Monday, February 28, 2011

Kumpulan Fima (RM1.63; Target: RM2.20): Highest quarterly earnings, steady!

Kumpulan Fima's quarterly results were out just now. Its earnings remained steady on an uptrend. Net profit rose to RM20.07 mil or EPS of 7.6 sen, a +35% q-o-q and +10.8% y-o-y. The increased earnings were contributed by higher earnings of all business segments, i.e. plantation, production & trading of security documents, bulking and food divisions. Net cash rose from RM120.7 mil in 3Q2010 to RM153,4 mil in 4Q2010 (calendar year), allowing the company plenty of flexibility for acquisitions or further expansion of its plantation business.

Trailing 12M net profit was RM64.6 mil or EPS of 25 sen, thus PER 2010 stood at only 6.6x, supported by net cash per share of 58.3 sen. Its share price movement had been rather lethargic lately, following the trend of the general market. I noticed that its shares have been moving rather close to the market (as opposed to TWS which could run quite contrary to market movement). Perhaps it could only rebound meaningfully when the general market is more favorable. As compared to Tradewinds, KFima's earnings growth is only 'decent' and rather predictable which probably led to its unexciting share price movement. It could also be due to the declining palm oil prices which plagued the plantation stocks, KFima is no exception.

In terms of valuation, putting an 8x PE to its EPS of 25 sen (most likely could earn more than that in 2011) will yield a share price of RM2.00, a 23% upside. I believe it should be trading more than 8x PE. Perhaps 10x should be a better valuation for it in view of its steady earnings growth backed by strong net cash position (reminds me of HSL).

For now, I am putting more chips in Tradewinds (M) as this company's businesses are superior to that of KFima, and I would say, can easily surpass Kulim. Yet, it's trading at a lower valuation than KFima in terms of PE. Looking at Tradewinds trading volume, seems that big players are coming in. Such an expensive stock (in terms of share price) with hundreds of lots queuing up to buy is something worth taking a look. Nonetheless, its shares are more volatile. You must have enough funds to stomach the high volatility. It could end up being the top gainer, and also being the top loser. Hahaha. But it's an upward trend. Ok. Sorry, digressed already. Back to KFima. Have a look at the charts below.

For previous posts on KFima, click here.

Keanpoh Photography

Keanpoh, a high school friend of mine just ventured into photography and the photos he took are quite mesmerizing, especially those that feature the environment. His works were featured in the media such as National Geographic and Framework Magazine. Anyone who loves photography can check out his website here. Cheers :)

Stocks Unleashed (ASX): Frontier Resources in the news and new maps of New...

Stocks Unleashed (ASX): Frontier Resources in the news and new maps of New...: "There is an announcement today from FNT. Basic points include: Multiple, areally extensive and strong copper and gold anomalous soil zones ..."

Tradewinds: The Shooting Star (RM8.23; Target > RM15) - A spectacular quarter!!

Tradewinds just announced its 4Q results on Thursday last week. Its performance was beyond my expectations and it's nothing short of spectacular. This led to its jump in share price by 67 sen, the top gainer on last Friday!!!

Net profit for 4Q2010 stood at RM193.5 mil or EPS of 66.5 sen while its whole year's net profit was RM482 million or RM1.65 per share, way ahead of my forecast of RM400 mil. I really like their huge increase in turnover and net profit, almost doubled y-o-y (year-on-year). Revenue for 4Q 2010 and whole year of 2010 were RM1.6 bil and RM5.8 bil respectively. Their huge revenue also means that improvements in efficiency and cost control could result in huge increases in their earnings.

The increase in earnings was attributed to better earnings from sugar refining and oil palm plantations segments. Operating profit from sugar refining jumped from RM68 mil to RM93 mil while its plantation operating profit increased from RM99.4 mil to RM143 mil. Earnings from rice division remained solid and were slightly higher than its average in previous quarters at RM57 mil.

Net gearing declined continuously from 1.08x in 1Q2010 to 0.83x in 4Q2010 which is good. Its high net gearing is not much of a concern in view of its resilient and lucrative businesses. Net assets per share rose from RM5.82 to RM6.83.

Its plantation business is expected to fare well in view of the favorable palm oil prices coupled with its increasing matured acreage (Its tree age profile is rather young, means that there is plenty of room for expansion in production). According to its quarterly report, rice division is expected to perform well for 2011 despite a more volatile rice market as it has bought forward some of this year's requirements to mitigate the risks. On the other hand, sugar refining could benefit from sugar price increases resulted from subsidy cuts.

In view of its prospects and strong earnings, I see a RM15 stock in the making. Its earnings were even more fantastic than Kulim's RM360 mil net profit for 2010. By simple calculation, if Tradewinds is to trade at similar PE levels as Kulim, its share price should be at RM20!!!

Surprisingly, there is not even one news on its profits or surge in its share price. I'm curious why Tradewinds (M) is rather absent from the media and the stockbroking houses. Hmmm...

For posts on Tradewinds, click here.

Revenue and earnings are in RM'000

Wednesday, February 23, 2011

ATIC Free Entry Ticket

ATIC (Asia Trader and Investor Convention) is coming to KLCC again on 2-3 April 2011. Anyone who wants to obtain free tickets for the 2 days can click on the link provided above. Nonetheless, it's only free for certain programs. For day 1 program, click here. For day 2 program, click here. See you there!

Tradewinds (RM7.89; Target RM13.50) 4Q2010 results preview: Still strong (A food giant conglomerate yet one of the cheapest stock in KLSE)

Results of Padiberas Nasional Bhd (Bernas) and Tradewinds Plantation Bhd (TWSP) were out. Both of these counters are 72.6% and 69.8% held by Tradewinds (M) Bhd (TWS) respectively. Given Bernas net profit of RM36.9 mil and TWSP's net profit of RM83.5 mil, combined profit contribution to TWS' net profit based on its equity stake in both companies should be around RM85 mil already. Note that we have only incorporated its plantation and rice business segments.

It has another sugar business division. Assuming that its sugar refining net profit is around RM35mil (Historically it's about RM35mil to RM40mil per quarter), total net profit for TWS is estimated to reach around RM110mil to RM120mil or EPS (Earnings per share) of 37 sen-40 sen. Total net profit for the whole year could reach RM400mil or EPS of RM1.35. Based on current price of RM7.80, PER 2010 is less than 6x.

Pricing the stock at PER of 10x, it should be trading at RM13.50. This is one of the cheapest stocks in KLSE in view of its food conglomerate business which is able to rake in profits in the tune of few hundred million. Not many stocks can have this kind of profits. We could compare TWS to Kulim as this stock also bears some similarities to Kulim, another conglomerate with oil palm plantations and food businesses. Look at what levels Kulim is trading now. TWS profits are even more stable and higher compared to Kulim's albeit with a higher net gearing. Perhaps TWS should follow Kulim's footsteps in announcing some share split or bonus issues which could see greater liquidity and participation from the investors, then the stock is poised for an upward re-rating.

In addition, it is rather generous with its dividends. It just paid out 20 sen dividend in Jan 2011 and probably will pay another 10-15 sen (Just a guess) for its final dividend in mid year, a 4% yield based on current price. Not bad at all. Results should be out soon within one week. Let's see how it performs for the final quarter.

For previous post, refer here.

Monday, February 14, 2011

Malaysian unit trusts: Good investment?

I'm back guys. Sorry for the long absence. I just went to China for holidays. Thank God I went to Guangzhou during CNY season. The traffic was good since many had gone away to their respective "kampungs" for CNY. If not, I'd probably spent most of my time on the roads.

Anyway, for those contemplating buying unit trusts, I did some simple research on some Malaysian unit trusts (Only selected few: Malaysia equities, Malaysia bonds and Malaysia Shariah equity) using prices ranging from 2004 to 2010 and some reward-risk measures such as Sharpe, M2, Treynor, Jensen's alpha coupled with performance consistency measures such as Spearman Rank. Probably there are a few research materials out there which offered contradicting conclusions. I'm thinking maybe I should just give a shot at this :p It's also a good warm-up for me after the long rest :)

A gist of the results as follow:
Islamic Equity

Looking at the tables above, generally unit trusts underperformed their benchmark indices (unfortunately). There seems to be no additional benefits of investing in unit trust funds as compared to individual stocks or bonds. However, it seems that equity funds were more resilient during market downturns. This could be due to greater diversification of the funds though this would need further analysis.

In addition, the Spearman rank measure seemed to show that there was little correlation between past and future performance implying that investors would not have the upper hand of picking past winning unit trusts.
Islamic Equity

Having said that, there were a few funds which consistently appeared in the higher rankings and outperformed their peers and benchmark indices. The funds were Kenanga Growth, Kenanga Syariah Growth and AmDynamic Bond which were also winners of The Edge-Lipper Fund Awards for multiple years. In this case, investors would need to go the extra mile to identify consistent winners like the ones mentioned above rather than just buying any unit trusts recommended by your unit trust agents.

PS: Sorry about the small tables. You might need a magnifying glass to read them or zoom in the page :p