The Board of Directors of Hiap Teck Venture Berhad is pleased to announce that the Company's jointly -controlled entity, Eastern Steel Sdn. Bhd. (“ESSB”) has on 3 May 2013 entered into a Facilitation Fund Agreement with the Government of Malaysia and Bank Pembangunan Malaysia Berhad. Subject to the terms and conditions of the Facilitation Fund Agreement, the Government of Malaysia agrees to provide a grant to ESSB for the implementation of the Project, an amount of ten percent (10%) of the construction costs of the Project or Ringgit Malaysia One Hundred and Forty Two Million Only (RM142,000,000) whichever is lower.
The said Project is the ongoing development by ESSB of a blast furnace on the Project Land comprising of planning, designing, financing, development, construction, equipping, installation, completion, testing and commissioning of the blast furnace together with the necessary facilities and public infrastructures at Kemaman, Terengganu.
None of the directors, major shareholders and/or persons connected with the directors and major shareholders of HTVB has any interest, direct or indirect, in the said Facilitation Fund Agreement.
Positive drivers. Some positive factors that may propel HTVB’s earnings include: i) an increase in demand for water pipes, should water pipe replacement projects kick off, ii) the US’ anti-dumping duties against nine oil and gas pipe-exporting countries may open a window of opportunity for HTVB, iii) its trading arm’s margin is expected to recover, and iv) contributions from its 55%-owned Eastern Steel SB upon commencement of commercial production may boost earnings further.
- Sensitivity analysis shows positive outcome. With HTVB’s current utilisation rate at just 50-60%, the company is already profitable. Our sensitivity analysis suggests that a 10% increase in the utilisation rate will further improve its profitability by 12.0% and 9.9% in FY14F and FY15F respectively, due to operating leverage effects. .
- BUY, MYR0.97 FV. We valued HTVB at 0.5x FY14F P/BV previously. In view of its stable operations and improving earnings visibility, we raise our valuation to 0.72x FY14F P/BV, which is -0.5 STD from the mean of its 5-year historical trading band (from -1.0 STD), to derive a new FV of MYR0.97.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Coco Chen
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Posted by Coco Chen > 2013-05-13 11:24 | Report Abuse
up,up,