PESONA-SMALL IS BEAUTIFUL

PESONA-SMALL IS BEAUTIFUL

MoneyInTheAir
Publish date: Tue, 29 Nov 2016, 09:32 PM
MoneyInTheAir
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Business Background
1)Construction: worked on various infrastructure, buildings and public amenities contracts. 
 
2)Manufacturing arm: produces Polyurethane architectural products ie. Cornices,
Chair Rails, Ceiling Rose etc. They also produce modular partition panels commonly known as PM2 panel which is an IBS certified product. 
 
Record High Outstanding Order Book
Securing RM2.3B worth of construction jobs YTD. (include RM488m for the construction of Central Plaza I-City Mall in Shah Alam secured lately) which comfortably provides strong earnings visibility to the group for the next 3-years. 
 
Recurring Income Stream
Development & maintenance of student hostels in Universiti Malaysia Perlis (UNIMAP) through the acquisition of SEP Resources S/B for RM29.2m in 2 tranches by acquiring 70% of SEP in the 1st tranche by FY16 while the remaining 30% would be completed by FY17 should they be able to get approval for the waiver on the Bumiputera ownership requirements. The concession is expected to generate average yearly PAT of RM10.0m for the next 20 years (FY17 onwards).
 
Earnings Estimate
1)Orderbook RM2.3B / 3years =Revenue RM766M per year
2)Revenue RM766M x 5% profit margin =PAT RM38.3M
3)PAT RM38.3M+RM10M (UNIMAP) =PAT RM48.3M
4)PAT RM48.3M / no of share 653,995,000 =EPS RM0.074
5)EPS RM0.074 x PE10 =Target Price RM0.74!
 
Other Potential Contract
1)A highway concession (30% stake) which believe the award is worth RM2.0B
2)another student hostel concession (90% stake) which believe earnings contribution double that of UNIMAP’s average PAT of RM10m – equivalent to RM20m PAT/annum
 
Earnings Estimation
1)RM2B x 30%=Revenue RM600M
2)RM600M /3years =Revenue RM200M per year
3)Revenue RM200M x 5% profit margin =PAT RM10M
4)PAT RM10M +RM20M(new hostel contract) +RM48.3M(existing contract) = PAT RM78.3M
5)PAT RM78.3M / 653995000 = EPS RM0.1197
6)EPS RM0.1197 x PE10 times =RM1.19!
 
Techincal Analysis
Support RM0.50 follow by RM0.475
Resistance RM0.60
 
For those who has higher risk can go for peosna-wc which the exercise price is RM0.25 and maturity date 27/1/2020. With pesona tp of RM0.74, the warrant is worth RM0.49 and with pesona tp of RM1.19, the warrant is worth RM0.94
 
Disclaimer
Please be informed that the information above is solely for the purpose of sharing and does not constitute a buy or sell call.         
 
 
 
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2 people like this. Showing 2 of 2 comments

Biorider

Bro, not all the 2.2B is belongs to Pesona, please bear in mind that some contracts are secured under JV of two or three companies....good, simple and straight to point analysis... good job!!

2016-11-30 12:13

Jay

good attempt but too simplistic

1. number of shares not 653m, should factor in warrants 110m and 39.5m new shares to be issued for acquisition of unimap, diluted share based is 802m, so eps is 6c instead of 7c

2. unimap RM10m profit is based on valuer's estimation 2 years ago, no updated valuation this round and the company actually made losses in the construction period, so profitability may be doubtful.

3. unimap company has huge payables (>RM100m), after change in ownership, pesona may have to borrow to pay that, incurring interest

4. highway concession you don't get paid upfront, so have to borrow to finance the project. again will incur high interest cost. highway concession in initial years usually is ebitda positive but net profit negative to breakeven

all these add up can give you an illusion of very high ceiling when in reality, it may be much lower. have to be more careful in the calculations

2016-11-30 17:53

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