Petronas Dagangan

Petdag

INCOME STATEMENT
Yr (m) …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
Sales …. 21,787 …. 25,060 …. 32,341 …. 32,342 …. 29,515
GProf …. 2,137 …. 2,016 …. 1,904 …. 2,236 …. 2,217
EBIT …. 834 …. - …. 519 …. 935 …. 991
Int Exp …. 6 …. 10 …. 16 …. 17 …. 9
PBT …. 1,207 …. 1,079 …. 707 …. 1,106 …. 1,164
PAT …. 913 …. 788 …. 502 …. 812 …. 837
No of shr …. 993 …. 993 …. 993 …. 993 …. 993
EPS (Dil) …. 0.95 …. 0.8 …. 0.5 …. 0.82 …. 0.84


GP Marg …. 9.81% …. 8.04% …. 5.89% …. 6.91% …. 7.51%
PBT Marg …. 5.54% …. 4.31% …. 2.19% …. 3.42% …. 3.94%
NP Marg …. 4.19% …. 3.14% …. 1.55% …. 2.51% …. 2.84%
EBIT/Int …. 139.00 …. #VALUE! …. 32.44 …. 55.00 …. 110.11




BALANCE SHEET
Yr (m) …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
CA …. 5,067 …. 3,566 …. 4,991 …. 5,772 …. 5,711
NCA …. 4,298 …. 4,505 …. 4,550 …. 4,395 …. 4,213
TA …. 9,365 …. 8,071 …. 9,541 …. 10,167 …. 9,924


CL …. 3,772 …. 2,793 …. 4,445 …. 5,018 …. 4,780
NCL …. 256 …. 294 …. 304 …. 320 …. 298
TL …. 4,028 …. 3,087 …. 4,749 …. 5,338 …. 5,078
Eq …. 5,337 …. 4,984 …. 4,792 …. 4,829 …. 4,845
TL+Eq …. 9,365 …. 8,071 …. 9,541 …. 10,167 …. 9,924



Cash …. 2,432 …. 1,259 …. 1,840 …. 359 …. 251
ST Debt …. 34 …. 98 …. 360 …. 443 …. 325
LT Debt …. 84 …. 113 …. 135 …. 140 …. 139
Total Debt …. 118 …. 211 …. 495 …. 583 …. 464

Inventories …. 803 …. 626 …. 1,032 …. 1,193 …. 1,279


CE …. 8,025 …. 6,537 …. 6,936 …. 5,508 …. 5,395
TD/Eq …. 2.2% …. 4.2% …. 10.3% …. 12.1% …. 9.6%
TD/TA …. 1.3% …. 2.6% …. 5.2% …. 5.7% …. 4.7%
TL/TA …. 43.0% …. 38.2% …. 49.8% …. 52.5% …. 51.2%

CR …. 1.34 …. 1.28 …. 1.12 …. 1.15 …. 1.19
QR …. 1.13 …. 1.05 …. 0.89 …. 0.91 …. 0.93







CASH FLOW STATEMENT
Yr (m) …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
Net Inc …. 913 …. 788 …. 502 …. 812 …. 837
D&A …. 362 …. 340 …. 345 …. 317 …. 294
FFO …. 2,065 …. 660 …. 847 …. 1,355 …. 1,880
CWC …. …. …. …. ….
NetOCF …. 2,065 …. 660 …. 2,562 …. 1,355 …. 1,880
Capex …. -228 …. -315 …. -395 …. -548 …. -555
FCF …. 1,837 …. 344 …. 2,167 …. 888 …. 1,392
Dividends …. -596 …. -616 …. -551 …. -829 …. -764
RE …. 317 …. 172 …. -49 …. -17 …. 73


NetOCF/Net Inc …. 226.2% …. 83.8% …. 510.4% …. 166.9% …. 224.6%
FCF/Net Inc …. 201.2% …. 43.7% …. 431.7% …. 109.4% …. 166.3%
Capex/Net Inc …. 25.0% …. 40.0% …. 78.7% …. 67.5% …. 66.3%
Capex/NetOCF …. 11.0% …. 47.7% …. 15.4% …. 40.4% …. 29.5%
DPO ratio …. 65.3% …. 78.2% …. 109.8% …. 102.1% …. 91.3%
Capex/D&A …. 63.0% …. 92.6% …. 114.5% …. 172.9% …. 188.8%




VALUATION
Year …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
Share Price …. 23.96 …. 24.86 …. 17.12 …. 31.44 …. 23.50
Market cap …. 23792.3 …. 24686.0 …. 17000.2 …. 31219.9 …. 23335.5

ROCE …. 10.4% …. #VALUE! …. 7.5% …. 17.0% …. 18.4%
ROA …. 9.7% …. 9.8% …. 5.3% …. 8.0% …. 8.4%
ROE …. 17.1% …. 15.8% …. 10.5% …. 16.8% …. 17.3%

FCF/Mkt Cap …. 7.7% …. 1.4% …. 12.7% …. 2.8% …. 6.0%
DY …. 2.5% …. 2.5% …. 3.2% …. 2.7% …. 3.3%

Petron

Petron

INCOME STATEMENT
Year (m) …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
Sales …. 7,602 …. 8,150 …. 10,902 …. 11,128 …. 11,476
GProf …. 564 …. 534 …. 129 …. 180 …. 287
EBIT …. 419 …. 249 …. - …. -18 …. -
Int Exp …. 32 …. 48 …. 73 …. 67 …. 60
PBT …. 323 …. 306 …. -86 …. -75 …. 136
PAT …. 238 …. 221 …. -64 …. -64 …. 98
No of shr …. 270 …. 270 …. 270 …. 270 …. 270
EPS (Dil) …. 0.88 …. 0.82 …. -0.24 …. -0.24 …. 0.36


GP Marg …. 7.42% …. 6.55% …. 1.18% …. 1.62% …. 2.50%
PBT Marg …. 4.25% …. 3.75% …. -0.79% …. -0.67% …. 1.19%
NP Marg …. 3.13% …. 2.71% …. -0.59% …. -0.58% …. 0.85%
EBIT/Int …. 13.09 …. 5.19 …. #VALUE! …. -0.27 …. #VALUE!




BALANCE SHEET
Year (m) …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
CA …. 1,510 …. 1,080 …. 1,271 …. 1,638 …. 1,680
NCA …. 1,147 …. 1,197 …. 1,208 …. 1,165 …. 1,102
TA …. 2,657 …. 2,277 …. 2,479 …. 2,803 …. 2,782

CL …. 1,284 …. 1,026 …. 1,404 …. 1,828 …. 1,712
NCL …. 209 …. 269 …. 315 …. 113 …. 127
TL …. 1,493 …. 1,295 …. 1,719 …. 1,941 …. 1,839
Eq …. 1,164 …. 982 …. 760 …. 862 …. 943
TL+Eq …. 2,657 …. 2,277 …. 2,479 …. 2,803 …. 2,782



Cash …. 175 …. 170 …. 374 …. 101 …. 39
ST Debt …. 216 …. 386 …. 790 …. 900 …. 900
LT Debt …. 92 …. 158 …. 198 …. 0 …. 0
Total Debt …. 308 …. 544 …. 988 …. 900 …. 900

Inventories …. 710 …. 500 …. 442 …. 695 …. 731


CE …. 1,548 …. 1,421 …. 1,449 …. 1,076 …. 1,109
TD/Eq …. 26.5% …. 55.4% …. 130.0% …. 104.4% …. 95.4%
TD/TA …. 11.6% …. 23.9% …. 39.9% …. 32.1% …. 32.4%
TL/TA …. 56.2% …. 56.9% …. 69.3% …. 69.2% …. 66.1%

CR …. 1.18 …. 1.05 …. 0.91 …. 0.90 …. 0.98
QR …. 0.62 …. 0.57 …. 0.59 …. 0.52 …. 0.55




CASH FLOW STATEMENT
Thousands
Year …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
Net Inc …. 322,984 …. 306,216 …. -85,772 …. -75,418 …. 136,252
D&A …. 64,348 …. 63,215 …. 62,485 …. 63,352 …. 60,302
FFO …. 408,380 …. 397,523 …. 20,106 …. 16,942 …. 168,949
CWC …. -58,412 …. -36,661 …. 280,682 …. 222,309 …. -144,083
NetOCF …. 349,968 …. 360,862 …. 300,788 …. 239,251 …. 24,866

Capex …. -43,462 …. -65,328 …. -99,604 …. -142,708 …. -49,808

FCF …. 306,506 …. 295,534 …. 201,184 …. 96,543 …. -11,040

Dividends …. -54,000 …. 0 …. -37,800 …. -28,350 …. -28,350
RE …. 268,984 …. 306,216 …. -123,572 …. -103,768 …. 107,902



NetOCF/Net Inc …. 108.4% …. 117.8% …. -350.7% …. -317.2% …. 18.3%
FCF/Net Inc …. 94.9% …. 96.5% …. -234.6% …. -128.0% …. -8.1%
Capex/Net Inc …. 13.5% …. 21.3% …. -116.1% …. -189.2% …. 36.6%
DPO ratio …. 16.7% …. 0.0% …. -44.1% …. -37.6% …. 20.8%
Capex/D&A …. 67.5% …. 103.3% …. 159.4% …. 225.3% …. 82.6%




VALUATION
Year …. 2016 …. 2015 …. 2014 …. 2013 …. 2012
Share Price …. 8.97 …. 5.00 …. 2.59 …. 3.00 …. 2.88
Market cap …. 2421.9 …. 1350.0 …. 699.3 …. 810.0 …. 777.6

ROCE …. 27.1% …. 17.5% …. #VALUE! …. -1.7% …. #VALUE!
ROA …. 9.0% …. 9.7% …. -2.6% …. -2.3% …. 3.5%
ROE …. 20.4% …. 22.5% …. -8.4% …. -7.4% …. 10.4%

FCF/Mkt Cap …. 12.7% …. 21.9% …. 28.8% …. 11.9% …. -1.4%
DY …. 2.2% …. 0.0% …. 5.4% …. 3.5% …. 3.6%

Bitcoin and other cryptocurrencies - how may these impact the individuals, the businesses and the financial sectors (fintech) ?

The value of bitcoin depends on:

1.  The number of transactions using bitcoin.
2.  Currency crisis or stability.
3.  Its storage of value as digital gold.


---------------


What is bitcoin?

The idea for bitcoin was first aired around 2009 in a white paper detailing the proof of concept written under the pseudonym Satoshi Nakamoto, whose real identity or identities have never been revealed.

The protocol and software underlying bitcoin are published openly, allowing any developer to review the code.

Just as no one owns the technology behind email, the bitcoin network has no owner or overall controller.

The emergence of bitcoin has given rise to a number of other online coins, commonly referred to as "cryptocurrencies", where encryption is used to regulate the number of units of the currency that can be created and to verify transactions.

The underlying technology supporting bitcoin, the blockchain, is also being made use of in a number of industries, from asset management to property registration.



The rise of bitcoin

Since launch in 2009, the price of a bitcoin has varied dramatically.  It hit a peak of around
US$ 1,120 in 2013, before fluctuating between $230 and $500 until 2016.

But the cryptocurrency has been on a tear over the past year, reaching an all-time high.

In early June it was US$ 3,018.55.

Some may worry that this bears the warning signs of a bubble, but so long as users continue to demand bitcoins and a growing number of endorse accept them as payment, then the value found in bitcoin could be here to stay.

While gold may be one of the most familiar alternative assets to an everyday investor, bitcoin is likely to be new territory.

But those who purchase gold as a way to store value outside of a mainstream bank could also find bitcoin of interest.

For those who think that nearly US$ 3,000 for a digital currency looks expensive, it is also possible to buy portions of bitcoin.  

These smaller units are dubbed "satoshis", named after bitcoin's illusive founder, and are to a bitcoin what pence is to the pound sterling.

Users can trade satoshis down to the one hundred millionth of a bitcoin.


Why buy bitcoins?

Bitcoin has positioned itself as a currency without fuss.  

No banks or fees are involved and users can reside anywhere in the world.

Just like any other currency or commodity, the price of bitcoin is led by supply and demand.  

But unlike government backed fiat currencies such as the dollar or sterling, there is a limit to how many bitcoins can exist.  

No more than 21m coins can ever be created, but the market is not likely to hit this limit for many years to come.

Just over 16m have been mined so far, but those worrying that this looks close to the cap should remember that mining becomes progressively more difficult over time.

There will never be an option to have the cryptocurrency version of quantitative easing and simply create more bitcoins, but since they can be broken down to the one hundred millionth through satoshis, it is unlikely they should become untraceable at any point.

Bitcoin remains a relatively small market for the time being, and so it does not take much to swing the price quite drastically in either direction, making it still very volatile.  

The value should stabilise in time with scale as more individuals use the cryptocurrency and more businesses accept it as payment.

The more people who adopt bitcoin and the more vendors who choose to accept it as payment, the more value will be added over time.

In order to accept bitcoin, online retailers need to join forces with a payment processor that has the means to complete the transaction.

In order to address the volatility of the price of bitcoin, users will have 10 minutes to complete the booking, after which time the price will be updated again.

Bitcoin payments are not confined only to purchases made online.

Each bitcoin wallet will generate a unique QP code that can be scanned for in-person payments or transfers.

Users can also head to one of the more than 1,200 bitcoin ATMs, which exchange bitcoins for cash or vice versa, scattered across 55 countries, most of which are in Europe or North America.

It is also possible to trade bitcoin on some well-established platforms.  

Bitcoin can be used to buy goods and services, and proponents of the coin would like to see it one day pose as a serious rival to traditional currencies.  

The anonymity of bitcoin has also raised questions about whether it could be a tool for criminal activity.

But unlike cash, bitcoin transactions can never be truly invisible because all trades are broadcast on the blockchain, although the identities of those involved are not known.

Developers claim that it is impossible to counterfeit, and that users are in complete control of their payments and cannot receive unapproved charges.


What about other cryptocurrencies?

With a current market cap of US$ 42.5 bn, bitcoin is by far the largest cryptocurrency on the market, but not the only one.

After bitcoin launched eight years ago a number of others sprang up to compete.

Website Coin Market Cap shows that there are 877 coins in existence with a total market cap of close to $110bn.

By market cap, bitcoin's two largest competitors are Ethereum and Ripple.  

Unlike other cryptocurrencies that work to eliminate the need for a bank, Ripple is working with banks to create an easier and more efficient way to send money around the world, allowing real-time payments across networks.

Banks can save back-office costs by using Ripple to process and settle international payments.


The blockchain in action

While blockchain has proved itself for bitcoin, it is still in the relatively early stages for most other anticipated applications.  

Blockchain has started to make headway in finance as a way to cut costs and reduce transaction times (fintech revolution).

In its 2016-17 business plan, the Financial Conduct Authority (FCA) acknowledged the potential uses of blockchain in financial services, calling it an "alternative approach to safe storage of information", such as custody, execution, and clearing and settlement, that can provide secure, transparent and immediate confirmation of information and can be distributed without the need for a central record-keeping authority.  

While the regulator did note that this alternative approach could have its upsides, it added that challenges related to data privacy, defect corrections and trust could arise.

Those companies currently testing applications will have to demonstrate to their peers that blockchain is a workable and worthwhile solution before there is industry-wide adoption.

The widespread adoption could be one of the biggest challenges facing industry-wide acceptance.

One of the benefits of blockchain is that is is distributed, so the more members you have the more secure it becomes.

If done properly, blockchain has the potential to speed up transactions, allow for international transfers, cut costs, ease regulatory burdens, mediate disputes and improve transparency across a number of industries.  





Additional article:

Tuesday, August 1, 2017

The Crypto Currency Debate: Future of Money or Speculative Hype?

http://aswathdamodaran.blogspot.my/2017/08/the-crypto-currency-debate-future-of.html

If you believe that bitcoin will eventually get wide acceptance as a digital currency, you may be able to justify that price, especially because there is a hard cap on bitcoin, but if you don't believe that bitcoin will ever acquire wide acceptance in transactions, it is time that you were honest with yourself and recognized that is just a lucrative, but dangerous, pricing game with no good ending.

Conclusion

Crypto currencies, with bitcoin and ether leading the pack, have succeeded in financial markets by attracting investors, and in the public discourse by garnering attention, but they have not succeeded (yet) as currencies. I believe that there will be one or more digital currencies competing with fiat currencies for transactions, sooner rather than later, but I am hard pressed to find a winner on the current list, right now, but that could change if the proponents and designers of one of the currencies starts thinking less about it as a speculative asset and more as a transaction medium, and acting accordingly. If that does not happen, we will have to wait for a fresh entrant and the most enduring part of this phase in markets may be the block chain and not the currencies themselves.

Value Investing (Pictorial)

https://www.facebook.com/photo.php?fbid=1382823955136662&set=gm.10156439396449622&type=3&theater

10.8.2017 Fuel prices go up by 2% to 3%

Wednesday, 9 August 2017 | MYT 5:52 PM

PETALING JAYA: Fuel prices are up across the board from tomorrow for the second week of August.

RON95 will go up by five sen to RM2.12 per litre while RON97 will go up by seven sen to RM2.39 per litre.

The price of diesel is up by one sen to RM2.06 per litre.

This is the second straight week of increase after RON95 and RON97 went up by four sen and diesel by six sen in the previous week.

The new prices will come into effect from Thursday until Aug 16.

This was announced on RTM1 and posted on the Domestic Trade, Cooperatives and Consumerism Ministry's Twitter account on Wednesday evening.

The weekly fuel pricing mechanism came into effect in April this year.

Prices of petrol and diesel had been placed on a managed monthly float system since Dec 1, 2014 following the removal of fuel subsidies.

Read more at http://www.thestar.com.my/news/nation/2017/08/09/fuel-prices-up-for-third-straight-week/#sxXkJmwackwMU8Gw.99

Rakuten: Go for undiscovered gems - small-cap

Tuesday, 25 July 2017

Rakuten Head of Research Kenny Yee and Vice President Research Vincent Lau at Market Briefing yesterday for select media on the small- and mid-cap stocks for the second half of the fiscal year. With the spotlight on small- and mid-cap stocks shining brighter than ever this year, this market holds much potential for an investor. - The Star

KUALA LUMPUR: A rising tide lifts all boats.

For investors looking to ride on the inflow of foreign funds into the stock market, an online brokerage is telling clients to go small.

“If you look at the FBM Small Cap Index, there is still value to be found within this space.

“The average price earnings ratio (PER) of the FBM Small Cap Index is trading at around the 13 times earnings level,” said Rakuten Trade Sdn Bhd head of research Kenny Yee.

“Some companies are even trading at single-digit PERs and this is where we are looking at aggressively to promote,” he told a press conference here on its investment outlook.

But after a surge earlier this year, finding the undiscovered gems in the small-cap universe is getting tougher.

“These stocks usually have a higher beta, but it is also getting tougher to unearth all the good small companies,” he said, adding that not all small companies with cheap valuations were of good quality.

The FBM KLCI is trading at an average mean of 16 times its historical PER, which Yee reckons is “neither cheap nor expensive”, given growth expectations.

Yee believed that the benchmark index would end the year at 1,850 points from the current 1,760 points, representing a further upside of 5%.

While he continued to be optimistic on the outlook of the FBM KLCI, Yee also advocated a focus on small and medium-cap stocks for any possible high beta opportunities.

Yee also said small and mid-cap stocks could see an even steeper climb from the spillover effect of the larger caps.

“If what we expect comes true, whereby the influx of foreign funds comes through, then we will see a very positive (impact on) the KLCI,” he said.

On a related matter, Yee said corporate earnings would see a further improvement this year, building upon last year’s gains.

“After last year’s growth of around 5%, we are seeing better earnings growth this year and it may surpass the 6% level.

“Corporate earnings could be underpinned by growth in the banking sector.

“Consensus is that there could be a further downturn in the consumer or housing space, but many are still seeing loan growth within the banking sector,” Yee said.

He added that the ringgit could see an improvement and possibly retest the RM4 level on catalysts such as solid prospective foreign direct investment inflows, especially from China at an estimated RM240bil.

“Since the ringgit/US dollar has the closest correlation to the yuan/US dollar, any positive impact on the yuan should likely be positive on the ringgit,” Yee said.

Read more at http://www.thestar.com.my/business/business-news/2017/07/25/rakuten-undiscovered-gems-in-smallcap-universe/#w5JR6m2H4XohkM2i.99

How the stock picks of StarBizWeek writers and fund managers performed in 2016

Saturday, 31 December 2016

More hits than misses in 2016 stock selection

THERE were more hits than misses in the bag of stock picks by selected StarBizWeek writers and fund managers published on June 18.

Of the writers’ six choices, five outperformed the benchmark FBM KLCI, while among the fund managers’ choices, two out of four outperformed the index, which was up a marginal 0.6% during the period under review.

Using June 17 to Dec 20 as the period of review, semiconductor firm KESM Industries Bhd, picked by Afiq Isa, emerged the winner, posting a strong capital return of 104.8%.

After adjusting for dividends, the company’s stock saw its share price increase from RM4.84 to RM9.91.

This may have been partly due to the illiquidity of the stock, as well as KESM’s improved financials on a year-on-year basis.

For its full financial year ended July 31, 2016 (FY16), KESM distributed dividends amounting to 7.5 sen, translating to a dividend yield of 1.8%.

Destini Bhd, picked by Gurmeet Kaur, rose 14.7% over the period from 58 sen to 66.5 sen.

Its shares hit a high of 88 sen on Oct 24 before trending downwards in line with the softer market.

The engineering specialist company, which counts the Ministry of Finance Inc as a substantial shareholder and caters to the aviation, marine, and oil and gas sectors, is still one to watch for its growth story.

An earnings rerating could be in the offing for the stock if the possibility of securing sizeable new contracts for its marine and newly-diversified rail divisions materialises, giving its existing order book a significant boost.

For the nine months ended Sept 30, 2016, the firm recorded a 82% increase in net profit to RM21mil.

Despite a tough business environment, CIMB Group Holdings Bhd, picked by M. Shanmugam, saw its stock go up by 11.7% to RM4.60 during the period under review.

The stock was chosen partly because of Indonesia’s economic recovery since more than 20% of CIMB’s business comes from Indonesia.

The banking group has also been rationalising its cost, with the efforts beginning to show in its bottom line.

For its third quarter ended Sept 30, it made a higher net profit of RM1.02bil compared with a net profit of RM803.9mil for the same period a year earlier.

The group paid out eight sen per share in dividends during the period under review.

Century Logistics Holdings Bhd, a choice of Intan Farhana Zainul, saw its share price rise as much as 8.5% to 88.5 sen amid news that South Korea-based CJ Korea Express Asia Pte Ltd was buying a 31% stake in the firm.

The stock rose to RM1.04 on that news before profit-taking set in.

CJ Korea had offered RM1.45 a share for the 31% block in Century Logistics, which was almost a 40% premium.

Cafe chain operator OldTown Bhd’s stock, picked by Yvonne Tan, gained 7.4% over the past six months, ending at RM1.89 on Dec 20 after having hit a high of RM2.02 in November.

Over the same period or up to the six-month period ended Sept 30, OldTown had also rewarded its shareholders with total dividends of three sen per share.

The stock was chosen partly because of its fairly high dividend yields, given the volatile market conditions.

For FY16 ended March 31, OldTown paid out dividends totalling nine sen per share, translating into a decent yield of about 5%.

Despite a slower-than-expected recovery in overall consumer spending, the company still has a relatively resilient business model and a strong balance sheet.

IT company Palette Multimedia Bhd’s stock, picked by Tee Lin Say, lost 7.1% at the end of the review period.

It touched eight sen in late June.

The company had no borrowings and had cash of RM1.45mil as of its first quarter to Aug 31, 2016.

For its first quarter, it recorded a loss of RM516,000 on the back of RM222,000 in revenue.

There are no comparative figures as the company recently changed its financial year.

A turnaround for the company looks likely, as just last month, Palette proposed to acquire biomedicine and herbal medicine company Genopharma Sdn Bhd for RM1.53mil.

This acquisition comes with a profit guarantee over the next three financial years.

Palette also has a new income stream from iMedic.

On Nov 17, Palette signed a partnership deal with Shanghai International Medical Centre in China (SIMC), where SIMC will adopt Palette’s Mobile Healthcare platform, iMedic, for all its doctors and specialists.

Read more at http://www.thestar.com.my/business/business-news/2016/12/31/more-hits-than-misses-in-2016-stock-selection/#3qrC8qh7cA4mF9cK.99

Consumer stocks emerge winners in 2016

Saturday, 31 December 2016

Consumer stocks emerge winners in 2016

BY TEE LIN SAY

Counters brave the storm and stand out for their resilience in earnings

FBM KLCI Top 20 Gainers

IN a year which saw the ringgit depreciate by some 10% and oil prices continued to languish, it was the evergreen consumer stocks which braved the storm and stood out for their resilience in earnings.

The top performer for the FBM KLCI was Dutch Lady Milk Industries Bhd.

Other food and beverage players such as Fraser and Neave Holdings Bhd (F&N) and Nestle (M) Bhd were also favourites with the investors, as all have benefited from the subdued commodity prices for the past two years. Collectively, their gross profit margins have widened for seven consecutive quarters from the fourth quarter of 2014 to the second quarter of 2016.

Another consumer and multi-level marketing player which made the cut was Hai-O Enterprise Bhd, which has seen improved sales from new products, higher recurring sales and an increase in monthly recruited new members.

For the second quarter ended Oct 31, Hai-O recorded 35.6% higher revenue of RM99.78mil and 78% increase in net profit of RM15.91mil.

Sole bank Public Bank Bhd made the cut, once again demonstrating its ability to generate stable profitability even when the operating environment remains challenging.

Public Bank’s net profit rose marginally by 3.1% to RM1.24bil in the third quarter ended Sept 30 compared with the same quarter last year, due mainly to higher net interest income and income from the Islamic banking business.

Two plantation companies made the list – Kuala Lumpur Kepong Bhd and United Plantations Bhd, not surprising given that sentiment in the sector has improved. Local crude palm oil prices are trading above RM3,000 per tonne and palm oil inventory levels have fallen to about 1.7 million tonnes, making this supportive for palm oil prices.

A new entrant to the list is Ekovest Bhd, which has attracted investors for its plans to make a special payout to shareholders of up to RM244mil, or 25 sen a share. Ekovest has hogged headlines since it announced its intention to dispose of a 40% stake in phases one and two of the Duta-Ulu Kelang Expressway (Duke) to the Employees Provident Fund for RM1.13bil.

FBM KLCI Top 20 Losers

The downstream oil and gas players and the rubber glove players were quite certainly the worst performers of 2016.

Investors sold down shares of Shell Refining Co (Federation of Malaya) Bhd, Petronas Dagangan Bhd and Petronas Gas Bhd (PetGas) on the back of unexciting earnings, forex losses and higher costs.

Generally, analysts are less enthusiastic on the outlook of Petronas Dagangan, as the domestic marketing arm of Petronas faces higher costs and weak consumer sentiment.

Meanwhile, PetGas continued to incur unrealised forex losses for its US-dollar finance lease liabilities, although this has now reduced from the previous year.

Not surprisingly, UMW Holdings Bhd was a big loser due to its oil and gas division, which has been badly hit by exceptional impairments and very low utilisation of its rigs.

Then there is Axiata Group Bhd, which has operations in 10 countries, and has seen competition rise in almost all the markets it operates in. Hence it needs to incur more capital expenditure which has thus put pressure on its profits.

The rubber glove players that were most sold down were Kossan Rubber Industries Bhd and Hartalega Bhd because of the price war on glove products. The industry as a whole will continue to be impacted by higher production cost, especially with the recent increase in minimum wage.

Nonetheless, glove makers are poised to record sequentially stronger earnings on improved supply-demand dynamics and a more favourable operating environment due to the weak ringgit.

SAM Engineering & Equipment (M) Bhd was another loser, probably because of the expansion cost it requires for its new RM100mil production facility in Bukit Minyak, Penang. Results over the last year have been weaker mainly on new projects start-up costs and foreign exchange movement.

SAM is building a new plant on a four-acre site in Bukit Minyak to produce nacelle beams for the new Airbus A320neo aircraft.

Read more at http://www.thestar.com.my/business/business-news/2016/12/31/consumer-stocks-emerge-winners-in-2016/#B3642WxMflb6TKbh.99

Nestle eyes RM500mil in e-commerce sales

Friday, 28 April 2017

BY S. PUSPADEVI

Chief executive officer Alois Hofbauer(pic) said Nestle has tripled its e-commerce sales in 2016 versus 2015.

KUALA LUMPUR: Leading food and beverage player Nestle (M) Bhd is optimistic of achieving RM500mil in e-commerce sales in the next three to five years backed by the rapid expansion in the digital space.

Chief executive officer Alois Hofbauer said Nestle has tripled its e-commerce sales in 2016 versus 2015.

“We started our e-commerce store sometime in 2015 using Lazada’s and 11th Street’s platform and ever since then we are witnessing rapid expansion in this space.

“Going by this, we might achieve the RM500mil sales target in the e-commerce space faster in the next three to five years,” Hofbauer said during a media briefing after Nestle’s 33rd AGM yesterday.

While many firms had sacrificed brand investment last year in the surface of a subdued consumer sentiment, he said Nestle was aggressive and invested 50% more in marketing and branding to deliver growth.

“This has somewhat given us stronger earnings and revenue in the first quarter ended March 31, 2017,” he noted.

That said, Nestle does not intend to reduce its advertising expenditure (adex) in print, television or radio, but will go all out in marketing in the digital space, going forward.

In 2016, the company was ranked top three among advertisers in Malaysia with close to RM500mil in adex.

On capital expenditure (capex), he said the company will be allocating RM200mil for capex this year, from RM123mil last year.

“This will be spread equally in all product categories, including refurbishing our warehouse,” he said.

Meanwhile, Nestle’s improved operational efficiency in its facilities and supply chain as well as its strategy to fuel, innovate and transform will help mitigate the impact of higher commodity prices and weaker ringgit.

“Year-on-year, we have worked on optimising end-to-end processes.

“Despite the rising raw material prices, we have lowered conversion costs and this has enabled us to maintain our pricing structure.

“We have also generated close to RM200mil in savings to be re-invested into growing the business,” he added.

For the first time in history, Nestle reached the RM5bil sales target, driven by domestic and export sales.

Nestle booked a 4.4% hike in net profit to RM230.43mil for the first quarter ended March 31, 2017, from RM220.68mil, a year ago on the back of a 4.4% rise in revenue to RM1.37bil from RM1.33bil.

The stellar performance was driven by both domestic and export sales, which grew 4.7% and 3.6%, respectively.

On whether the company will increase prices of products, Hofbauer said it will only consider revising prices in a sensible manner depending on the usage of raw materials.

However, this will be Nestle’s last resort, he concluded.

Read more at http://www.thestar.com.my/business/business-news/2017/04/28/nestle-eyes-rm500mil-in-ecommerce-sales/#8uMR5qXGj7PRPT2c.99

Loan criteria review won't resolve affordable housing issue

Wednesday, 19 July 2017

Referring to media reports on calls to review housing loan criteria for potential buyers of affordable houses, the central bank said in a statement that the comments had caused confusion and were not based on facts and accurate information.

PETALING JAYA: Access to financing is not the main issue in affordable housing, said Bank Negara.

Referring to media reports on calls to review housing loan criteria for potential buyers of affordable houses, the central bank said in a statement that the comments had caused confusion and were not based on facts and accurate information.

“If the issue of affordable housing is to be resolved, all parties must be clear on the root cause of the matter and honestly strive to help those affected by it,” it said.

Based on engagements with banking institutions, it found that housing loans rejected by banking institutions 

• mostly involved borrowers with high levels of pre-existing debt obligations that would expose them to severe financial risk if further debt were extended.

“For such borrowers, the risk of foreclosure is significantly higher and they are much more likely to fall in financial hardship in the event of income shocks or large medical expenses,” it said.

According to Bank Negara, eligible home buyers will continue to have access to financing.

In the first five months of 2017, RM40bil of housing loans were approved to more than 152,000 borrowers. (Average of RM 263,000 per borrower). Three quarters of these borrowers were first-time house buyers.

The approval rate for housing loans had also been stable at 74%, it said.

Banks had also introduced more flexible financing solutions to improve affordability, such as that offered for PR1MA homes.

Outstanding housing loans had continued to outpace overall loan growth, increasing by 8.6% year-on-year to RM493bil as at end-May 2017, the central bank pointed out.

“The responsible financing guidelines are in place to protect the interests of borrowers by ensuring that those who borrow are within their capacity to honour their financial obligation. Financial institutions will offer financing to all eligible borrowers and only reject loan applicants who are clearly over-extended in terms of the ability to take on more debt.”

Read more at http://www.thestar.com.my/business/business-news/2017/07/19/bank-negara-loan-criteria-review-wont-resolve-affordable-housing-issue/#DmP0bDcZSyjz9pKL.99

OldTown (Kenanga Research)

OldTown - Wider Serving in China

Publish date: Wed, 9 Aug 2017, 08:54 AM 

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OLDTOWN had entered into a Territorial License Agreement to provide a licensee the rights to operate outlets and to sub-license outlets within Shanghai, China. The move will expedite the group’s overseas café chain expansion strategies. However, we make minimal changes to our earnings estimates on limited contribution to earnings in the short-term. Maintain OUTPERFORM with a slightly higher TP of RM3.00 based on 18.0x FY18E EPS.

Larger café presence in China. Yesterday, OLDTOWN announced that it had entered into a Territorial License Agreement with Xiamen Kuaike Investment Management Company Limited (the Licensee) to operate café outlets in Shanghai, China and to sub-license the rights to other operators.

Under the agreement, the Licensee would be granted: 

(i) the exclusive right to operate café outlets within Shanghai, 

(ii) a nonexclusive right to use the Trade Mark, Trade Name, business systems to set up a network of outlets in Shanghai, China and sell approved products within Shanghai, and 

(iii) the exclusive right to grant sublicenses to other licensees in Shanghai. 

With this, the group would be paid one-off license and outlet fees alongside recurring fees via royalties. The terms of the agreement are set to be effective for five (5) years from 31 August 2017 with an option to renew for two (2) consecutive terms of five (5) years each.

We are positive on the news, as it would strengthen OLDTOWN and its brand names in the China region where most of its products are exported. Currently, the group has three (3) other outlets operating in China in the Jiangsu Province. As the local café scene is undergoing pressures from more cautious consumer spending, it made business sense for the group to expand this segment by tapping into foreign markets where sentiment is more vibrant. Further, the group’s products have demonstrated promising demand growth and strategically established outlets may be able to leverage on the existing acceptance to drive growth. Recall that FY17 FMCG sales from the Greater China region registered at RM105.2m (+46% YoY).

Minimal adjustments to earnings for now. While there are no details on the maximum number of outlets that the Licensee can operate, they have scheduled to open its first outlet by 4QCY17. In addition, we believe any contributions in the short-term may be minimal given low store base. Considering this with some minor housekeeping adjustments from the group’s audited accounts, we tweak our FY18E/FY19E earnings up slightly by 1.7%/1.8%.

Maintain OUTPERFORM with a slightly higher TP of RM3.00 (from RM2.95, previously), following our adjustment in earnings. Our target price is based on an unchanged 18.0x FYE EPS. Which is closely in line with +2SD over its 3 year forward average PER. We believe the increase is supported by similar premium ascribed by the market to other FMCG players such as KAWAN, PWROOT and SPRITZER.

Source: Kenanga Research - 9 Aug 2017

Vitrox

Financial Release

3rd August 2017 - ViTrox to achieve another record high in 2Q17

KUALA LUMPUR (Aug 3): Hong Leong Investment Bank Research (HLIB Research) has maintained its "buy" call on Penang-based machine vision and electronics company ViTrox Corp Bhd with a higher target price of RM4.54, and said it expects an earnings upgrade, pegged to a price to earnings (P/E) multiple of 20 time, in line with global peers' average.

In a note today, HLIB Research said it sees ViTrox will achieve another record breaking quarter in 2Q17 after its strong performance in 1Q17.

"We expect a back-to-back record breaking streak in 2Q17 with revenue reaching RM75 million-RM78 million yielding a core net profit of RM20 million-RM23 million," the report said.

In 1Q17, the group achieved revenue of RM69.61 million against RM56.03 million in the corresponding period in the previous year, representing an increase of 24%.

Quarterly profit for 1Q17 stands at RM18.57 million, up 19% year on year from RM15.6 million in 1Q16.

For FY16, full year net profit stood at RM64.95 million, up 46.6% from RM44.32 million a year earlier, whereas revenue rose 46% to RM234.03 million against FY15 revenue of RM160.29 million.

ViTrox's four business units are:

• machine vision system standard (MVSS), 
• machine vision system tray (MVST), 
• automated board inspection, and 
• electronic communication system.

According to the report, the MVST segment is expected to make a strong comeback in 2H17 as clients gear up for the major product launches towards the end of the year.

Another Penang-based corporation, SRM Integration Malaysia Sdn Bhd (SRM), is also seen to be experiencing robust growth in FY17. This will correspond to ViTrox's revenue attributed to MVSS, as SRM is a major customer for the segment.

Currently, ViTrox and another industry player are at a preliminary stage in exploring ways to further automate production to enhance efficiency and reduce human labour amid migrant worker restrictions by the government, the report said.

For FY17-19, HLIB Research raised its earnings per share forecasts for ViTrox by 8.7%, 22.7% and 22.6%, respectively.

Over the past year, ViTrox's share price has increased by 135.81% from RM1.95 in Aug 2, 2016. Today, the stock opened at RM4.56, up 7 sen from yesterday's closing price of RM 4.49.

As of 11.36am, ViTrox's share price was at RM4.52, bringing a market capitalisation of RM2.11 billion.

sourced from: The Edge Markets