Icon8888 Gossips About Stocks
(Icon) Dolomite - Earnings Will Soon Explode Like Dynamite
Executive Summary
(1) Dolomite is principally involved in building material, property development and construction. It was the type of half dead company that looked like will never perform.
(2) However, in 2011, it diversified into steam and thermal power generation in Shandong Province, China. Construction cost for the plant was approximately RM197 mil. The power plant has been commissioned and started production in July 2015. Going forward, this division will provide a significant boost to earnings.
1. Background Financials
Based on 276 mil shares (assumed full conversion of 12.7 mil RCPS) and share price of 38 sen, the company's market cap is RM105 mil.
Annual Result:
| F.Y. | Revenue ('000) | Profit Attb. to SH ('000) | EPS (Cent) | PE |
|---|---|---|---|---|
| 2014-12-31 | 86,421 | 7,385 | 2.80 | 11.43 |
| 2013-12-31 | 98,856 | 12,595 | 4.79 | 6.58 |
| 2012-12-31 | 97,002 | 3,266 | 1.24 | 18.55 |
| 2011-12-31 | 39,062 | 3,840 | 1.46 | 18.50 |
The group has not performed well in the past few years. Based on net profit of RM7.39 mil for FY2014, historical PER is approximately 14 times. However, going forward, earning is expected to grow substantially as the steam and power generation business starts contributing.
The group's performance over past few quarters is as set out below :-
The group's gearing is a bit high. Based on net assets of RM176.5 mil and net borrowings of RM345 mil, gearing is approximately 2 times. The bulk of the loans are project financing related to the China power plant business.
2. Details of the Shandong Steam & Power Generation Project
In 2006, Dolomite obtained the right to develop a power plant in Linpan, Shandong, PRC from a company called Xin Yuen Xin Realty Limited ("XYX") at no cost.
XYX has secured all requisite approvals for the power project from authorities in 2002. However, it was unable to secure financing as the PRC government has in 2004 pohibited lending by local banks to finance certain industries (of which power generation was one of them) with the objective of cooling down the economy.
The project is 100% owned by Dolomite.
In 2011, Dolomite officially kicked start the project after securing financing from Maybank.
The duration of the concession granted by the Shandong provincial government is 50 years.
The project involved the construction of a coal fired thermal power plant, comprising he followings :-
(a) three units of boiler with a capacity of 75 tonnes per hour each;
(b) two units of turbine;
(c) two units of generator of 12 MW each (total capacity 24 MW).
Upon completion, the plant will produce steam and electricity whereby the steam will be sold to factories in the vicinity and the electricity will be sold to Shandong Electric Power Corporation (a wholly owned subsidiatry of State Grid Corporation of China).
The company expects steam and electricity to contribute approximately 75% and 25% respectively of the revenue to be generated from the plant.
In the latest September quarterly report, the company indicated that the steam and power plant started production in July 2015. Please refer below :-
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Discussions
1 person likes this. Showing 41 of 41 comments
like your taste, fundamental and common sense based investing. easy for layman like me....
2015-12-10 16:24
The only reason behind the price surge is out good ministry announce electric rate to go up
2015-12-10 16:30
According to the DOLOMITE Sept qtr report, the jump in profit is due to forex gain of RM12 mil current qtr (3 qtrs: RM16.6 mil). NOt sure how ICON got the EBIT figures, but according to the seg result, Steam/Power segment result for 9 mths cum = loss RM1.5 mil whereas 6 mths total is profit of RM3.8 mil, meaning Sept qtr the steam/power segment has registered a loss of RM5.3 mil???
2015-12-10 16:57
Comparing the Q3 rpt and Q2 rpt, it seems that construction and prop devt were making good gains...
2015-12-10 16:58
The balance sheet show borrowings of RM340 mil but interest paid in cashflow for 9 mths <RM5 mil? I suspect the interest cost is capitalised to the project, and once it commence op, the interest cost will be flushed out to the p&L? I think this counter need more study...
2015-12-10 17:01
if you are the director of a company and u owe 340m wouldn't it be easier to do a restructuring like capital reduction than to actually pay the debtors by whatever cash you have? one thing for sure these fellas travel first class under company expenses wherever the go. minority shareholders' interests are far from their mind.
2015-12-10 17:13
340m for 5% bank loan will be approximate 17m per annum
For nine month will be 12.75m
2015-12-10 19:57
EBIT means earnings before interest and tax. For a big capex project and with 340 mil borrowings, wouldnt the interest be alot? And for shareholders, we would want to know waht is the net net gain because that is what goes into our pocket and drive the share price.
2015-12-10 21:18
Looks like they have some forward contracts for their expected revenues from the power n energy biz in China. These forex gain could be their mark to market gain when they renewed / extended the forward contracts.
2015-12-11 08:32
Net profit is far too little to pay the 5% bank loan
May be they borrow from loan shark 6 or 7%
2015-12-11 15:12
Bank loan is too high
Ev is very high more than twice the market cap approx 300m
What will you give the tp if the ebit is only 11.4m?
2015-12-11 15:57
Insufficient of detail on how there Dolo will do d repayment, profit from biz operation. Mudajaya and Mfcb has more details to digest. Anyway, good highlight from Icon888
2015-12-11 21:45
now only get into China's eletriciy industry is too late, u nvr heard Beijing wants to cut Aluminum production dunno how many tonnes?
God bless u
2015-12-12 09:48
Wah...........another midas touch write up by Mr. Tilapia Icon8888 神童！
good write up.. I was not around these time I guess I missed out a lot of ur informative articles. Next time I must subscribe and U drop to my mail box.. I am wiling to pay. ........
Hope you guys doing well in every trading events.
2015-12-12 17:05
calvin, gray aka optimus is looking on u.
U really should learn from someone knowlegible.
I hope not to call u headless chick face flying in the sky again.(Horrible)
2016-11-27 19:06
Posted by Ooi Teik Bee > Nov 25, 2016 10:32 PM | Report Abuse
Calvin can share his stocks picked to everyone as a reference. We can select them and invest if we feel confident.
I do not like Calvin attacked many writers and recommended his stocks to override the writers. If he is good, I appreciate his sharing.
Most of the times, I check his stock selections, most of them are lousy stocks in term of fundamental. In term of TA, they are down trending. I just keep quiet because I do not like to attack any writer in I3.
Most of his actions are very irritating and he does not show any respect for others.
Hope he can improve after reading this posting. It is not an attack, I say it out sincerely from the bottom of my heart.
Thank you.
Ooi
2016-11-27 19:10
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4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Probability
People everyday working 12 hrs also cannot identify such gem..
How come this Icon keep coming ..with such jewels?
and keep coming..
2015-12-10 14:25