Monday, August 30, 2010

Lonbisc Still Worth Investing ??

The long awaited Lonbisc's result is finally here. Lets drill down more details on its result and recent development on Lonbisc. We will look at these 2 angles to assess the possibility of its future perspective, after all, shares investment is theoretically only making so call future "prediction" or assumption on its growth and earnings, though we know that for one to have an entirety details understanding of it, is far more harder than one can really achieved. Gosh, who have the luxury time to read the company result and understand them thoroughly each time the company result was published ??? I for one is damn lazy bump on this but again there is no free lunch in this world. You reap what you sow and blame no one.

I've previously written two posts on this here.

Okay, lets start the ball rolling...............

FIRST, lets work on its recent development :-


Summary :-
  • LBB has invested in LHB since 2006 and  the original investment cost of RM12,088,798.
  • The loss on the disposal of 11,272,200 ordinary shares of LHB under the Company’s level  is RM130,737.11. 
  • The purchaser of the 11 million ordinary shares of LHB was QL Resources Berhad which is currently listed in the Main Market under Bursa Securities Malaysia Berhad.
  • The justification for disposing at a consideration price that is lower than the cost of investment is the historical share price and share liquidity constraint of LHB in addition to the strategic overlap in respect of the investments into TPC and LHB.  In this instance, the proceeds accrued as a result of this disposal could be used to enhance the value of the Company and its shareholders.
My verdict #1 :-
Invested since 2006 and disposing it with a loss !!!
-1 point from me.

2) The Company had on 1st March, 2010,acquired 25,600,000 ordinary shares of RM0.50 each in TPC Plus Berhad (“TPC”) for a cash consideration of RM7,680,000 or RM0.30 per TPC Share representing approximately 32% or the issued and paid-up share capital of TPC. The Company on 9th April, 2010 and 27th May, 2010, acquired additional 888,900 TPC shares and 429,100 TPC shares, respectively, at RM0.30 per TPC Share. These acquisitions effectively increased the Company’s percentage of shareholding in TPC to 33.65%.

My verdict #2 :-
Active acquiring and having 11th factory in placed for expansion, also trying to list Kino, that show the growth part.
+1 point from me.

3) High gearing leads to high financial risk coz of the potentially exaggerated fluctuations in the returns to shareholders. I believed, the total risk of a company is made up of its financial risk and business risk. For a company base that represent a paid up capital of 96millions shares of Lonbisc, this consider relatively small base. So, there is an advantage towards this, as the high geared would mean high financial leveraging but this would mean high financial risk as well, if this is not turn out well by way of increasing its revenue and profit to service the finance cost then, high chance will lead to uncontrollable default payment in future. This is serious stuff and no laughing matter. You put yor investment at steak. !!!!

Lets come back, if a highly geared company couple with increase revenue and profits every year then the profits will be magnified dramatically. This is one of the advantage i meant for having high geared but it is also a two way edged sword though. A company can be brought down by just having too much of unrecoverable debt if not managed properly.

I am not worry about business risk for Lonbisc as Lonbisc is the consumer type of business, where the demand for consumer products would probably be more stable. Hence, this would experience smaller fluctuations in profit and therefore a lower lever of business risk.
Unless the management of Lonbisc has abused the loaned money else, it is healthy to acquire for expansion with the borrowed money, company can not just stay stagnant, these activities are meant for increasing shareholders value. But, sad to say, we some how have seen 2 investments not being very fruitful so far;

a) disposal of LHB at a loss
b) 32% KheeSan purchase at high price

What more disappointments they gonna bring ??

We certainly would hope that the TPC investment will pay off and leverage them to maximise the profit on Lonbisc. The Management of Lonbisc has to put in full alert in such situation that the current gearing as mentioned in my previous post is just way too worrying. So, the Management has the responsibility to bring in greater value to shareholder by increasing the revenue and profit, since the "financial aid" has been utilised and we have yet to see any leveraging effect from it.

Okay, enough said. Lets do the math now :-

I would rate below,

Gearing > 1 - extremely high
Gearing 0.7 - 1 - High
Gearing 0.5 - 0.7 - Medium
Gearing 0 - 0.5 - Low

From the latest 4Q,
Share Capital = 96,014,000
Retaining Profit = 103,297,000

Current Borrowings = 192,914,000

Gearing = 192914/199311 = 0.97 (wow,,, this is serious case man. HIGH, HIGH & HIGH !!!!)

They are very much in debt, so whats now ??
Abandon the ship ???
Yeah, this is the right way to do, avoid this stock, there are other better stock waiting for us.
High gearing mean high speculation, coz, no one know what will happen next ???

oh dear....Lonbisc in deep shit !!!!!

NOT so fast. As i said before, Lonbisc is a consumer type of business, so long as there is no business risk, operation will continue to generate revenue and profit, i don't see is there any fear for now unless hanky-panky from the management of Lonbisc, then this will really caught us off guard.

BUT, what about the gearing part someone may ask ?? No choice loh, since damage already done, the only way is to tackle them "slowly"..... but how ???

I mentioned "slowly", so this stock is not meant for short term bid, instead a long haul struggle. Buy this stock, don't expect for overnight miracle. coz the gearing concerned would pretty much a factor making this stock unattractive.

So, What Lonbisc needs to do to gain investor confidence in a practical term......
a) continues to growth revenue and profit by leverage on the high geared
b) company must continue to pay dividend (which they did with a mere 1.5sen TE)
c) reduce the gearing, thinks the only right way to do is to give RI but this will further dilute the EPS.

Yes, item a) & c) would mean to reduce the gearing, these should be the practical ways for Lonbisc to bring down the gearing to a comfortable level and the current good valuation will continue to gain support on its share price.

BUT BUT BUT, what is bloody wrong with their 4Q earning now !!!! I would expect a better or equal Q result than its corresponding Q at least. See what happen here, only managed to grab through 4m gross profit NOT even half of corresponding Q. Gosh, something went wrong someway ???

See ? 96% of revenue on Operating Expenses !!!!!  DAMN IT ! (from toto :P )
Sugar gone up ? TELUR gone up ? Flour gone up ? what else you name it .......
What synergy have you done all these year with Lay Hong to maximise LBB's profit ??
What sort of profit margin are u talking here ? 4% ? Better off close the business. :P

Hey, this used to be my cup of tea but not anymore. You see what i see ?? I suspect there could be hanky-panky within LBB, since i don't know what it is, so better avoid.

My final verdict #3 :-
4Q result put me in puzzle and disappointment. EPS, dilution & NAV have all shrink.
-1 point from me.

FINAL RESULT : 1 +ve and 2 -ve

Friday, August 27, 2010

Some Thing For You To Ponder

I was doing some internet banking transactions today, saw the above advertisement from HLBB. The wording caught my attention in which it says "Now everyone can invest in shares!" and "NO CASH NEEDED". What d hack !?? no cash needed !!! oh, see beside "EPF's Members Investment Scheme" !!

For a moment i thought, no cash needed. wow fantastic !! deeper thought, still needed cash, just that it's from your EPF account 1. You need at least >10K in EPF account 1, see EPF Withdrawal Eligibility here for more details.

Now, something for you to ponder, let say average EPF yearly dividend is about 5%. If i make a withdrawal from EPF and park those money in REITs to get at least yearly dividend of 7% to 8%. In return, i still fetch back at least 2% higher or more assuming the shares price remain unchanged. Looks pretty much worthy right ? After all can't even take out those money until you reach 55 years of age. Assuming you have 20 years more to run till your retirement age, 2% a year will give you extra 40% when you reached your retirement age. ha ha ha ha !! Is it just simple as that ??? Do your math dude. !!

Thursday, August 26, 2010

GENM - An Expected Dividend

BINGO !!! As expected, GENM only declare 3.6sen dividend as what i was predicted earlier. The profit also expected to be stable where it registered RM305million on this 2nd Q. Consolation is that, a 0.6sen dividend higher to its corrsponding Q. Hokkien people say "No fish, shrimp also can lah"....

GENM qtrly report here.

3.6sen dividend represent about RM200millions, which mean there is about RM100millions left over in retain earnings. Lets work out the final cash balance for GENM.

Est. cash balance after covering all it acquisition, shares buyback and licenses here = RM1.12billions

Add this Q profit after minus dividend = 1.12b + 100m = RM 1.22billions.

GENM still have approximately RM1.22billions to be squandered away.

What do you think GENM will do next ????

Tuesday, August 24, 2010

Whats Next For GenM After EGM ?

Below, Genm announcement, as expected, shareholders gave its approval to acquire UK casino. A plus for GSP and a minus for Genm.

Announcement Details :

We refer to the Initial Announcement and the announcement dated 9 August 2010, both in relation to the above.

On behalf of GENM’s Board of Directors, we wish to announce that GENM’s shareholders have approved the resolution in relation to the Proposed Acquisition, as set out in the Notice of EGM dated 9 August 2010, at GENM's EGM held today.

Whats next for Genm ? More RRPT ? Lets work out the remaining cash for GENM :-

TOTAL CASH about RM5.2billions

1) Based on the Company’s issued and paid-up share capital of 5,907,059,648 ordinary shares as at 18 August 2010, and after taking into account the cumulative net outstanding treasury shares to-date of 214,501,100 (representing approximately 3.63% of the issued and paid-up share capital), the Company intends to purchase up to a further 376,204,865 of its shares (representing approximately 6.37% of the issued and paid-up share capital) within the next 10 months.

2) On 3 August 2010, New York Lottery announced that its evaluation committee has unanimously recommended to the New York Governor that Genting NY be awarded the New York video lottery licence for the Project. Genting NY’s proposal included US$380 million as an upfront licencing fee.

  • Item 1 of shares buyback of 376millions shares, this may cost approximately, 376mil x RM3.10 = RM1.2billions
  • Item 2 will cost approx. US$380 x RM3.2 = RM1.2billions
  • Acquire UK casino = RM1.68billions
Est. Cash balance remain = 5.2 - 1.2 - 1.2 - 1.68 = RM1.12billions
Est. coming Q to be announced on 26/8/2010 & net profit approx. = RM270millions
Est. total cash balance = RM1.12b + RM270m = RM1.39billions
Will there be special dividend for this Q ????
Lets work out :-
Share Issued = 5.9billions
Maximum afforded dividend for this Q = 1.39/5.9 = 23sen per share
Let's chop dividend by half = 23/2 = 11sen per share
11sen per share dividend for this Q is possible but based on track records and the possibility to retain more cash for development and enrichment works for item 2 and UK casino. So, cut this by another half = 11/2 = 5.5sen.
My final figure of dividend for this Q could be around 3sen to 5sen. Special dividend ???? big fat hope again.

Monday, August 23, 2010

Spotlight on Genting EGM

Some analysts pessimistic about UK casino purchase due to challenging operating environment

PETALING JAYA: While the investing community may now be re-looking at Genting Malaysia Bhd due to its new flavour as an international play, just earlier this year this casino operator did not have a compelling story to tell.
Sure, profits were decent and it was sitting on a cash pile of some RM5bil, but that cash hoard was becoming more of a hurdle as all that money wasn’t doing anything.

Then came the announcement in early July that Genting Malaysia was setting its sights on its United Kingdom (UK) casino operations following the proposed acquisition of four casinos from Genting Singapore plc.

Analysts and shareholders kicked up a fuss, with what was seen as a clear-cut related party transaction.

Genting Malaysia announced that it was proposing to acquire Genting Singapore’s UK casino operations for £340mil (about RM1.67bil). Genting Singapore first bought Genting UK in 2006 at £626.91mil (RM3.13bil)

The UK casino operations comprise four companies – Nedby Ltd, Palomino Star Ltd, Palomino World Ltd and Genting International Enterprises (Singapore) Pte Ltd – collectively known as Genting UK.

Gambling in the UK is regulated by the Gambling Commission on behalf of the government’s Department for Culture, Media and Sport under the Gambling Act 2005.

There have been significant updates to UK’s gambling laws, including increasing tax on poker profits from 15% to as high as 50% depending on profitability. There have also been increased rates on all categories of amusement machine licence duty.

These measures are likely to continue to dampen the gaming enviroment in the UK and some analysts are pessimistic because of the challenging operating environment.

There are concerns that Genting Malaysia could be buying Genting UK at a time when the economy is not only weak, but faces a double whammy of the casino industry facing tough legislation.

Hence, all eyes will be on Genting Malaysia’s EGM tomorrow to approve the acquisition of Genting UK from Genting Singapore Plc Genting Malaysia’s second quarter results to June 30, will be also released on Aug 26.

Genting Malaysia has been on a roadshow in the last few weeks to meet up with its shareholders and to explain the rationale and potentential of buying into the UK casino operations.

Last week at Genting Singapore’s EGM, the resolution in respect of the sale of UK casino assets to Genting Malaysia passed by shareholders.

It is however interesting to note that over the last two days, Genting Malaysia has bought back a total of 11.2 million shares at an average price of RM3.03. This brings its cumulative treasury shares held at 3.71%.

The group has announced its intention to purchase up to a further 376 million shares (representing 6.4% of share cap) within the next 10 months.

Meanwhile last week, Genting Malaysia Bhd obtained all the necessary approvals and signed the agreement to develop the Aqueduct New York racino.

Genting New York is expected to invest US$1.3bil which consist of US$380mil (RM1.22bil) of licencing fee, US$350mil (RM1.12bil) initial capital expenditure (4,500 video lottery terminals), and US$650mil (RM2.08bil) to build three hotels of differing standards, shopping, recreation, spa and other resort facilities.

Dubbed Resorts World New York, the proposed three-storey facility will also contain several restaurants, water features, an outdoor terrace connected to the Aqueduct racetrack which will be able to accommodate up to 10,000 people and a 2,200-bay car park.

Genting New York aims to complete the entire development within 12 months from the date it obtains formal approval from the state to proceed.

As part of a wider development plan, Genting New York is also proposing to build three hotels of differing standards, shopping, recreation, spa and other resort facilities at a total cost of US$650mil (RM2.09bil). That will take the proposed outlay for the entire project to over US$1.3bil.

“If we assume daily win per terminal of US$300 (similar to the more successful Yonkers racino closer to New York city centre), Resorts World New York may contribute RM595mil and RM196mil to Genting Malaysia’s revenue and profit after tax respectively by 2013,” said an analyst from HwangDBS Research.

UOBKayHian reckons that the project is neutral to Genting Malaysia’s revised net asset value but is slightly earnings-accretive over the long term, assuming that the Aqueduct would be eventually given a license to operate table games.

The research house estimates the slot facility could provide a payback period of 5.5 years (on full expansion), while the payback period for the rest of the facilities could be significantly longer.

“Conservatively, Aqueduct could pull in revenue and operating profit of US$468mil and US$84mil respectively when it is fully expanded.

“This accounts for about 14% of Genting Malaysia’s forecasted 2012 operating profit,” said the research house.

The recent spotlight on the entire Genting group has been brought about by Genting Singapore’s sterling results and the re-rating of casino sector in Singapore. Genting Singapore is 52% owned by Genting Bhd.

Genting Singapore’s second-quarter results took the investing community by surprise, when it beat analysts and consensus estimates.

For the second quarter ended June 30, Genting Singapore posted a net profit of S$396.5mil (RM925.9mil) compared with a net loss of S$50.7mil a year earlier.

Revenue soared to S$979.3mil from S$120.1mil previously. This translated to a profit margin of about 40%.

Saturday, August 21, 2010

D-Day for GenM on Tuesday

KUALA LUMPUR: Since the passing of Tan Sri Lim Goh Tong, the late founder of the Genting group, his son and successor Genting Bhd chairman and CEO Tan Sri Lim Kok Thay’s tenure has been marked by an internationalisation of the group.

In an age of globalisation, this internationalisation strategy has taken the Malaysian gaming giant to spread its wings from its comfortable casino base on the lofty peaks of Genting Highlands, Malaysia to the UK, Singapore and soon, the US.

After acquiring the UK casino assets in 2006, the group went on to open the high-profile Resorts World Sentosa integrated resort in Singapore on Feb 14 this year, and is now bidding for a racetrack casino in New York City.

One of the direct effects of this globalisation drive on equity investors is the key decision that has to be made by minority shareholders of Genting Malaysia Bhd in an EGM on Tuesday.

At the EGM, they will decide whether or not to approve Genting Malaysia’s proposed purchase of the UK casino operations from Genting Singapore plc.

Genting Singapore shareholders had approved the proposal at an EGM on Wednesday. The deal is set to cost Genting Malaysia £340 million (RM1.68 billion) for the assets that include 44 gaming licences in the UK as well as various properties.

Genting Malaysia’s major shareholder Genting Bhd and the parent group’s chairman and CEO, Kok Thay (who also holds a direct 0.28% stake in Genting Malaysia) would not be voting at the Genting Malaysia EGM.

Since they are deemed interested parties in the transaction, they would abstain from voting in accordance with stock exchange regulations. The decision thus rests on the larger minority shareholders which, for Genting Malaysia, means some pretty high-powered foreign institutional investors.

The top five such minority shareholders are International Value Advisers LLC (2.48%), Vanguard Group Inc (1.38%), Blackrock Fund Advisors (1.27%), Wintergreen Advisers LLC (0.78%) and First Pacific Advisors Inc (0.72%).

However, a look at Genting Singapore’s list of minority shareholders also shows some of the same names, such as Blackrock Fund Advisors (0.9%) and Vanguard Group (0.3%), among others.

Among the smaller minority shareholders, Fidelity Management & Research holds 0.04% in Genting Singapore and 0.17% in Genting Malaysia; while Credit Suisse Asset Management holds 0.02% in Genting Singapore and 0.14% in Genting Malaysia.

The UK casino operations to be transferred are housed under Nedby Ltd, Palomino Star Ltd, Palomino World Ltd and Genting International Enterprises (Singapore) Pte Ltd.

Critics have voiced that it is yet another related-party transaction within the gaming group. They also lament that the deal does not create much value for the Malaysian arm and will deplete its cash pile.

The knee-jerk market reaction then was to bid down Genting Malaysia’s share price, which fell 12 sen to RM2.62 on July 2, a day after the proposal was first announced. Conversely, Genting Singapore’s share price rose as investors there welcomed the sale.

However, Genting Malaysia’s share price has bounced back sharply over the last week, gaining 12% in the past five trading days alone. The stock closed at RM3.07 yesterday, up 3 sen or 1%.

UK casinos seen as unexciting for Genting Malaysia

An analyst at a large brokerage-backed research house said on both a price-to-earnings ratio (PER) and enterprise value-to-Ebitda (EV/Ebitda) basis, the UK casino operations looked more expensive than Genting Malaysia’s total business.

Acquiring the UK casino operations would bring down Genting Malaysia’s overall valuation numbers, he said.

In the letter to minority shareholders dated Aug 9, RHB Investment Bank Bhd (RHB IB), the independent adviser for the proposal, said at market close on Aug 2 and based on consensus estimated FY2011 earnings, Genting Malaysia had an EV/Ebitda of 6.1 times and a PER of 12.9 times.

Based on the purchase price of £340 million, the valuation for the UK casino operations on EV/Ebitda basis was 11.2 times, with a PER of 25 times, according to the report.

Some analysts also said for the medium term, not much growth would be expected for the UK casino market.

Two analysts that The Edge Financial Daily spoke to said separately that among the major dampeners to growth was a smoking ban in enclosed public places that came into effect on July 1, 2007 across the UK. This has been blamed by the industry for reducing revenue.

At the same time, growth would be hurt by the uncertain outlook of the UK economy over the next several years, a two-year civil servants pay freeze expected to last well into 2012, and the value-added tax (equivalent to the proposed GST in Malaysia) that has returned to 17.5% effective Jan 1 this year from a temporary reduction to 15% on Dec 1, 2008.

Nonetheless, RHB IB recommended shareholders to vote in favour of the proposal.

Relating to the EV/Ebitda valuation, the independent adviser said: “Although the implied 2011 EV/Ebitda is above the average EV/Ebitda multiples of comparable companies, we do take into consideration that the proposed acquisition involves the acquisition of a controlling stake in the acquiree group.”

RHB IB had calculated an average EV/Ebitda of 9.3 times and an average PER of 19.8 times on a list of 15 comparable companies.

The adviser added: “We note that the purchase consideration is fair as the EV/Ebitda multiple implied by the purchase consideration for the proposed acquisition of 11.2 times is within the average EV/Ebitda multiple of comparable listed companies after applying a 20% to 30% control premium of between 11.2 and 12.1 times.”

According to an industry source, one reason for the transaction is that the UK casino business is a better fit for Genting Malaysia, while Genting Singapore is focused on getting up to speed and watching the competition with the Las Vegas Sands group that owns the Marina Bay Sands casino.

Genting Malaysia’s casino business is a likely better fit for the UK casino landscape in terms of clientele and type of operations, as compared with the integrated resort-style Genting Singapore operations.

Moreover, Genting’s entry into the UK casino market was initially based on the premise that the UK government would be liberalising the industry and would allow the construction of similar Las Vegas-style “super casinos” as promised by the administration of former prime minister Tony Blair.

However, the idea did not materialise under the Gordon Brown leadership, the industry source added.

Tuesday EGM ‘a tougher sell’

The proposed sale of the UK casinos to Genting Malaysia will make Genting Singapore a pure integrated resort play, and strengthen its balance sheet to face competition from Marina Bay Sands and other regional casinos.

With the proliferation of new casinos across Asia and the aggressive branding and expansion of Macau as the region’s premier gaming destination, Resorts World Sentosa will need to constantly reinvest and upgrade itself to attract more regional gamblers and high-rollers.

Resorts World Singapore will thus face an increasingly competitive environment, to which its Universal Studios theme park — the only one in Southeast Asia — is a big added attraction for the integrated resort.

This is much unlike the casino operations in Resorts World Genting, which operates as a monopoly, and caters more to the local crowd with less reinvestment needed.

How minority shareholders in Genting Malaysia will decide on Tuesday remains to be seen, but the approval in Malaysia “is a tougher sell” compared to Singapore, said an observer.

That key decision could well decide how the wider Genting group plans the next step of its internationalisation strategy.

Thursday, August 19, 2010

Carlsberg - Another Good Q

Carlsberg just announced Q2 result and declared Interim Dividend of 5 Sen and Special Dividend of 2.5 Sen, total up to 7.2sen dividend. Bravo, another good Q !! Net profit of 30m for this Q about 250% increase compare to previous corresponding Q. Thanks to the World Cup and the synergy from Carlsberg (S) aquisition. Earnings per share for the quarter grew to 10.08 sen versus 4.21 sen a year ago.
Simply, by adding Q1 EPS with Q2 EPS, we get 12.38 + 10.08 = 22.46 sen. 2 more Q to go, just X2 we get a total estimated 22.46 * 2 = 44.92sen.

PE = 5.2/44.92 = 11.57
FV = 15 * 44.92 = RM 6.73 (ho ho ho)

Making money just as simple as that. Buy this type of value stock and keep them for long term. AHA, would not it just as simple as 123....
1. buy...
2. keep....
3. rewards....  :) :)

Tuesday, August 17, 2010

GENM A Pinocchio Formation ??

Finally, GENM starts to move and break the RM3 barriers. :) But many TA would think this is not convincingly enough to break above RM3 as it last closed at RM2.99. In technical term this might called a pinocchio bar or in short pin bar as GENM rammed up to RM3.11 before settling down at RM2.99. Gosh, so volatile. !!
Even so, this has not confirmed as pin bar as yet, cause, a confirmation of pin bar would depend on the third bar which mean this would need to depend on tomorrow bar forming, if the third bar makes the pin bar sticks out noticeably in between, then we can confirmed it is a bearish reversal pin bar formation. wow !! talking technical here. ha ha ha ha

Am sure you guy heard a lot of this, if the breakout not convincingly break through, further down side would be expected. walau er..... i am just another technical expert here. aikse man. Don't mean to teach technical here. In fact long term guy like me don't depend on technical as these kind of stuff would not apply to long term investment. :)

In short, i have sold some GENM out at RM3.05 today. Reason is simple, because i don't believe GENM will ever give special dividend anymore. They are talking about spending few hundred millions for RRPT for buying UK casinos from GENSP. So, what is that more to expect for special dividend so to speak. This trend up is an opportunity i believe and it make way for me to look at GENSP instead. So, seize the day if you can. Till then happy trading.

Friday, August 13, 2010

Genting Singapore swings to Q2 profit

Bravo !!! started to generate profit already. :)

Genting Singapore Plc reported second-quarter profit of S$396.5 million (US$291 million) compared with a loss a year earlier as its new casino resort in Singapore “made an impact” in its first full quarter of operations.

Revenue surged to S$979.3 million in the three months to June 30 compared with S$120.1 million a year ago, according to a filing to the Singapore stock exchange today.

Earnings before interest, tax, depreciation and amortization, or Ebitda, were US$513.9 million, with margins of 52 percent, the statement said.

Singapore overturned a 40-year ban on casinos in 2005 to spur economic growth.

Genting’s US$4.7 billion Resorts World Sentosa opened on February 14 and features Southeast Asia’s only Universal Studios theme park.

Billionaire Sheldon Adelson’s Las Vegas Sands Corp opened its rival US$5.5 billion Marina Bay Sands casino resort in Singapore’s financial district in April.

The group’s Ebitda figure was “way above our S$244 million and consensus forecasts, which we think was S$220 million,” Aaron Fischer, a casinos analyst at CLSA Ltd in Hong Kong, wrote in an e-mail.

“With such a strong set of results, our fair value for the stock will likely be revised to at least S$1.50,” Fischer wrote.

Genting Singapore, controlled by Malaysia’s Genting Bhd, is the second-best performer on the Straits Times Index over the past 12 months, surging about 50 per cent compared with the benchmark’s 14 per cent gain.

The shares ended at S$1.28 today before the results announcement, compared to their record close of S$1.30 in December. Fischer’s target price for the stock is S$1.30, according to Bloomberg data. - Bloomberg

Tuesday, August 10, 2010

LONBISC Surely Worth More Than That

I was once written this stock LONBISC here, that was 4 months back. We are expecting the 4Q to be announced end this month (Aug). I would expect the momentum to be continued where the 4Q would registered higher revenue with better profit, just assume by taking the latest rolling 4Q, it will represent a total of EPS of 22.37sen. This would mean a PE of 1.25/22.37 = 5.58sen, this is far more lower to industry PE like Apollo = 11sen, OFI = 9sen and HupSeng of 7.6sen.

The previous 3sen Dividend would be a bit disappointing but would improve gradually i believe, as this can be seen through their expansion plan by having their 11th factory in placed and taking over of TPC plan though it is a struggle bid. The current NAV stood at RM2.23, which mean the company trades at just 58% of NAV. With the expansion of plant, i would foresee a climb in future revenue and net profit figures. This would mean a better future dividend and they used to pay 50% of it earnings as dividends way back in 2007, i would expect it may continue again. If so, then base on 22.37sen EPS a minimum of 10sen dividend is likely possible by early next year.

My way of simple FV based on current valuation would be 7.5 X 22.37sen = RM1.67. Thus, a 6 months mid term of investment would possible to see the price trading about 75% of NAV to somehow at least finding it actual value for Lonbisc.

The only set back for Lonbisc is it high short term borrowings which stood at RM114 millions, if this is not control  well it may turn out to be a disaster to Lonbisc but luckily Lonbisc has a very high reserve from it retaining earnings where a figure of RM99 millions to counter the set back. Alternatively, a one off RI would do the business by knocking down it borrowings.

Saturday, August 7, 2010

REIT vs direct real estate investment

INVESTING in real estate can be tricky.

For a start, those who intend to make a quick buck by “flipping” property within a few months will find that it is risky, especially in a property market less buoyant than in Hong Kong or Singapore.

The alternative is hard work, that is, managing residential properties (and absorbing all the hidden costs that come along with it) as long term investments, receiving rent and selling them off for a capital gain or profit.

Another factor that may deter investors from real estate is the difficulty in raising enough capital to purchase a particular property.

So, should you consider putting your money in a real estate investment trust (REIT) instead?

Granted, a REIT does not comprise residential property, but if it is profit you are interested in, it may be an option.

REITs originated in the United States in the 1960s, but it wasn’t until 2005 that Axis REIT became the first property trust to be listed on Bursa Malaysia.

In Malaysia, there are now 14 REITs to choose from on the Main Market, offering investors a choice to own stakes in commercial, industrial, plantation and office real estate.

Aside from being more liquid than investing in real estate, one of the reasons why REITs are more appealing than investing in actual real estate is because of its high yield.

Gross dividend yield in the FTSE Bursa Malaysia index is about 2.9%, while the average yield for a REIT in Malaysia is about 8%.

REITs yield higher returns because commercial real estate generates a huge amount of cash flow from rentals.

If one invests in real estate though, it may be hard to charge the most preferred rental rate, even if the property had been purchased for a hefty price, simply due to market forces.

As for REIT prices on the stock market, they generally tend to be “low risk” because their prices are sustained by the yield factor, hence the volatility element is reduced.

Even so, REITs are not immune to economic difficulties.

REITs such as AmFirst, Hektar, UOA and Axis hit their lowest point in the middle of the financial crisis in 2008 but have since recovered to their pre-crisis prices, if not better.

Part of their recovery, says an analyst, is due to good management, good investor relations and a proven track record when it comes to acquisitions.

Still, one critic of REITs says it is probably more worthwhile to purchase stocks of established companies if they want to play safe.

Advocates of the property trust point to the fact that REITs are a different investment class altogether, choosing to view them as an investment that bridges the gap between a fixed deposit and the stock market.

One drawback of REITs is their inability to benefit from capital gain, unlike real estate.

But with REITs, returns may be secured with less risk which make them a nice way to take advantage of the big booms in the real estate market.

Investors can do without taking on the risk of mortgage payments, unscrupulous tenants and rising tax rates.

However, less risk obviously comes with less reward.

Good capital appreciation is still the main factor driving demand for landed residential properties.

Since 2008, there has been an annual compounded growth rate of 10% for capital appreciation in residential hotspots such as Petaling Jaya, Taman Tun Dr. Ismail and Mont Kiara.

A home can go up in value ten-fold given the right market conditions, which would give one a hefty sum of money right into his or her pocket - this won’t happen with any REIT.

Ultimately, for someone who wants to have more control of their assets and is willing to improve their value, investing in residential real estate can be a good choice.

For someone looking for passive real estate investment, with the added benefits of portfolio diversification and liquidity, a REIT is a good option to consider.

Think of them as allowing investors to be exposed to the real estate market without having to fork out as much capital.

Alternatively, REITs could be purchased as part of a balanced portfolio, until one has enough capital to enter the real estate market.

Tuesday, August 3, 2010

What's In Store In Aug 2010 & Beyond

Aug 2010 …

1. EONCap will hold its EGM on Aug 19 2010 for shareholders to vote on the proposed disposal of its entire assets and liabilities to HLBB;

2. Cocoaland was “currently in discussions and negotiations with potential partners to broaden its growth which could involve the issuance of new shares amounting to between 20% and 30% of its share capital. at discount;

3. The government is likely to announce the award of contracts for two major public transport projects worth RM1.1 billion in Aug 2010 to Scomi Eng (Partial);

4. Malaysia will only announce its 2Q2010 GDP numbers on Aug 2010;

5. Detailed list of the programmes and projects for the first two years (2011-2012) rolling plan of the 10MP and Part II of the New Economic Model;

6. MRCB is front runner in acquiring several parcels of land in KL and Selangor, including 60.7ha in Jalan Cochrane, an 8 ½ ha tract in Jalan Ampang Hilir and another 400ha in Sungai Buloh under the purview of the Rubber Research Institute of Malaysia. Government land sales are expected to be announced in conjunction with the unveiling of the 10 MP;

7. B-Retail, which owns 7-Eleven Malaysia Sdn Bhd and Singer (Malaysia) Sdn Bhd, is scheduled for listing in mid-August 2010;

8. Genting Mal Bhd’s ubsidiary, Genting New York, had formally bid to develop and operate a video lottery facility in New York is likely to be announced on Aug 3 2010;

9. Affin Holdings Bhd, a Malaysian bank partly owned by Boustead Holdings Bhd, may conclude the acquisition of Indonesia’s PT Bank Ina Perdana by the third quarter 2010. The acquisition would be Affin’s first overseas venture;

10. Ho Hup has been granted a time extension of four months until Aug 4 2010 to submit its revised regularisation plan to Bursa Malaysia Securities for approval. Ho Hup hoped to “complete preparation and drafting of its regularisation plan” for submission to the relevant authorities within six months from July 2010.

Sept 2010 …

1. Axiata will be announcing a dividend policy by the end of the 3Q2010;

2. Kencana Petroleum Bhd and Dialog Group Bhd are among nine companies shortlisted to construct an oil and gas services terminal in Malaysia’s Sabah state. Contract expected to be awarded on September or Oct 2010;

3. The actual transfer of assets and liabilities from EON Capital to HLB will only be done once the Kuala Lumpur High Court makes its final decision … Sept 20 to Sept 23 2010 as well as on Sept 27 and 28 2010;

4. Primus had filed a legal suit last month against the directors of EON Cap and three entities controlled by Rin Kei Mei and Tan Sri Tiong Hiew King for RM1.1bil in damages as it believed the price for EON Cap should be much higher than that offered by HLB. It was reported that trial dates were set on Sept 20 to 23 as well as on Sept 27 and 28 2010

Oct 2010 …

1. The Economic Transformation Plan which includes the 12 NKEAs, as well as the announcement of the 2011 Budget, both slated for October 2010;

2. Faber’s renewal of its medical services concession will be sometime in Oct 2010;

3. The listing of Malaysia marine & Heavy Engineering Sdn Bhd (MMHE) – a unit of Petronas – in Oct 2010;

4. Industry observers do not discount the possibility of more tax or duty hikes at the Budget 2011 in October 2010

Nov 2010 …

1. US Democrats midterm congressional elections in Nov 2 2010;

2. A Saudi-Malaysian consortium, whose member includes MAHB has prequalified to bid for work for the first phase of the expansion of Prince Mohammed Bin Abdulaziz Airport in Medina, Saudi Arabia. An award expected by the end of November 2010;

3. Contractors For LRT Package A are supposed to submit their tenders in August 2010. It will then need two to three months to evaluate them and hopefully start the main ground works in November 2010. Sources say IJM Corp is a strong candidate for a portion of the main civil works. As such UEM Group also stands a chance. However MRCB could turn out to be a surprise candidate;

4. Linear director had undertaken to “deliver” the King Dome project to Linear, to “indemnify” Linear in the event of any loss, including refund of the cash advanced and to take over the letter of award at cost in the event Linear decides not to proceed further. A Nov 30 2010 deadline had been set. Linear is expecting itself to be out of PN17 “within 12 months” from June 2010. The company already has a turnaround plan in mind, which will be spearheaded by its new directors;

5. HLBB and EONCap have given themselves a time extension to obtain the relevant approvals for their proposed transaction on the sale of the latter’s assets and liabilities to the former by Nov 30 2010, from Aug 15 2010 previously.

Dec 2010 …

State private equity fund manager Ekuiti Nasional Bhd (Ekuinas) will announce its third investment before year-end (2010). They are talking with a number of parties but have not decided on any companies or sectors. This (third investment) is to fulfil its third objective to invest in the non-core assets of either GLCs, PLCs or MNCs

Jan 2011 …

KEURO’s directors are of the view that approval to implement the WCE will be obtained in FY2011 ending Jan 31, 2010.

In The Near-Medium Term …

1. A white knight may emerge for KKB. Sources say the company is planning to diversify into the property and construction sector with the appointment of chin;

2. It is learnt that Carotech’s lenders had two meetings in July 2010 to discuss the company’s proposed debt restructuring scheme and will likely give it the green light. Carotech has been given six months beginning 1 July 2010 to complete the exercise;

3. Sources say E&O’s major shareholders are believed to be considering a privatization of the property develop. They are talking to banks to finance the exercise;

4. The shareholders Sarawak Plantations are said to be looking to sell down their interest in the state owned company;

5. Khazanah could possibly lower its shareholding or exit altogether in the near term of about six months, including those under UEM Group. The likely assets (for divestment) are PLUS Expressways Bhd, CIMB Group Holdings Bhd, Tenaga Nasional Bhd, Time Engineering Bhd, TIME dotCom Bhd and DRB-Hicom Bhd,” said the report;

6. Speculation is rife that Ekuinas, with JV partners could be eyeing a stake in POS. Ekuinas will announce its next investment project by the end of 2010;

7. MMM is requesting a three-month time extension from Bursa as it is unable to meet the July 31 2010 deadline for the submission of its audited accounts for the fiscal year ended March 31, 2010;

8. Bina Puri is close to signing a JV agreement with IIB to develop some seven acres of a RM500 million mixed development in Medini, one of the five flagship zones of Iskandar Malaysia. The agreement is expected to be sealed soon;

9. CIMB is in the process of negotiation with the relevant authorities on how to get listed in Jakarta;

10. Sources say BHIC may soon get a letter of intent for its next batch of patrol vessels, which could be worth up to RM8 billion;

11. UEM Group Bhd is keen to bid for the RM43 billion KL MRT project;

12. LSE-listed Aseana Properties Ltd, a unit of Ireka Corporation Bhd, may consider returning excess cash to shareholders following the proposed disposal of properties in 1 Mont’ Kiara for RM333 million. Aseana expects to complete the proposed transaction by year-end (2010);

13. UEM Group were no plans yet to re-list the company or raise capital but did not rule out the possibility in future.

14. UEM Group Bhd has no plans yet to dispose of its 45% stake in Time Engineering Bhd, but will do so if there are interested parties with substantial game plan. Time Engineering had received its shareholders’ mandate in July 2009 to sell its entire stake in TdC at no less than 48 sen a share;

15. Market speculation of a potential change in a substantial shareholding of Mudajaya Group Bhd. One of Mudajaya’s shareholder is Mulpha Intl;

16. DRB-Hicom aims to make its banking unit, Bank Muamalat Malaysia Bhd, one of the top five Islamic banks in the country within the next two years;

17. Fitters’ MD Datuk Richard Wong’s had significantly increased his equity interest to over 30% of the company’s paid up capital. It plans to attract institutional investors in the near term;

18. PJI is in process of a capital restructuring exercise which hopes to complete in six months (July 2010 – Dec 2010). It is also undergoing a management reshuffle. It has disposed two of its assets;

19. The High Court had granted Transmile a restraining order under Section 176 of the Companies Act 1965 to halt further proceedings and actions taken against the company and Transmile Air Services Sdn Bhd (TAS) for 90 days starting July 16 2010;

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