Malaysia Business News

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Sunday, January 21, 2018

Its share price rise (Till 19 Jan 2018) could be a positive reaction by the market to the group’s results for the second quarter ended Nov 30, 2017 (2QFY18), which saw net profit jump by more than 46 times to RM6.54 million from RM141,000 in 2QFY17. Revenue increased by almost 15 times to RM147.3 million.

The reason for the big rise in profit and revenue is the inclusion of the earnings of Wira Syukur (M) Sdn Bhd, a construction firm which was injected into Vizione as part of a RM280 million reverse takeover exercise that was completed on Oct 9 2017.

In mid Jan 2018 Vizione — for-merely known as Astral Supreme Bhd — proposed a private placement of up to 406.71 million shares. Based on an assumed price of 16.5 sen per share, the placement is expected to raise up to RM67.11 million in gross proceeds, part of which will be used to fund construction projects.

To put things into perspective, Vizione’s net cash position (minus borrowings and finance lease liabilities) stood at RM25.9 million as at Nov 30, 2017, while its gearing ratio was at 0.06 times.

Vizione managing director Datuk Ng Aun Hooi is positive about the group’s prospects for financial year 2018 (FY18) onwards. He said the group is projecting a revenue of about RM800 million for FY18. Vizione’s order book at present (Mid Jan 2018) stands at RM3.3 billion, and out of this it is expecting to recognise RM800 million as revenue for FY18 and has a target to replenish its order book by at least RM1.2 billion in 2018.

Projects making up this order book include jobs awarded by KL Northgate Sdn Bhd for the construction of apartments, shops and offices worth RM1.12 billion, the construction of office suites for Paragon Hemisphere Sdn Bhd worth RM401 million as well as a RM465 million contract awarded by Hektar Aneka Sdn Bhd for the construction of Rumah Mampu Milik Wilayah Persekutuan.

Also making up its order book are contracts awarded by the federal government for the development of public housing schemes in states such as Kelantan, Kedah, Sabah and Terengganu which amount to about RM947 million.

Government jobs are in fact formed the majority of jobs taken up by Wira Syukur, a company which he formed with two other partners in 1996. Building affordable homes, including in government housing schemes, have proven to be a recession-proof model. Wira Syukur had managed to pull through economic down-turns such as 1997 to 1998 Asian financial crisis.

With Wira Syukur integrated into Vizione, Vizione would continue its bid for government jobs … increase its focus on infrastructure construction jobs rather than property construction jobs. Infrastructure jobs have better margins than property construction.

The group at present is tendering for both property and infrastructure jobs in Sabah, Kuala Lumpur and Negeri Sembilan. The group’s tender book size is about RM2.9 billion.

Wira Syukur’s — and now Vizione’s — forte is in the construction of affordable homes would eliminate the need for imports of materials which are usually needed for highend housing projects.

Looking at Vizione’s 2QFY18 financials, the net profit excluding one-off expenses such as corporate exercise and employee share option scheme expenses amounts to RM9.17 million, resulting in a net profit margin of 6.2%.

Imputing an expected revenue of RM800 million for FY18 and a net profit margin of 6.2%, and assuming a maximum enlarged share capital of 4.47 billion shares post placement, Vizione could be looking at a projected FY18 forward PE of 14.9 times based on 16.5 sen.

The FY18 forward PE valuation is higher than that of some construction players such as Pesona Metro Holdings Bhd (nine times) and Mitrajaya Holdings Bhd (6.3 times), but lower compared with others like Gabungan AQRS Bhd (17.5 times).

In terms of its order book size, Vizione’s RM3.3 billion as at mid Jan 2018 seems to be on a par with, or higher than, its peers. Pesona Metro’s order book stood at RM1.6 billion as at Sept 30, 2017. Mitrajaya reported an order book of RM1.69 billion as at Sept 30, 2017 and Gabungan AQRS’s order book amounted to RM2.58 billion as at Nov 16, 2017.

If Vizione can deliver on its earnings and keep its margins in check, it could be one of the construction stocks to look out for in 2018.

Thursday, October 15, 2015

It is expected to grow in tandem with the booming semi industry. Despite a potential slowdown in the global automotive sector, industry observers are confident that KESM, the largest independent burn in test and service provider for the local auto semi industry, will not be too affected by such a scenario.

The burn in process is a practice for detecting early failures in semi devices by subjecting the components to both electrical and thermal stresses over several hours. Typically, the burn in test is conducted at the component level when the cost of testing and replacing parts is at its lowest.

KESM has some 70% contribution of its total burn in and test sales from the global auto industry. It supplies specialized semi devices to the world’s reputable auto manufacturers.

Apart from the auto sector, KESM also serves customers and consumer to the communications and consumer sectors.

KESM does not deal directly with the auto players but rather clients which are semi makers supplying to the auto sector.

Semiconductor content are in cars, ranging from the entertainment, GPS, engine management and even driver assistance system is increasing.

Industry observers say it is common practice for semiconductor players to do the testing both in house as well as to sub contract out the service (burn in and testing process) to a third party.

The company has also benefited from forex gains for FY2015.

In May 2015 KESM completed the acquisition of the remaining stake of 34.62% in its 65.38% owned subsidiary KESM Test Sdn Bhd.

KESM also involved in electronics manufacturing service (EMS) however contribution to the group is small.

The company is controlled by Singapore based Sunright Ltd with 48.41% stake.

Any upward pressure in utility costs and minimum wage rates in Malaysia and China will adversely impact KESM profit margins.

Tuesday, April 14, 2015

The company reported a net loss of rm4.2 million in 4QFy2014, from net profit of rm6.3 million in 4QFy2013 due to one off impairment loss on receivables of rm5.5 million, realized and unrealized forex losses of rm4.1 million and losses related to relocation of its China based operations.
It is believed the worst is over for the company and expect a stronger 2015, underpinned by capacity expansion and the shift to higher margin products – thin stretch films and PVC food wrap.

It had completed the 1st phase of expansion at end 2014 with the installation of its state of the art thin stretch film machines, four additional lines for PVC food wrap and new machines for the compounding division.

It will invest an additional rm40 million in 2014 for its first 33 layer nano technology stretch film line, a blown film line more PVC food wrap machines.

It is the sole manufacturer of PVC food wrap in Malaysia and one of only three in ASEAN. It aims to be the largest producer in the region by 2016. Profit margin from this segment is the highest amongst its business units.

The weaker ringgit will improve its competitiveness against global risks.

Earnings will also be boosted by lower resin prices, which are correlated to crude oil. Raw materials account for about 80% of operating costs.

It is currently trading at a huge 37% discount to book value (14 April 2015). Historical PER is 12.4 times.

Thursday, March 12, 2015

It had snapped up several parcels of land totaling rm151 million, has dismissed concerns its gearing is high amidst the gloomy property market outlook.
It had in Jan 2015 announced the acquisition of two parcels in Bukit Mertajam, Penang for rm31 million, It had reportedly its maiden venture into the Penang mainland property market.

It had also entered into a conditional agreement with Nation Holdings Sdn Bhd to acquire 3.24ha of leasehold land in Selayang for rm120 million. It is said to be setting its sight on Sabah.

Its enthusiasm for expansion is concerned by many due to its high gearing of about 0.5 times. The company’s total debt to equity ratio of 64% against LBS Bina’s 40%, Hunza Properties Bhd’s 43% and SelDredging’s 79%.

Huayang believes sales from its project launches will fuel profit growth and improve operational cashflow. This will pare down borrowings in the medium term.

The acquisition increases its gross development value only marginally. This may allay market’s concerns in the short term but the apprehension remains whether affordable housing developers can continue to acquire new land parcels.

It is a developer primarily focusing on affordable housing.

With the prices of construction work and materials locked in by Huayang and unit pricing not expected to increase given the company is a developer of affordable housing, profit margin is expected to be maintained. As prices are locked, its primarily focuses on improving sales of its various projects.

Its stock price downside is buffered by high dividend yield. However when its gearing is high, the management might forgo high payout.

If the property sector weathers the ongoing period of tight lending standards now (March 205), Huayang may emerge as one of the favourite picks for property sector.

Sunday, March 8, 2015

As it delivers on its earnings, this will lead to a re-rating of the stock.

It is also gaining interest among institutional investors, which CIMB Equities Research believes hold a combined 15%-20% stake.

The company’s particleboard and furniture factories is that demand from Japan and China remains robust. Its competitive manufacturing edge is not easily replicable and the barriers to entry for the Japanese market remain high.
No other Malaysian furniture player exports to Japan. To cope with burgeoning orders from China, HeaveaBoard is likely to reduce the sale of lower-margin E1 boards to free capacity for E0/super E0 boards.

Over the medium term, HeaveaBoard is considering line extension/expansion to increase capacity.

A potential re-rating catalyst is strong 1QFY15 results.
Its Chinese customer base is growing at a rate of 40-50% per annum and HAVE is likely to reduce its allocation for E1 boards in favour of much higher-margin E0/super E0 boards for supply to China. It is also mulling a pressing line extension or new pressing line to increase capacity to meet the strong demand from China.

Observers were impressed by HeaveaBoard’s German-made state-of-the-art equipment and control systems.

All of HeaveaBoard domestic and most of its ASEAN-based competitors are not in the E0/super E0 space as only Japanese regulatory requirements demand such boards. Given this and the very long and stringent quality due diligence process, many particleboard manufacturers prefer to sell lower-margin but higher-volume E1/E2 boards. Thus, HeaveaBoard’s competitive advantage is sustainable over the medium term.

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