Mr Steve Ong. Your target price is RM3.50. CIMB small cap king Nigel Foo has target price for Signature at RM4.23. Signature is a bargain!

Thank you Mr Koon for sharing and all your charitable works.

Mr ONG. CIMB issued a report on Signature today calling an Add.

CIMB
8 April 2015
Malaysia
Company Flash Note
Signature International | PDF
The signs are here
SIGN MK / SGNA.KL | ADD - Maintained | RM2.25 tp:RM4.23
Mkt.Cap:US$74.19m | Avg.Daily Vol:US$0.25m | Free Float:41.00%
Construction | Author(s): Nigel FOO +60 (3) 2261 9069,
▊ Signature International was one of the top small-cap gainers in Mar, up 14.7% mom (FBMSC was down 2% mom). Even after the recent rally, the stock’s valuation is still attractive at only 6x 2016 P/E, with a 5-6% dividend yield. We maintain our EPS forecasts and target price, based on an unchanged 30% discount to SOP (to reflect its small cap and tight trading liquidity). Securing major jobs and expanding profit margins are potential re-rating catalysts for the stock. Signature remains an Add.

What Happened
Among our small-cap universe, Signature International was one of the major outperformers in Mar, with its share price up 14.7% mom compared to FBMSC’s 2% decline and KLCI’s 0.4% gain during the month. Other major small-cap gainers in Mar included GHL, HeveaBoard and MyEG.

What We Think
We believe Signature’s strong share performance since the start of the year (share price up 21% YTD) was mainly driven by two factors: i) Rising quarterly net profit (refer to Figure 2). 2QFY15 net profit was RM9.1m (after excluding RM3m in provision write-backs) compared to only RM2.9m in 2QFY14 as its order book continued to grow. Signature’s kitchen system production and installation only start when the main contractor completes its job, usually three years after a property is sold. As such, Signature’s current revenue and order book comes from property sales in 2011/2012. The outstanding order book is consistently above RM200m. As the domestic property market peaked in 2014, we expect Signature’s earnings to only peak in FY2017/18. ii) Higher free float. Signature’s free float has improved by around 11% to around 41% currently as one of its major shareholders, HSC Healthcare S/B, has reduced its stake in the company from 20.9% to 9.1%. We view HSC’s selldown in Signature as positive as it has helped improved the stock’s liquidity. In the past, institutional investors had complained about Signature’s lack of trading liquidity. Average daily trading volume in Signature shares in Feb-Mar was 0.67m compared to only 0.01m in Jan

CIMB issued a report on Signature a couple of hours ago:


Signature International | PDF
The signs are here
SIGN MK / SGNA.KL | ADD - Maintained | RM2.25 tp:RM4.23
Mkt.Cap:US$74.19m | Avg.Daily Vol:US$0.25m | Free Float:41.00%
Construction | Author(s): Nigel FOO +60 (3) 2261 9069,
▊ Signature International was one of the top small-cap gainers in Mar, up 14.7% mom (FBMSC was down 2% mom). Even after the recent rally, the stock’s valuation is still attractive at only 6x 2016 P/E, with a 5-6% dividend yield. We maintain our EPS forecasts and target price, based on an unchanged 30% discount to SOP (to reflect its small cap and tight trading liquidity). Securing major jobs and expanding profit margins are potential re-rating catalysts for the stock. Signature remains an Add.

Can anyone verify the unsubstantiated news of controlling shareholders selling their 60% stake?

Icon8888. Well said. You sound like Clint Eastwood in Dirty Harry. You're the man!

CIMB's target price for Signature is RM4.23. There is an 88% upside.

There could be something big brewing in Signature. CIMB values the share at RM4.10.

It closed strongly today at RM1.93 on high volume.

Aberdeen is accumulating Oriental Holdings because the business is well managed and has a very strong balance sheet. Aberdeen is buying a business for RM7/share that is worth RM25/share. It may not be an exciting investment but Aberdeen has a superb track record in long term investment.

LTKM is definitely attractive buy below RM5.50.

Can shareholders vote to change fund manager ?

Are shareholders allowed to vote for a change in fund manager?

Good article on Freight in this week's Edge. Well managed company which has been profitable since listing in 2005.

This is the investment that will grow by 15-20% per year.

Big boss of Zelan married last month.

Big ang pow for shareholders?

Why would IJM want to privatise K Euro when it diluted its controlling stake by issuing new shares to MWE and the Pang brothers of Mamee?

Hi KC. Thank you for the great postings & honesty.

Signature reported very good results yesterday. Share price went up about 3sen today. CIMB target price is RM2.68.

Success Transformer is consistently outperforming but zero analyst coverage.

There is little fund ownership.

PER of 6.5x. It has consistently been profitable ever since it was listed 10 years ago.

GBH will be transformed into one of the most admired oil & gas companies in Asia. RM3-4 no problem.

Heng 611 is right. We cannot continue to have a low cost (and salary) structure.

Malaysia is attracting the wrong mix of businesses. Low value added contract manufacturing.

We must reduce the flow of lowly paid foreign workers. Improve our education system.

Success Transformer trading at 6X historical earnings.

Its industrial lighting manufacturing business in China is growing at 25% p.a.

Dear Mr Koon,

There are many Singaporeans, Thais, Filipinos, Chinese, etc who have emigrated in addition to Malaysians.

But you are right in stating that Malaysia has tremendous potential.

Success Transformer has the potential to grow 200-300% over the next few years. The land in Rawang alone is worth RM200mil if revalued at RM60 per sq ft.

Sarawak Cable will have a near monopoly on power & telecom cable manufacturing in Malaysia

You are right. Success very undervalued. PER of 6x. RNAV is RM3.

Delloyd share is worth RM15 according to KiniBiz.

Mr. Calvin. You are right. We did a study on Daiman a couple of days ago. The fair value is about RM10 per share. A lot of upside still.

Thank you.

Mr. Chong. An excellent analysis. Thank you.

Investment guru Alpha Chart bought Success Transformer on 29 April.



Alpha Chart
Think Risk then Profit
Apr 29, 2014

Signature... A Bearish Beginning?
ShareThisAmidst a bearish market, I find the indiscriminate selling amongst some penny stocks, an opportunity to buy into the market...and this marks the beginning of the Signature portfolio.

This portfolio has an investment amount of RM500,000 and let's just take 1 May 2014 as the commencement date for easy reference as we are so very near the end of April.

I utilized 17%, amounting to RM86,100, of the funds and bought into Hovid-WB and Success.


I find the current indiscriminate selling unjust and offer good entry into quality stocks.
at 7:44 PM

Totally agree with Mr Brent. Freight Management is an excellent company. Well managed with steady profit growth for the past ten years. Fairly low PER and 16% profit growth for the past 5 years.

The rights issue which was announced in mid 2013 is big 3 for 4 (rights price not set yet). Best prepare financing.

Mr Vegebotak. My (small) portfolio is up 470% since 2009. I'm living my dream! Little trading; all acquisitions on fundamental analysis. Hohoho.

Success Transformer closed at RM1.53 on Friday. Smashing the 5 year high. It is still trading at a steep discount to NTA and RNAV.

RNAV is estimated to be RM2.60.

Is the delay in implementing the rights issue a cause for concern? A red flag for K Euro?

CIMB top 3 small mid cap stock pick for 2014. Target price of RM2.40. CIMB has incredible track record of small mid cap winning stocks. MyEG, Prestariang, Bonia, Perdana, etc.

Mr Chong. You are indeed right on the PER of 18x for Boilermech. HLG in its recent report has PER of 24x for FY15F.

The business moat that Boilermech has is that its biomass boilers are in high demand that customers to have pay a percentage deposit upfront before Boilermech commences manufacturing. Boilermech will bill the customer progressively.

Success Transformer manufactures low voltage transformers and industrial lighting. Its products are mainly for the export market (50%). Trading at a trailing PE of 6x and price to book of 0.6x, it is below the radar of many funds. It has a 60% stake in oil & gas fabricator Seremban Engineering.

Khee San is one of the largest and most established sweet manufacturers in Malaysia. It has a market cap of RM50mil. Trailing PER is 12x. Price to book is a steal at 0.6x. The land on which its factory is located on the outskirts of KL is worth about RM40-50mil. It is located a couple of km from Sunsuria's major project.

Boilermech's ROE is 32%. Has net cash position of 35sen per share. PER of 18x looks attractive.

The gem that London Biscuit has is its 32% associate Khee San. Khee San is the largest manufacturer & distributor of confectionery and sweets in Malaysia.

It is trading at a PER of 13x based on the earnings of the latest quarter. The market cap is ridiculously low at RM45mil.

Financial management leaves a lot to be desired. Balance sheet is below average.

The factory is sitting on a gold mine. The market price of the factory land is RM40-50mil. Will not be surprised if Khee San relocates it factory and sell the land. It has other landed properties worth RM8-10mil.

Khee San is worth RM1-1.20 per share.

Padini has a strong balance sheet but from my observation, the number of people shopping in Vincci has fallen to a few people.

The outlets used to be packed. The shoppers have moved to Uniqlo & H&M.

I do not approve Optimus 2 language but he has a valid point. Mr Koon should perhaps promote a stock before he buys or has a position in a listed company.

Mr Koon is a highly respected philanthropist.

Khee San looks great. Steep discount to NTA

Success is the type of business that is under appreciated. It should be taken private at NTA of RM1.85. It has land in Kora Damansara that was bought at RM2 psf.

Low earnings multiple and deep in the money, major shareholder who owns 65% of the shares should take it private.

It is understandable that a high growth company will need to conserve cash; hence the low dividend payout of 30-40%. Mature companies invariably have a high payout ratio. In many instances, leveraging its balance sheet to boost ROE.

Signature is not a furniture manufacturer as it outsources the low margin manufacturing function. A model used by Apple and Nike. When its brands gain traction in large developed markets, the top line is expected to grow exponentially. The business model is highly scalable.

Earnings growth is expected to be 25-35% over the next couple of years.

Suria operates 8 ports in Sabah.. It has a market cap of RM750mil compared to Westports RM12bil. Westport operates a busy container port and Suria smaller regional ports. The potential over the next few years is tremendous. The moat is amazing.

It is trading below NTA. The kicker in share price will be developing the prime land it owns around its ports which it has recently entered into a JV with an established property developer.

Freight Management has been reporting a profit every year since it was listed.

It is one of the best managed logistic companies in the Asean region. It has this asset light model, initially pointed out by investment guru Mr KC Chong.

Prestariang is a very interesting company as it has managed to secure contracts to provide training to government and quasi- government agencies at attractive terms.

It is like UEM in the 90s without the high capex. The share price is trading at a decent discount to fair value.