangsang for about RM80mil. 

 

Given all this, it is in my personal opinion (not a recommendation to buy or sell) that KPS should be worth at least double its current share price. Personally, I feel it should be trading at a market cap of RM1bil. Perhaps it will be as more people discover the qualities of this stock.

 

Here’s a look at the BULLISH stock charts of plastic injection moulding/EMS players:

 

Will KPS rocket up soon as well?

 

Join my Telegram channel for random updates @worthystocks 

https://t.me/worthystocks

 

#KPS (5843)

 

 


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