Harimau Capital

Formerly known as Bolton Berhad, the company changed its name to Symphony Life Berhad in March 2013 and has been a long time developer of high-end commercial and residential properties with major focus in the Klang Valley market.

The year of 2014 has been a major milestone year for property counters in general with the FBMKLCI Properties Index returning close to 9% YTD. The trend has largely been supported by performance of major property stocks like Mahsing, Sunway, SPSetia, which have been closely tracking the index, whereas the small and mid cap counters have delivered much better returns.

Against the backdrop of major rallies in the small and mid cap property counters, Symlife is among those counters which have been laggards in the previous round of uptick. The counter has merely delivered 2% YTD return based on opening price of RM1.05 during the start of the year and closing price of RM1.07 as of 10th May 2014.

Given the fact that the company has delivered a somewhat satisfactory result in the last quarter's earnings release and with a net tangible asset value at RM1.93, perhaps the share price performance of Symlife could have been better than a mere 2%. Trailing 9-month EPS is at 12.7 cents giving a trailing 9M PE of circa 8 times. 

Overall, the property index is expected to outperform the major index FBMKLCI and what this possibly means is that we are perhaps at or close to the end of a major bull market. Year 2014 could be a watershed year for the equities markets and while the bull is taking a rest now amidst the "sell in May and go away" mood, it might be a good time to pick up property laggards like Symlife to position for the next rally in the property index.

Technically Symlife is well positioned to chart new territory of a multi-year high price range of RM1.30 - RM2.00.  Initial target for the counter would be RM1.40, followed by RM1.80 should the initial price target level is well supported.

Note that Symlife had issued warrants (Symlife-WB) during end of year 2013 and based on observation of relative price performance of the warrant to mother share, it is a good proxy for leveraged play as well.

Disclaimer - Disclaimer - The information/ opinion above is intended for reference / educational purposes only. The information does not constitute investment advice or an offer to invest and is subject to correction, completion and amendment without notice. Caveat emptor is advised.

Due to the recent pull-back of market in general, Harimau Trader Portfolio has delivered lower return of around 16% YTD 28th June 2013, compared to 33.14% for YTD ended 22nd May 2013.

While most counters still remain profitable, Ekovest has slipped into a loss-making position with a return of -3.1%. Harimau Trader maintains its stand on this counter and may look into adding its position should more favorable price entry point arise.

Dividend of 4 cents from MFCB has gone ex and will be received soon. This amounted to RM231. Taking this into consideration, the position of MFCB remains at break-even level.

A new member - Integrax Berhad has been added into the portfolio due to the promising technical outlook of the share price.

For more details please follow the link to the file : Harimau Trader Portfolio - Update 28/6/2013

Integrax Berhad is the operator for the Lumut Port located off the straits of Malacca, one of the main channels for growing international and ASEAN trades. While being strategically located off the straits, the relatively smaller berth of the Lumut Port and the onshore infrastructure support of Lumut / Perak, as well as competition from Port Klang are key reasons why this port is only meant for smaller vessels and hence comparatively smaller trades. This explains the stagnating revenue growth predicament plaguing this small port operator over the past 5 years and hence placing it below the radar of many big brokerage houses.

Nonetheless, one of the key merits with this company is that being in the port business means businesses are recurrent and cash-generating, hence the reduced likelihood of volatility in revenue and earnings. Due to the fact that its business has not seen much expansion, reinvestment and CAPEX needs are minimal, as evident by the reduced asset base and debts over the past years. This has allowed the company to quietly chalk up its cash hoard and as at 31st March 2013, cash position stands at RM130mil. while debts are minimal (RM4.5mil). 

At RM 1.49, the market capitalization of Integrax is approximately RM 450mil and it trades at a discount to its NTA of RM2.00. Stripping the cash holding out, the market currently values its port business at around 7 times FY2012 PE. Not too bad for a consistent cash cow??

Note that the company has also been back on the dividend paying track. After missing in FY2009, the company started to pay 3 cents in FY2010, 16 cents in FY2011, 4.1 cents in FY2012 and 4.5 cents in FY2013. Judging from the trend, it is likely that investors can be assured of at least 4 cents dividend annually, potentially more to come.

Another piece of good news that came in recently is the expansion of its port facilities due to a new agreement entered into with Tenaga Nasional Berhad. This will potentially turn the revenue predicament of the group around and pose it for re-rating in line with higher revenue growth upon commencement of operations under the new agreement. While this will add another RM 90mil to its balance sheet due to construction at the port facility, the group's financial position will still very much remain intact.

Based on recent technical reading, the re-rating will probably kick in soon. First target is around RM 3.00 whereas longer term target of RM 4.50 will very much depend on sustainable revenue and earnings growth down the path. Stay tuned....

P/S : In line with the favorable outlook for the group, Harimau Capital Trader has decided to add Integrax into its portfolio for continued monitoring purposes.

Disclaimer - The information/ opinion above is intended for reference / educational purposes only. The information does not constitute investment advice or an offer to invest and is subject to correction, completion and amendment without notice. Caveat emptor is advised.

For tracking of the performance of Harimau Capital's featured stocks under "Trading Idea", we have worked out a spreadsheet detailing the performance of each individual stock, as well as the composite return of a portfolio consisting all the stocks covered. The purpose of this exercise is to examine the price movement behaviour of the featured stocks vis-à-vis the general market performance - as measured by the FBMKLCI index. 

Note that this section is meant solely for educational purposes and does not represent any opinion / recommendation for buying / selling the above-mentioned stocks. This section will be featured monthly for consistent tracking purposes.

For more details please follow the link to the file: Harimau Trader Portfolio

Main Highlight - Power Generation Business

Financial Highlights

For FY2012, Group's revenue stands at RM 632mil whereas net profit is RM 57mil. This translates into an EPS of 25.5 cents, thus valuing the company at 6.5 time PE.

With the power generation operations chalking up sizeable cash hoard over the years, MFCB is currently in a net cash position of approximately RM 60million (cash per share - 25 cents). On top of that, the company is capable of generating around RM 100million cash from operations every year for the past 5 years, thus giving it the ability to distribute good dividends.  

Please see here for detailed financial highlights: 5-Year Financial Highlights

Key Risks

One key risk to MFCB's power operations is that both power plants are due for license renewal in 2017, thus rendering uncertainties over its earning visibility beyond the next 3 - 4 years. 

Potential catalyst for the counter is therefore over possibility of extension of licenses and/or more favorable power tariff negotiations for these power plants.

Technical Highlights

Based on historical trends, MFCB qualifies as another long-term bullish counter. Current price level serves as a good foundation from which more upward movement can be expected. Share price has been consolidating since 2010 but has recently shown possible signs of moving out its consolidation price range of RM1.70 - RM1.80. Should the current momentum be sustained with trading volume, next targets shall be at RM2.00 and RM2.40, with longer term target at RM2.70.

At 1,769 points, KLCI is currently in a bullish mode and should the momentum stay on with sustainable trading volume, it is well poised for more record-setting highs. Meanwhile in the short term the index looks more likely to consolidate further, but any such consolidation may just well be a breather before it continues its climb upwards.

In the current round of rally, many property counters have benefited from the post-election uptick and many second liners have since produced double-digit percentage returns within a short two-week time frame.

Below is a snapshot of Property Index, which explains why property counters will still have some legs to run: 

Note that the index has just broken above its major resistance level at 1,270 - 1,280 level and technically this is a sign of a more sustainable upward development for the index and hence all relevant property counters. The Property Index currently stands at 1,417 level with next level target of 2,000 in sight. Based on current momentum and barring unforeseen circumstances, we are talking about hitting the target within 6 - 12 months.

While counters like Huayang, UOA Development, Dijacor, Mahsing, Tambun, have all made their recent highs in the this first round, there are potentially still other laggards that will play catch up in the subsequent rounds of rally. However, today's introduction will focus on a construction turned property development play counter:

Trading Pick - Ekovest Berhad

Traditionally a construction and engineering company, Ekovest Berhad is a potential property play with big integrated development called The Gateway @ KL Bund. Its other property development projects include Eco Business Park in Cheras and Menara Titiwangsa. Together all these 3 projects have a gross development value of RM4.8bil. 

On the other hand, Ekovest is also a candidate for the Iskandar Development theme as the group is currently embarking on some construction activities within the Iskandar region. Its CEO's, Mr Lim Kang Hoo is also owner for Iskandar Waterfront Sdn Bhd, which is slated for IPO this year.

While it will be interesting to how these developments will pan out for the group, however, technically, funds flow and share price development over the years for this counter seems to suggest that it is well positioned to further rally with long-term price target of RM 7. For group's financial highlights please see here: Financial Highlights

Since 1979, MKH has helped enhance lifestyle standards through innovation and creativity.

MKH Berhad (Formerly Known As Metro Kajang Holdings Berhad) is a respected and established property developer with a reputation for cost-effective well managed projects and is listed in the Main Market of Bursa Malaysia.

MKH's current portfolio comprises a range of developments across all property sectors which are mainly located in Kajang, Damansara, Semenyih, Serdang and Melawati. To date, it has developed and undertaken more than 30,000 units of mixed development projects with a value exceeding RM6.0 billion. In addition, the MKH Berhad is also involved in oil palm plantation, project management, property investment, construction and furniture manufacturing.

Highlights

With a root in property development and construction, MKH has over the years branched out into the plantation industry through the acquisition of oil palm business in Indonesia. The business has started to bear fruits in the current financial year and contributed positively to its top and bottom lines. Such diversification strategy shows that the management is actively pursuing business opportunities and yet has so far managed business expansion in a profitable manner. 

With Q1 2013 results yielding an EPS of 10.68 cents, full year results are likely to surpass past years and the Group is well poised for a record year in its history. Annualized EPS is likely to be around 30 cents - 40 cents, suggesting a relatively low PE of around 5 to 7 times. ROE is also likely to be in the double digit. On top of that, the company also has a stable dividend record, distributing 5 cents (3.75 cents nett) per annum.

A new entity created from the merger between Sunway Holdings Berhad and Sunway City Berhad.

As shown in chart above, this counter has been in a major base-building stage for many years and major reversal pattern was finally confirmed in March 2013 with a breakout above major resistance level of RM2.75 - RM2.80.

RSI reading shows that the stock is a long-term bullish counter with potential upside at RM5.20 in the long-term based on cup-and-handle pattern that is formed over a 13-year period. 

Barring potential volatility arising from the upcoming General Election in Malaysia, Sunway promises longer term potential upside with high degree of certainty.

Another point worth noting is that the company's warrant: Sunway-WA (5211WA) is currently trading at an attractive premium of around 14% only. The warrant is a good proxy for a leveraged investment into the positive outlook of the mother share with an expiry in 2016.

An ideal approach to investing in such counter would be "buy at dips" and/or "buy more at further dips" so that one could ride on the long-term uptrend over the next few years.

The promising outlook is solely based on technical analysis.

Introduction

Pantech Group Holdings Berhad (5125) is a supplier of pipes, fittings, flanges, valves and other component products. The company serves across a wide range of industries such as oil and gas, plantations, power, water, refinery and petrochemical plants and the products are mainly manufactured for industrial purposes.

The company operates a manufacturing plant producing stainless steel-welded pipes and fittings in Pasir Gudang, a major transport and logistics hub for regional O&G activities. The site is also at close proximity to the soon-to-be major petrochemical hub at Pengerang, Johor.

Pantech was listed on the Bursa Malaysia back in February 2007.

Fundamentally

Like all service and manufacturing companies in the O&G sector, Pantech's fate relies heavily on the global O&G CAPEX budget from major oil companies. Domestically, PETRONAS has been investing heavily on many development projects, especially on the marginal oil field development front. 

The trading and manufacturing business is not particularly exciting as profit margins are usually low and competition is intense due to weak product differentiation in the steel-related product market. O&G sector is also a cyclical business where investment decisions are significantly influenced by oil prices.

Moving up the supply chain - While trading remains the backbone of the Group's business, Pantech has gradually been building up its manufacturing capacity for different steel products catering to domestic industry needs as well export demands. Going forward, the company has plans to move into the production of alloy and other high-yield products. This allows the company capture higher profit margins along the supply chain.

Financially

5-year Financial Summary - Historical financial performance suggests that company's performance is still largely dependent on industry's cyclical trend. Recent recovery in financial performance however may suggest that business outlook has somewhat turned more favorable especially with ongoing ETP project spending on the O&G front.

*Based on today's closing price of RM 0.74

Technically

Technical reading remains favorable at this stage. Recovery has been steady and this is confirmed by continuous build-up in trading volume.

A major reading for the pattern of mid to long term bullish trend (3mth - 12mth) of the counter was spotted in Feb'12, Aug'12 and Jan'13 with RSI reading breaking above the 80% level whereas subsequent retracements remained above 30% level. Recent RSI spike to 88% suggests that a more accelerated price movement with upward bias is likely to occur.

Technically, this counter has enough momentum to re-test its historic high of RM1.10 recorded back in Jan'07. Immediate target is set at RM1.07.

Catalyst

- The major driver is likely to come from the ongoing development of the Pengerang Petrochemical Complex in   

  Pengerang, Johor.

- Weak results from PETRONAS in the latest announcement - indication of more reinvestments are required to 

  bump up future earnings.

- Recovery in global oil prices against the backdrop of stronger global economy.