Wednesday, April 24, 2013

MYEG ... Apr13

There is indication of positive progress in its new work permit renewal service. MYEG had secured its first major contract from a plantation government linked company. Furthermore, the online vehicle voluntary transfer system (VVYS) service is gaining popularity with motorcycle dealers.

Higher than expected revenue growth from new services should catalyse the stock.

The take up rate for the new foreign workers work permit renewal service for 20000 of tis foreign workers is gaining traction, particularly with SME. However response from the bigger companies has been slow.

There are currently (April 2013) around 3.5 million to 4 million foreign workers in Malaysia. The potential market size for this business is around rm175 million to rm200 million annually.

The VVTS is gaining popularity with used car dealers as well as motorcycle dealers. VVTS motorcycle market is growing faster than the car market as most motocycle transfers are done by the dealers and not by the banks. Among the commercial banks, Maybank’s branches had started to use MyEG’s VVTS service nationwide and expect the other commercial banks to follow suit over the next few months from April 2013.

In March 2013, MYEG and DIGI launched a promotion in which DIGI subscribers get DIGI talk time rebates if they renew their car road tax and insurance with MYEG.

Tuesday, April 23, 2013

MEGB ... Apr13

A potential cash bumper dividend of 36.6 sen could be on the cards for MEGB should it consider divesting some of its fixed assets.

Rumours have been rife that Datuk Seri Edmund was looking to cash out on his 23.8% stake in Masterskill. Given that nothing concrete has developed thus far and with the appointment of Siva Kumar as the new executive director, it is believed that the group would instead look to unlock the value of some of its fixed assets.

The anticipated the 36.6 sen bumper dividend based on the assumption that the fixed assets would be sold at the current book value after settling all its outstanding debts.

Masterskill's Santhara has resigned as chief executive officer and would be succeeded by Siva Kumar Jeyapalan, who is also a major shareholder in the company. It had been reported that Santhara might decide to venture into politics and that he would be designated as a board director.

Market was positive on Siva Kumar's appointment, as he could bring in new financial and cultural perspectives and potentially turn around the company and steer it back into the black based on his past experience. The move could potentially help the group move forward with its ongoing transformation plans.

It made a loss of RM28.3mil in FY12 compared to a profit of RM45.3mil a year ago due to lower student enrolment.

Monday, April 22, 2013

OldTown ... Apr13

Its aggressive store rollout strategy and expansion into China may be impressive, but not its same store sales growth. However now that it has 100% halal certification for all its outlets, the group expects SSS growth to enter double digit territory.

While new outlets will help grow revenue, the question is can they sustain sales without cannibalizing the old outlets?

The thing is there is not much SSS growth at the moment. However with its soon to be launched halal campaign, it is expecting at least double digit growth.

Halal certification will provide the group with access to a much wider market. This will boost its organic growth significantly considering its current customer base its mainly non Malay.

In the past couple of months, OldTown has also been focusing on its China efforts. In fact two new deals will soon position the group for expansion in China’s F&B and fast moving consumer goods sectors. This capex will funded by rm64 million that the group had raised via a private placement.

Expect to see a small shift in its earnings – moving towards FMVG – with its new factory in Ipoh and its China operations.

Its prospects are bright with two key drivers: the strong growth of its FMCG segment, which is expected to get a boost from its growing regional mark shares, including an untapped markets like China, South Korea and Vietnam and the opening of more outlets in Malaysia, Singaporem Indonesia and China.

Whether not OldTown’s halal certification helps maintain sales in its local F&B business, its expanding FMCG segment and prospects in China will certainly speed up its pace of growth.

Friday, April 19, 2013

Tenaga ... Apr13

It is expected to benefit substantially from the sliding yen, given its sizeable exposure to the currency.

It was not unusual for TNB to be among the top beneficiaries, given its sizeable foreign debt. Likewise, TNB would see its interest and principal repayments increase in a firmer yen scenario.

As at Nov 30, 2012, TNB had RM4.71bil yen-denominated loans, accounting for about 21% of its total outstanding loans of RM22.4bil. Its US dollar-denominated loans during the period stood at RM2.76bil. Its total ringgit equivalent of foreign currency borrowings is RM7.47bil.

A 10% decline in the yen vis-vis the ringgit over an extended one-year period would bring about an incremental RM470mil of forex translation gain or 12% against estimated net profit forecast of RM3.78bil for financial year ending Aug 31, 2012.

TNB is expected to announce its financial results on April 19 2013.

However critics say that the weaker yen might only mean a paper gain for TNB unless the company had actually made payments for its yen-denominated loans.

Its share price (April 2013) has charted new highs lately on expectations of an improved financial performance and lower coal prices.

TNB is currently (April 2013) bidding for two new coal-fired power plants of 1,000MW (Project 3A) and 2x1,000MW (Project 3B).

As TNB continues to rally, TNB is already earning higher-than-usual return on invested capital at present (April 2013), in part due to Government aid (subsidised gas, and oil and distillates compensation). Any industry reforms are unlikely to materially boost TNB's profitability. In fact, do not rule out the possibility of TNB's profitability being squeezed.

Thursday, April 18, 2013

IOICorp ... Apr13

It was reported that IOI Corp was planning an initial public offering (IPO) of its property arm in the fourth quarter of 2013, speculating the total value of the listing to be in the region of RM10bil.

This would be a huge improvement in size, considering that it was only in 2009 that IOI Corp had bought back its then-listed property arm IOI Properties Bhd for a mere RM310mil in cash and shares, valuing the unit at about RM1.3bil.

It would be positive if the group lists its property arm, as it would allow it to unlock value and for investors to better appreciate its property division.

At the moment (April 2013), the property division was “hidden” and that there wasn't much visibility in terms of its value, future plans and launches in the pipeline. If it were to be listed on its own, then IOI Property would eventually be able to find its own value.

Back in 2009, IOI Corp had taken IOI Properties private as the company was undervalued, trading at 8.4 times versus IOI Corp, which was trading at 15 times back then.

As at IOI Corp's financial year ended June 30, 2012, the total asset value of the property development and investment segments stood at RM7.7bil, contributing a pre-tax profit of RM538mil or 20% of IOI Corp's total pre-tax profit.

This raises the issue of whether IOI Corp's property division's IPO could be priced at more attractive valuations than IOI Corp. IOI Corp was currently (15 April 2013) trading at a forward price earnings of 20.7 times on 2013 earnings.

Market observers opine that IOI Property was currently (15 April 2013) 100% owned by IOI Corp, there was room for value creation. If it were to go for a separate listing, this would mean that the parent company sells down its stake and gets back some value from its assets. It could use that money to expand its business or give it back to shareholders.

A separate property listing would also reduce the risk for the plantations side. This was because at present (April2013), funds from IOI Corp were being used to buy and develop land for its property segment.

Meanwhile the Lee family of IOI Corp has been buying back shares on the open market ahead of a corporate exercise reportedly to relist the group’s property arm.

Under this option, shares in the property arm will be distributed to IOI Corp’s shareholders, which will result in the unit separating from the group.

The family, led by IOI Corp MD and CEO Tan Sri Lee Shin Cheng had increased its stake in the company from 43.33% to 45.78% as at April 2013.

If it is distribution in specie, IOI Property will no longer be a subsidiary of IOI Corp but both companies will have common shareholders and be independently listed.

Both listed entities will then be valued purely on their aggressive plantation and property business.

IOI Corp could trade at a better PER if it became a pure plantation company following the demerger of its property business.

As for the property arm, the relisting exercise could value the property arm at up to rm10 million.

As earnings from its overseas property ventures start to come in IOI Corp may look again at the option of relisting its property arm, which will enable investors to channel their investments in a more focused manner.

In the last three financial years revenue from the property division has been an average of rm950 million.

The company will also offer investors more exposure to the Singapore real estate market instead of being a mainly Malaysia play.

Wednesday, April 17, 2013

IGBREIT ... Apr13

IGB has stepped up its share buyback activity. IGB Had 5.66% in its share base in treasury as at April 2013.

Its net assets per share stood at rm2.78.

At current level (15 April 2013), investors are valuing IGB’s assets at rm900 million if one were to exclude its 51% stake in IGB REIT. The book value of IGB’s top five investment properties – hotels and offices – is already rm900 million in its 2011 annual report.

It was reported that IGB’s north and south office tower blocks at The Gardens alone worth rm763 million instead of rm280 million they are carried at in their books.

IGB’s investment in the owner and operator of Renaissance KL Hotel is rm303 million. The hotel was valued at rm710 million.

IGB’s other hotel assets include a 60% stake in Cititel Mid Valley which was carried at rm284 million as at end 2011. IGB also owns 100% of the 390 room Boulevard Hotel in Mid Valley City, the 627 room Gardens & Residences and Micasa Hotel in Jln Tun Razak, KL.
The group’s other hotels include Cititel Penang, Pangkor Island Beach Resort, Cititel Express Kota Kinabalu and Micasa Hotel Apartments in Myanmar.

Internationally, the group manages associate hotel chain St Giles that has over 1808 keys in cities. IGB’s assets also include an office building in Australia.

However one concern about the company is the possibility of it needing cash from shareholders to fund its expansion locally and abroad.

For now (April 2013), market observers prefer IGB REIT over IGB. IGB lacks clear catalyst as it transitions to its next growth phase in the longer term. Execution of overseas projects also a key downside risk for IGB.

One nearer term potential catalyst for IGB is a firm news of its hotels and offices being spurn off into another REIT.