Why is there so much selling pressure at 0.79 - 0.80?

Take profit lah and sell to 0.63 for me to pick up more.

This is not a penny goreng stock. It will attract institutional funds to buy for long term investments. Weak holders and speculative retailers may take profit for 3-5 sen tiny profit and will likely miss out on the next explosive rerating moves.

I reckon that YTLPI could use RM810 million from cash proceeds to pay a special dividend of 10 sen per share, then remaining RM2.2 billion to pare down debts and reduce interest costs by RM100 million a year (still higher than the associate earnings of RM72m).

Share price should surge to at least RM0.72-0.75 in near term.

Some may think that YTLPI earnings may drop after the disposal as the associate's earnings of RM72m a year will be gone, but in fact YTLPI net profit will increase due to lower interest costs.

YTLPI will receive cash of RM3.0 billion after disposal, which will help to reduce nett borrowings. If average interest cost is 5.0% p.a., then the disposal proceeds will help to reduce interest cost by RM150 million a year. If interest cost is 4.0% p.a., then annual interest cost saving will amount to RM120 million which will be higher than the earnings contribution from Electranet.

You may think this is a one day show only. The share price is strong today on knee jerk reactions to the disposal news. But it could be the start of a strong re-rating phase that may push it to the RM0.90-1.00 level in next few months, especially once its Jordan power station achieves commercial operations.

If dividends improve to 7.0 sen by FY2024, it will not be a surprise for share price to catch up to RM1.00 still based on a 7% dividend yield.

If no further disposal of assets, YTLPI earnings are expected to rise from RM399m (EPS 5.0 sen) in FY2022 to RM638m (EPS 7.9 sen) in FY2023 and RM727m (EPS 9.0 sen) for FY2024 according to projections from Maybank IB.

These include contributions from the new Jordan power plant that will post earnings of over RM100m in first full year operations and increasing every year to as high as RM500m few years later as external debts are pared down and interest costs coming down.

PER valuation is going down to 7x and dividend yields at 7.5% assuming dividends maintained at 5.0 sen going forward.

With capex for Jordan power plant is coming to the tail end, free cash flows will improve as Jordan contributions pour in. There is a potential for dividends to improve to 6.0 sen in FY2023 and 7.0 sen in FY2024 pegged at 80% profit distribution.

minus out the nett debt of RM21.6 billion, YTLPI should be worth at least RM21.2 bn + RM12.6 bn - RM21.6 bn = RM12.2 billion or RM1.50 per share.

Electranet contributed about AUD23.9m profit after tax to YTLPI every year, hence the disposal of Electranet at RM3.057 billion values it at 42x PER.

The 100%-owned Wessex Waters contributes about RM500 million profit after tax to YTLPI every year. Just imagine valuing it at the same valuation of Electranet will give Wessex a value of RM21.2 billion or RM2.62 per share of YTLPI.

The 100%-owned PowerSeraya contributes about RM300 million profit after tax for YTLPI every year. Using the same valuation will give a value of RM12.6 billion of RM1.55 per share of YTLPI.

Not mentioning of other assets like the 45%-owned Jordan new power plant that will contribute over RM100 million profit every year after commercial operations later this year and potentially the proposed 500MW solar power plant at Kulai, YTLPI is deeply undervalued.

In the absence of high content costs and additional licence & royalty fees, Astro Q4 earnings should be much better with the reopening of almost all economic sectors from Nov.

Hope it can register net profit of over RM150 million in Q4 then. Operating cash flows are strong and will enable a 4th dividend of 1.5 sen plus final dividend of 2.0 sen, making full year dividends of 8.0 sen yielding over 8.0%. Safe bet at RM0.96.

This Q3 result is not bad lah with only a small drop of 5% in TV subscription revenue from last year, compared to almost 10% drop p.a. in past 5 years. Q3 earning was dragged down by higher content costs (due to major sports events) and royalty fee compared to last year.

Earnings in this Q3 are 21% higher than Q2 thought August was still in lockdown. Radio earning was dragged down by higher marketing expenses, licence and royalty fees compared to Q2, which I hope will not recur in Q4.

Media Prima at RM0.45 is too cheap to be ignored. Its latest quarterly results show that its operating cash flows before working capital changes and capex topped RM150 million for the first 9 months of 2021. With minimal capex going forward, its free cash flows may exceed RM170 million or 15 sen per share every year, adding to its nett cash position of RM263 million as of 30 Sept 2021.

By Dec 2022, Media at RM0.45 will be almost fully backed by nett cash of RM490 million with free cash flows of RM170 million every year. Real cash cow!!

Not being able to post long comments here is just a small frustration. A much bigger frustration is to see a great company that I have been following for years going nowhere with its management not creating values for its shareholders anymore but focusing on short term gains for themselves and parent company.

I choose to sell off all my Daibochi holdings at RM2.71 in the open market rather than accepting the offer from Scientex.

I switch to other companies with better management.

I am afraid such a company management will not be generating good values for the company shareholders in long run, with such corporate mentality and such a parent company tying its hands in managing the company.

I am really disgruntled by the privatisation manaeuvres of Scientex and despise the cooperation by Daibochi management to only fulfill the agenda of its parent company, failing to protect the value of its other shareholders.

One would imagine what sort of affordable houses one would get from a developer who always want to win it all. And how would Daibochi continue to win the trust and maintain good relationship with its long term MNCs if it tries to win it all?

It somehow shows similar corporate culture in the parent itself, trying to win it all and not creating any win-win situation for stakeholders. I reckon that companies with such corporate mindset will not prevail in long run.

The privatisation saga is not bringing any good to Daibochi shareholders but indirectly revealed the narrow-minded corporate mindset and compromised integrity of the management.

or they think the fair value of the company should be just at RM2.10 level and Scientxx is really dumb in offering RM2.70.

It has come to an impression that the management of Daibochi thinks that the RM100m capex expansion is a complete waste of shareholders' money and will not bring any good to the company in future,

In trying to impress the top boss, the management of Daibochi has overdone it in suppressing the fair value of the company.

can only post one sentence by sentence

this is frustrating. Posting many times still not successful.

I have the same feeling. Looking at the desperate moves and pathetic valuation by the IA, I doubt there will be any revised offer at all.


Posted by Syndicates > Oct 15, 2021 10:37 AM | Report Abuse

this boss is stingy. if there's revision of offer, he might wait till another 6 months to do it so that he will be free from obligation to pay additional price to those who have accepted the offer in this round.

Somehow my previous posts got all blocked.

@observatory, many thanks for the relentless effort to analyse the numbers behind the IA fair value.

I missed out on the terminal value of RM539.68 in my rushed calculations yesterday. I agree with your derived number of RM57.883m for FY2026 FCFE.

My guess of the numbers for FCFE in FY2022-2026 may come out more or less like what you had below. The common trick that might have been used was to deduct the operational cashflows of the company in FY2022-2023/2024 by the announced capex figure of RM100m to get a depressed set of free cashflows for the front years.

Again, to me any such basis is wrong for a number of reasons:
1) a majority part of the RM100m capex has been spent in FY2020-FY2021 before the takeover offer was made by Scientex, i.e. RM25.7m in FY2020 and RM64.0m in FY2021 ended July. There should not be much major capex left for FY2022-2024

2) In the DCF calculation, it is fair to deduct the operational cashflows by capex spent to derive the free cashflows. However, it does not appear to me that any benefit of the expansion capex has been reflected in the IA's cashflow projections. The implied FCFE of RM57.883m in FY2026 is even lower than the actual operational cashflows of RM70m in FY2021A. This is totally unreasonable as it suggests that the planned expansion plan by the management of Daibochi would be simply punitive in wasting shareholders' money without generating any higher returns in future.

3) If the intention of the IA was to derive the fair value of the company at current state (without any major expansion), they should have just used the normal maintenance capex of the company which averaged less than RM10m every year. It has somewhat become highly punitive to include the major capex of RM100m but not any benefit (increased earnings) of the capex in the calculations of the fair value.


______________________________________________________________________
So for illustration purpose, I massage the numbers to assume major capex spending for three more years (!), and after that, with magic, there is a 180% jump in FCF in Year 4. This is what I get:

(In million RM)
Year FCFE FCFE @PV
FY22 20.000 18.488
FY23 20.000 16.941
FY24 20.000 15.524
FY25 56.000 39.830
FY26 57.883 37.725
Total N/A 128.506

It appears to me that the Independent Advisor might have taken some of the expansion capex in reducing the free cash flows of the company in the calculation of the fair value.

My estimate is a capex amount of RM20-23m that has been used in suppressing the annual free cash flows of the company. This basis is totally fraud. The reason of embarking on an expansion plan is naturally to grow the company earnings and cash flows in future years, but the expansion capex incurred in FY2020-2021 has been used to its advantage of reducing the projected annual free cash flows for FY2022-2026 in the fair value calculations.

So cheeky yet clumsy!!

I just reworked out the fair value using the assumed cost of equity Ke of 9.13% and perpetuity growth rate, g of 2.0% and the stated formulae in the Independent Advisor report. To get the stated fair value of RM668m, they have assumed annual free cash flows of less than RM50m:

FCFE FY2022 2023 2024 2025 2026
RM m 47.3 48.3 49.2 50.2 51.2

Present Value of projected FCFE = FCFE / (1 + Ke)5 = RM190.2m
Present Value of Terminal Value = FCFE for FY2026 * (1 + g) / (Ke - g) * 1 / (1 + Ke)4.9 = RM477.4m

Fair Value = RM190.2m + 477.4m = RM667.6m

As I pointed out earlier, Daibochi's free cash flows for FY2021 already amounted to RM70m based on its Q4FY2021 quarterly results.

It is hence totally unreasonable to assume annual free cashflows of below RM50m for FY2022 - 2026, even lower than actual FY2021 FCF. The Independent Advisor has also clearly ignored the ongoing expansion plan and the potential earnings growth in next few years.

If I rework the fair value with assumed FCFE of RM70m for FY2022 then increasing 2% p.a. to FY2026, the fair value will be RM987.9m or RM3.01 per share.

If I assume the current expansion will result in 25% higher FCF for FY2022 and 50% higher FCF for FY2023 then increasing at 2.0% p.a. to FY2026, then the fair value would be RM1,439m or RM4.39 per share.

Investors pls beware of the huge disparity in valuation by tweaking the assumptions and do not take the face value given by Indenpendent Advisor as granted.

There is nothing much to analyse in the Independent Adviser report. There is a vaccuum of information in how they derived the fair value.

The only info stated is the assumed cost of equity of 9.13% and perpetuity growth rate of 2.0%-2.5%, both are within ballpark estimates. However, there was nothing mentioned on assumptions made in the projected free cash flows of the company and how many years of FCFE was taken into account in the calculation of the present value.

It is totally unclear as to whether the Independent Advisor has taken into account the planned expansion in their projected free cash flows. If they had just taken the free cash flows of the company in the past 2 years to project a nominal growth of 2.0%-2.5% for the next few years, then it will understate the expansion growth effort of the company.

Can please share UOB reports on SOP here?

I did not manage to sell any daibochi-wb at 40 sen lah, that was only 100 shares traded at 40 sen last week. I sold most at 0.34-0.365 but still keep some till year end. This balance wb is considered free already.

Ya I pay more attention on a company cash flows rather than its accounting profits. How much cash a company has and how much cash it can generate sustainably will determine how much this company is worth. As we are just minority investors in the listed company, our tangible returns are in the form of dividend distributions or capital repayment by the company we invest in.

On the other hand, the accounting profit of a company can be easily distorted by many non-cash items like depreciation, amortisation, deferred taxation etc. A company may have very high accounting profits and low PE ratio but no cash, just like in the case of Serba Dinamik. What was the point of investing in such a company with increasing debts though reporting record profits in past few years? Same for other companies that report extraordinary profits by having mark-to-market adjustment gains from revaluing its assets. Minority shareholders get nothing benefit until the company can monetise the assets or convert the accounting profits into real cash and reward shareholders with handsome dividends.

What we should be looking for is a company with good management and an enviable business that can generate sustainable cash flows over years. A good management can innovate and create higher shareholders' value for the company. An enviable business typically has certain consumer monopoly that can withstand competition and does not require heavy capital expenditure every year to sustain its operations.

In particular, I am always on the look out for companies with sustainable annual free cash flows of at least 15% of its market capitalisation. For instance, Media Prima trading at RM0.190 had a FCF/Price ratio of over 50% with projected annual cash flows of at least 10 sen. MHB at RM0.44 had a FCF/Price ratio of 15% with projected free cash flows of 6.0 sen per share. DKSH was good at RM3.00 with FCF of RM1.00 per share.

I am looking at BJFood now. Based on its latest quarterly results, its free cash flows may top RM100 million for this FY or over 30 sen per share. At RM2.02, it fits into my investment criteria. The only issue with this company is how much capex it would spend to expand its retail Starbucks or Kenny Rogers outlets and whether it would be well spent. If it plans to open 25 new outlets, it may set it back with at least RM50m of capex and free cash flows may drop by half.

Thanks @observatory.

I was just lucky enough to grab wb weeks before the Scientex takeover offer came and managed to realise >100% profit gains in one month.

But that was not my original intention of buying daibochi-wb. I was prepared to hold it until year end to see if daibochi would reach RM3.00 and wb to RM0.50-0.60.

Anyway all is not wasted. Thanks to Scientex offer for me to take some quick profit first and get back some capital money to buy other under-valued stocks.

In fact, this daibochi-wb was not my biggest gain this year. I had bigger gains in Media Prima when I spotted this hugely undervalued stock at RM0.19 in late Nov last year. Media reported a turnaround in its quarterly result ended Sep 2021 and I found out that its operational cash flows might exceed 10 sen per share after the turnaround. With nett cash of 18 sen per share then and projected free cash flows of 10-11 sen per share every year forward, it was a no brainer to grab as much as possible at RM0.190. I managed to sell progressively as it surged up due to aggressive buying by Johari in the open market and disposed all my holdings by RM0.745.

Another quick gain was made when Maybank raised its target price for MHB to RM0.85 on 4th March 2021 when it was trading at RM0.44. I checked that MHB had nett cash of RM0.25 per share then and projected free cash flows of almost 6.0 sen per share, it was a damned good buy at 44 sen a piece. I grabbed plenty and manged to sell all by 80 sen within 2 months.

Latest one is DKSH that I mentioned before. It is giving me almost 90% gain now within 2 months.

My point is that you will never go wrong by picking stocks with strong cash flows. Just need to be patient. Sometimes luck plays a key factor in determining how fast you may make the desired gains.

@iknownuts, thanks for the note on warrant.

I do not have much daibochi wb left in my portfolio but more mother shares for long term holding.

What possible news that pushed it to new high today?

aiyo this has to drag on for another 3 weeks to 25th Oct.

No need to waste time on this and better focus on other counters.

Ok got it, thanks.

I was misled by the timeline in the CIMB report.


Posted by iknownuts > Oct 4, 2021 1:07 PM | Report Abuse

https://www.bursamalaysia.com/market_information/announcements/company...

If you accept the offer from scientex via this method, if there are any subsequent increased scientex offer, you will also get the increased price

@iknownuts, are you sure today is the day Scientex first accepts offer from the public?

I reproduce the wordings from CIMB analyst's report dated 14 Sept for reference:

[ Other salient details of Scientex’s takeover offer
Takeover offer lapses in three weeks if no extension granted
 Scientex will get to compulsorily acquire the remaining Daibochi shares it does not have when its ownership in Daibochi reaches 97.2%. Section 222(1) of the Capital Markets and Services Act 2007 (CMSA) permits the offeror to compulsorily buy the target company’s shares it still does not hold once it already has 90% of the shares it did not own prior to the takeover offer.
 The first expiration date to accept Scientex’s offer is 4 Oct 2021, being the 21st day after the notice of the unconditional voluntary takeover offer was first tabled.
 If Scientex wants to extend the offer’s expiration date, it will have to inform Bursa Malaysia by 2 Oct 2021 – or two days before the first expiration date.
However, the takeover offer cannot go past 60 days of the offer date (Friday,
12 Nov 2021).]

However, when I cross check on the Notification from UOB dated 20 Sept, clause 4.5 (a) says that "..the Offer will remain open for acceptance from the Posting Date for a period of not less than 21 days ...".
Clause 4.3 says ".. the Offer will be made in conjunction with the posting of the Offer Document ("Posting Date"), which will not be later than 21 days from the date of this Notice.

Now, I do not know exactly when the Posting Date is set to be. If UOB posted out the Offer Document on 20 Sept, then the Offer shall expire on 11th Oct the earliest. If the Posting Date was set at the 21st day from the Notice, then the Posting Date shall be 11th Oct and the Offer shall expire latest by 25th Oct. Right?


Posted by iknownuts > Oct 4, 2021 1:02 PM | Report Abuse

Adoi pls, dont simply spew misleading info again. Today is the day the offer document goes out la. Means today is also the day scientex first accepts offer from the public

Again, pls post responsibily…

As @observatory pointed out, Daibochi share price is likely to settle higher than the RM2.3-RM2.4 pre-announcement level given Daibochi’s hidden value gets wider recognition now.

As liquidity will be thin after a few more percentage of Daibochi shares have been mopped up by Scientex and funds from the open market, share price volatility will only increase. A bad news would move the share price by 5%-10% easily and a good news would make it surge over 10%-30% in a single day of tradings.

As long as fundamentals have not changed, lower share trading liquidity is not an issue to me as I do not buy in millions. I had success in picking up DKSH below RM3.00 though its free floats are lower than 20% with DKSH parent holding over 75% of this listed entity in Bursa. Patience pays off handsomely by riding on its expansion plan from two years ago by M&A and investments in internal cost optimisation projects.

DKSH announced a good set of results for quarter ended June 2021 and investors chased it high by over 80% in few weeks. Why are funds and investors so upbeat on DKSH? Again, I will resort to cash flows analysis to explain why this is a real gem. DKSH operational cash flows are so strong that it managed to pare down RM100 million of debts with just 6 months of operational cash flows and declare a 10 sen dividend. Its paid-up capital is low at 168 million shares, so its annual operational cash flows could top RM200 million. With minimal ongoing capex, it would be able to declare high dividends once its debts are pared down to manageable levels. With projected EPS of 60 sen and free cash flows above RM1.00 per share, DKSH may declare dividends up to 60 sen a year. For a dividend yield of 7.0%, DKSH may be worth RM8.57. For a dividend yield of 5.0%, DKSH may be worth RM12.00.

Now look back at Daibochi. It has quite similar situation as DKSH:
1) a strong parent with over 60% stakes
2) involved in consumer food & beverage product chain
3) long term business partner to consumer F&B giants like Nestle
4) embarking on expansion plan though organically and potential benefits to be realised in next 2 years
5) has potential to embark on internal cost optimisation projects to improve EBITDA margin with synergy support from Scientex in areas like raw material procurement, factory operational efficiency, inventory optimisation, stronger negotiation power with customers & suppliers
6) strong operating cash flows of 32 sen per share potentially when the 60% capacity expansion plan is successful, and hence potential high dividend payouts for many years to come
7) low liquidity
8) wider recognition of its potential among investment community

In the next few days, Scientex will need to make announcements on how much acceptance it has received for the privatisation offer, including any from the institutional funds.

It is anybody's guess now as to whether Scientex would raise the offer price. Scientex could well walk away with 66%+ stakes and get on with life, and hence there is a real risk for Daibochi share price to fall to RM2.30-2.50 level in short term.

Investors need to consider the potential risk of losing +/-10% capital if not accepting the offer, and balance the risk with potential rewards of holding it for long term.

Today 4th Oct 2021 is the last day to accept the take over offer from Scientex. Given that Scientex did not announce any extension of the offer by 2nd Oct, the current privatisation offer will not be extended so today is the last day to submit your acceptance form to Scientex. I do not know the exact procedure of submission as I do not have any intention to accept the offer, hence do not bother reading the procedure.

@observatory,

Hmmm... this PE matrix is even trickier. This Forward PE ratio in page 7 was calculated using the most recent weekly share price of Daibochi divided by the four upcoming quarterly consensus EPS.

My view:
1) This PE was distorted by a few bad quarterly results, eg. 4QFY2018 that recorded a small loss.
2) This PE figure was brought down substantially by consensus forecase earnings that were higher from 4Q2019 after the completion of MPP acquisition
3) Not sure if the consensus forward earnings estimates have taken into account the planned expansion

Anyway the chart also shows that the Forward PE for past 5 years for other Container & Packaging Group Average was also around 20.0x. Therefore, it shows the generally bullish view of consensus on comparable packaging companies.

As you mentioned, Daibochi is a long term indispensable business partner to big consumer giants like Nestle and Heineken who are trading up to 27x PE. Ones would argue that Daibochi should be trading at PE range higher than that of packaging companies but below that of big consumer giants. In short, it is reasonable to peg a PE range of 20x to 27x to Daibochi.

Applying it to Daibochi actual FY2021 earnings of 14.4 sen per share:

1a) 20 x RM0.144 = RM2.88
1b) 27 x RM0.144 = RM3.89

Applying it to Daibochi forward FY2022 earning estimate of 20.1 sen:

2a) 20 x RM0.201 = RM4.02
2b) 27 x RM0.201 = RM5.43

My view is that since this is a Forward PE, so it should be applied on forward FY2022 earnings estimate rather than past actual FY2021 earnings. So we are looking at a valuation of RM4.02 to RM5.43 for Daibochi.

Analysts may apply certain discount to factor in the low liquidity of Daibochi. How much this discount factor should be again is arguable.


Posted by observatory > Oct 2, 2021 4:40 PM | Report Abuse

@dragon328,

You've brought up a valid point that Daibochi mean PE may be lower than the past 10 year mean at 18.6X given it was a higher growth company in the past.

I checked out the forward PE of last 5 years using Bursa Alpha Indicator Report. It was based on Refinitiv data. You can find in page 7 of the report in the link below. The past 5 year average forward PE is even higher at 20.5X (it shows average instead of mean). The average forward PE was only dragged down in the last two pandemic years, a temporary situation.

https://www.bursamarketplace.com/mkt/tools/research/ch=research&pg...

Applying the 5 year average PE approach
(1) pre-announcement consensus FY22E EPS = RM0.201
(2) Fair value per share = RM0.201 x 20.5 or about RM4.1

Even apply a 20% margin of safety it still yields RM3.3

Why did the forward PE stay above 20X, even up to 27X for most of the 2017 to 19 period? I believe one of the reasons is during that period the market has rerated branded consumer companies like Calrsberg, Heineken and Nestle. The forward PE of Nestle was raised from 30+ times to an eye watering 50X times. As an indispensable business partner to Nestle and the like, Daibochi should benefit.

@anti_colonialists, oh you come back again with even hotter temper!!

Your heated tempo has blurred your own logic, sadly to say.

I have stated many times that I am just a small investor in Daibochi and my view is naturally biased for my investment interests in Daibochi.

Do I have a bigger agenda? To smear Scientex as bad guy? What for?

I already said I do not dispute the remarkable achievement by Scientex in the past 10-20 years and Mr. Lim has good business acumen.

The topic of this forum is on Daibochi and the recent hot topic is obviously on the proposed privatisation offer from Scientex.

As a long term investor in Daibochi, I believe the take-over offer price from Scientex of RM2.70 is inadequate and I think its privatisation offer will fail this round. I hope for a higher offer price from Scientex or for continued listing of Daibochi to allow us to ride on its long term expansion plans. Full stop. No other agenda.

It appears that it is you who try to attack forumers here who do not support the offer from Scientex. What is your agenda?

Are you speaking for any analyst or journalist or Scientex or other "giant competitors of Apollo"?

I do have difficulty understanding your posts to which sometimes I have difficulties writing any response. But I try my best to put some response to your "genuinely explanation" below in BLOCKs.


Posted by anti_colonialists7 > Oct 2, 2021 3:43 PM | Report Abuse

@dragon328 was gloomy morning here you bring good laugh.

You refuse accept own flaw, after I destroyed your logic and invalidate your argument.

Also proven by reason you are evil due to continued new false claims, to support your view, that reasonable to smear name and integrity of innocent parties like hard working analyst and journalist, using made up flawed logic to support your bigger agenda to smear Scientex as bad guy.

After I invalidate logic of your argument, now you try to hide your track again, change tune softer to "just personal view" that it is "common trick" in "M&A" and "stop waste time with nonsense".




Anyway give you last benefit of doubt, if you really believe you innocent, then you might have difficulty understanding my post, and I will genuinely explain again why your logic is flawed and your action evil. Suggest you repent.

1. Analyst job is to answer licensed big investors like Apollo/Samarang (investor of Daibochi), Vanguard/Norges/EPF/Affin (investor of Scientex) that have billions dollars. [WOW THIS IS A EVEN BIGGER PUBLIC SMEAR ON ALL THE ANALYSTS WHO HAVE FAMILIES TO FEED LEH]

2. In other words customers of analysts are giant licensed companies with billions dollars parked everywhere in world, not some little company that make plastic and low cost house. [THIS IS YOUR OWN SMEAR AND UNDERSTATEMENT ON SCIENTEX ACHIEVEMENT]

3. If you want to stick to your claim that analysts can be paid and influenced by third party, it is naturally more likely that other giant customers of the analysts (not Apollo/Samarang) are doing so. [DO NOT UNDERSTAND THE LOGIC BEHIND YOUR ACCUSATION ON OTHER "GIANT CUSTOMERS" OF THE ANALYSTS, WHAT FOR THEY WOULD DO IT?]

4. If you really think just because tp is lower after Scientex announce take over, is "proof" analysts are swayed by third party, naturally it must be giant competitors of Apollo that are current investor in Scientex, like Vanguard/Norges/EPF, that are "exercising muscle onto analysts" to get lower tp and block Apollo so they can get Daibochi at good price. [YOU SEEM TO BE SLAPPING ON YOUR OWN FACE HERE. WHETHER IT WAS SCIENTEX OR "GIANT COMPETITORS OF APOLLO THAT ARE CURRENT INVESTOR IN SCIENTEX" WHO EXERCISED MUSCLE ONTO ANALYSTS TO GET LOWER TP, WHAT DIFFERENCE DOES IT MAKE? YOU SEEM TO BE HAVING INSIDER KNOWLEDGE ON THIS. PLEASE REPORT IT TO SC FOR THE GOOD OF THE PUBLIC.]

5. If that sound crazy, imagine how insane your own claims sound, and your public accusation and evil smearing of innocent hard working people like analysts and journalist with families to feed, it should be you that is brought to justice in a real court [THAT REALLY SOUNDS CRAZY TO ME, HAHA. IF THESE ANALYSTS AND JOURNALIST DO NOT WANT THE PUBLIC TO CRITICISE THEM, THEN THEY'D BETTER BE MORE PROFESSIONAL AND RESPONSIBLE TO THE TARGET READERS AND HENCE TO THEIR OWN FAIMILIES. HAD SOMEONE REPORTED THEM TO THE SC OR MACC, THEN THEIR CAREER WOULD BE DOOMED AND FAMILIES NOT FED. IT ALREADY HAPPENED BEFORE. THEY ARE NOT SUPPOSED TO ANSWER TO ANY OF THESE SO-CALLED "GIANT CUSTOMER" NOR "GIANT COMPETITORS OF APOLLO AND CURRENT INVESTOR IN SCIENTEX".]

I think the assumed nett profit of RM65.7m for FY2022 may be reasonable as it has factored in a 39.5% increase of profits from actual FY2021 net profit of RM47.1m. It takes time for the company to realise higher revenue and earnings from its planned expansion.

The PER ratio of 18.6x may be questionable as it was the mean PER for past 10 years of Daibochi which was considered a high growth company who expanded its market cap by 20x in 20 years. Even if I pitch it 20% lower at 15x PER, Daibochi would still be worth RM3.00 per share.

But the key point is that Daibochi is one-of-its-kind in Bursa, that enjoys consumer monopoly with big F&B MNCs through its long standing good track records and relationship with the customers. It is really hard to find another company listed in Bursa that has such an enviable position in consumer business. If Scientex wants to privatise it, it will take away the rights of investors to ride on the long term success of Daibochi. This is a great company that may continue to expand organically or via M&A for the next 10-20 years.

The other plastic flexible packaging companies like BP Plastic, Thong Guan or even Scientex make commodity-like products like stretchable films which compete mainly on pricing. When other low cost producers come along from China or Vietnam, their profit margin will suffer just like what we are seeing now in glove makers here.

Even if Scientex walks away from the offer, Daibochi share price may drop momentarily to RM2.30-2.50 level but it will eventually rise beyond RM2.70 when more investors see its potential. That's why I have not sold a single lot of Daibochi mother share which I think may fetch a valuation of over RM4.00 in medium term.

Why so bullish? Again I will resort to cash flow valuation. In my earlier post above, I estimate that Daibochi may see annual free cash flows of 32 sen per share by FY2023. If there is not further major expansion, the capex requirement will be minimum and Daibochi would be able to declare up to 80% to 90% of net profits as dividends just like what Bermaz Auto and Uchitec have been doing for years. So Daibochi dividends may go as high as 25 sen a share from FY2023. For a 7.0% yield, Daibochi may trade up to RM3.57 and for 5.0% yields, it may go close to RM5.00. For comparison, other consumer stocks like Nestle, DIGI or Dutch Lady trade at 3%-5% yields.




Posted by observatory > Oct 2, 2021 11:40 AM | Report Abuse

Meanwhile I want to return to the valuation. This is what have brought me to Daibochi forum in the first place.

I've earlier put forward my own valuation case based on a simple 10 year historical forward PE. Some analysts have used this approach to value Daibochi. Forward earning helps to look past the recent pandemic impacts.

(1) Just before the offer announcement, before analysts' forecast have been affected by the offer, the Bloomberg consensus FY22E net profit is RM65.7m (source: Kenanga)
(2) The share base is 327.372m. FY22E EPS = RM65.7m/ 327.372m = RM0.201 per share.
(3) 10 year mean PE is 18.6X (source: CIMB)
(4) Fair market per share = RM0.201 x 18.6 = RM3.73

The estimated fair value at RM3.73 is much higher than RM2.70.

Granted valuation is an inexact exercise. But even with margin of safety applied, it's still much higher than RM2.70.

Besides acquirer should pay for premium rather than mean valuation.

@iknownuts, I understand your points. In fact, I shared some of your views and offloaded some daibochi-WB at 0.345 yesterday.

I have declared my interests in Daibochi and would share my rationale of betting more on its warrants Daibochi-wb. I was fortunate to have grabbed plenty of daibochi-wb at 0.13-0.15 weeks before the privatisation offer from Scientex appeared. Investment is an art rather than pure logic. It is a game of probability of winning vs losing. Often you need to take on high risks to get higher returns in order to beat the market.

Daibochi-wb exercise price is RM2.50 and expires in June 2022. Daiabochi was trading at RM2.20-2.30 and wb was at 0.13-0.15 then, meaning the warrant was out of money. Why bet on it? What was the downside? I told myself that I would cut loss on wb at RM0.10 for a max 30% loss by year end if daibochi still languished below RM2.50. The upside could be handsome if Daibochi goes towards RM3.00 for a 300% upside gain. I was betting to see earnings growth of Daibochi in its July quarterly result or latest in its Oct quarterly result, from its expansion plan. So it was a no brainer.

Now Scientex's offer is on the table and Daibochi share price is kind of stuck at RM2.70s and wb at RM0.30s at least for next 2 weeks. Where is the upside and the risk?

Lets look at the potential upside first. What is the chance of Scientex raising its offer price? We need to examine the reason behind Scientex offer in the first place. Why would Scientex still want to increase its stakes in Daibochi though already holding a controlling stakes of 62%? I would evaluate this in terms of cash flows which is the most important factor to businesses.

In Daibochi's Q4 quarterly result, it achieved operating cash flows of about RM70 million after tax payments before working capital changes for FY2021. It spent close to RM64m for its expansion capex, funded entirely from its operating cash flows, not requiring to raise any new debts nor equity injection from Scientex. If Daibochi pulls off its expansion plan well to increase capacity by 60% and its management is able to secure additional revenue for 80% of the additional capacity over the course of next 10 months or so, then it is reasonable to project that Daibochi revenue and earnings will expand by 50% by FY2023. Its annual operating cash flows may expand to RM105 million then. Given its nett debt of RM50m only and normal capex of RM5.0m, its free cash flows may top RM100m or 32 sen a share by FY2023. If Scientex is able to acquire the remaining 38% stakes in Daibochi at RM2.70 per share, it will have to fork out cash of RM336m. Scientex would be able to get back this money in just 3 years by owning 100% stakes in Daibochi and extracting out the annual free cash flows as dividends. So it makes good business sense for Scientex to privatise Daibochi. For Scientex to raise the offer price to RM3.00, it will set it back with RM37m of additional privatisation costs which it would get back with 3 months of cash flows from Daibochi. For offer price to be raised to RM3.30, it will need additional costs of RM75m which would face strong resistance from Scientex shareholders. In short, I would put the probability at 50% for the offer price to be raised to RM3.00 and at 30% for offer price to be raised to RM3.30.

Where is the downside? If Scientex walks away with the offer, I expect Daibochi share price to drop back to RM2.30-2.50 level and wb to RM0.15-0.20 level at initial responses. I would put this probability at 20%. Even for a low probability, the potential downside to daibochi-wb is huge at 30%-50%. That is why I chose to offload some holdings of daibochi-wb at 0.345 yesterday. The risk is real. Investors beware.


Posted by iknownuts > Oct 2, 2021 11:49 AM | Report Abuse

@observatory

Nope my view point has not changed. Also, i did not advise anyone to do anything. I am not a licensed person anyway to advise anybody. What i said in my earlier postings is for investors to think about all possibilities instead of just seeing the mainly rosy points painted here. Whilst we post here anonymously, we still need to post responsibily (Well, for me anyway)

I have a position in daibochi, and i do intend to accept the offer from scientex, but if the price keeps going up, i will continue to sell in the open market. I have already started offloading some on friday.

Now why do i offload now instead of waiting? If scientex ups their offer, i can also enjoy the upside, right?

@anticolonialists, I think your logic is fraud and you are the one making false claims here. If funds like Apollo or Samarang had exercised their mucles on analysts, then we would have seen analysts' reports calling for a fair value of RM3.85 or higher for Daibochi. But what we saw was just a report from CIMB lowering his valuation immediately from RM3.85 to RM2.75 after the offer.

It was my personal view that it is common trick for an acquiror to work on analysts or journalists to put out a report favourable to them in a M&A exercise. And my view may be biased because I have declared my interests in Daibochi and I strongly felt that the offer price by Scientex is inadequate.

You appear to be strongly against any view that the offer price is unfair and you think Scientex is all good. That is your view and it is ok for me.

If you are just an observor who "enjoy good arguments", then put up hard facts and figures to support your view, and not launch personal attacks on those with a different view.

Stop this nonsense. We just want to invest and make some returns from the stock market. You too stop wasting time here and grab a good coffee and have a good weekend!!

Daibochi to RM3.00 and Daibochi-WB to RM0.60 next week, cheers!!



@dragon328 good job contradicting your own arguments, once again reveal your consistent false claims, raising worrying question about your intention.

I have already responded you that analyst job is to answer big investor like Apollo, in other words licensed investment companies with billions dollars to play. You ignore that to create new false claims.

If you want to stick your claim that someone can "exercise its muscles onto analyst", then it is more likely other customers of the analyst, big investors like Apollo, are "exercising their muscles".

Companies like Scientex are not licensed investment company that have billions dollars and analysts begging to service them.

There can be many reason for analyst to think that Scientex offer is fair. If I use your argument style, one possible reason is other big investors with share in Scientex and are Apollo competitor, are "exercising their muscles on analysts" that need their business.

If true then possible competition between foreigner Apollo/Samarang (Daibochi) and Vanguard/Norges (Scientex) or local big investors like EPF/Affin (Scientex). It is normal for them to play hundreds of millions to billions in market and have many analysts begging for their business.

Level headed investors may think that sound unlikely. If sound unlikely, other possible view is the analyst is independent, and think the offer price is fair for Daibochi shareholders due to own professional opinion.

If you really believe they are pressured and their integrity compromise, what stop you from reporting to regulators and let them investigate? Clearly they will know better than us if any malpractice.

But you seem happy to destroy other people lives and rice bowl by your perverted sense of justice and slander and trial in court of public (collusion) opinion.

This is clearly because you want to sway public that Scientex is unfair, and you even make slanderous claims that they "exercise their muscle onto analysts and journalists and using them to do tricks".

I said earlier, are you joking or think everyone has 0 integrity and can be paid or pushed by Scientex? That is big insult to all hard working analysts and journalists implying they are bought. No different from anti vaxxers insane claims on big pharma.

You are clearly doing this to support your evil agenda to smear Scientex name and integrity with fake story and slanderous claims and you are happy to harm other innocent parties to support your agenda.

Do you think it is fun if their professional career and integrity discredited and smeared on a public website by unknown people? Only conclusion why you are acting this way is because you are evil.

Unsurprising from same people masquerading as victims and champions of greater good, while ironically camouflaging attack to smear name and integrity of genuine professionals and companies.

Shareholders that are reading here beware and do not be swayed by master puppeteers acting behind the scene.

Don't just keep saying that Scientex has improved Daibochi performance. Be more specific. In which areas and by how much?

We are just small investors in Daibochi. Naturally we like to see the company we invest in to perform well and hope for a higher offer price mah.

Don't get too emotional. Grab a coffee and some Daibochi-WB shares, then you will have a different perspective. Cheers!



Posted by anti_colonialists4 > Oct 1, 2021 2:46 PM | Report Abuse

@observatory you claimed "a big part of Daibochi's growth come from Mega acquisition". What is your intention are you trying to discredit Scientex role that improved Daibochi performance?

While ignoring fact that @dragon328 make false claim that Scientex did not improve Daibochi performance? Are you condoning false claim to suit your agenda to sway shareholders?

(Note you already said you are biased, Scientex unfair, and hope other shareholders follow you)

Your reply raises question if you work together with @dragon328. Since you claim "(partly due to the pandemic situation)" what is your intention to say "partly" when the pandemic is main reason?

Daibochi performance improved under Scientex until the pandemic hit most companies in the world. Whether Mega or not the fact is Daibochi performance magically shoot up to RM47 million for 2 years under Scientex and win-win for all. Is it your intention to discredit Scientex role and say partly due to bad management?

After that you go further say Mega "mostly plateaued profit in 8 to 9 quarters" to support your bias view or condone false claims by @dragon328 that Scientex did not improve Daibochi.

Makan to RM2.78!! What a rush to mop up shares.

@anti_colonialists

You have not been able to come out with any specific point to support your view that the offer price of RM2.70 is good.

And you are particularly sensitive to remarks that you deem discredit Scientex. We do not know your interests here but your desperate action itself seems to suggest that you are trying to encourage retailer investors here to accept the offer by Scientex. But you need to understand that whatever remarkable achievements made bby Scientex in the past 20 years has nothing to do with this privatisation offer and bears no interests to shareholders of Daibochi whatsoever.

If you think Scientex deserves some respect by making such an offer, then it has to earn it. Likewise, if you want us to think the offer is good, convince us with facts and figures.

Why the offer price of RM2.70 is good enough? What are the improvements to Daibochi financials if Scientex owns 100% of it? What good would it be for minority shareholders of Daibochi to forego our long term holdings of Daibochi at RM2.70 instead of riding out its expansion plans?

If you cannot even convince ikan bilis us here, then Scientex is doomed to fail in this privatisation attempt. FYI, Samarang just added 346k shares of Daibochi yesterday at RM2.71 and Scientex got zero. People are buying up Daibochi at RM2.73 now and Scientex will likely end up nil today.

It is a common trick in corporate deals. Can you prove it right or wrong?

If an equity analyst came along to recommend that the fair value of Daibochi should be RM3.85 (CIMB original tp) or higher, then it would make sense to suspect other investors or funds to have exercised muscles onto the analyst, but we have not seen any of such.

Get your facts right and not just make baseless claims here.

If you are just an observor, you are wasting your time posting abusive comments on those who think the privatisation offer is unfair.

If you are an investor in Daibochi, just sell off your shares if you think the offer is good and move to other counters.

If you are a shareholder or party in concert with Scientex management, then go tell Mr. Lim to just raise the offer price or withdraw it. DO not waste everbody's time here.


Posted by anti_colonialists3 > Oct 1, 2021 11:41 AM | Report Abuse

@dragon328 you claimed "big boy exercising muscles onto equity analysts and investment journalists to help sway retail investors to sell off Daibochi to them. totally unnecessary small tricks getting analysts to produce reports to their advantage."

Another unfair beautifully disguised shot to discredit Scientex by smearing their name and integrity with false claim?

It is analyst job to answer big investor like Apo***, so your claim is half false or full false. If your claim is claim half true, you must agree it is also possible some other big investor or competitor of Apo*** are "exercising muscles onto" analysts?

Are you claiming Scientex paid or exercised its muscles on analysts and paid The Edge and other journalists to use them as "small tricks"?

Are you joking, or think everyone have 0 integrity and pressured or paid by Scientex? That is big insult! No different from anti vaxxer insane claims on Big Bad Pharma!