The bamboo maker cum vaccine supplier had a radical change in their fundamentals, and yet market is pricing them at the “old” KANGER point of view. However, it is time for investors to relook into KANGER with their new proposition in the property and construction segment.

Genting Tourism Boom

I’m sure plenty of you had seen videos with regards to footfall in Uncle Lim’s favourite spot in Genting, and at the first glance we would think that the beneficiaries should be GENM (KLSE: 4715) and the holding company GENTING (KLSE: 3182). But on a more rational standpoint, both of the company had seen quite a substantial increase in share price ever since the rapid vaccination program and huge reduction in number of COVID-19 cases.

In other words, the investment reward for GENM and GENTING had become relatively lesser.

As for proxies, property developers with projects in Genting might be benefited from the tourist recovery to be back to c. 28.7 million in CY 2019. Some names such as TROP (KLSE: 5401) and NCT (KLSE: 0056) had projects around Genting, which could benefit from it, too.

But amongst all the companies mentioned, KANGER should be the most undervalued of all.

In February 2021, the company had entered into a SPA with the potential Reverse Takeover Target (RTO) company – Aset Kayamas Sdn Bhd for the acquisition of 126 units of serviced apartments in Genting for RM142.87 million in Tower A.

We had seen a significant recovery in footfall alongside with US$800 million investment by GENM into Genting SkyWorlds which is expected to be opened soon, the property prices in the area are expected to increase in tandem with the growth in footfall and tourism income.

At the first glance, KANGER could benefit from the capital gain of the properties, but there is more to it.

With the strategic partnership with Aset Kayamas, KANGER could operate and lease the 126 units while waiting for the capital gain of the investment, this could bring a more consistent cashflow to KANGER and ultimately benefit from the acquisition in two ways – operating & managing, and finally monetize the projects via disposal at a certain profit.

Construction Recovery Theme

In the month of October, we had seen significant of cash inflow into the construction segment. This is largely due to the market believes the sector would be benefited from the economical reopening of the market. Not to mention the upcoming budget might also weight in more for the sector.

Backtracking on KANGER’s proposal to diversify into the construction segment, the company is currently applying for the highest CIDB license – G7 to undertake its existing construction orderbook which is worth about RM1.0 billion in total size. Assuming that the orderbook would last KANGER for 3 financial years, each financial year would be left with RM333.3 million, which is approximately 20 times of normalized financial year 2022 first quarterly performance.

KANGER had also acquired Sung Master Holdings Sdn Bhd for a total sum of RM94.8 million for a 51% stake in the company.

For your information, Sung Master is primarily involved in supplying building materials and it was expected to deliver a profit after tax of RM20.0 million in the full year 2021.

I did a CTOS check on Sung Master (I can’t share the screenshot for obvious reasons) and noticed that one of the major customers for the company is actually Aset Kayamas. If you link the acquisition of properties – which could be involved in operational and management, it is very likely that KANGER would receive construction projects from Aset Kayamas, while supplying building materials to them, which would land a strategic partnership between the two parties.

But there are more to it.

Potential RTO In Place

Dated 4^th of October, we noticed that an emergence of a new substantial shareholder – Miss Chai Woon Yun, which holds approximately 9.3% of KANGER shares after the rights issue. A quick background check on Miss Chai and we would note that she was actually the daughter of the founder of Aset Kayamas.

Herein attached is a report by Sinchew on the emergence of new substantial shareholder.

So, if we think rationally, KANGER had done the following:

1. Acquired properties from Aset Kayamas.
2. Had RM1.0 billion worth of construction projects on hand (potentially from Aset Kayamas).
3. Acquired 51% of Sung Master, who supplies to Aset Kayamas.
4. Emergence of new substantial shareholder which is expected to be PAC from Aset Kayamas end.

Definitely something interesting is brewing in KANGER side for now.

Should the RTO really happens, Aset Kayamas who had a diversified property development projects where a combination of Luxury Highrise Residences and Affordable Housing projects such as Axon, The Hipster, The Hermington just to name a few. With years of experience in the property development segment, the materialization of the RTO would definitely change KANGER forever.

At least on the current price of 6 cents per share which is same with the rights issue price, our entry price for the current level is the same as PAC of Aset Kayamas. So practically, the chance to lose money is extremely low and I believe KANGER is worth more than double the current share price even before the RTO take place.

If the RTO did take place, I think it would be too late for investors to invest in the company.