财务自由梦想 = 资金 + 自律 + 知识 + 毅力
Why MALAYSIA SMELTING CORPORATION will be my largest exposure of stocks in 2017 (paperplane2016)
I'm NOT the author of this article. This article was first publised at paperplane's personal blog & is now published here with permission from paperplane. Minor alignment & slight amendments have been made for better presentation purposes. Please don't invest if you are not sure about the business or its future.
First, I normally don't recommend stocks. But this rare gem really worth our studies. I share with all here the studies I have done and it is for references purposes only and it doesn't serve as any recommendation to buy or sell.
Why Malaysia Smelting Corporation Bhd (MSC) get my attention? A few reasons:
1. This stock is owned by one of the most famous value investors - Dr.Neoh.
2. Strong Cash Flow
3. TIN PRICE rally!
4. Selling of lands in Penang factory to unlock value??
5. Price recover back past 2-year record at RM4 range?
1. This stock is owned by one of the most famous value investors-Dr.Neoh.
From annual report 2015, he owns around 1.40%, another famous fund managers-ICAP owns around 2.90%
10.NEOH CHOO EE & COMPANY SDN BERHAD- 800,000 units=0.80%
13.DYNAQUEST SDN BERHAD-600,000 units=0.60%
The shares are easy to calculate as it has share outstanding structure of 100mil exact. From the 2015 Annual Report, Top 30 shareholders had owned around 72.54% of the shares, making most circulating outside in market estimated to be only 27%
2. Strong Cash Flow
Most of the investors would have stop digging more once they have seen their results past 2 years. Most of the time it was volatile, and also at the same time in loos making. Well I would say digging deeper we might understand more of this company.
This company is the second largest Tin producer in world after one in China (MSC is producing consistenly 30,000 Tonnes every year). Tin prices have been volatile since and MSC wrote off huge losses during last 3 years after the political risks surface in Indonesia and their venture in Indonesia was forced to a halt and they have no choice but to write them off.
Some write off still happens in recent quarter, but I think the amount left to be write off are really not that much anymore.
Look at Q2 2016 result, a one-off RM30mil write-off on associates occur. Without this, the company is actually in profit for 1H 2016.
A further reading under notes, it states as such:
6. Share of results of associates and joint ventures
The Group’s share of results of associates and joint ventures recorded a net share of losses of RM30.53 million in 1H 2016 compared with a net share of profit of RM0.35 million in 1H 2015. This was mainly due to higher share of losses from KM Resources, Inc. arising from the provision of additional prior years tax liabilities
Without such one-off items, we can estimate the EPS to be around RM0.88 per year. Which makes its P/E look attractive at around 4 now.
Its strong cashflows generation of around 79mil YTD is even more fastinating. Making its EY, ROC at marvellous status.
Its liability is manageable with its strong cashflows generation, while the cash yielding is one of the craziest I have seen recent years beside the earlier identified KESM!
It is yielding even crazier than KESM when I notice it. KESM was yielding near 30% when I discover it in 2015 end. MSC is now yielding around 46% and can even be MORE due to recent TIN price rally, coupled with weakening currency of MYR.
3. TIN PRICE rally!
The most fundamental reason I am positive about MSC is due to recent rally in Tin Price.
Look at AR 2015, the company keep good track record on Tin prices for few years as below. Tin prices traded around range of USD 20,000 actually recent years. But a crash on prices happen in 2015.
Tin price has since recover in 2016. As below for 2016
http://www.mtpma.org.my/index.
It has recently recover to above USD 21,000 which is why I am positive on their near future earnings.
4. Selling of lands in Penang factory to unlock value??
I read a recent news from the edge daily. There was rumors where MSC might reallocate their smelting factory from Penang state to Klang as the land in Penang could be redeveloped into properties to unlock their values. If this happen, I am not sure if it might impact their temporary functions? But CEO resigning from company is a big warning sign to me.
Could it be tussle of wars among Malaysian and Singaporean? Or is there other things? I wouldn't want to do any estimation. But if reallocate did happen will be extra bonus to us.
5. Price recover back past 2-year record at RM4 range?
Look at its price during 2012 when it was trading at RM4.50 high. I believe with no much write off can be further done on associates, its near future result can be very fascinating.
Its investment in associates as noticed in latest quarter result report is RM49.78mil, compared with Dec15 RM84.47mil. MSC, come and write off the balance. So the price can go further down and next year it will boom like mad.
Assuming next yr no more write off, EPS of 0.80 at P/E 10 can easily give it RM8 TP.
Its cash yielding is around RM1.58 per share per year. By that, it should be easily traded at range of RM15-RM18.
In near term using recent latest results, I think it can challenge EPS of RM1, giving P/E 10=TP RM10
EPS RM1 derived from below：
30,000 tonnes capacity per year x Avg price per tonnes USD19,000 x MYR 4 x profit margin around 4.5%=RM102.6mil net profit.
S/O=100mil, so easily EPS=RM1 per year. P/E can be even lower near 3 next yr.
EVEN, we are so pessimistic that It will by Maximum goes back only to 2-3 years high of RM4.50 range, it will still give us around 32% return.
(Note: MSC price was RM3.41 at time of this article written by paperplane)
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Discussions
12 people like this. Showing 50 of 103 comments
Your RGB & Johontin W are doing crazy, now bank security guards also know you
2016-11-17 01:27
Ezra_Investor, I don't judge people whether they know or don't know, not even judging them that they don't know what they don't know. Don't think you are so superior to think other people don't know & you are the only one to know.
I am here to look for investment opportunity to make money, not here to teach people. You go ahead with your life purpose but don't ever think all others are stupid. You are also kind of stupid to think you are clever than above all.
2016-11-17 07:55
Ezra_Investor, you are so right, don't try to teach people when people never ask you to teach, or else you make yourself looked stupid OR too ego.
2016-11-17 07:59
wah! just know that paper also know write article. Always blow cow only but this time really blow with fact.
Good job!
2016-11-17 08:00
Ezra_Investor, I will be so pleased to see you to remove your posts, you are making right move to rectify yourself. If you really want to teach people, do like what KC do, write more article to teach people, let those interested to be taught to read your articles(s).
2016-11-17 08:02
Look at Q2 2016 result, a one-off RM30mil write-off on associates occur. Without this, the company is actually in profit for 1H 2016.
A further reading under notes, it states as such:
6. Share of results of associates and joint ventures
The Group’s share of results of associates and joint ventures recorded a net share of losses of RM30.53 million in 1H 2016 compared with a net share of profit of RM0.35 million in 1H 2015. This was mainly due to higher share of losses from KM Resources, Inc. arising from the provision of additional prior years tax liabilities
Without such one-off items, we can estimate the EPS to be around RM0.88 per year. Which makes its P/E look attractive at around 4 now.
Its investment in associates as noticed in latest quarter result report is RM49.78mil, compared with Dec15 RM84.47mil. MSC, come and write off the balance. So the price can go further down and next year it will boom like mad.
Technically the RM30.53 million was not a write off but MSC taking up its share of loss in KM Resources, Inc.
Taxes in Indonesia very tricky unlike income tax in Malaysia. On and off prior years tax liabilities may suddenly pop up.
What is the status of KM Resources, Inc. operation ?
Anyway.... the balance of investment value as stated was only RM49.78mil left... unless MSC is committed to inject more fund.
2016-11-17 08:06
Recent quarter the management argue lower production, it actually trigger my worry also. If price good but nothing to sell also useless. I will closely monitor this stock to ensure no negative surprise.
Nowadays... hardly see lombong bijih timah in Malaysia... where the bijih timah come from ?
2016-11-17 08:09
haha. the tax liability a bit tricky really. I wonder why majority write off still appearing.........now I understand after rMoi explain. Hopefully this year will be last. Anyway share of loss in associate no impact right? Unless they want to continue pump money to help, else maximum loss just the amount they invest into associates.
2016-11-17 09:05
Dear Moneysifu and plane, I admired you guys to invest in all these high risk stock..... imagine this scenario, u owned this counter, and the market crash..... and the company is also losing a lot of money......which during the market crash, u can't sell your shares because it has dropped 30%, but at the same time the company is turning bad, like it always do, losing money, what will you do?
Bcos as u all know the tin price very very unstable, this has high probability of happening.
2016-11-17 09:42
aiyo, think positive lah, why always market crash, why not bull market coming......
2016-11-17 09:45
problem is not market crash u know, if the company very good then crash will do nothing else, just in case, when it crash, the company turn lousy.... MRapolo, if u can't understand then just ignore my question, not asking you :)
2016-11-17 10:18
The only way to make money in stock market is to understand the business, management & company, knowing the financial details of the industry & companies, think as a business owner, understand own financial capacity how far we can go & what returns we can expect. Most important is to control the emotion.
2016-11-17 10:30
Some like apple while others like orange, some prefer wait for musangking durian to drop once a year.
I like watermelon :)
2016-11-17 10:34
high risk high return. MSC is high cash, high yield, low risk, super good high return. haha
2016-11-17 10:43
his question is "market crash company turn lousy??", which i really dont understand...
2016-11-17 10:46
To be fair, Market crash all die, even public bank also could not avoid. I was cheated by someone since 2010 for market crash was in the corner. So my money was earning less than FD since then. Luckily i woke up last year & do it myself. Far superior returns than so called self proclaimed M warren.
2016-11-17 11:07
A lot more to learn from you guys.....I will follow you guys and learn along the way, not using money thou XD
2016-11-17 11:27
Buy some cartons of sardines, luncheon meat, and preserved veggies in case something goes wrong in '17 and newbie didn't make it out the arena. Won't risk this.
2016-11-17 11:31
I hope everyone can make money here also. Just monitor closely on its progress........
2016-11-17 12:28
Posted by RUOutOfUrMind > Nov 17, 2016 07:55 AM | Report Abuse
Q: Ezra_Investor, I don't judge people whether they know or don't know, not even judging them that they don't know what they don't know. Don't think you are so superior to think other people don't know & you are the only one to know.
A: I've never claimed to be superior to anyone, since when?
Which word, which statement did I tell everyone I'm more superior than them? C'mon, tell me.
I don't claim to know everything, but when I write, I must make sure I KNOW something.
The reason why I judged you is because your arrogant yet ignorant attitude.
As they say "Empty can makes the most noise".
As KC would say “Empty tong, pong, pong, pong”.
Q: I am here to look for investment opportunity to make money, not here to teach people. You go ahead with your life purpose but don't ever think all others are stupid. You are also kind of stupid to think you are clever than above all.
A: That's your problem. Don't mix me with you.
I'm here to make money, but also doing my part of the social responsibility towards the investing community.
At least when I make something I give back to the society, ask yourself, what have you contributed back?
I never thought others is stupid, I only think you ARE stupid.
Q: Ezra_Investor, you are so right, don't try to teach people when people never ask you to teach, or else you make yourself looked stupid OR too ego.
A: Whether I teach others or not is up to me. Whether people listen or not is up to them.
I cannot force others to accept my opinion, but I can choose whether to at least try or not.
Plus I wasn't even teaching you in the first place, I was talking to MoneySIFU.
If MoneySIFU didn't complain anything, so what what basis do you campur your mouth?
As they say "Mind your own business".
Q: Posted by RUOutOfUrMind > Nov 17, 2016 08:02 AM | Report Abuse
Ezra_Investor, I will be so pleased to see you to remove your posts, you are making right move to rectify yourself. If you really want to teach people, do like what KC do, write more article to teach people, let those interested to be taught to read your articles(s).
A: You're wrong. I'm only removing it because I'm dishearten by people like you, not because I've made a mistake.
The reason why I never write an article is exactly because of people like you.
When you give people something good for free, they will never appreciate. So why should I?
I only like to teach selective and potential people who I like, just like moneySIFU.
Please stop talking. I'll stop here as well.
It's a waste of time to talk to you, as you keep on twisting my words and intentions.
And time is money. Time wasted is money wasted.
2016-11-17 13:23
Ezra bro,
Don't get dishearten and continue your great work. I find your writing and sharing one of the best in i3 without prejudice and not trying to promote stockpick. :D
2016-11-17 13:44
http://www.mtpma.org.my/index.php/statistic/2014-07-07-04-56-57
I monitor this closely
2016-11-17 14:45
I was not the one who started to calling people stupid, please check all comments.
You have said what you wanted to say & me too. Thank you.
2016-11-17 15:41
Ya... amount that can be written off is upto the cost of investment... unless MSC has given big loans and advances to the associate... or if MSC as lead shareholder is contractually obliged to provide financial support as in AirAsia
2016-11-17 16:42
Hi paperplane, do you know what is the meaning of turnover as indicated in the table?
------------------------------------------------
paperplane2016 http://www.mtpma.org.my/index.php/statistic/2014-07-07-04-56-57
I monitor this closely
17/11/2016 14:45
2016-11-17 17:10
now, RM400mil in value, if you to takeover whole company, and this company can give you cashflows 120mil, are you willing to takeover?
2016-11-18 08:39
The movement of tin price in the past has largely determined the results of MSC. Please view my working below for clearer picture
If the tin price was moving up, the company were making profit
If the tin price was moving down more than 4%, the company would likely make loss
http://klse.i3investor.com/files/my/blog/img/bl2510_msc_results_vs_tin_price_movement.jpg
2016-11-19 11:40
Tin Bull Market Extends Into Q4, Good News to MALAYSIA SMELTING CORPORATION?
http://klse.i3investor.com/blogs/moneymoney/109542.jsp
2016-11-22 15:25
Haha. Moneysifu, when you write this what was tHe price?? Is there near 20% gain Liao?
2016-11-25 22:06
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ronnietan
Latest Q 17 sen EPS. If it can sustain this level, or even higher, next couple of quarters, you'd have another winner in your portfolio.
Helpful if it'll re-instate a dividend this year.
2016-11-17 00:29