Dear Friends

THPLANT is bombed out and unwanted/unloved at 50.5 sen while KGB is now a hot stock recommended by Analysts

We shall take a look at both

1) THPLANT

See current qtr result

This qtr earned 1.5 sen

Annualised 1.5 x 4 = 6 sen

At 50.5 sen

its P/E is 8.41

If we assign P/E 10 it will be 60 sen

P/E 15 will be 90 sen

P/E 20 will be Rm1.20

In time past they assign P/E 25 to plantation

So the goal post has changed and might be changed again in future as market is not static

Look further

At 50.5 sen with NAV of 79 sen it is selling at a nice discount of 36%

This is better than 30% discount to NTA advocated by Ben Graham as a margin of safety

Now look at its balance sheet

(Refer Bursa website)

Current loan  Rm798,706,000

Non current loan Rm36,000

Total debt = Rm834.706 Millions

And cash Rm95,487,000

Other Invetments Rm15,801,000 & Rm1,825,000

Total cash/cash equivalents: Rm113,113,000

Debt less cash

=  Rm721,593,000

Now how to clear this debt?

Answers:

Two ways

1) By regular earnings from palm oil operations

This qtr profit is Rm17,553,000 profit after tax (PAX)

One year X 4 = Rm70.212 Millions a year

Now divides 

 Rm721,593,000 by Rm70,212,000

= 10.27 years

So at the current rate of income it will take 10.27 years to see THPLANT debt free

But look mare carefully again

Assets classified as held

for sale (Under Note 13)  Rm782,389,000

These are 7 Palm oil Estates in Sarawak held for sale at reserve price of 

Rm782.389 Millions

If these are sold then both its current and non current loans will be settled INSTANTLY (no need wait for 10 years)

it will be Rm782.389 Millions less Rm721,593,000

= Rm60.796 Millions

Of course we know Those Designed Rm782.389 Millions (Lands) Are Worth Far More

And the actual sale price will reveal its True Value

Now latest Qtr FFB is over 91,000 Tonnes

So we expect with High Cpo prices Rm3500 to Rm4200 Thplant should see accelerated real earnings

So Thplant has Huge Margin of Safety and over time we should see its Value go up by Assets Disposal as in Bplant (Bplant has 220,000 acre while  Thplant beats it at 240,000 acres)

It will also jump like a tiger like Jtiasa after its debts are cleared

Its 91,000 FFB now trailed Jtiasa at 131,000 tonnes

Given time Thplant should see more maturing Palm oil from its Vast 240,000 Acres (Jtiasa 206,000 acres)

This Thplant has Assets as low as Rm3K per acre in Sarawak to Rm5K per acre in Trengganu, Pahang, Johor, Sarawak & Sabah (FULL OF ASSETS VALUE)

240,000 ACRES is 1.35 X Spore Landsize of 177,000 Acres

At 50.5 sen it is totally bombed out and unwanted. Hence it attracts our attention

2) Kelington 

This Qtr earning 4.91 sen

Annualised 4.91 x 4

= 19.64 sen

At Rm1.88 

Its P/E is 9.57

Its P/E looks better than Thplant

But look at its NAV

it is 47.46

At Rm1.88 it is selling at Rm1.88 divides by 47.46 or 3.96 Times Book Value

Way too expensive unless its Earnings justify

Now look at its balance sheet (Refer Bursa)

Long term loans Rm56,160,000

Short term loans Rm160,071,000

Total debt Rm216,231,000

See Cash Rm190,062,000

Fixed deposit with bank Rm30,793,000

Total cash Rm220,855,000

Cash less debt = Rm4.624,000

About Rm4.63 Millions cash positive

Now look deeper

This qtr supposed to have earned 4.91 sen

Rm31.668 Millions (PAX) profit after tax

Where is the Money

To see that we look back to the CASH Acc of previous Qtr below

Inside the Balance sheet (last qtr)

Short term borrowings Rm140,828,000

Long term borrowngs Rm39,615,000

Total debt Rm180,443,000

See Cash

Cash and bank balances Rm149,342,000

Fixed deposit Rm30,380

Total cash/cash equivalent = Rm179,700,000

A net debt of Rm743,000

So here we see the actual cash earned QtoQ is only

Total debt less cash

=  RmRm4.63 & Rm743,000

= Rm5.37 Millions

But reported in Latest Qtr profit

Rm31.668 Millions?

Where is the Cash?

For that we look at Receivables Acc

Trade receivables Rm380,369,000 (Current qtr)

Trade receivables Rm321,366,000 (Previous Qtr)

So We See Profit has increased by Rm59 Millions

But they are NOT CASH BUT RECEIVABLE (OR IOU)

See definition of Receivables

What Are Accounts Receivable (AR)?

Accounts receivable (AR) are the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivable are listed on the balance sheet as a current asset. Any amount of money owed by customers for purchases made on credit is AR.

IN OTHER WORDS THEY ARE IOU (I OWE YOU) & NOT CASH

Now look at all past records of KGB

Again Please Refer to Bursa Webpage

KELINGTON GROUP BERHAD ("KGB")

[Company No. 199901026486 (501386-P)]

Statement of Financial Position

As at 30 June 2022

Trade receivables 321,366,000

Other receivables 85,460,000

Total (IOU) = Rm406.826 Millions

And all throughout June, Sept, Dec 2022, March 2023, June 2023 & Sept 2023

KELINGTON still sitting on RECEIVABLES (IOU)

KELINGTON GROUP BERHAD ("KGB")

[Company No. 199901026486 (501386-P)]

Statement of Financial Position

Trade receivables Rm380,369,000 

Other receivables Rm81,408,000

Total IOU = Rm461.777 Millions (IOU)

After 15 months we SEE IOU Gone up

And Cash Account only a small Rm5 Millions Surplus

See Further

Contract liabilities Rm255,820,000

Trade payables Rm188,949,000

Other payables Rm62,426,000

Due for payment = Rm507.195 Millions

(More than 1/2 Billion Ringgit due for payment?

Is there any assets for sale just in cash cash needed?

We do not see any Assets (No Property is listed in KGB AR)

So?

Only way is to Collect Receivable

Or get bank loan

Or Give Out Private Placement at Discount

All else failed then Give Rights Issue to ask for monies

All these are yet future

In any case we will know in time to come

IF KGB can get its IOU in on time then should be OK

If not then just be careful

Best Regards

Calvin Tan

Please buy/sell after doing your own due diligence or consult your Remisier/Fund Manager

Below are extracts from Past Quarterly Reports of KGB

KELINGTON GROUP BERHAD ("KGB")

[Company No. 199901026486 (501386-P)]

Statement of Profit or Loss and Other Comprehensive Income

For The 2nd Quarter Ended 30 June 2022

Trade receivables Rm325,044,000

Other receivables Rm37,469,000

Total Receivables or IOU = Rm382.513 Millions

 The 3rd Quarter Ended 30 September 2022

Trade receivables Rm343,453,000

Other receivables Rm68,075,000

Total IOU = Rm411.528 Millions

 31 December 2022

Trade receivables Rm384,641,000

Other receivable Rm80,805,000

Total IOU: Rm465.446 Millions

 31 March 2023

Trade receivables Rm334,890,000

Other receivables Rm102,703,000

Total IOU : Rm437.593 Millions

30 June 2023

Trade receivables Rm321,366,000

Other receivables Rm85,460,000

Total IOU: Rm406.826 Millions

d Quarter Ended 30 September 2023

Trade receivables Rm380,369,000

Other receivables Rm81,049,000

Total IOU : Rm461.418 Millions

Above shows persistent delay of Full Payments for Work Done by many quarters

How much of these sums will turn into bad debt?