Highlights

Logic Invest Research Blog

Author: loginvest   |   Latest post: Wed, 27 Nov 2019, 11:49 AM

 

SHL Consolidated Bhd - 2Q FY 2020 Update Report (HOLD)

Author: loginvest   |  Publish date: Wed, 27 Nov 2019, 11:49 AM


UPDATE REPORT

Residential and commercial property markets are softening throughout Malaysia. Meanwhile broad economic conditions in Malaysia continue to deteriorate. The recent rate cuts around the region support our cautious outlook that we noted in our previous report. The property industry is expected to remain sluggish due to tighter lending policies put in place by Bank Negara and a broadly weaker economic environment. SHL Consolidated Bhd (“SHL”) is a well run company with a good land bank that has years to run. The company’s emphasis on good value has helped it maintain positive earnings despite very challenging conditions. Still, a deceleration in sales and profits is quite visible in YTD 2Q FY 20 results

INVESTMENT RISKS

Risks to our recommendation and target price include: i) softness in property prices, ii) an increase in the general level of interest rates, and iii) an increase in the cost of building materials.

RECOMMENDATION

We maintain our HOLD recommendation whilst decreasing our fair value estimate to MYR 2.27. SHL has a very solid balance sheet and should be able to maintain prospective dividend yields above 6% over FY 2020- 2021. Also, the company has an excellent landbank and sound management; SHL recently formed a JV with Japan’s Marubeni Corp to construct a condominium project with an estimated GDV of RM327 mn at Bandar Sungai Long, Selangor in which SHL holds a 67% stake. The project sits on a 9.56 acre land consisting of 568 condominium units and is expected to take off soon with an expected completion date in March 2020. Value investors will want to accumulate at levels below MYR 2.10.

COMPANY PROFILE

SHL Consolidated Bhd is an investment holding company and it provides strategic, financial and corporate planning services. SHL Consolidated Bhd. and its subsidiaries are an integrated commercial and residential property development group, which are also involved in granite quarrying and manufacturing of aggregates, general building construction, earthworks, infrastructure works, the ownership and operation of a golf resort, the manufacture of clay bricks, supply of finished brickworks of wall and other brick structures, the manufacture of aluminum framed doors and windows, the provision of soil and concrete laboratory testing services, the provision of professional construction management and geo-technical services, the marketing and distribution of building materials, rental of properties and money lending business. Its subsidiaries include SHL Corporate Services Sdn. Bhd., Goodstock (Tawau) Sdn. Bhd. and Wilayah Builders Sdn. Bhd.

Source: Wilson & York Securities Research - 27 Nov 2019

Labels: SHL
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Land & General Bhd - Persistent Challenges

Author: loginvest   |  Publish date: Tue, 26 Nov 2019, 5:41 PM


What’s New

Weak 2QFY20 performance. L&G reported a 2QFY20 profit of RM1.7m, on the back of RM39.2m revenue. This takes 1HFY20 earnings to account for 31% of our initial full-year estimate which was below expectation, largely due to the weaker-than-expected margins from its on-going projects (Astoria, Sena Parc and Damansara Seresta).

Improved property sales. L&G achieved RM30.2m property sales in 2QFY20, taking 1HFY20 property sales to RM45m (forming 57% of our FY20 assumption of RM79m), mainly contributed by its Damansara Seresta project in Bandar Sri Damansara. Meanwhile, unbilled sales stood at RM183m which will underpin its earnings visibility in the near term.

Higher expenses for education arm. Its education business experienced a much weaker EBIT margin of 21% during the quarter, compared to its usual >30% margin. This is mainly attributable to higher overheads following the recruitment of additional teachers from Aug 2019 due to its international school expansion plan.

Outlook

Challenging property market. L&G only launched the second phase of Damansara Foresta called Damansara Seresta (RM480m GDV) in 2HCY18 in view of the sluggish property market. We believe most of its pipeline will now be further delayed until there is a turnaround in the operating environment. The delay has derailed L&G’s earnings growth momentum, and a strong sales performance from Damansara Seresta would be critical to sustain its earnings growth. We have revised down our FY20-22F earnings by 18%/19%/17% to account for weaker margins for both its property and education divisions.

Valuation and Recommendation

Maintain HOLD. We maintain our TP of RM0.16, based on an unchanged 75% discount to our RNAV. We believe it would take a much longer time for the company to monetise its deep land value given the persistently weak property market that has resulted in delays for its launch pipeline.

Source: Alliance Research - 26 Nov 2019

Labels: L&G
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Cocoaland Holdings Bhd - 3Q FY 2019 Update Report (HOLD)

Author: loginvest   |  Publish date: Tue, 26 Nov 2019, 11:47 AM


UPDATE REPORT

Compared to other snack food players, Cocoaland sales and profits have held up reasonably well over the past three quarters. YTD 3Q19 vs YTD 3Q18 sales are lower, corroborating our view that economic conditions in Malaysia and around the region continue to deteriorate. YTD 3Q19 export sales now account for 55.3% of total sales vs 52.6% during the same period last year. Local sales have decreased over the last two quarters, however export sales are still showing very slight growth. Meanwhile, margins have firmed up a bit. Looking ahead, Cocoaland will fare better than many players, though the likelihood of high growth in sales and profits is not high.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) rising trends in material costs, ii) an increase in the general level of interest rates, iii) an increase in the USDMYR exchange rate, and iv) a sharp slowdown in the general level of economic activity in Malaysia or in the economies of the company’s major ‘own brand’ export markets - China/HK and the Middle East.

RECOMMENDATION

We maintain our HOLD recommendation on Cocoaland Holdings Bhd and maintain our fair value at MYR 1.98. It is possible that the share price will surprise on the upside; sales growth may accelerate more quickly than we expect. Cocoaland has very little debt on the balance sheet as well as plenty of cash. Export sales continue to soften in Eastern Asia, though sales in the Middle East have shown surprising resilience. The top three overseas market regions remain Eastern Asia, Southeast Asia and Middle East. Should global trade continue to deteriorate, value investors will want to collect at levels below MYR 1.80. The shares are currently standing on a dividend yield above 2.5%.

COMPANY PROFILE

Cocoaland Holdings Bhd is ranked approximately in the middle of the thirty listed companies in the Malaysian snack food industry. The company is one of the few home grown Malaysian consumer firms that have successfully penetrated regional markets. Cocoaland Holding’s predecessor company, MFESB, was formed in 1980. This company and others were consolidated and converted to a public limited company in 2000 under the name Cocoaland Holdings Bhd, prior to listing in 2005. Cocoaland has been quite successful with its fruit gummy line, which remains an affordable small luxury snack in these difficult economic times.

Source: Wilson & York Securities Research - 26 Nov 2019

Labels: COCOLND
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BP Plastics Holdings Bhd - 3Q FY 2019 Update Report (HOLD)

Author: loginvest   |  Publish date: Mon, 25 Nov 2019, 11:44 AM


UPDATE REPORT

YTD 3Q FY 19 sales and profits have held up reasonably well at BPP, however profits are slightly lower, corroborating our view that economic conditions in Malaysia and especially Singapore continue to deteriorate. The recent rate cuts around the region support our cautious outlook for the next few quarters. Management has done a fine job of reducing controllable costs, however increasing trade tensions, and rising machinery upkeep and electricity costs may limit margin expansion over the next few quarters. Indeed, management indicates that trading conditions will remain challenging over the next few quarters. At prices below MYR 0.90 value investors will want to accumulate more aggressively

INVESTMENT RISKS

Risks to our recommendation and target price include: i) a stronger USDMYR exchange rate, ii) an increase in resin prices and production costs, and iii) a sharp slowdown in the general level of economic activity in Asia, Middle East and Europe. Prices for ethylene and polyethylene have been lower 2H 19 vs 1H 19. While positive for BPP’s margins, the price weakness in these materials may signal lower demand ahead

RECOMMENDATION

We maintain our HOLD recommendation on BP Plastics Holding Berhad (“BPP”) whilst raising our fair value estimate to MYR 1.10. Looking ahead, average ROE is likely to be maintained at levels of 10-11%, whilst P-BV stands on 1.1x trailing book value and 1.1x current year book value. Importantly, the company has a very clean balance sheet.

YTD 3Q 19 total export sales amounted to about 72% of total sales, with about 63% of sales in USD, 10% in SGD and remaining in EUR & JPY. The company has a dividend policy of paying out a minimum of 40% from its net profit. We maintain our estimated dividend payments for FY 19 and FY 20 at 6 sen per share. At current prices, the prospective dividend yield is likely to remain at or above 5.0%

COMPANY PROFILE

BP Plastics Holding Bhd (BPPLAS) is an investment holding and provision of management services company. The principal activities of the Company, through its subsidiaries is manufacturing and trading of plastic products. Its subsidiaries include BP Plastics Sdn Bhd, BP Packaging Sdn Bhd, BP Packaging Sdn Bhd and Baoman Rubber Limited. On June 10, 2010, the Company acquired 100% interest in BPPlas Plantation Sdn. Bhd. (BPPlas Plantation). On October 5, 2010, BPPLAS incorporated a wholly owned subsidiary, Baoman Rubber Limited (Baoman).

Source: Wilson & York Securities Research - 25 Nov 2019

Labels: BPPLAS
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Teo Seng Capital Berhad - 3Q FY 2019 Update Report

Author: loginvest   |  Publish date: Wed, 20 Nov 2019, 9:59 AM


UPDATE REPORT

Egg prices rose nicely over 3Q 19 whilst feed prices softened; thus TSCB had quite a good quarter. However, economic conditions in Malaysia and especially Singapore continue to deteriorate. The recent rate cuts around the region support our cautious outlook that we noted in our previous report. Looking ahead, we remain cautious on our sales volume and egg price outlook. Feed prices may trend higher over the next few quarters as crop damage seems to be on the rise in many countries. Competitive pressures are growing as other large players have announced capacity expansion plans. That said, TSCB will likely fare better than some of the other listed poultry/egg players.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) rising feed prices, ii) weaker MYR exchange rates vs USD, iii) an increase in the general level of interest rates, iv) lower egg prices, v) continued overcapacity and competition in the poultry/egg sector and vi) sharply lower levels of economic activity in Malaysia and Singapore.

RECOMMENDATION

We maintain our HOLD recommendation on Teo Seng Capital Berhad (“TSCB”) but increase our fair value estimate to MYR 1.20. As above feed costs may rise and a weaker MYR would reduce margins. The company has invested heavily in new capacity, as have other players in the industry. It is possible that egg prices may come off a bit more in 4Q 19, however prices seem reasonably well supported and demand for inexpensive protein will remain firm. Finally, the dividend yield for TSCB seems attractive and sustainable. Value investors will want to consider this stock at levels near or below MYR 0.94.

COMPANY PROFILE

Teo Seng Capital Berhad is engaged in investment holding and provision of management services. The Company is a subsidiary of Advantage Valuations Sdn. Bhd. The Company's ultimate holding company is Emerging Glory Sdn. Bhd. The Company operates in three business segments: investment holding segment, trading of pet food, medicine and other related products segment, and poultry farming. The Company subsidiaries include Teo Seng Farming Sdn. Bhd., Teo Seng Feedmill Sdn. Bhd., Success Century Sdn. Bhd., Ritma Prestasi Sdn. Bhd., Teo Seng Paper Products Sdn. Bhd. and Liberal Energy Sdn. Bhd. On March 4, 2011, the Company's subsidiary acquired a wholly owned foreign subsidiary, Premium Egg Products Pte Ltd (Premium Egg)

Source: Wilson & York Securities Research - 20 Nov 2019

Labels: TEOSENG
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Sarawak Plantation Bhd - 3Q FY 2019 Upload Report

Author: loginvest   |  Publish date: Tue, 19 Nov 2019, 11:00 AM


UPDATE REPORT

CPO prices have been trending higher through 3Q 19, however soybean oil prices remain sluggish. Economic conditions in Malaysia and especially Singapore continue to deteriorate. The recent interest rate cuts around the region support our cautious outlook that we noted in our previous report. Looking ahead, we expect CPO prices to trade in the range of MYR 2,200 - MYR 2,300 per MT over the next few quarters. Weakness in India’s economy, not to mention a trade tiff, and EU resistance to buying palm oil, are some of the factors that drive our cautious outlook. On a more positive note, FFB production has picked up nicely at SPB.

INVESTMENT RISKS

Risks to our recommendation and target price include: i) litigation risk, ii) a sharp reversal in CPO prices, iii) a stronger USDMYR exchange rate, iv) an increase in the general level of interest rates, and v) a sharp slowdown in the general level of economic activity in Malaysia or among the economies of the major CPO importers, which include China, India, Pakistan, Europe and the US.

RECOMMENDATION

We maintain our HOLD recommendation on Sarawak Plantation Berhad (“SPB”) whilst increasing our fair value estimate to MYR 1.70. Looking ahead, average ROE is likely to be maintained at levels of 1-5%, whilst PBV stands on 0.8x trailing book value and 0.8x current year book value.

CPO prices may have some upside 1H 20, but not a large quantum in our view. On a more positive note, SPB has a very clean balance sheet; there is about 24 sen per share in cash or about 14% of the current share price. SPB is currently trading on a market cap/mature ha ratio below MYR 18,500 per ha, which seems like a reasonable bargain. Ta Ann Holdings Bhd has taken a 30.4% stake in SPB. Looking ahead, the emergence of Ta Ann as a new shareholder augurs well for SPB’s growth prospects. Value investors will want to monitor SPB at prices below MYR 1.50; the industry is searching for ways to use more palm oil domestically.

COMPANY PROFILE

SPB’s major line of business is the cultivation and milling of palm oil. The company was incorporated in October 1997 and converted into a public limited company in Feb 2000. SPB was listed in Aug 2007. The company has a total planted area of 34,837 ha, with mature acreage of 25,670 ha. Total acreage increased by 5,200 ha in 2016, some of which will begin yielding FFB in 2018-2019.

Source: Wilson & York Securities Research - 19 Nov 2019

Labels: SWKPLNT
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