NGGB - UNVEILING A POTENTIAL UPTREND COUNTER WITH

LIMITED DOWNSIDE RISK !!!!! (PERSONAL TP 0.54  Short Term,

0.64 Mid to Long Term),

The sentiment of investors on BSKL had improved towards the end of the week with the revival of BANDAR MALAYSIA Project, and therefore possibly next week heightened sentiment might fuel more rallies in counters which have already retraced to their supports. 

Recently I had spotted this mid cap company; an investment grade, which have been underlooked and undercovered  -  NEXTGREEN GLOBAL BERHAD or NGGB (Stock Code 7241, listed on MAIN BOARD, INDUSTRIAL PRODUCTS/SERVICES.)

In summary, NGGB is a Malaysia-based investment holding company. The Company operates as a printer, offering prepress (including desktop publishing), press and postpress.

In 2015, NGGB has diversified its business activities to the manufacturing of renewable pulp and paper products. NGGB revolutioniezs the pulp and paper industry by integrating the production of non-wood green pulp and paper with renewable energy and zero waste technology.

I noticed considerable interest starts to build in on Friday where the volume registered a sizeable increase to 5 million units which is its 2 months high volume. 

This positive momentum & enthusiasm should carry forward next week ( forbearing instances of the adversity/ negativity of the regional markets sentiment affecting Bursa Malaysia) since it was able to close Friday conclusively at 0.455. I forsee it trending to the next resistance of 0.49 before heading to my personal TP between 0.54 (short term)  to 0.64 on the intermediate to long term.

WHY I THINK THIS STOCK IS UNDERLOOKED AND COULD HAVE GREAT POTENTIAL TO RISE FURTHER? 

1. Recent Private Placement of 21.3M Units @ RM 0.45 - Indicates Investor Confident In Company Future Outlook

There had recently been a Private Placement exercise of 21.3M units @ RM 0.45, which amounts to RM 9.585 million. The first tranche placement shares of 10M units were listed on 1/3/2019, and second tranche of 11.3M on 26/3/2019. From this listing date until 10/4/2019, there had been no significant amount of selling in the market, eventhough there were times that market price of NGGB was above 0.45 placement price.

Although the price had started to move down between 10/4/2019 and 18/4/2019 below this important 0.45 threshhold, there was insignificant amount of selling indicating the big hands are still holding on. And on Friday 19/4/2019, the price recovered back to 0.455.

This is important as it indicates to me that there are strong investors out there, who are entrusting their capital to the company and are looking at LONG TERM gains and not taking petty 2-3 cents profit on their investment.

2. Pioneering the Green Technology Park Project in Pekan (GTPP) - Strategic MoU

In my opinion, this project is a pioneer in GREEN TECH industry for pulp and paper mill.

i. A bit of background on this project:

The 410-acre (165.92ha) GTP project is being developed over five phases with completion in 2020. The RM2 billion project has yet to contribute significantly to the group’s bottom line.

Phase 1 of the project, which is nearly completed, features a pulp and paper mill factory with a production capacity of 10,000 tonnes of wood-free paper, as well as a 5,000-tonne tissue paper factory. The commercialisation of the factory will only begin from the middle of 2019.

Phase 2 will involve the set-up of a new factory with the capacity to produce 100,000 tonnes of box liner paper, as well as 120,000 tonnes of corrugated paper.

Phase 3 will involve another factory with a capacity to produce 65,000 tonnes of tissue paper.

Phase 4 will involve the construction and development of a feed mill with production capacity of 30,000 tonnes of agro-feed, as well as a fertiliser plant with an output capacity of 50,000 tonnes of fertilisers using the by-products from the biogas plant.

Phase 5 has been earmarked for light industries involving the construction and development of packaging and printing factories.

ii. Signing of MoU with Strategic Partners:

Currently this project is in the 2nd phase. NGGB has signed an MoU with two listed Japanese firms (IHI Corp and Nomura Holdings Inc) to develop a technology that converts empty fruit bunches (EFB) into pulp and paper. Refer article below for the news:

https://www.theedgemarkets.com/article/nextgreen-partners-japanese-firms-develop-efb-green-tech

Mitsutoshi Murakata, Head of Nomura’s Asia Infrastructure Project Office, said: “Developing a vibrant green economy is important for both the global economy and the environment. With the MoU in place, we are glad to officially start exploring a long-term business partnership with NGGB and IHI to realise this initiative.”

Hiroshi Ide, Executive Officer and Vice President of Resources, Energy & Environment, at IHI, said: “We bring to the table our vast experience and knowledge in energy solutions and have begun commercial operations to produce fuel pellets made from empty fruit bunch (EFB) of the palm fruit. We hope for this technology to be used together with NGGB’s to create a sustainable ‘green’ business model that is scalable and profitable, while at the same time making a big step forward in environmental conservation in Asia.”

iii. Updates on the MoU as of 11 April 2019

On 11th April 2019, NGGB announced  that the feasibility study has been completed and all parties agreed to continue on the more detailed studies:

"Further to the announcement made on 13 February 2019, the Board of Directors of the Company wishes to announce that the Company, IHI Corporation and Nomura Holdings, Inc. (“Parties”) have conducted the feasibility study of the business of Empty Fruit Bunch (“EFB”) Pulp, EFB Paper and EFB Pellets as described in the MOU and completed the evaluation of the feasibility and profitability of the collaboration including but not limited to the project of Phase 2a and Phase 2b of the Company’s Green Technology Park Pahang (“GTPP”) as well as the project in Negeri Sembilan and Sarawak.

Following the result of the abovementioned study, the Parties have agreed to continue with the feasibility study on the development of a 30-megawatt Biomass Power Plant, Alkaline Recovery Plant and wastewater treatment plant for the GTPP and projects in Negeri Sembilan and Sarawak. The Parties started discussion on the collaboration structure including but not limited to establishment of a joint venture arrangement and terms of the definitive agreement, which will be entered into between the Parties to formalise the collaboration."

http://malaysiastock.biz/Company-Announcement.aspx?id=1134104

With the above progress, we can see that the company is moving forward in its mega RM 2B GTPP Project and we should see more updates on this as time passed by.

3. Management Analysis - Confident To Turnaround to Profit in FY2019

Refer to link below on NGGB management's latest comments on its company turnaround forecast in FY2019:

https://www.theedgemarkets.com/article/nextgreen-sees-return-profit-fy19

NGGB expects to return to profit in the financial year ending June 30, 2019 (FY19) on the back of improved market conditions, as well as the commercialisation of its industrial park. Some of the important strategies as noted:

i. to improve contribution by the industrial park rather than printing business. Management ancitipates the industrial park development to match or exceed that of the printing business from FY20 onwards.

ii. once the GTP starts production of wood-free paper, apart from selling the product, it can also be used in the printing of books to target markets such as Europe.

iii. contributions from the group’s third core business of manufacturing renewable pulp and paper products to come once the GTP commences commercialisation.

I believe that investors in NGGB are making investments based on "future value & earnings" of the company, instead of based on historical earnings which have been sub-par at the moment based on latest financial reports.

4. Technical Analysis Point of View - Potential Breakout From Oversold Position

Refer below daily chart of NGGB from November 2018 to April 2019. A few indicators of potential breakout of the downtrend can be seen:

a. NGGB had formed a bullish flag pattern over this 6 months period, approaching towards the tip of the flag. the support price of 0.42-0.43 region has been tested 4 times as indicated by circles 1,2,3,4, and prices have rebounded each time.

b. MACD is converging and about to cross the signal line on continued price bullishness.

c. Stochastics and RSI is seen moving from oversold position, into upwards direction indicating bullish bias

d. Recent rebound from low, was accompanied by surge in volume at 5 million units.

Should the price be able to breach 0.47 level, I foresee it testing the first resistance at 0.54 in the near term, and test 0.64 in the longer term.

CONCLUSION

Considering all the above, my personal TP for NGGB is set at RM 0.54 (Short Term), and RM 0.64 (Mid to Long Term)

LET’S SEE HOW THE SHARE PRICE MOVEMENT IN THE NEAR FUTURE FORBEARING ANY GOOD CORPORATE NEWS.

Disclaimer : The above opinion is not a BUY CALL but only sharing my observations.

BURSAMASTER