Warisan is a laggard and unloved stock. Despite its decent earning of 21 sen, consistent dividend of 12 sen and high net asset value per share of RM3.69, the share price has been struggling within the range of RM2.20 to RM2.60 for the last 2 years. Things are about to change with earnings spiking up within the next two years:-
(a) Its tourism arm MayFlower is flourishing, with outbound and inbound tours registering high growth; total annual turnover is around RM500 million (b) The heavy machinery division is capturing new market share especially in East Malaysia. (c) The newly launched Automotive division, marketing China-made trucks, is making inroads into the commercial segment.
Once upon the time, all three members of the Tan Chong Group namely APM, TChong Motors and Warisan were all trading in the range of RM1.50 to RM2 per share. Within the last two years, both APM and TChong have graduated to medium weight stocks of between RM4 to RM5 per share.
Tan Chong Group is now grooming Warisan to be in the same league as the other two sister companies. It may take another two years for Warisan to catch up the same level of earnig.
In the past few years, both the company and the Chairman have been buying back and accumulating Warisan shares.
Warisan is a light-weight investment-grade stock. Earning has not been growing for the last 3 or 4 years, staying at around 0.21 per share and dividend has also not been increasing, stagnating at 0.12 per share. Share price has only appreciated by about 38% over a period of 4 or 5 years - insignificant average of 7.6% per year.
However, net asset backing has over the years increased to the current figure of RM3.69 per share. Warisan also has a big pile of cash of RM115 million (Sept 2011) - it works out to RM1.70 per share of cash over total paid up capital of 67,200,000.
With the current share price of 2.51, Warisan looks grossly undervalued!
Warisan's future hinges on marketing viability of Bison trucks- rebadged Foton trucks from China. People may doubt whether China trucks would sell in the Japanese-dominated Malaysian market, linking them to the similar fate suffered by China-made saloon cars.
Bison trucks would gradually gain acceptance in Malaysia as in other countries due to the following reasons:
1) The pricing is competitive, cheaper than any other Japanese models.
2)The quality is high with Euro 2 engines, and tested in the vast region of China as the NO. 1 truck of the country.
3)If you are a businessman, you may not want to drive China-made cars for obvious reasons, but you would not mind buying China trucks for your factories because they are cheap and good.
4)Bison is marketed by Warisan's sister company Tan Chong which has a wide network of potential customers. Bison is a cheaper alternative to Nissan and UD trucks sold by Tan Chong.
Warisan has recently launched another line of products: dump trucks, cement-mixer trucks and prime movers. All of them are heavy-duty China made trucks. The sales would pick up slowly as they are new in Malaysia. Short term contribution would be insignificant but in a longer term, profit generation could be quite substantial.
Warisan has just released the 1Q2012 results. The earning per share shot up from 3.28 sen to 6.33 per share. That is a jump of 93% compared to the results of 1Q2011. This is only the beginning of Warisan's growth. As the commercial truck business picks up gradually, the earning will also gain momentum. Besides, the asset backing is currently RM3.95 per share. Watch out for more growth in the coming quarters.
Warisan used to be a lethargic stock, rarely traded with miserable daily volumes. Things seem to look up a little bit for the last one week; seemingly someone is nibbling into this counter to collect the shares. There is no announcement to indicate any corporate move. However, do watch out for the quarterly results in August to gauge the earning growth.
In the past few years, both the company and the Chairman have been buying back and accumulating Warisan shares. This company is not for quick-profit traders but long term investors. There will not be any fast money but if you have financial stamina, I believe you would be rewarded in a couple of years.
There was a flurry of trading activities of Warisan shares last week. Today's company announcement revealed that among other people, the controlling shareholder Tan Chong Consolidated was buying Warisan shares in the open market. They bought a total of 176,000 on 11th July. Although the volume purchased is nothing to shout about, it is pertinent to note that they have been buying consistently throughout the year. Generally, when the major shareholder or the company itself keeps buying the shares, it is worthwhile to have a look on the business potential of that company.
Warisan has just released 2Q results. Net profit increased by 45% from 9.59 sen 13.98 sen per share. The company declared a interim dividend of 6 sen per share gross. If the profit can be maintained in the 2nd half, annualized earning should be around 28 sen per share. At the price of RM2.74, that works out to PER of about 10, quite decent.
The chairman and controlling shareholder of Warisan bought 2.55 million Warisan shares on 29 August 2012, by way of direct deals. The price paid was RM3 per share. Direct deal transactions are normally not reflected on Bursa Malaysia. It is reported via company announcement.
When insider buys large volume of shares, it is an indicator of better things to come.
It is true that the liquidity of this counter is quite low. First, the capital base is small, only 67.2 million shares. Secondly, most of the shares are tightly held by the major shareholder and they keep buying in. Thirdly, potential of this company is yet to be fully realized and retail investors are not interested.
It is not that difficult to buy say 50,000 shares if you are prepared to pay market price of RM2.60 to RM2.80 per share. However, it is unlikely you can sell them for profit at this moment due to lack of retail interest.
This counter is for medium to long term investment. Certainly, it is not meant for trading or short term purpose.
There are some goodies in the budget store for Warisan. Tour operators which bring in more than 750 foreign tourists or 1500 local tourists will enjoy tax holiday for 3 years.
Warisan has a subsidiary tour company named May Flower which operates both inbound and outbound tours. May Flower could be the largest tour operator in Malaysia with annual gross profit of closed to 50 million RM.
There would be substantial savings in terms of tax exemption for the next three years, which in turn would be translated into higher earnings.
Recently Warisan launched the new line of trucks- prime mover, dump truck & cement mixer, in Bintulu, Sarawak. Within a short period of time, the company sold 50 units of various types of trucks (Business Time 5/10/2012). Bintulu is the location of SCORE - a huge industrial and infrastructural development of Sarawak, which may take more than a decade to complete. The company aims to capture 20% of the truck market share in Sarawak and 8% of national market.
As the China truck business was only launched within the last two years, meaningful profits will only roll in within next few years. Because the capital base of Warisan is only 67.2 million shares, the earning growth can be quite explosive when the sale of trucks picks up over time. Be on the lookout for BISON and AUMAN trucks on the road. When these brands are noticeable on the roads or construction sites, Warisan share price would have soared.
PETALING JAYA: Warisan TC Holdings Bhd’s net profit for the first quarter ended March 31, was marginally lower by 5.6% to RM2.68mil from RM2.84mil in the previous corresponding period, due to escalating costs.
Revenue rose 14.6% to RM114.69mil from RM100.11mil a year earlier, attributable to the increased contribution from the company’s travel and car rental, and automotive divisions.
In a filing with Bursa Malaysia yesterday, the company said its travel and car rental division recorded 24.2% higher revenue at RM51.9mil compared with the corresponding period last year.
“The increase in revenue was due to the continued disposal of used rental vehicles by the car rental sub-division in this quarter, which generated a gain from disposal. China’s in-bound business was doing well in the first two months of this year before the MH370 incident.”
The company said its automotive division recorded a growth of 77.5% in revenue to RM19.5mil compared with the corresponding period last year, as the sale of vehicles picked up after the launch of heavy commercial trucks in the second quarter of 2012 and passenger pick-up vehicles in September last year.
“Segment profit, however, decreased to RM34,000 from RM557,000 in the corresponding period last year because of higher completely-knocked-down import costs and branches set up to widen the distribution network.”
Revenue from its machinery division fell 21.7% to RM41.1mil, due to higher input costs and lesser unit sales of the heavy machinery sub-division. “The parts and services department performed relatively well in this quarter,” said Warisan TC.
On the company’s prospects, it said the travel industry, particularly those in-bound to Malaysia, had been affected by the tragic MH370 incident and a number of unfavourable cases in Sabah recently.
“The in-bound travel business, particularly from China, has dropped tremendously, which has affected our travel and car rental division. Despite Visit Malaysia Year 2014, promotional expenditure in China has been cut in this cooling-off period. “Going forward, the group continues to focus on strengthening its market presence, increasing its product range, cost stabilisation and productivity improvements.”
Anyone, this companies sell very diverse products---in cosmetics, heavy machinery, trucks, and car renting business. What is their primary or most profitable business that has the potential to grow in the future. I am interested in the cosmetics potential? How profitable is this sector for this company? I am not that interested in trucks and others.
When the stock market moves into the low ebb, privatization becomes a popular tool for the controlling shareholder to buy up all the remaining shares at a very cheap price. Warisan is potentially a good stock for such corporate move-- NTA of RM5 per share but market price is only RM1.70.
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....