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RajanKumar

Author: Rajankumar   |   Latest post: Mon, 14 Jan 2019, 05:25 AM

 

Hidden Gem Of Penny Stock

Author: Rajankumar   |  Publish date: Mon, 14 Jan 2019, 05:25 AM


 

   

 

(i) Establish a new distribution centre in Brunei On 1 March 2017

-The built-up area and capacity of the new warehousing facility are estimated to be approximately 18,000 square feet (“sq. ft.”) and 916 pallets respectively, which is 3 times bigger than the existing capacity.

 

(ii) Acquisition of warehousing facilities in Kuching, Sarawak On 28 February 2017

-This additional warehousing facilities and office would have a built-up area of approximately 39,000 sq. ft. and 6,000 sq.ft. respectively.

 

(iii) New warehousing facility in Kota Kinabalu, Sabah completed Dec 2017

-have an estimated built-up area of approximately 34,746 sq. ft. with 10 load/unloading bays and a capacity of 3,920 pallets.

 

QUARTER 4 FINANCIAL YEAR 2018 REPORT

The Group’s revenue experienced a reasonable level of revenue growth. There has been positive demand for its consumer-packaged goods. The Group’s revenue for Q4 2018 increased by RM14.33 million or 11.74%, from RM122.07 million to RM136.39 million, as compared to the immediate preceding quarter ended 31 March 2018 (Q3 2018).

The increase in revenue was mainly due to increase in revenue contribution from its

operations in Sarawak from RM44.19 million (Q3 2018) to RM53.25 million (Q4 2018),

operations in Sabah from RM55.67 million (Q3 2018) to RM60.29 million (Q4 2018) and

operations in Brunei from RM 20.26 million (Q3 2018) to RM20.46 million (Q4 2018).

The Group’s profit before tax in Q4 2018 is RM 5.40 million compared to a loss in Q3 2018 RM9.65 million. The profit is due to increase in revenue and streamline of operating costs.

 

COMPANY PROSPECT

Secured distribution contracts in Quarter 3  FY 2018 and the momentum and are expected to continue to contribute positively to Group’s revenue moving forward:

(i) Nestle Products Sdn Bhd for Nestle grocery products to cater for the modern trade channel in Brunei;

(ii) Heineken Marketing Malaysia Sdn Bhd for Kuching, Sibu and Sri Aman in Sarawak;

(iii) L’Oreal Malaysia Sdn Bhd for L’Oreal consumer products under the brands of “L’Oreal Paris”, “Maybelline” and “Garnier” for Sabah, Labuan and Sarawak;

(iv) Oriental Food Industries Sdn Bhd for Sabah and Sarawak;

(v) Sincere Match & Tobacco Factory Sdn Bhd for Sabah, Sarawak and Brunei;

(vi) Power Root Marketing Sdn Bhd for Kuching, Sibu, Miri and Bintulu; and (vii) Oriental Food Marketing (M) Sdn Bhd for Kuching, Sibu, Miri and Bintulu.

PREDICTION

Currrent market cap around 70 million and let assume for Financial year 2019 company can achieve profit 2.5 million per quarter which equivalent to 10 million per year. Based on 12.0x PER , market cap can achieve 120 million. target 0.24 to 0.25. Potential return 70%. 

Labels: KTC

KTC (0180) - A package of hope

Author: Rajankumar   |  Publish date: Fri, 11 Jan 2019, 09:05 AM


Consumer packaged goods distributor KTC eyes turnaround after turning in a profit in Q1

AFTER a loss-making bout amid a receivables debacle, consumer packaged goods distributor Kim Teck Cheong Consolidated Bhd (KTC) seems to have made a turnaround as it registers a significant growth in net profit for the first quarter ended Sept 30. (Q1’19).

 

The Sabah-based company charted a year-on-year net profit growth of 1625% to RM2.11mil in Q1’19.

In a Bursa Malaysia filing, KTC said the significant increase in net profit was due to new distributorships secured, which provided fast moving inventories and better profit margins.

The five new distributorships were secured from Heineken Marketing Malaysia Sdn Bhd, Oriental Food Industries

Collectively, the five contracts have a monthly target revenue of RM14.8mil.

KTC executive director Dexter Lau tells StarBizWeek that the company’s earnings ahead are expected to be favourable and consistent.

“There were several cyclical events this year, such as the zero-rated Goods and Services Tax (GST) period and implementation of sales and service tax (SST).

“The chances of a repeat in earnings performance like in FY18 should be drastically reduced, given that we will not be actively expanding, and shall instead aim to focus on improving our financial position,” he says.

As of Sept 30, 2018, KTC’s cash flow from operations have turned positive to RM747,000, when compared to the same period last year, which was cash flow negative at RM25.26mil.

In addition, the group saw an improvement in trade receivables turnover days from 83 days to 67 days in Q1’19, as well as an improved inventory turnover period from 93 days to 64 days.

KTC’s strategy remains in rationalising its business, by maintaining clients or brand owners that can provide synergy, and letting go of those with thin margins and heavier resource spend.

For example, in Q1’19, KTC reduced more than 30% of its client portfolio.

Despite that, the group managed to increase its revenue by 44% year-on-year during the quarter.

KTC’s gross profit margins are generally consistent at an estimated 12% to 13%.

The group’s net gearing currently stands at 2.12 times.

Implementing more prudent financial management, KTC can further reduce its net gearing, going forward.

During FY18, the group made losses amounting to RM8.13bil, which was attributed to the termination of contracts with several agencies, closure of government-owned chain of convenience stores resulting in returned goods, ongoing write-off of expired and damaged products as part of prudent inventory management practices, as well as writing-off GST dispute and overdue prepayment.

KTC was also embroiled in a debacle over an outstanding receivables amount of RM4.93mil over a period of 270 days, which saw the resignation of former audit and risk management committee chairman Wee Hock Kee in September.

Wee had opined that the receivables should be impaired, but the board had decided that the amount was recoverable.

Lau clarifies that a sum of RM4.72mil of the outstanding RM4.93mil had since been collected, plus some RM180,000 was written off as a prudent measure.

He says the receivables sum was considered to be immaterial as it only constituted 1% of total group revenue, and was recoverable.

Following Wee’s resignation, Wong Wen Miin was appointed to the board of KTC as its new audit risk management committee chairlady.

Wong, with her roots as a reporting accountant, has served across various divisions under the Works Ministry, Finance Ministry and the Prime Minister’s Department for more than 30 years.

“Madam Wong has been a great addition to the board and her appointment is in line with KTC’s target to appoint more board members who bring with them technical expertise and have the ability to provide practical advices to the group.

“In fact, upon her appointment, the first thing Madam Wong requested was to look through our books, during which she found a mistake in an under provision of taxation,” Lau elaborates.

KTC has taken cognisance of the Minority Shareholders Watch Group’s comments on Wee’s resignation, and has since appointed two qualified accountants to the board -- one being Wong, and the other, former auditor Phang Sze Fui.

Lau notes that the company’s financial results would have been better, had KTC not engage in an aggressive expansion over the past two years.

“However, it is much like a chicken and egg situation.

“If we did not expand our capacity, we would not have been able to obtain distributorship agreements from larger clients like Heineken and L’Oreal.

“Now that the expansion part is done for the near term, our focus is to improve the processes in the business, in terms of efficiency, effectiveness, and adaptability,” says Lau.

One and a half years ago, KTC’s utilisation rate of its warehousing infrastructure was only less than 20%.

Currently, the capacity is nearly 100% utilised.

In terms of revenue breakdown by geographical market, KTC has grown its Sarawak and Brunei segment to constitute 44.6% of total revenue in Q1FY19, as compared to 31.6% in the same quarter of FY18.

KTC’s closest peer would be Harrisons Holdings (Malaysia) Bhd, also based in East Malaysia.

Harrisons has a larger market capitalisation of RM239.7mil, and currently trades at a price-earnings (PE) multiple of 9.72 times.

On the other hand, KTC has a market capitalisation of RM68.9mil.

Assuming that KTC is able to replicate their performance in the first quarter throughout the rest of the quarters in FY19, they will achieve a net profit of just above RM8mil.

At the current market price, this implies a forward PE of approximately eight times, which is a discount to Harrisons. It remains to be seen how KTC will perform in the coming quarters.The group will have to keep a close eye on its cash flow management and gearing levels as it seeks to solidify its turnaround plan.

 

Labels: KTC

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