A quick look at KNM (4.5.2010)

A quick look at KNM (4.5.2010)
http://spreadsheets.google.com/pub?key=tcCGJ_jnIm-UI-eucHCcPlA&output=html

KNM Group expects to perform better this year

4.5.2010


PROCESS equipment manufacturer KNM Group Bhd (7164)expects to perform better this year on lower tax rates and higher exploration and production activities.

"We recently spoke to the management of KNM following the breakdown of its proposed takeover offer. We believe that investors have overlooked the business aspect in the last few months after the takeover news first broke off back in February 2010," wrote HWANGDBS Vickers Research Sdn Bhd (HDBSVR) analyst Lee Wee Keat in a note to clients yesterday.

KNM's substantial shareholder and group managing director Lee Swee Eng had recently aborted his proposed offer via Bluefire Capital Group to buy KNM's entire business at RM0.90 per share.

Last year was a bad year for KNM as oil majors held back spending in view of low and volatile oil prices.

"We understand that KNM managed to secure only RM1.5 billion worth of jobs last year, and capacity utilisation was only 65 per cent compared with 80 per cent in 2008.

"(Profit) margins for the jobs secured were also slimmer as intense competition over the modest number of jobs available led competitors to cut prices," he said.

Lee expects margins for the next few quarters to remain sluggish as the company completes jobs secured last year. He estimated that the average completion ranges from 15 to 18 months per project.

"We gather that margins have improved since, but have yet to recover to previous levels."

Lee also said concerns over KNM's orderbook replenishment persists.

"KNM has a RM2.4 billion orderbook, with RM400 million of new contracts secured thus far. This is slow, but we foresee a rise in exploration and production activities in the second half of this year to trigger contract flows."

The group currently has a RM11 billion tender book comprising jobs mostly in the Middle East and Europe.

However, Lee has cut his new wins assumption for KNM to RM1.7 billion from RM1.8 billion previously for the financial year ended December 31 2010 (FY10), based on current tender book and historical hit rate of 15 per cent.

KNM's FY09 audited net profit stood at RM260.6 million after adjusting for the tax incentive, which was granted by the Finance Ministry on April 7 2010 to its subsidiary KNM Process Systems Sdn Bhd for the acquisition of Borsig.

Totalling RM1.4 billion, the tax incentive will apply for a period of four years from 2009.

"We expect a lower tax rate going forward as local operations will be spared from paying taxes. Also, there was no impairment charge for Borsig. Borsig contributed about 45 per cent of total FY09 earnings," said Lee.

The research firms has upgraded KNM to "hold" from "fully valued", but lowered its target price to RM0.60 from RM0.65.

"We expect some overhang in the share price given the EPF's recent heavy selling, but at the current price level, we believe that most of the negatives have been priced in. KNM has also started to buy back its shares.

"We believe KNM's strong RM571.7 million cash balance should support more buyback on share price weakness," said Lee.

Read more: KNM Group expects to perform better this year 
http://www.btimes.com.my/Current_News/BTIMES/articles/03knm/Article/index_html#ixzz0mvpKFNdB

A quick look at Integrax (4.5.2010)

Integrax Berhad Company

Business Description:
Integrax Berhad. The Group's principal activities are owning and operating 2 port facilities, Lumut Maritime Terminal (port facility for dry and liquid bulk, break bulk and containers) and Lekir Bulk Terminal (port facility for dry and liquid bulk) comprising Lumut Port. Other activities include providing tuggage services, and extracting and smelting mineral ore. Operations are carried out in Malaysia.

Wright Quality Rating: LAD0 Rating Explanations






A quick look at Integrax (4.5.2010)
http://spreadsheets.google.com/pub?key=t8WcTpUdhaSg_cm5MvKQYLQ&output=html

30/04/2010  
PROPOSED FINAL DIVIDEND
The Board of Directors of Integrax is pleased to recommend a final dividend of 3% less Malaysian income tax for the financial year ended 31 December 2009, subject to the approval of the Company's shareholders at the forthcoming Twenty-Fourth Annual General Meeting to be convened.

A quick look at Genting Berhad (3.5.2010)

Genting Berhad Company

Business Description:
Genting Berhad. The Group's principal activities are operating hotel, gaming and entertainment, tours and travel related services. Other activities include generation and supply of electric power, oil palm plantations, palm oil milling, construction, property development and management, oil and gas exploration, sale of crude oil and investment holding. Operations of the Group are carried out in Malaysia, Asia Pacific, Europe and other countries.

Wright Quality Rating: ACD0 Rating Explanations






A quick look at Genting Berhad (3.5.2010)
http://spreadsheets.google.com/pub?key=tn_N2jnN3rN857OjJ3soAyA&output=html

Warren Buffett's Investment Secret

Asked whether he has an investment secret, he says simply: "Pragmatism."

Warren Buffett's wonderful world of investing

A quick look at Daibochi (3.5.2010)

Daibochi Plastic and Packaging Industry Berhad

Business Description:
Daibochi Plastic and Packaging Industry Berhad. The Group's principal activity is manufacturing and printing flexible packaging materials. Other activity includes developing land into residential and commercial buildings. The Group principally operates in Malaysia.

Wright Quality Rating: LBC1 Rating Explanations






A quick look at Daibochi (3.5.2010)
http://spreadsheets.google.com/pub?key=tiRMwQJfZ-5eKyfTy1bPXWw&output=html

Comment:
Not a great stock.
A gruesome stock.

A quick look at Latexx (3.5.2010)

A quick look at Latexx (3.5.2010)
http://spreadsheets.google.com/pub?key=tECNeQDUY1U6NYZKZZlixQQ&output=html

Kenanga Research initiates coverage on LPI Capital with buy call

Kenanga Research initiates coverage on LPI Capital with buy call

Written by Kenanga Research
Monday, 03 May 2010 08:56


KUALA LUMPUR: Kenanga Research has initiated coverage on LPI CAPITAL BHD [] with a buy recommendation at RM15.04 and target price RM16.80, and said it favours LPI the most among general insurers in Malaysia due to its well-diversified business portfolio enabling the company to minimise its operating risks and generates the highest return on equity (RoE) to reward shareholders.

The research house said the auto insurance segment is expected to turn around in 2010-11 with the proposed increase in premium rates and the change of motor tariff structure, which is a re-rating catalyst.

"We have not factored in the potential tariff hike in this report, however, we estimate every 5% increase in net premium, could increase LPI's earning by 9%," it said.

The research house said LPI has multiple distribution channels including its own agency network and tapping into Public Bank's 250 branch networks.

"We believe its faster-than industry's organic gross premium growth rate of 15%-16% is achievable," it said.

Kenanga Research said historically, LPI's premium has grown at a CAGR of 15% for the last 10 years.

"We estimate LPI now trades at 12.7 times FY11 PER, offers 6.2% net dividend yield and we forecast RoE of 17.2%; which is better than most of the banking stocks.

"We believe its business model of growing revenues at the calculated risk should sustain its earning growth of 12%-14% over next two years and efficient capital structure do offer a solid dividend yield story to investors," it said.

The research house said LPI deserved a valuation premium given stronger growth, higher margin, low investment risk, better market position; whilst the downside is well cushioned by its 6.2% net dividend yield.


Related:

A quick look at LPI

A quick look at Genting Malaysia GENM (2.5.2010)

Genting Malaysia Berhad Company

Business Description:
Genting Malaysia Berhad Formerly known as Resorts World Berhad. The Group's principal activities are leisure and hospitality business which comprises hotel, gaming, cruise and cruise related operations, entertainment businesses, golf resorts, tours and travel related services and other support services. Other activities include property development and management provision of training, offshore financing, utilities and cable car management services, proprietary timeshare ownership scheme, selling and letting of apartment and investment holding. The Group operates in Malaysia and Asia Pacific.

Wright Quality Rating: AAA1 Rating Explanations







A quick look at GENM (2.5.2010)
http://spreadsheets.google.com/pub?key=tp5o0Wh0t3M0rC_NfN1I6Ag&output=html

Comment:
GENM is a great company by my criteria.  GENM earned MR 1.32 billion and paid 'miserable' dividend of MR 300 million last year.  It carries cash equivalent to MR 5.25 billion.  To date the management has not proven itself to be able to employ this cash productively in the new ventures they had undertaken in recent years.  Why not return this cash to the shareholders?  Let's look at what Buffett wrote on GREAT companies.

The Three Gs of Buffett: Great, Good and Gruesome

Here are some golden words from Buffett.


1.  On 'Great' businesses, Buffett says, "Long-term competitive advantage in a stable industry is what we seek in a business.

• If that comes with rapid organic growth, great. 
• But even without organic growth, such a business is rewarding. 
• We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere. 
• There's no rule that you have to invest money where you've earned it. 
• Indeed, it's often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can't for any extended period reinvest a large portion of their earnings internally at high rates of return."

----
OSK Research: Genting Malaysia to trade sideways
Written by OSK Research
Friday, 30 April 2010 10:07




KUALA LUMPUR: OSK Research says Genting Malaysia’s shares, which were actively traded on Thursday, April 29, could continue trending sideways.


The research house said on Friday, April 30 that the stock has been trending sideways for many months and a trading range has been detected. It is ranging from the RM2.68 level to the RM3.00 level.


"That means the stock is expected to until one of these two levels is violated. In other words, yesterday’s active trading in the stock’s shares does not signal anything significant," it said.


OSK Research said the stock’s longer-term outlook will remain a sideways bias until it has violated one of these two critical levels.


Within the trading band, look for an immediate support at the RM2.75 level and an initial resistance at the RM2.88 level

From: The Edge Malaysia

A quick look at Proton (2.5.2010)

Proton Holdings Berhad Company

Business Description:
Proton Holdings Berhad. The Group's principal activities are manufacturing, assembling, trading and providing engineering and other services in respect of motor vehicles and related products. Its models include Waja, Gen.2, Perdana V6, Arena (Jumbuck), Saga range, Savvy, Satria Neo, Persona and Exora. It also offers Lotus sports cars models, such as Elise, Esprit, Exige, Europa and Evora. It is also involved in financial services and property management, as well as operating as an investment holding company. Operations are carried out in Malaysia and other countries, including Asean, China, Indian Subcontinent, the Middle East - North Africa, the United Kingdom/Western Europe, Australia and South Africa.

Wright Quality Rating: CANN Rating Explanations

A quick look at Proton (2.5.2010)
http://spreadsheets.google.com/pub?key=tD9LN07eCpTS6nveY5Sgy4A&output=html

A quick look at F & N (2.5.2010)

Fraser & Neave Holdings Berhad Company

Business Description:
Fraser & Neave Holdings Berhad. The Group's principal activities are manufacturing and distributing soft drinks. Other activities include distributing dairy products, manufacturing and selling glass containers, property investment holding, property development and investment and investment holding. The Group operates in Malaysia, Vietnam, China, Singapore, Philippines, Middle East, Thailand and other countries.

Wright Quality Rating: DBB1 Rating Explanations









A quick look at F & N (2.5.2010)
http://spreadsheets.google.com/pub?key=tyqRmMbLVEXV80BN2RNGD-Q&output=html

A quick look at UMW (2.5.2010)

UMW Holdings Berhad Company

Business Description:
UMW Holdings Berhad. The Group's principal activities are the importing, assembling and marketing passenger and commercial vehicles and related spares and manufacturing original and replacement of automotive parts. Other activities include manufacturing and trading oil pipes and providing various oil and gas services including drilling and pipe coating, trading wide range of light and heavy equipment ,marketing of established agency lines, rebuilding and repair of heavy equipment and diesel engines, manufacturing engine, treading of tubings and casings and manufacturing of couplings for oil and gas industry, vehicle exhaust systems, kangaroo bars, filters and seats, manufacture and assembly of power steering pumps and shock absorbers, blending, packaging, marketing and distribution of lubricants and provision of support services, provision of information technology services, property development and investment holding. Operations of the Group are carried out in Malaysia and Overseas.

Wright Quality Rating: BBB1 Rating Explanations








A quick look at UMW (2.5.2010)
http://spreadsheets.google.com/pub?key=tzdm-V8ZSvV8pv_fn-UQOlg&output=html

External auditors raise red flags at 6 companies

Several accounting firms have raised red flags at six companies yesterday, indicating they could not complete their audits properly.

The companies are Nam Fatt Corp Bhd, Patimas Computers Bhd, Mangotone Group Bhd, Wawasan TKH Holdings Bhd, Luster Industries Bhd and KBB Resources Bhd, based on their announcements to Bursa Malaysia.

Five of them had their accounts qualified, which means that auditors had incomplete information for their work or they may disagree with the company's management on certain assumptions.

However, Luster's auditors, which is Grant Thornton, did not qualify its opinion but pointed out to shareholders that the company's fate rests on an approval by Bursa Malaysia Bhd.

Financially-troubled Luster, a precision plastic parts maker, had submitted its revamp plan on September 18 2009, which was rejected by Bursa on February 11 2010. It appealed on March 4 but Bursa has yet to decide.

Construction group Nam Fatt is also in trouble after it defaulted on some loans and made an operational loss of some RM560 million in the year to December 31 2009.

It has to submit a revamp plan a year from March 15 2010 and it has yet to finalise such a plan.

Accountants from Deloitte & Touche could not find enough audit evidence for doubtful debt provisions while audited accounts of certain subsidiaries were not available.

In this instance, Deloitte said this is in breach of the Companies Act.

In the case of Wawasan TKH, a disposable food packaging maker, its auditors BDO did not agree with the assumptions of its management.

Management thinks that certain assets worth RM83 million should not be impaired, or that the value should not fall, because of assumptions on sales growth of up to 19 per cent and gross profit margins of up to 18 per cent.

"These assumptions by their very nature, are difficult to substantiate given past actual outcomes and are regarded as significant areas of uncertainties," BDO said.

As for Patimas, its auditors do not share the management's optimism that it could recover money from a former subsidiary.

Auditors of Mangotone, which is undergoing a restructuring, could not find enough evidence to support their work while those of KBB were not present during the counting of finished goods at warehouses.

The vermicelli maker did not arrange for the presence of its external auditors during the counting of products worth some RM27 million.

http://www.btimes.com.my/Current_News/BTIMES/articles/redflag/Article/index_html

Related:

8 Signs Of A Doomed Stock

A quick look at Nam Fatt - PN17 (1.5.2010)

Red Flags and Pitfalls for Avoiding Financial Fakery

A quick look at Padini (1.5.2010)

Padini Holdings Berhad Company

Business Description:
Padini Holdings Berhad. The Group's principal activity is acting as dealers of garments, ladies' shoes and accessories. Its products are distributed under the brand names of Padini, Padini Authentics, PDI, P & Co, Seed, and Miki. Operations are carried out in Malaysia and Hong Kong. The Group distributes its products within the domestic market and to overseas markets, including the Middle East countries, other Asia Pacific countries and other countries.

Wright Quality Rating: DAA2 Rating Explanations










A quick look at Padini (1.5.2010)
http://spreadsheets.google.com/pub?key=tWJgoo7xN96USdF9uQ0QAPA&output=html

A quick look at Nam Fatt - PN17 (1.5.2010)

Nam Fatt Corporation Berhad Company

Business Description:
Nam Fatt Corporation Berhad. The Group's principal activities are constructing bridges, heavy concrete foundations, roads, factory complexes and other similar construction activities. Other activities include building, maintaining and operating the Jiangjin Bridge on a built-operate-transfer basis, constructing projects in the oil, gas and petrochemical related industry, steel fabrication, structural steel engineering, manufacturing and trading steel doors and industrial boilers, researching, developing, producing, selling, installing and maintaining metal roofing and wall cladding, manufacturing galvanised iron roofing sheets, property development; owning and developing golf resort and its recreational amenities, property developer and property manager, resort and development, managing a golf resort and recreational clubs and investment holding. The Group operates in Malaysia, Africa and Asia.

Currency: Malaysian Ringgits
Market Cap: 28,763,370
Fiscal Yr Ends: December
Shares Outstanding: 319,593,000
Share Type: Ordinary
Closely Held Shares: 35,229,890 (11%)

16/03/2010
NAMFATT - New admission into PN17

Wright Quality Rating: LCNN Rating Explanations








A quick look at Nam Fatt - PN 17 (1.5.2010)
http://spreadsheets.google.com/pub?key=tAskkNgs3uU8eyk_WrTFcSw&output=html

Some RED FLAGS (hindsight) in the accounts of Nam Fatt at end of 2008 to note are:

Share price 
RM 0.19  or market capitalisation of 34.16 m. (The price rose to RM 0.30 from March 2009 and dropped precipitously to RM 0.09 when the news of the company's financial problem was known.)

Income statement
Negative earnings -14.09 m
Interest expense -18.73 m

Cash flow statement
Negative CFO  -41.27 m
Neglible CFI
Negative FCF  -44.10 m
CFF  -34.11 m (Borrowings increased significantly)

Balance sheet
Total Debt 499.69 m
Account Payables' Days 206.58 days  (This then increased to 714.24 days in end of 2009)
Interest cover 0.66
Total Debt/Equity 0.82
Net Debt to EBITDA 26.64  (Ideally, this should be less than 5.  Bankers do not lend if this ratio exceed this figure.)

Of interest, these commonly used parameters DID NOT raise any red flags at end of 2008:

Equity 607.44 m (What is the actual value?!)
NAV 1.59
Current ratio 1.54
Quick ratio 1.51
Account Payables' Days 82.22 days (Though this subsequently ballooned to 307.08 days in end of 2009)
LTD/Equity 0.34
Dividend 2.08 m


Related article:

Measure long-term solvency and stability

Assessing indebtedness. How much debt is too much?

Acceptable debt

Debt and Leverage: Financial weapon of mass destruction

Be fearful of excessive leverage and debt

Buying Stocks on the Verge of Bankruptcy

8 Signs Of A Doomed Stock

Red Flags and Pitfalls for Avoiding Financial Fakery

Asset valuation approach in liquidation

Liquidation value is the net realizable amount that could be generated by selling a company’s assets and discharging all its liabilities.

When valuing a business for liquidation, most assets are marked down and the liabilities treated at face value. 

• Cash and securities are taken at face value.
• Receivables require a small discount (perhaps 15 percent to 25 percent off).
• Inventory a larger discount (perhaps 50 percent to 75 percent off).
• Fixed assets at least as much as inventory.
• Any goodwill should probably be ignored.
• Most intangible assets and prepaid expenses should beignored.

The residual is the shareholders’ take.

This valuation method is useful for companies being dissolved.