also switched some OCK 97 sen to GADANG 128 sen (hopefully can switch back on condition that GADANG moves higher first). Gadang is too low to ignore after taking away Capital City.

insignificant. just for fun. fundamental improving gradually (thanks to higher than expected tenancy ratio + continue to expand more towers - for are certain). Rare case of single digit premium (although irrelevant).

Mr Pink, thanks for your analysis.

Appreciate it if you could clarify, last 2 FYs PBT for property is RM54m + RM40m = RM94m. You mentioned PBT recognised is about RM130m. How do we explain for the difference of RM46m? Tx.

Accumulate. Premium drop below 10% (first time). Mother share is 97 sen and warrant is 35.5 sen. Sell mother, buy warrants.

Use to be PE of 120x, today is 90x. A very simple rule of thumb for beginners can use is when the PE is 90x, ask the question whether we can be certain (likelihood) that next 3 years the company can do a CAGR of 90%. If the answer is a big YES, then I think its is not high PE. After all, general advices is PEG should be at around 1x or below. PEG = PEx/Growth% = 90x/90% = 1x.

MIDF TP 70sen, Kenanga TP 48sen, sometimes research houses is not very helpful, especially for beginners.

Make your own independent judgement after doing a thorough research. What is the e-commerce sector growth expected for next few years?

Watch out for better than expected "tenancy ratio" in the next few quarters and higher expenses on ICT sectors, will benefit OCK.

Gadang will provide a "few surprises".

New Contracts (RM500m), Better 4Q results, Better than Expected Capital City cash contribution (RM200m), Dividend (>4% DY), and Disposal of Non-Core (at great profit).

Market sentiment is weak at the moment for all sectors except for Technology. One of the character of "intelligent investors" is not IQ or EQ, it is "patient". Am happy to see the market has not recognise the full potential, hence, have time to accumulate.

Solutn another interesting ACE counter, NPMargin 20%, ROE 20%, PE net cash is about 10x, possible bonus after one year, or coincide with going main board. One catalyst I can see is the expansion of its capacity in 2018. Patient is the name of the game. At 30 sen, reasonable. Interesting biz model.

@keke, i don't think he bought back, his original holding is 5m. With bonus an split, he will have 12.5m and free warrants. He actually sold 1m (post bonus). Surely he believe there is still value to it (he already made about 3x its original cost).

MD may reward himself with good dividend (thanks to strong cash flow from Capital City), else he will use the money for new contracts.

Yes, actually that link is from tksw, else, I am still guessing. Tx tksw. Gadang + RGB is his largest holding of about RM15m. The rest spread over about RM500k-1m. Another large holding is Solution, about RM6m.

Top 10 shareholders of Gadang (51%), besides the top 2 major shareholders, the remaining is institutional investors and one prominent investor. (ex-bonus/split shareholding)

http://www.4-traders.com/GADANG-HOLDINGS-BERHAD-13006555/company/

Some updates relating to OCK Group after 1Q results.

http://sosfinancialplanning.blogspot.my/2017/06/sos-dear-mr-ock-sure-or-not-375-sen.html

I thought brand name and reputation will provide higher profit margin, on contrary, SunCon NP Margin is 6.7-6.9% (last 2FY), and Gadang NP Margin is 8-11% (last 2FY).

The time to get interested is when no one else is. You cannot buy what is popular and do well. Today is lowest volume of the month at 1.39m traded.

Construction profit for Gadang is about a third (45m) of SunCon. Guess how much is SunCon now? RM2.6b with PAT of RM129m. Construction alone is worth about RM866m (one third of SunCon), the rest are FOC, Property Division, Utility and Plantation.

focus on the playing field instead of the score board

Why EPF buy into a company where the MD is involved with corruption.

I remember Bornoil raised about RM230m about a year ago, everyone is expecting a 12% or more return in less than a year? Lately they pumped in about RM120m in gold mining (Pahang) and about RM80m in marble mining and some cash for expanding Sugar Bun and Pezzo outlet, expecting the return in less than a year, is asking for trouble. Mining biz takes a bit of time (more than a year). Plantation takes 3-4 years, can't see a single sen of revenue. Just have to follow their progress and monitor what is their performance, a bit later.

A simpler explanation will be, in cash flow term (before tax), about RM217m cash in flow from Capital City will be recognised next couple of years (Btw, there is no GDV for Capital City, Gadang only provide land and share of GDV).

The company still have about GDV of 3-4b of property to go (Semenyih, Puchong, Kwasaland, Damansara Perdana, Cyberjaya, Pokok Sena, etc), if I remember correctly, will last them for many years.

market cap = 825m, net cash = 55m, market cap (net cash) = RM770m. Next 3 years average PAT = RM110m - 120m or more if more major contract secured.

Rough calculation of "considered value" of Gadang @ 2 June 2017
1. Construction order book is RM1.4b (effective interest) x 9% (NP margin) / 3.5 years x PE 14x (TA ascribed) = RM504m (assumed next 3.5 years no new contracts secured - unlikely)

2. Property - GDV 5.4b - assumed 12 years @ 20% NP Margin at PE of 8x x discounting rate 79% = RM504m (conservative of using 12 years)

3. Utility/Plantation - invested about RM80m, used 2.5 factor, value at about RM200m

4. Net cash as at Feb 2017 is RM55m.

Total sum of parts = 504 + 504 + 200 + 55 = 1.463b divided by 654m shares RM2.23 per share vs today's price of RM1.26.

Kenanga report on 1 June 2017 (after meeting with management) is very positive for Myanmar's towers' tenancy ratio of increasing its tenancy ratio from 1.15 to 1.35 times by end of the year.

Point 1
UOB KayHian gave OCK its blue-sky scenario fair value of RM1.30 a share based on tenancy ratio of 1.15 times for 920 towers. 1.15 times = tenancy increase of 30%. Based on the tenancy ratio of 1.35 times and 610 towers (will be increase gradually), fair value will be about RM1.20 a share.

Point 2
Similarly, Vietnam achieved RM11.6m turnover over 2.5 months, i.e. RM13.9 per quarter or RM56m p.a., higher than previous year turnover of RM50m. I suppose it comes from better tenancy ratio.

Point 3
Solar energy segment also worth mentioning as it attained a PBT of RM1m per quarter vs RM0.4 per quarter of preceding year quarter.

2 important facts worth considering:
+ inked a long term leased with MPT (100 towers) - Kenanga
+ another 300 towers to be built (lower USD at the moment)

Prospects - "business and performance of the Group are expected to remain positive for the FYE31.12. 2017"

Normally 2H performance is better than the 1H, due to the nature of the biz. So, don't try to annualised it, it won't be accurate. Do look at analyst report as a reference and see if their view make sense and within your own expectation.

@zoomsbooms, under the new Companies Act, all share premium must be capitalised (via bonus issue) into share capital by Jan 2019. Most companies will do a bonus issue prior to that, else, bursa will come up with a "capitalisation program" for all listed companies to implement this new regulation. (not sure how they do it if the share premium is less than 10% of paid up, 1 for 10?, or even lesser like 1 for 30? So, a lot of odd lots will arise).

OCK minimum bonus issue, based on 31 December 2016 (company's level) is 2 for 3, if they manage to increase their retained earnings in the company's level, the can do 1 for 1, after 31 Dec 2017.

So the million dollar question is, when will OCK do it? The MD decides. If I were him, I will show some increase in qtr earnings, then I will do the bonus. Meaning, after 2 quarters from now. But remember, it is on Company's level not Group.

At 34.5 sen appears to be a bargain. Since market is slow, no harm accumulate some slowly, as there is not much interest here.

No worries.

If OCK gave bonus of 1 for 1, say based on today share price (93sen), warrant price (34.5sen) and warrant exercise price (71sen), the ex-bonus will be 46.5 sen, 17.25 sen and 30.5 sen respectively. The warrants will likely to attract more retailers, speculators and investors (non-institutional) who believe the mother price will touch 1.20 in a few years time (or 60 sen ex-bonus)

@chooheng, mother price, warrant price and warrant exercise price, all will be adjusted. No one loose out.

Warrant at 35.5sen about 13% premium with mother share is about 94 sen. Add or buy if your are considered valuation of the mother share is 105 sen and above.

If you are convinced they can do a CAGR of 80% for next 3 years, i.e. profit of RM230m by 2020, its a bargain. It is rare profit goes up 6x in 3 years, well, JJPTR may have done that.

Worth to add some at 38 sen?

MD bought another 450,000 shares on 22 May 2017. Making it 4.6m now. Too little, anything less than 20m shares, is too small for MD. Looks like more buying is expected.

Thanks to AffinHwang road show. Bravo.

I've removed my comments earlier today and included in my Part 11 blog on Gadang. The market will see its potential once each project is executed effectively.

Likely MD will continue to buy. He sold 5.5m shares in Sept and all his warrants lately, total proceeds is RM31m. He bought 4.2m shares lately, cost him only RM5.4m. He still has RM25m cash. FD? Few rationale reasons a businessman buy a stock, like biz, it must have done a considered valuation (like projects, estimated the risks and rewards).

Some of the measurable reasons a person will buy Gadang shares (whether EPF or foreign institutionals, likely justifiable):

1. Projects secured since Sept 2016 to May 2017, value added far exceed share price increased
2. Dividend (likely Nov 2017), perhaps is close to FD, 3.5%
3. Company ROE > EY, foreseeable next 2-3 years.
4. Anticipated securing major projects next couple of months
5. Better 4Q, profit for 2017 exceed 2016 by more than 10%
6. Gadang, PE is low compare with other peers.
7. Reward > Risk (biz risk and investor risk is different)

As I have said before, "operator" or "stockist" is part of the eco-system. Some are better than the other, it is relative. They are like acquaintances in the office, no harm having them around, but when you are sick, they won't be there for you, you are on your own. That explain why investment must be independent.
23/05/2017 16:15

Unless KLK dropped half, otherwise, BKawan may be a good friend. Share buyback since a year ago from 16+ to 19+. Of course, don't put this one in your competition stocks, move like snail.

Congratulations!!!!

Based on my observation, Gadang's MD is quite a conservative and rationale person. He must have seen the value attained exceeded the price movements or non movements. I remember he mentioned the Company is going after contracts with higher margin. I like his capital allocation skills in biz and hopefully he is as good as his investment skills as well. (If we look back in Oct and Nov 2016, the fluctuation of share prices due to various "issues", he and his senior management gain the most from the ESOS, 86 sen)

I have added a bit before he bought that 2.5m shares. Investment decision is best when it is independently made and based on considered valuation as well as rationale, not just "expectation".


As for when the share price reflect its added value, nobody will know. In a longer run, the gap will reduce as when they realised it from the better results.

Like your sifu WB said, price is what you pay, value is what you get. In a short run, the market is a voting machine, and in the long run, its a weighing machine. Time is a friend for investor and an enemy for speculator.

Gadang is a laggard compared with some of its construction peers. YTD, Gadang is up only 22%, while other peers like GKent, Ekovest and Econpile have gone up 32%-35%, with PE of 12-18x and valued at 1.5b, 2.3b and 1.3b.

The other laggard is Suncon, up around 20%, PE 21x and valued at 2.6b.

YTD, Gadang value has increased 22% from RM700m to RM840m, and during this period, it secured effectively about RM1.13b of construction contract. Every company has different composition of sectors they are in and within the same sector, risk is also different, The value from RM1.1b contract is easily 2-3x the increase in price of RM140m.

Gadang's PE is among the lowest at 8.4x and lowest Mcap at RM840m. The rest is at least RM1.3b to RM2.6b. With one more project of RM500m, market cap can hit above RM1.2b.

+ added some popcorns and a few more "tickets" to watch the movie. Wow, so many sifus said 60sen, so should accumulate more or not? 50% upside, similar to Gadang and Century?

MD is buying & senior officers are selling, very interesting case. There is a reason why the MD sits on the other side of the table. Is it a "considered valuation" before they made their decisions? The sellers think it is over valued, and the buyers think it is under valued. I think it is under valued. Add pop corn + bought some tickets. If you want to watch the movie, get your tickets before it is sold out.

another opportunity to accumulate.

AffinHwang calculation on the parcel delivery contribution a bit low based on the invested capital.

+ pop corns + "chips"

Another neglected counter with great potential. The e-commerce market is big enough for 2-3 more players with deep pockets + expertise (moats).

Gadang's share price did not move for the last 60 days, reminds me of OCK-WA, moving between 20 sen to 25 sen from 25 May 2016 to 24 Feb 2017 ( up between 50% to 90% in about 270 days). Today, OCK-WA is 38 sen. Not sure it is worth the wait.

I think the inflexion point is from MRT2 & TRX City, however, it is not reflected in the share price yet. This two project easily worth RM370m to Gadang.

This has not even include Kwasa Land, Puchong Land, Melawati Land, Damansara Perdana Land, & Solar Project. Upside at least 30% (plus dividend)

@Js Goh, Frankly, Genting casino is faster. Just go for "big" or "small" - 100% in about 1 minute - 2 minutes. After all, there is always a small element of "gambling" in stock investments. The MD will tell you, "I turn my RM3m to RM15m in 4 years, boring is fine. I love boring." Your JJPTR will turn from RM3m into "RM?" in 4 years.

Great observation. Boring counter. MD bought 5.2m shares at 65 sen in 2013 (when no one interested) and now about RM3.25 (ex-bonus and split is RM1.30) in 2017.

Damn boring for the MD, went up 5x in 4 years. Really, damn boring. (haven't even consider the dividend or the free warrants).

Based on observation during the "Oct 2016 Gadang Chaotic Issues", guess who is laughing to the bank. (Exercise price is 86 sen for ESOS).

Up 2 sen x 654m shares = market value up by RM13m. Contract of RM328m, 51%, 2 years, estimated PAT p.a. (conservative) RM10m x PE of 12x = RM120m. Share price up RM13m vs value up about RM120m. Price is what we pay, value is what we get.

In the short run, share market is a voting machine, in the long run it is a weighing machine. I do agree however, stock market is not all science, and neither it is all arts.

Make sure all your check list boxes has all ticks before investing. Company biz (checked), People (checked) and Price (checked). Good luck.

Another contract secured from TRX City Sdn Bhd for RM328m. (MRT2 - RM952m). Total RM1.28 b, not bad.