https://www.theedgemarkets.com/article/perodua-taps-ridehailing-ridesharing-market-first-sale-1000car-fleet

Hi,

What happen to the legal issue between Splash and Syabas (now under Selangor State)?
Will they need to settle this first before any water deal can be completed?

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5752417

Thx

Most analysts (Hong Leong, Kenanga, MIDF, TA securities etc) view the offer price of RM2.56 as unattractive. I am sure that the price has already been agreed with med bumikar and PNB Equity Resources even before the announcement was made last Friday.
PNB is actually the major shareholder of UMW anyway, this could also be seen as a restructuring of PNB holdings in Perodua to be put all in UMW. Better corporate structure for PNB and at the same time help increase the value of UMW.
I think the main question is how much do UMW want MBMR (all to themselves). As i mentioned earlier in my previous comments, anything below the NTA of MBMR (RM3.68) is actually attractive for UMW. But i don't think we can expect UMW to increase their offer to that price.
But i think it would be fairer to the minorities (EPF especially) that has stayed invested in the company during the past 2 years, when ringgit has depreciated and sales deteriorate, to be fairly compensated at valuation of at least 1x book value of their holdings in Perodua (since that is actually the main reason as to why UMW is acquiring MBMR) which is something in the range on RM2.80.

What's your view?

Thx

Guys,

Extract from a legal website on the privatisation regulation of a listed company:

De-listing
22. What action is required to de-list a company?
The target is allowed to de-list where a takeover offer has resulted in 90% or more of the listed shares being held by the bidder or its PACs. However, in cases where the bidder and its PACs do not hold 90% or more of the listed shares, the target is only permitted to request de-listing where:
The target convenes a general meeting to obtain approval from its shareholders and sends a circular, in the prescribed form, to the shareholders. A separate meeting and circular may be necessary for holders of any other class of listed securities.
The resolution for withdrawal is approved by a majority in number representing 75% of the value of the shareholders (and holders of any other class of listed securities) present and voting either in person or by proxy at the meeting. The proportion of shareholders or holders of other classes of listed securities objecting to the withdrawal at the meeting must not be more than 10% in value.
The shareholders (and holders of other classes of listed securities) are offered a reasonable cash alternative or other reasonable alternative for their shares (exit offer).
An independent adviser has been appointed to advise and make recommendations to the shareholders (and holders of other classes of listed securities) in connection with the de-listing as well as the fairness and reasonableness of the exit offer.
If the bidder has achieved acceptances rendering the offer unconditional, but falls short of the compulsory purchase threshold, the bidder will have to launch a second takeover offer to satisfy the exit offer requirement (see Question 20, Compulsory purchase of minority shareholdings).

website:
https://uk.practicallaw.thomsonreuters.com/0-502-1894?transitionType=Default&contextData=(sc.Default)

Summary:
1) to take private MBMR, UMW will need 90% interest.
2) if not, have to do a general meeting and get 75% voting rights to take it private. AND not more than 10% of the shareholders reject the privatisation proposal.

Thx

Hi hafid,

Yup. There is always the possibility that it will go thru.

I think for umw the main offer that will need to go through is the current offer to med bumikar (control 50.1% of mbmr). Once they have gotten the majority interest in mbmr, they can consolodate both the income statement and balance sheet into umw financials (however with high non controlling interest portion).

At the same time they will also get majority position in perodua with a total of 59% int (upon completion of pnb equity resources 10% in perodua as well as the int held by mbmr).

Then umw will need to make a decision on whether they want to have mbmr as a listed entity or not. They will need to acquire at least 90% interest (i think, appreciate if someone could confirm this) for them to take mbmr private. For me, anything below the nta (rm3.68) makes sence for umw as it will be a value accreative transaction. And the nta is expected to only go up as long as perodua makes profit (which is most likely the case). Umw is currently trading at 2.2x their NTA.

Anyway for the minorities, if the deal with med bumikar goes through, the min price for the shares that they are holding will be rm2.56. If umw really wants mbmr for themselves, minorities might get a better deal than what is being offered at the moment.

Appreciate any comments.

Thanks.

Hi lau,

I am also not sure if the other minorities would accept their low offer. Take epf for example, they have been an investor of mbmr even before 2016 when the share price was traded above rm2.60 (at least since 2012 and most of the time it was higher than rm3.) It was only in 2016 that the share price actually go below rm2.60 level. And given the better prospect of perodua at the moment due to the strengthening of ringgit as well as introduction of new car models (myvi and the new suv expected in 4q18) i can only assume that mbmr financials will only get better. Even the alloy wheel business are showing good growth with breakeven targetted somtime in 2019.

I am not sure that epf would want to divest their stake now with an offer price that really do not take into account the better prospect of MBMR.

I am sure the independent advisor would say that this deal is not fair and not reasonable for the minorities of mbmr.

How much would umw needs for it to take mbmr private? Is it 90%? Hopefully they can revised their offer price if the feedback from minorities are not that great..

What do u think?

Thx

Hi gsi,

Agree with u on the offer being too low. At rm2.56, it only represent 70% of the company's total book value of 3.68.
At least they should have offer something that is near to the book value of mbmr 22.6% in perodua. End of financial year 2016 it was rm1.1b or rm2.80 per share. End of 2017, should be higher.

So agreed that the offer should have been around rm3 for it to be reasonable.

Hi lau,

Umw does not want to maintain the listing status of mbmr actually.
Please refer to the announcement made by umw holdings. Page 1

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5719957

Thx

Hi mr pauper,
The MGO will be the same offer as the one made to Med Bumikar. So it will still be RM2.56.

Refer to page 4 of the announcement.


http://www.bursamalaysia.com/market/listed-companies/company-announcements/5720041

Hi maclin,

Warrant is expiring on the 21st Nov. So most probably all warrant holders have started to convert their warrants to mother shares. In general, it would take 2-3 weeks for the conversion to be completed.

1Q17 profit of RM21.2m is lower than last year even after taking out the one off gain in 1Q16. Profit for 1Q16 would have been ~RM26m if we exclude the RM91m gain from disposal of Templar land to SP Setia.

Quite disappointed with management on the King Koil business. KPS paid RM116m (for 60% stake) and the business only managed to contribute RM0.5m to the group. They could have used the money better like paying shareholders more dividend....

If we take out Splash contribution (of which the group is expected to dispose off), the result would have been negative...Hopefully when the disposal happens, they will be more cautious on how they will used the money...

wow no buyer....:(

Hi guys,

I know now why people are not buying the N2N-Wa.

Some trading platform like Maybank Investment is saying that the exercise price is RM0.32. Given the warrant is currently trading at 37sen per share, this would translate to a discount of more than 10% compared to the mother share.

But after having verified at bursa (refer to: http://www.bursamalaysia.com/market/listed-companies/company-announcements/3635625), the real exercise price is actually RM0.45. There is a step up clause on the exercise price every year. As of 9th Apr 2016 the exercise price is now 45 sens and not 32 sens.

Thanks....

Hi,

Just wanted to know, why don't people buy the N2N-Wa instead? Currently it is trading at 40 sen. The conversion is only 32 sens. Meaning you will get a share of 72 sens which is a 6.5 sens discount to the mother....

Thx

Hi Xxxvalue,

Why do you think that the first scenario is unlikely? From my understanding Gamuda and Tan Sri Wan Azmi (of Sweet Water Alliance) are unlikely to want to dispose Splash if the price is to low compared to the Book value. This will result to a loss of disposal in their P&L which might effect some of the debt covenants of the companies (Gamuda in particular).
I also don't think Gamuda will get the shareholders vote if they decides to dispose it at a much lower price to the book value. Maybe you could share with us your thesis?

The second scenario is actually given. Basically it is the current recurring profit of the company. Not sure what you mean as it being unlikely. Maybe you believe that the businesses under KPS will record lower profit? If so, maybe you can explain a bit further.

Appreciate your input. Thanks

morning guys,

I can't comment on the share price movement (not a technical chart expert) but in terms of fundamental, i think this stock is highly undervalue.

Here is the 2 scenarios to why i think it is undervalue:

1) Assuming that the splash deal would go through @ around 1xBV, which values Splash at around RM2.8bil (this is of end 2015. It should be around RM3.1 bil given the earning that splash will be generating for 2016), this would translate to around RM840mil cash for KPS or RM1.68 per share. That's already 30% above current market price. This does not include the other profitable businesses like Sprint, NGC Energy, King Koil, Aqua Flo, Century Bond etc.

2) Assuming the deal will be delayed. KPS is generating a steady PAT of around RM110mil (at least) from their current business (Splash, Sprint, NGC Energy, King Koil, Aqua Flo etc). Adding the 15 mil from Century Bond PAT, total recurring PAT is expected to be around RM125mil/ year. At current market cap, this will only translate to a PE of 5.1x which i think is relatively low...

Feel free to comment. Would like to get your views on this. Thanks.

Gooooo red bulll!!!!

Good result. :)

Hi guys,

Just wanna to check on smthg. Is the chart forming a cup and handle pattern? . A friend made a remark on this. I normally focus on fundamentals. Not an expert in tech analysis.
Appreciate your input. Thx

Hi tiny,

Deadline set by fed govt is on the 7th oct. If the deal is not finalise by then the fed govt will step in by either invoking Wasia (which i think would be the last thing they want to do at the moment given the weak market sentiment) or facilitate the deal by funding the valuation gap between selangor and splash ( as per what had been done with the puncak deal).

Hi tiny,

Depends on the valuation that they will get. Currently gamuda and tan sri wan azmi are asking for at least 1xBV which translate to a valuation of rm3.1bil. with 30% interest in splash, kps portion is valued @ rm930mil or around rm1.86/share. Splash is generating steady PAT of at least rm300mil per year (or around rm100mil for kps)

@ the current price kps is only trading @ 5xPE which is very low. You will see going forward that the company will post quarterly PAT of at least rm25m to 30m given that the other assets in its portfolio is also turning around (highway , hospitality etc).

Why the sudden gap down?

IJM aborted the deal in 2014 because Silk could not get the approval from the sukuk holders (Affin Hwang) to do a refinancing exercise.

I believe, Tengku Uzir would only want this highway if WZ could refinance the sukuk.

The highway is actually a good asset to have given the traffic growth that it can offer in the future via the current and future property development projects near the area (MKH, Naza, Tropicana, Sime Darby etc).

In terms of financials, the highway is turning around and offer a steady cash flow which is mainly contributed by the growth in traffic as well as the recent toll rate hike back in Oct 2015.

That being said, the issue with this assets is actually link to its debt/ sukuk. If you refer to Silk Holdings 2015 audited account (page 59), you will see that the sukuk Mudharabah link to the highway carries a very high interest rate of 8%.

That is why the main catalyst for the assets is actually the refinancing of the Sukuk to a rate that is more acceptable with the current market condition (around 4%). If this were to happened, it will translate to a finance cost savings of around RM26mil which will go straight to the bottom line.

As of 1Q16 the highway recorded a lost of around -RM2.8 mil of which if we were extrapolate, will translate to a loss of -RM11.2mil. This would mean that if the shareholders can refinance the sukuk,at the current traffic rate the highway would be automatically profitable by RM15mil.

Do we have information on the charter rate??

Just notice that there are no malaysian institutional investors in Gkent (Epf, kwap, asb, tabung haji etc). Must be due to the limited coverage by market analysts.

A coverage by any big investment banks like maybank or cimb will most likely spur up more interest from these large investors which hopefully can push up the price.

Hopefully by continously delivering profit growth, some analysts from these banks will take notice of gkent potentials.

Hi Arvin,

Currently the negotiation is still between selangor state and shareholder of splash. Government has given a deadline of 7th oct for the 2 parties to conclude the sale. Upon deadline the fed will step in. The 2 possibilities is to either invoke wasia (which i think the govt would not want to do ) or propose to help selangor in the acquisition of splash ( maybe the same arrangemnet as what was done earlier with puncak niaga).

The valuation of rm3bil is actually equals to only 1xBV and less than 10xPE which i think is a fair valuation for the asset.

In terms of the share price, that is hard to predict. I can only say that if it goes to 8x sens, it will be really undervalue given that the company can easily record a minimum recurring Pat of rm25 mil per quarter. Even at the current price that would translate to only 5xPE. Should be great for those who are interested in the stocks (myself included) ^_^.

The catalyst for kps would mainly be the potential offer price of splash by the selangor state govt. Based on the annual report, as of 31 dec 2015, splash carriers a book value of rm3.1bil which values kps stakes at rm930mil. Gamuda and Tan Sri Wan Azmi had repeatedly said that selangor should pay at least the book value if they want to acquire splash which was the norme for the other acquisition of water assets made by the federal govt and even selangor (puncak niaga).

Selangor keeps mentionning the use of Wasia but the investment community knows that the federal govt would prefer paying the book value valuation rather than taking an assets of a private company by force. If the federal were to invoke wasia it would send a very discouraging message to the investment community (especially foreign investors) which would probably put malaysia in the least place to invest in the future given the uncertainty of ownerships of assets just like what had happened to other countries that use similar strategy to acquire assets (Venezuela for example).

Given the current situation with 1MDB, i don't think Najib would want to have another negative spot light by the investment world.

Anyway, the decision for kps to divest splash will primarily be under the hand of minority shareholders given that kdeb is a party in concert with the acquirer ( unless of course the fed govt invoke wasia which i highly doubt!).

At rm930mil, the offer is almost double to kps market cap.

If u analyse the dividend payment made by this company, you will notice that they normally pay out 40% of the profit as div.

Assuming that they will maintain this amount of payment in the future, the LRT3 project has the possibility of providing investors with an additional 7 sen div.

Basically we can look forward to a 14sen div payment by Gkent in Fy18 end jan (first full year of the lrt3 earning contrybution). That's a 8% yield to the current share price.....

Hard to find a floor for armada if epf keeps dumping the stocks. They have been doing this since the announcement of the termination contract by Woodside Energy back on 4th March.
As of end Feb, they were holding 513mil shares but now they only have 395mil shares. Maybe investors should wait until the selling stops before entering. Given epf numbers of shares, the price of armada will only go down if epf still decides to offload the stock...

Hi up_down,
Ur right. Hope there will be no more impairment exrcise going fwd.
It will be great if they can give some dividend back to the shareholders.

We'll just have to wait and see if the 3q results are good or not.

It shouldn't be hard for the company to beat last years results given that they only achieved RM1.3mil PAT.

However, historically 3Q is always the worst quarter for the company.

Hopefully it goes well this year.

Hi guys,

Currently i just don't see what is so appealing about this company. It has consistently underperform for its investors. However in terms of technical, it does show a bull pattern ( not an expert here). But without any fundamental financials backing, the stock could turn south pretty quickly.

Maybe those that bought this stock could shed some light on the prospect of this company. Appreciate your input.

Thanks.

Yup undervalue company.

In terms of revenue and core PAT they seem to be quite flattish. But what is really appealing about this company is its ability to generate growth from its operational cash flow.

For FY16 the company is generating RM25mil of operational cash flow if compared to the RM17mil that they achieved in FY15 and FY14.

At 5.9x PE and 3.8x Cash from Ops, this company will eventually get some interest from the investment community.

The biggest contract that i could think of is their proposal (via a JV with UEM) to build the 340km Central Spine Road extension from Manchis, Pahang to Kota Bahru Kelantan which was valued at an estimate of RM4bil. WZ will hold a minimum 30% interest in the JV co which value their portion of the contract at RM1.2bil which is 1.5x their order book value as of end 2015 of RM800mil.

Other than that they were also pre-qualified for 8 packages relating to Sungai Besi Ulu Kelang Elevated Expressway (Suke) and Damansara Shah Alam Elevated Expressway (Dash)

There were also 2 other issues that were discussed in the AGM that i believe were interesting:

1) on the disposal of Splash: Chairman mentioned that negotiation is still on the way between Selangor and the 2 other shareholders (Gamuda and Sweet Water Alliance). KPS is not in the negotiation table due to the conflict of interest arising from selangor majority interest in KPS. Basically once a price have been determined, KPS will follow suit (using the same valuation). The disposal will need to get minority interest approval. Gamuda valued the company at RM3bil ==> which means KPS will get 900mil if this valuation is used. Deadline is on the 7th October.

2) Venture into Non Revenue Water business. No contract has yet been tendered out by the federal or any state governments. However, Chairman is hopeful that this will be made soon. Management and the BOD are confident that they will able to convince the federal or state governments to used their pipe solution under the brand Wavin given the proven track record of the products in Hong Kong where NRW fell from a high of 30% to only 15% after the authorities decided to use Wavin pipes.

Other issues raised by shareholders:

To increase dividend payment

To start a share buy back program.

Both will be considered by the BOD after discussing with the relevant advisors.

Hi arvin, in the agm now. Chairman was explaining the reason for the investment into kaisercorp (license holder of king koil). Basically the business strategy is to franchise the brand to more franchisee, globally. Currently the brand has presence in 80 countries at the moment and the idea is to grow the numbers of franchisee going forward. They believe that the venture will be a high margin business given that all of the business capex and risk will be borne by the frachisees. Kps will collect royalties basically with minimum cost.

The financials in the announcement has yet to taken out any one off and restructuring costs.
The actual profit level going forward should be higher.

I think there is still high potential for this company to grow (in terms of revenue and earnings). At the current price, the company is trading at an undemanding PE of only 9.9x. However if we look at the 4Q16, earnings from their PDP role in LRT3 has yet to start.

At an estimated 6% of the RM9bil project, Gkent is expected to get a total of RM270mil for the next 5 years. Using simple average this translate to RM54mil/ year. The current shares outstanding is 300.4mil.

This means the LRT3 project alone will provide Gkent with a potential earnings of up to 18sens per share per year (However it might be slightly lower due to the potential cost that GKent need to incur but normally the costs for project management are not expected to be high).

Trailing 12 months EPS (without LRT3) is at 16.7 sens ==> which give GKent a valuation of 9.9x PE.

If you include the potential EPS from LRT3 this would come up to = 16.3sens + 18sens = 34.3sens.

Which means GKent is currently being valued at only 4.8x PE which i think is super super low (bear in mind that the LRT3 project is confirm and that this company always rewards its shareholders with dividends).

Feel free to comment if you thinks that i have made any mistakes in my calculation.

regards.

I think this is one of the cheapest construction stocks in the market with a valuation of only 5x PE.
If you look at the financials, you can see that this company have been growing (revenue and PAT) continuously since 2012.

I guess that is why Franklin Templeton decided to invest in Gadang. I would expect other funds to follow suit soon.

Currently both EPF and KWAP only holds 3% each. Tabung Haji has yet to buy into this stock. With the other counters in their portfolio posting negatives results, i would think they will need to increase their position in stocks that would be able to provide them growth this year.

Not bad... RM98mil contract to supply chemical products.
Hopefully there will be more contracts awarded to KPS especially on the Non Water Revenue related.

Should b this week i think...

A big portion of the RM116mil is actually being used to pay off the RM90mil debt in Kaisercorp Sdn Bhd (holding co of the license of King Coil).

However, still need to question the BOD on the profit that KPS is expecting from this venture as there were limited info provided from their announcement.

However i am still bullish on the overall outlook of the company with the JV with SP Setia starting to take off (Setia Eco Templar). For the overall duration of the project KPS is expected to received 16% of the total GDV cost (estimated @ RM1.2bil) or RM200mil which ever is the highest. This is a lot better that the RM42mil value of the land recorded in the balance sheet.

The biggest potential would still be the company's decision to go into the Non Revenue Water (NRW) industry and also the disposal of Splash....

Hi sudahkena,

But you have to be careful. The issue with the QA is that most of the investor in particular Credit Suisse and Pacific Aliance are yield type investor. If i am not mistaken they hold a combine of 25% shares in Sona.

They go to Europe for example and borrow money at a rate of below 1%.
Then use this money to buy Sona shares at 45 sens knowing that the cash trust amount to be distributed to shareholders is around 48sens (if QA is rejected) . This translate to a profit yield of more than 6.6% which is ok for them since its not their money anyway in the first place. Basically this is an arbitrage opportunity for them.

In order for the QA to pass, they will need at least 75% vote (not inclusive of management votes).

That's why people are anticipating that the QA would not pass thus making the Sona Warrant a very risky investment at the moment.

Hi mamajeru,

Actually the warrant might be suspended from trading once the QA is rejected. Just notice Cliq Wa was suspended last month.

Hi mamajeru,

There will be no distribution of cash to warrants holders. The cash in the trust account is only meant for shareholders.

I think the warrants will still be listed until their maturity. However, they can only convert upon sona's acquisition of QA. Deadline for QA is July 2016.

Basically the warrants would not be worth anything if the QA is rejected in the upcoming EGM.

Next quarter should see a higher profit contribution from their JV company MRCB George Kent Sdn Bhd, the PDP of the LRT3 line contract.

The JV only contributed around RM600k on 4Q16 given that the project only started in Jan 2016.

Hi emma,

Don't think they will fix the PP price now. Most probably after their quarter announcement and MRT contract award (if any). They would want to make sure that the PP price will be higher.

They did that in 2014.

1) Announce the award of RM350mil rapid project on 11th June 2014 (price jump from 1.71 to 1.86)

2) Fixed the price of the private placement on the 27th June 2014 ( fixed the PP price @ 1.68, 10% discount of the 5 day average price)

3) list the private placement on the 4th July (share price adjusted by 2 cents on the opening to RM1.84 to take into account the new shares issued from the PP)

Good luck guys for tomorrow's meeting....

Bursastockdummy, the appointment of new ceo is actually a good news. But the issue with this stock is its major shareholder, EPF, is on a selling mode right now. This stock will be under pressure until epf decides to stop selling. They are worried about the sustainability of Armada's contracts (i personally think that armada would have putten a termination clause in all their contracts in order to protect themselves). Until a real development on the Woodside cancellation contract, i believe epf will continue selling.

I guess they will b awarded one of the mrt2 contract soon......