Very tired Week: Police Day parade

Dear Readers, it had been a very busy week. I was given the task of being the stage manager of Police Day parade 2007. It was challenging, plus all the ad hoc tasks that i was given. But i done it with no regrets. I have to thank all my colleagues who listen to my complains. Well, the event run smoothly, the satisfaction is there. Love it! Thus, this week i can only provide some information from my broker. Next week, i will go back to analysing companies. Anyway, i am looking into Yaan Security. :D

http://research.uobkayhian.com/research/content.show.action?filename=2007060115373796701187013.pdf <-------- focus MacarthurCook Industrial REIT

Investment: TiongWoon

ET was wondering whether does TiongWoon still worth 0.55, after all the calls, at target $1.00

My task today will be reanalyse TiongWoon again, after its recent acquisition of a tower crane operator Soon Douglas, which operates: 49 towers and two mobile cranes.

From the chart below, we can see the new forecast of EPS is at 62.5% and thus, new EPS is at 4.2 cents. Its instrinsic value will be at $1.22 (in 2 years time) (refer below), after using the revised EPS as well as a new EPS growth rate. I use 25% growth rate as a more prudent average of the 4 years from 2006 to the forecast for 2009F.

Investment: Gaming Resorts

Resorts World (Resorts) reported 1Q07 net profit of RM237.6m. Ex-exceptional of RM67.2m from gain on dilution in Star Cruises, net profit would have been RM174.4m (-28.4%yoy, +18.1%qoq). Results was below our and consensus expectations due to larger than expected losses at Star Cruises, but we expect Star Cruises performance to improve in 2H07.

Star Cruises losses rose to RM94.1m (1Q06: RM46.5m), but an improvement from 4Q06's RM185.3m loss. Star Cruises earnings was hit by a) higher ship operating expenses per capacity day (+1.1%yoy) due to charter hire fee for Norwegian Crown, b) decrease in net revenue yield of
6.5% due to downward pricing ressure on inter-island cruises in Hawaii and lower onboard revenue in the Asia fleet. Star Cruises will be withdrawing Pride of Hawaii from the competitive Hawaii market effective Feb 08 and redeploy it to Europe for summer 2008 to capitalise on the growing demand for European cruises.

Revenue grew strongly by 28.9%yoy (-2.2%)qoq to RM1,063.9m, on the back of higher volume of business at Genting Highlands due to higher visitor arrivals and more favourable luck factor.

EBIT rose by 49.4%yoy (-13.5%qoq) on higher revenue and improvement in margin to 32.6% (1Q06: 28.2%, 4Q06: 36.9%) due to better luck factor and continued cost savings

Balance sheet continued to strengthen as net cash jumped to RM1,372.6m (23sen/share) vs 1Q06: RM148.8m, 4Q06: RM707.9m.

Maintain earnings estimates and HOLD call (entry price RM2.55).

Investment: Be wary of STI

This is from my Broker:

Singapore bourse- Rising wedge formation close to breaking down. The ST index had reached a high of 3559 yesterday and quickly reversed down. We had earlier identified the 3550 level as a critical resistance level while stating that the index could be in a terminal wave 5 move. Today's decline has raised the probability that a significant peak is in place. The pattern of the index's move from March low off 2930 has traced out a rising wedge pattern and typically any breakdown will result in a sharp reversal. As we write this the index has already lost 35 points at 3523. Immediate trendline support is at 3512 for today. There is a risk that the index could gap down if sentiment turns negative. As such, we think it is prudent to reduce exposure. If the index breaks below the uptrend line, then next immediate support would be at 3400, the low of the prior 3 weeks. Readers should also note that other regional markets are also week and indices like the KLCI and Jakarta Composite Index appear! vulnerable to a steep correction.

Best Regards

K Ajith

Genting Intl

Requested by my dearest ET, she wanted to know about my analysis on Genting Intl, thus, this week featured Genting Intl.
Like always: A brief recap on the 8 criteria:
1)History of consistently increasing sales and earnings
2)Sustainable competitive advantage
3)Future Growth Drivers
4)Conservative Debt
5)ROE > 15%
6)Low capital expenditure required to maintain current operations (in account sector: CAPEX)
7)Good Management & Competent at capital allocation
8)Buy only when the stock is undervalued, i.e. Share price

I got Genting Intl's quarterly report from ET's link (from the tagboard), and went ahead to analyse its report:
1) There is a more than a 100% rise comparing quarters to quarters ( $4890 k to $ 67,550k)
2) EPS - Basic @ 1.2, Diluted @ 0.13
3) From calculations: ROI @ 2.5%
4) ROE @ 3.83%
5) Long term Liabilities increased by $87,760k
6) Short Term payables and borrowings decreased by $256,421k
7) Net cash generated increased from $3674k to $25,992k
8) Dispose 50% interest in Stanley Leisure
9) Gent Intl utilised its proceeds from their "First Convertible Bonds" as follows:
i) Cost of issuance ($6,003k), ii) Subscription of shares in Resorts World at Sentosa Pte. Ltd. via Star Eagle Holdings Limited ($407,062k) and left $11,935k unutilised
10) The proceeds from their 'Second Convertible Bonds' have not been utilised.
11) "... through its wholly owned subsidiary, Star Eagle Holdings Limited ("Star Eagle") increased its investment in RWS from S$27,187,500 to S$525,000,000.."


Currently, we can observe that Genting Intl is placing huge bet on the Integrated Resort in Sentosa. From their huge investment in RWS as well as their long term borrowings to fund this project. Plus, since they are now the sole controller of the IR project. Things may very well swayed to their favor. How successful will this IR project be in the future? Can it beat our neighbouring Macau? How would the response be in Singapore? These are unforseen circumstances in the future. But on a short note, if the company is so confident on this project, this enthusiasm will trickle down to its sharesholders.


Currently, the share price of Genting Intl is standing at 0.95. Using EPS method: the long term instrinsic value for Genting Intl is standing at $3.77




However, if were to use the discounted cash flow method, then the instrinsic value is at $0.78



Thus, this shows that Genting Intl does not have enough cash flow to operate its operation, but pointed out at point 10, their proceeds from the convertible bonds has not been utilised. This proceeds can serve as cash flow when they need. My future view on this stock at this point is still good.

Pine Agritech

Hi readers, I would like to present my analysis on Pine Agritech. And if there is still time left (Mothers' Day you know?), I will do Tiong Woon too. Before i start, let recap on the 8 Criteria:
1)History of consistently increasing sales and earnings
2)Sustainable competitive advantage
3)Future Growth Drivers
4)Conservative Debt
5)ROE > 15%
6)Low capital expenditure required to maintain current operations (in account sector: CAPEX)7)Good Management & Competent at capital allocation
8)Buy only when the stock is undervalued, i.e. Share price < Intrinsic Value

I got OCBC investment Research report on Pine Agritech yesterday, dated 11 may 2007. A brief run through for the report (Extract):
1) Revenue grew 81% YoY to RMB405.4m and net profit surged 115% YoY to RMB146.5m, ... primarily attributed to acontinued increase in contribution from its high margined SOS product which made up 48.5% of revenue and 69.8% of gross profit as compared to 30.5% and 46.4% respectively in 1Q06. SOS's gross profit grew 223% YoY to RMB135m
2) ...concerns about Shenji stumbling on its RMB700m commitment for FY07 is somewhat allayed as management showed prompt payment in its financial statements from Shenji.
3) Fair Value @ 0.76
4) Profit after tax increase at 115.2%
5) EPS forecast at 0.202
6) EPS growth forecast at 12.9%
7) ROE forecast at 33.5%
8) PE growth at 1.3x

Pine Agritech, from the past reports have managed to sustain growth and profits:
Year to Turnover Gross Profit Net Profit EPS EPS Growth PER Net Div Yield
31 Dec (RMB m) (RMB m) (RMB m) (RMB cents) (%) (x) (%)
FY 05 797.0 270.8 234.6 7.8 28.6 42.0 1.2
FY 06 1,577.7 699.4 538.0 17.9 129.3 18.3 1.6
FY 07F 1,874.5 815.6 607.2 20.2 12.9 16.2 1.8
FY 08F 2,101.0 902.5 670.6 22.4 10.4 14.7 2.0

Their sale of soybean-based products such as Soy Protein Isolates (“SPI”), Soybean Oil, Soy Oligosaccharide Syrup (“SOS”) and Soybean Peptide are their key competitive advantage. I don't see that they will lose this advantage in the near future. SPI and SOS have been their growth driver, especially SOS, "SOS's gross profit grew 223% YoY to RMB135m". SOS and SPI will continue to be their growth driver. But one thing to note is that, i hope there will be more drivers to let Pine Agritech be a leading Soy company.

Since i can't post the pictures of my excel spreadsheet, thus i just type my findings here regarding Pine Agritech's instrinsic value:
Using EPS method, the ten years forecast is $3.03, whereas using the discounted cash flow method, the forecast for ten years is $4.00.
In conclusion, Pine Agritech is quite a good long term investment for ten years to come as if you bought this share at the current price of 0.69, 1 lot, ten years later, it will become $2260 (using the $3.03), including the calculation of commissions and clearing fees. Good investment right?

Cont'd

For Asl marine, in order to suffice their order book, in their f/a 05- 06, they have added $96.25M in capital expenditure. Almost immediately, their net profit for the year ended 06 is a whopping $16.8 M. Thus, the expenditure produce a roughly 17% of its net profit. Majority of these capital expenditure are on financial lease, with $8.23M worth of Tugs pledged for a loan facility if Asl needs it. Another plus point is that, they really try to minimise their debt, and mostly incurred are finance lease and the various hedges against currencies they had with other parties. A majority of their leases will be ending in another 5 years time, after which, they may either purchase their leased equipment, or re-lease a newer equipment.

In terms of ROE, lets check: Net income for the year 2006 is $23.621M and their average shareholders' equity is $121.687M. Which means Asl Marine ROE is 19.41%

1 Point i like about Asl is that they had $28.629M in positive cash flow, after all their expenditure.

In conclusion, Asl marine have conservative debt (pt 4), their ROE is 19% (pt 5), their capex is relatively average (as they are in a high capital business) (pt 6), AND they got a good positive cash flow.

Golden qns, given their current price, are they valued correctly? Their current price is $1.22 per share (as of today). Their EPS (Earning per share) is $0.10 ($23.066M/230,197,899), thus, P/E ratio is 12.2, which is really good!

Last but not least, what is the stock intrinsic value?

The first method is using the discounted earning per share method: EPS is $0.10, assume EPS grow at 10%, discount factor is 4%, the intrinsic value is $1.38Second method is using projected cash flow method: cash flow is $28.629M, growth at 7%, and guess what!! The intrinsic value is also exactly $1.38 (first time i got both calculations with same value)

Thus, to wrap Asl marine up, is that --- this company has a good FA, a good value company to invest, however the current price may not seem attractive as it is not really at a huge discount, i.e $1.22 compared with $1.38. Maybe, when the bull fall, if Asl marine falls to $0.60 and below, make sure everyone grabs it okay? Thats all!