tapdance

tapdance | Joined since 2017-06-05

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2021-12-25 14:29 | Report Abuse

TapDance (Obscure Investment Ideas), [25-Dec-21 2:24 PM]

#PMBTECH China energy cost structure changed from a fixed to floating rate system. The effect is especially pronounce for the heavy power consuming industries e.g. metal smelting, as cost is allow to float without a cap.

Local analysts estimate that current Silicon metal price is near cost level. Recent lower price transactions are from smaller plants in attempt to clear their lower cost inventories produced prior to the cost hike. Industry will consolidate. These inefficient facilities will not survive going forward.

US and Europe competitors are facing their own challenges as energy cost has also escalated in recent months, while operating at inefficient scale. Government policies in limiting imports - primarily China, may ease the pain. It sacrifices downstream end-users' interest - that is, Aluminium, Solar, Semicon, EV, Automotive, Batteries, Chemical, Construction and etc.

Meanwhile PMBT's cost structure improvises as capacity expands - cost per unit declines. The result is a material improvement in its global cost curve position - which is already near the top quartile.

Additionally, the market favors 'green' metals produce by renewable and sustainable resources, fetching certain premium over the average coal powered metals.

Ceteris paribus (wherein business usually not), PMBT should check in ~RM350m PBT on the Silicon metal business alone. Profit, obviously, will be higher when additional capacity kicks in post CY2022.

Stock

2021-10-15 17:14 | Report Abuse

Xi also pledged to accelerate the development of wind and solar power in China.

“[We will] step up our efforts in the development of renewable energy, and accelerate the planning of large-scale photovoltaic and wind power projects in [our] deserts and nearby areas,” he said. “Construction for phase one of these projects, with a combined installed capacity of 100 million kilowatts, has begun.”

Xi did not give details of the solar projects, which are bigger in scale than India’s entire renewable energy portfolio.

https://www.scmp.com/news/china/science/article/3152055/cop15-chinas-xi-jinping-pledges-us232m-new-fund-protect-world

Stock

2021-10-15 11:03 | Report Abuse

fo ll ow me at te le g ram: tapdance (obscure investment ideas)

Stock

2021-10-15 11:02 | Report Abuse

My prudent investor friends generally ask about the sustainability of the silicon price and its accompanying impact on $PMBTECH / 7172 (PMB TECHNOLOGY BERHAD), and that has the recent run-up fully reflected the company's prospect.

My BIASED response on -

#SILICON PRICE'S SUSTAINABILITY

1. We saw China's ESG policies disrupting Silicon metal's supply coming. But to say we see China's power woe causing an eruption in Silicon price is an exaggeration .

2. China's ESG policies will not stop. Period. The >70% coal fired energy plant contribution into its power network is an eye-sore to a government that promises to lead the world in carbon emission cut. The ratio has to be brought down.

3. To bring down coal fired power contribution, either Beijing has to shut coal fired plants OR/AND increase renewable energy contribution.

4. Inefficient plants operating in the high energy consuming industries (e.g. steel, aluminium, silicon etc.) will have a hard time surviving thereby reducing/consolidating capacities under a few bigger corporations. Thereby our original thesis.

5. Amongst the renewables, Solar is relatively easier to setup in scale. Solar needs silicon.

6. China commands >70% of global silicon capacity. Repeat, China commands >70% of global silicon capacity.

7. US is pushing hard for Solar AT THE SAME TIME. https://reut.rs/3AbJIJF

It may be true that current Silicon price momentum will slow down upon China rectifying its power disruption. But to say that Silicon price will crash like Gloves' ASP (and therefore suggesting PMBT's prospect to share the same) is not a fair comparison as the underlying demand's sustainability is wildly different.

Based on above facts, one should be able to form his/her own opinion on the metal's prospect.

#HAS PMBTECH'S PROSPECT FULLY PRICED IN

1. I have calculated PMBT's prospective earnings under an optimum situation previously. Namely: 72,000 tons capacity x RMB 60,000 silicon price x 0.65 RMBMYR = RM2.81bn revenue.

2. Considering the operating leverage, at conservatively estimated 8 - 10% NPM, PMBT should earn ~RM225 - 280m pa. i.e. trading at ~11x PE. PMETAL has never touch below 20x after its run-up in 2017.

3. What I did not mention is the possibility of margin expanding further than the norm. Silicon is made of sand. Widely available hence no pricing power/premium.

Other metals such as Aluminium requires Alumina or Steel for iron ore, their raw material price usually correlates positively. Hence after awhile their producers' margins falls back to norm. For silicon, the dynamic suggests it may not. Can management lock-in the ultra high margin? Yes.

4. Coal - which is one of the cost component - price has risen sharply recently hence offseting some of the benefit mentioned above.

5. PMBTECH has 2 more phases to expand. I have no idea if those 2 mentioned phases will be of the same size/volume. Still, it is fair to expect at least the same. Namely, whatever I have accounted above, multiply by 2. Yes, if one desires apply your own discount factor.

6. At mere ~1% global market share based on production capacity, PMBT's cost efficiency is already on-par with those largest China / Europe silicon producers.

7. Management strength. IMO, this is the most critical factor of all. PMETAL has demonstrated its track record through both peak and trough periods. The learning curve was steep. Remember the failed China venture, the less efficient Mukah plant, and fire incidents... all happened when Koon family were less known with less resources.

Today, investors are blessed to have a replica of the 2016/2017-PMETAL in 2020/2021-PMBTECH which is way smaller, less tuition fees to be paid, faster ramp-up and all when the Koon family possesses a lot more resources (i.e. lower risk, faster/higher high-returns).

(ashamed to admit that) I missed PMETAL, and I won't miss PMBTECH.

Lastly, to rewards those who has read this far - there might (or might not) be some minor disappointment from the 3Q FY21 result given the MCO disruption; depending on how huge the offsetting impact of both disruption vs. silicon price movement.

That could be the (last) chance to pound for those who likes to buy the dip.

Stock

2021-10-15 11:00 | Report Abuse

Login to i3 once in a while and amused by many interesting comments.

Stock

2021-10-05 12:58 | Report Abuse

detailed PMBTECH analysis at my te le g ram channel - tapdance (obscure investment ideas)

Stock

2021-09-29 14:48 | Report Abuse

i3 untagged my posts after my active posting in other platform

Stock

2021-09-29 14:45 |

Post removed.Why?

Stock

2021-02-24 09:37 | Report Abuse

Market is too fixated on the single bottom line figure.

So let me lay it out for those who can wait -

$KLSE-SALUTE explicitly says 'SEVERAL PRODUCTS SLATED TO GO INTO MASS PRO IN NEXT 3 TO SIX MONTHS'.

Stock

2021-02-23 23:07 | Report Abuse

If the maiden contribution is only operating at 30% of its intended capacity, then EBIT from new capacity alone could potentially ramp up to RM20m i.e. ((13 - 7) / 30%). p/s: my experience says 1st quarter utilisation rate is more like ~20%; feel free to compute your own expectation.

Total EBIT after adding existing plant's contribution is RM27m per quarter, or RM108m pa.

$PMBTECH / 7172 (PMB TECHNOLOGY BERHAD) is currently valued at RM1,590m EV hence translates to 14.7x EV/EBIT. Not at all exorbitant as many thought.

On the other hand, $PMETAL / 8869 (PRESS METAL ALUMINIUM HOLDINGS BERHAD) is trading at normalised ~25-28x EV/EBIT. Can the same repeat in PMBT?

Stock

2021-02-23 23:07 | Report Abuse

On the uptrend. New capacity’s maiden quarterly contribution alone generates +138% / +44% segmental Revenue / EBIT growth.

Performance could have been better if not for the ultra-high shipping costs.

Capacity ramp up will be gradual and optimize (72k tons pa.) by end of 2021. Expect more to come.

News & Blogs

2021-01-20 15:11 | Report Abuse

Meanwhile it is close to nothing.

Stock

2020-11-20 15:11 | Report Abuse

That was not nice.

News & Blogs

2020-10-09 11:44 | Report Abuse

The report is dated Dec 2019, not 2020. It is an old report.

Stock

2020-08-10 10:06 | Report Abuse

NTPM is a little-known PPE stocks.

Stock

2020-08-08 23:28 | Report Abuse

Under the massive USD printing, there's no way for gold price to reverse its uptrend. Any temporary breather is a buy.

Stock

2020-08-04 11:50 | Report Abuse

@sengtan somehow the link is not working. You can google the article simply search toilet paper demand spiked, from business insider.

Stock

2020-05-21 09:55 | Report Abuse

Bursa is pulling off again?

News & Blogs

2020-05-17 09:34 | Report Abuse

Consumers are spending more/less on packaged food (& beverages) during lockdown? ..snacks?

Stock

2020-05-15 10:54 | Report Abuse

Strange that Nylex does not mention anything about ethanol. Especially when every other listed companies seizing the opportunity to broadcast their healthcare-related venture. And we know for a fact that Nylex is a major ethanol supplier.

And the share price is still very well supported after result announcement. Was it stage for 'someone' to buy more?

Stock

2020-05-15 09:39 | Report Abuse

Diesel price has only started declining in early Feb '20, and Ancom Logistics is already seeing visible/material margin expansion.

So the improvement is primarily driven by the operating leverage i.e. revenue expanded by 14% which translates to a +35% EBIT expansion (Y/Y).

Diesel is down by more than 35%, if you have not check on the pump prices lately.

How does it look like when both (operating leverage & low fuel cost) factors surface at the same time? Use your imagination.

News & Blogs

2020-05-15 09:37 | Report Abuse

Diesel price has only started declining in early Feb '20, and Ancom Logistics is already seeing visible/material margin expansion.

So the improvement is primarily driven by the operating leverage i.e. revenue expanded by 14% which translates to a +35% EBIT expansion (Y/Y).

Diesel is down by more than 35%, if you have not check on the pump prices lately.

How does it look like when both (operating leverage & low fuel cost) factors surface at the same time? Use your imagination.

News & Blogs

2020-05-14 22:46 | Report Abuse

Earning improvement came in faster than I've expected. More to come.

Stock

2020-05-14 22:43 | Report Abuse

Earning improvement came in faster than I've expected. More to come.

Stock

2020-05-14 22:31 | Report Abuse

It's a surprise that mgmt. decided to not mention anything about its ethanol side of business.

News & Blogs

2020-05-14 15:11 | Report Abuse

Too many big headlines in the news in the last few months. People simply overlooked the magnitude of the petrol price slashed. Check it up, and you'll be shocked.

News & Blogs

2020-05-14 15:11 | Report Abuse

Too many big headlines in the news in the last few months. People simply overlooked the magnitude of the petrol price slashed. Check it up, and you'll be shocked.

Stock

2020-05-14 15:10 | Report Abuse

Too many big headlines in the news in the last few months. People simply overlooked the magnitude of the petrol price slashed. Check it up, and you'll be shocked.

Stock

2020-05-13 15:21 | Report Abuse

All in all, it is just the beginning guys.

News & Blogs
News & Blogs

2020-05-13 15:14 | Report Abuse

So what is the difference now vs. 2017 - 2018? Oil price. Check how much margin has expanded (in %) during the 2015 - 2017 period when oil price tanked.

News & Blogs

2020-05-13 15:14 | Report Abuse

Nylex was earning RM30 mn PBT back in 2017/2018, before trade war affects its performance. Now trade war impact gone as US/China reach consensus on petrochemical products. And Nylex's market cap is only RM174 m. So without even the need to point out the various positive factors mentioned in my article, I rest my case.

Stock

2020-05-13 15:11 | Report Abuse

So what is the difference now vs. 2017 - 2018? Oil price. Check how much margin has expanded (in %) during the 2015 - 2017 period when oil price tanked.

Stock

2020-05-13 15:05 | Report Abuse

Nylex was earning RM30 mn PBT back in 2017/2018, before trade war affects its performance. Now trade war impact gone as US/China reach consensus on petrochemical products. And Nylex's market cap is only RM174 m. So without even the need to point out the various positive factors mentioned in my article, I rest my case.

News & Blogs

2020-05-13 14:09 | Report Abuse

Back in office now, so can only rush this out during lunch break. Apologies for the grammatical errors.

Stock

2020-05-13 09:30 | Report Abuse

The momentum is feeding itself now. And the chartists are still not aware... strange.

News & Blogs

2020-05-12 10:01 | Report Abuse

Slow and steady up trend... Nylex is still below chart-ist(s)' radar.

News & Blogs

2020-05-12 10:00 | Report Abuse

There are those who focuses on the future, and those fixated on the past.

Stock

2020-05-11 12:34 | Report Abuse

There are only really 3 key questions to ask here. 1) Nylex's current sustainable earnings? 2) Is the sanitizer demand here to stay? and 3) are those value reflected on price yet?