Hi Calvin,
Just to highlight the standard practice for gross profit margin formula- denominator is revenue, not cost.

Hi Value Invest,
Thanks for sharing your investment thought.
The first criteria I look at is consistent free cash flow, follow by ROE and net profit margin, next is gearing level. Asset backing is just a comfort to me, never a main criteria.

yes, you are right, many property companies are at huge discount to RNAV, not just on Bursa, HKEX has many reputable developers on big discount too.

Hi Calvin,
Thanks for your posting of TSH valuation. I am overwhelmed by your valuation methodology and analogy.

Just to highlight some comment you made which I believe may not be accurate:-
1. When cash is used to acquire asset, this does not increase NTA of the company. It merely involves transfer of short term asset to long term asset in Balance Sheet. NTA remained the same.
2. Your statement "Not forgetting that the extra Rm52.25 Millions palm oil purchased are from highly fruitful matured trees which will boost earnings further."

This statement is not very accurate as the Rm52.25 mil purchase was on palm oil estate under JV, which Jtiasa has already accounted for under JV results. The rationale of the acquisition stated by management was to secure the estate before Jtiasa carry out replanting on this estate which it has no control. The financial impact from the acquisition was not disclosed, which I guess is very minimal. After all, it could just be a cash out from this estate by controlling shareholder. 

Hi Value Invest,
I would yhink which is a better pick depend on what is our objective, dividend vs capital gain..of course dividend appears more reliable than capital gain which is subject to market forces.

If we do a quick comparison on these few metrics,
1. Efficiency - net profit margin %, ROE
2. Cheapness - Market Cap / Free Cash Flow
3. Asset quality - yield per acre

JTiasa appears to be the winner among Taann, SOP and SWK Plant but lacking in terms of dividend yield ( as compared to Taann). When Jtiasa catch up on dividend payout, then it will be an obvious overall winner. Let's see if the one in control has this intention .


Hi Calvin,
I am still waiting for your article to support your suggestion on why TSH is more undervalued than Jtiasa that you mentioned not too long ago :)

Hi Calvin, do you mind sharing how you arrive at the conclusion that TSH is more undervalued than Jaya Tiasa? Other than price movement from the point you bought these stocks.

I really hope so and this RPT transaction may not be at the expense of MI as no sufficient details were provided. After all, JTH is super cash generator which may turn out to be a very yield dividend stock.

I see this RPT as a form of pay back to related party to make up for not being able to enjoy fully the high CPO price towards end 2021 and beginning 2022. Furthermore, they control 55% WHD vs less than 40% JTH.
The rationale provided in the announcement is to secure the land rights before Erajaya carry out the replanting( I believe most trees are over 15 years as the JV was signed in 2004) over the next 3 years, which requires Rm44 mil. The financials of WHD for last 3 years revealed that it has not enjoyed any upside from CPO price increase, hence, I assume the JV has benefited Erajaya mostly as Erajaya was investing in the infra as well as planting of trees. ( Announcement did highlight that there is no material impact to JTH’s EPS in FYE 24 for this transaction indirectly confirm the benefits to JTH will not change much after the transaction, except Rm52 million less in the bank).
What I see lacking is no financials were provided as to how much Erajaya was enjoying, at least over the last few years under JV with WHD. Only with such information investors would be able to evaluate whether the price tag of Rm52.25 mil for 55% equity in WHD (with 5967 hectares land) work out to Rm6,443 per acre and with some liabilities in the company too, is a fair transaction.
As a shareholder, I just wish this is not the beginning of a series of RPT that will take non controlling shareholders for a ride. I am watching closely if Subur Tiasa is the next RPT candidate.

he is acting like a moderator. He makes sure it doesn't go up too fast or drop too much LOL

@Shootup -can investors sue serba for mismanagement to get back capital now before it goes to 1sen after suspension removal?

There was a recent court decision but in China, may be good reference.

https://chinaeconomicreview.com/kangmei-ordered-to-make-385m-in-compensation-payments/

Only when management is proven to have fabricated the fraud, then there is a case.
The biggest difference between Serba and this China Company is whether Serba has cash to pay even though investors succeed in the case and get a similar court order.

I am of the view that 3A is ready for a re rating if the revenue and profit continue for next 2 quarters. PE expansion from historical 8 to 12 times is justifiable as the company has shown revenue growth, better profit margin and growing dividend. In addition, capacity expansion and operational efficiency improvement are still on going. Having said that, short term share price movement is still influenced by TKH.

@observatory - "The knowledge gained in the process will be my biggest reward."

Totally agree with you, that is valuable in investing journey as it will sharpen our skills and thought process in evaluating the merits of corporate decision by management.

@observatory, thanks for sharing the Apollo's article.
Scientex may be considering clause 4.5 (b) now : )

@observatory, dragon328. You are most welcome. We are doing our part to provide more info and view to fellow shareholders, with the hope of helping all of us to evaluate whether this offer is fair .

Extract from the Notice of Offer:-

4.5 Duration of the Offer

(a) Original duration
Provided that the Offeror does not withdraw the Offer with the SC's prior written approval and every person is released from any obligation incurred under the Offer, the Offer will remain open for acceptance from the Posting Date for a period of not less than 21 days ("First Closing Date") or such later date(s) as UOBKH may announce, on behalf of the Offeror ("Closing Date").

(b) Revision of the Offer
Pursuant to paragraph 12.03 of the Rules, if the Offer is revised after the Posting Date, the Offeror will:-
(i) announce such revision together with the following information:-
(aa) the revised offer price; and
(bb) the price paid or agreed to be paid and the number of voting shares or voting rights purchased or agreed to be purchased, which lead to the revision;
(ii) post the written notification of the revised take-over offer to all Holders, including all the Holders who have previously accepted the Offer, no later than the 46th day from the date of the Offer Document; and keep the Offer open for acceptance for a period of at least another 14
days from the date of posting of the written notification of the revised take-over offer to all Holders.

( iii)

Where any of the terms of the Offer are revised, Holders who have previously accepted the Offer shall also be entitled to receive the revised consideration that is to be paid or provided for the acceptance of the Offer. The Offer may not be revised after the 46th day from the Posting Date

I am eager to see whether the coming quarterly results will have more one off or non recurring items to cloud the fair value of the company as lock down provides the excuse needed to reflect a not so rosy picture. I could not imagine how any offeror, in the midst of any privatization offer, would like to paint it otherwise...just my evil thought : )

@Observatory, I see both yourself and Dragon328 have been providing valuable comments and perspective in this forum, which has served the purpose of providing relevant information for minority shareholders to evaluate the fairness of the offer. I am holding on to my shares and also of the same opinion as you, the worst could just be forced to sell at 2.70 in the event of compulsory acquisition.

YOCB looks like a potential privatization counter with almost 70% market cap in cash and stable cash generating business with minimum capex requirements.

Yes, deep pocket investor could make the difference.

https://www.thestar.com.my/business/business-news/2014/08/23/dr-yu-im-a-longterm-investor-in-hlcap

3 possible scenarios as mentioned by CGS-CIMB in FGV case.

Following Felda’s failed attempt to take FGV private, CGS-CIMB Research expects three potential scenarios to take place.

One scenario could lead to FGV requesting Bursa Securities to accept a lower percentage public spread if it is satisfied that such a lower percentage is sufficient for a liquid market in such shares.

Bursa Malaysia requires a public shareholding spread of 25% compared to 14.01% in FGV currently.

Meanwhile, the second scenario could result in FGV requesting an extension of time to rectify the situation, the research house said.

“The third scenario is that FGV could request to withdraw its listing from the official list if it convenes a general meeting to obtain its shareholders’ approval and successfully passed the resolution which requires 75% of the total number of issued securities held by the shareholders present and voting either in person or by proxy and the number of votes cast against the resolution is not more than 10%, ” it added.

MI's 10% still crucial in third scenario.

If any 2 of these 3 funds.. Appollo Asia fund, Samarang Asian prosperity fund, Public Islamic fund, do not accept the offer, privatization is out as any 2 combined already hold more than 10%, but this exercise is not conditional upon any minimum acceptance. So even if Scientex can acquire 20% at 2.70, thats a good deal for Scientex to get this 20% relatively cheap. My guess is Scientex just want to collect as much as it can at 2.70, knowing this offer price is not attractive enough to get to 90% threshold to make compulsory acquisition.

Lets try to put up a fight for higher offer price :)

@focusinvesting, thanks for working out some value estimates. If you take the latest 9 months results to rework the estimates, it will be higher than the Rm1.87 fair value in your estimate. Anyway, I would say this is a safe bet at current price of around Rm1.1. Don't take my words because I have vested interest :)

Cash reserve building up fast and valuation looks attractive from PE(less than 7) and PB(less than 0.7) perspective. That is because it has been a low growth company, management seems highly conservative resulting in low PE all this while. Stable dividend(4 to 5% pa) but not much capital appreciation unless market willing to expand its PE to double digit on better prospect ahead where FY21 likely to achieve record profit.

The other way to look at it... Based on past PE of 25, kossan normalised annual profit is assumed at less than 400 million at current price. Is that too pessimistic or fair?

@Fabien, only on matters he is abstained from voting or if there is privatization and minority of more than 10% put up the fight collectively, other than these, I think cant stop any action by the big man.

Short term material cost pressure but long term growth intact as sustainable FPP starts to gain acceptance by MNCs.

Ex dividend price not update in system yet?

@Johnzhang, i will give more thought to the matter first. In the meantime, you can reach me at my blog if you wish to discuss further.

@Johnzhang, Agree with your view. That's the weakness of minorities, fragmented and hard to get collective action. Unless and until there is a perceived champion to lead, not easy to have meaningful impact.

@Investor, dont think YMCJ will object if HLI propose more dividend from HLYM, then HLI can give more to its shareholders. I still think the wealthy boss not so willing to share with minority. Generosity is with the heart, not the wealth. If there is a heart, there is a way :)

@observatory, the probelm is the person who can make the decision does not face minority shareholders in AGM, its his generals that look helpless and give excuses in the AGM.

Very poor resources management. If could not find good investment opportunity, still many ways to utilise part of the cash to enhance shareholders value eg special dividend or share buy back

Disclosure in 2019 AR stated FD n cash with related company. Similar to Panamy, huge cash placed with related company at miserable rate.

@Joo1818 Agreed with you on miserable interest income when cash is so much, i suspect it provides cheap cash resource to Hong Leong Bank :(

https://m-bagger.blogspot.com/2020/12/daibochi-long-term-sustainable-growth.html

https://m-bagger.blogspot.com/2020/11/hong-leong-industries-what-is-plan.html

If yiu hv 3 existing shares, on completion of the exercise, you will have
6 shares + 2 warrants.

About 16 mil now as 19 Oct disposed another 1.77 mil.
It seems that Samarang is quite desperate to sell down further. With not much buying support, price can come down fast. If you see the long term prospect of Daibochi is bright, this will be a good opportunity to accumulate whenever Samarang get more desperate.

Samarang as of yesterday left with 4.99%, from now on it plays hiding game.

After last Friday disposal, it still has 5.5%. I believe after today disposal will only left with less than 5% (tomorrow announcement should confirm this). Less than 5% no longer substantial shareholder, no more disclosure required when sell further.

Depend on when Samarang stop selling Daibochi or stop buying Coastal, Latitude and Chinwell..my guess.

It just continue with the service by Rhb islamic but with higher fee. The existing 10 yr agreement expiring on 31 July, fee was Rm100 million. Now another 5 yr for Rm145 million.

@Gemstar, thanks for the good effort. Getting different views and feedback will allow us to learn together. But I have some reservation on the assumptions and generally agree with Observatory's comments on initial FCF and FCF growth assumption (looking at past years average FCF, 500 mil is definitely on the very high side). For me, 300 to 400 mil would be a more reasonable range.

What contribute to the growth assumption? If it is motorcycle sales, which is a durable consumer goods, what drive it? Population growth or inflation? Dont think can derive growth from building materials unit.

There is one area you may want to rethink again in your IV calculation...Has the Non Controlling Interest (or Minority Interest as I, the old timer used to know it in the past) been factored in? If we look at the Income statement and Balance sheet, this NCI is rather substantial.

Anyway, IV is a just an indicator as there are too many variables and assumptions in the model.
BUt one thing is sure, it has lots of cash and is a strong cash generator with minimum CAPEX.

My limited understanding on impact of MFRS 16 on financial statements are slightly different.
Yes, income statement will have impact as lease rental and depreciation amount are not the same. Balance sheet definitely is affected with inclusion of asset as well as liability.
On cashflow statement, other than including it at different sections- operating vs financing, there is no difference at end results as cash balance in bank could not be changed due to accounting method.
Hope experts in this area could provide further clarification or confirmation.

Dont really agree with item 3 on Dividend growth calculation. Dividend per share as well as payout ratio are equally important measures other than total dividend paid.

Company can increase total dividend by increasing payout ratio without profit growth.
Similarly, total dividend paid can go up but dividend per share keep dropping due to private placement or rights issues.
Total dividend alone is not enough to measure real dividend growth.

I think top line growth will still be strong but bottom line depend on the success of its RTE products.
Top 30 shareholders control 90% and most of them need not announce change in shareholdings as its below the 5% threshold. If the recent selldown not by one or few of the fund, who else has so much shares to sell? Not forgetting most of them came in since IPO, meaning their cost is only 55 sen. I believe the selldown is due to expectation of slower or negative growth in bottom line after the not so encouraging results in last 2 quarters.
Worth keeping eye on this stock but may be too early to enter now...my 2 cents.

Will SC allow that?

I am puzzled why the internal reorganisation and transfer of listing is not conditional upon SOA, imagine if SOA is rejected, does it mean warrant holders will then hold unlisted warrant in a shelf company?