Our website is made possible by displaying non-intrusive online advertisements to our visitors.
Please consider supporting us by disabling or pausing your ad blocker.
Hong Chew Eu
Following
0
Followers
182
Fame: 573
Retired Group CEO of i-Bhd. Now a full time blogger
Jaya Tiasa – tough to be profitable when firing on one cylinder
Jaya Tiasa has undergone a significant transformation since its inception as a timber company in the 1980s. The diversification into oil palm has shifted the Group's primary revenue source.
But without this shift, the company would be in trouble today. Currently, the oil palm operation is the main profit driver. The timber segment faces declining production volumes due to policy shifts toward sustainable practices. The Group's reliance on oil palm highlights the critical need for a turnaround in the timber operations.
Looking ahead, the focus must be on improving operational efficiencies. This hinges on the readiness of the forest plantations to contribute to log supply. While the company has 2 business segments, only one is contributing to its bottom line. It is tough to be profitable when running one one cylinder with a 2 cylinder engine. https://www.i4value.asia/2024/11/is-jtiasa-investment-opportunity.html#more
TDM has 2 business segments – Plantation and Healthcare. In 2007, TDM expanded its plantation business to Kalimantan Barat, Indonesia and touted “…that the growth of the plantation operations will be in Kalimantan.”
By 2016, the Group’s Indonesian assets amounted to RM 532 million. But then things began to go wrong with the company having to incurr impairments from 2016. It got so bad that the Group decided to sell of the Indonesia assets in 2019. By this time, after all the write downs, its Indonesia assets was reported to be RM 106 million.
Without the Indonesian operations, the Plantation segment is a profitable one. The Healthcare segment, although a small player in the Malaysian healtcare sector, has always been profitable. Let us hope that maybe the company will start making money by just running its operation better rather than try to be bigger.
Hap Seng – land sales could not sustain its performance
Although it is a diversified group, I would consider Hap Seng predominantly a property company as about 70% of its net assets were deployed for the property segment.
The past decade has been tough for Hap Seng. For many years, it had to rely on sales of land and/or other assets to maintain the contribution from the property segment. Despite this its ROE had declined from an average of 19% in 2014/15 to an average of 11% in 2022/23.
I would like to think that things would improve moving forward as there were no longer any need for land sales in 2023. I also think that we have reached the bottom of the property cycle. The challenge is whether the market has already priced in all these better prospects?
Globetronics – can if rediscover its product development mojo?
If you are a tech company, being winners for many years may not be enough to have a sustainable future. Just think of Nokia, Yahoo and Blackberry and you can understand what I mean.
In the Bursa Malaysia context, we are seeing this playing out for Globetronics. The company was founded in the 1990s and for the first 2 decades, it was considered a fundamentally sound stock with good returns. Unfortunately the company experienced declining performance over the past 12 years. Globetronics’ revenue decline is in contrast to the growing revenue from the global semiconductor industry.
Globetronics needs a turnaround. But it is more than improving efficiency or productivity. It is about developing products that will generate good demand when the products come on stream in the next 4 to 5 years. The Group seemed to have been able to do this new product development process a decade ago. Somehow it lost this edge. If it fails to rediscover this product development mojo it will not be an investment opportunity but a value trap. https://www.i4value.asia/2024/10/is-globetronics-value-trap.html#more
Affin – will a change of shareholders improve performance
The performance of Bursa banking group Affin over the past 12 year was nothing to shout about. Its performance, measured against a panel of 10 Bursa Malaysia banks, is below the sector median across key metrics such as returns, efficiency, and loan performance. However, it has improved its capital adequacy ratio.
But I would not consider Affin a value trap as it remains profitable with a margin of safety over 30% based on the asset value. However, it lacks a sufficient margin of safety under the earnings value.
The Sarawak State Government has recently acquired a substantial stake in the bank. There is hope that the state would divert its funds to Affin thereby improving its deposits and hopefully grow its loans. But if the challenge is efficiency and loan performance, I am not sure whether there would be a quantum leap in performance. https://www.i4value.asia/2024/02/is-affin-value-trap.html#more
FACB Industries started off as a mattress company. In the early 90s it ventured into China as well the into the stainless steel pipes and fittings sector. Thereafter there was a change in the controlling shareholder. But there was no new business ventures and the group continue with the bedding and steel operations for many years
About a decade ago, the group started to divest its steel business so that today it is left with the bedding operations, its investment in China and lots of cash.
In Dec last year, the controlling shareholder pass away and his son has taken over the management of the group. Nothing new has happened so far but I hope that with a new person at the helm, there may be a change in the business fortune. So keep FACBInd in your radar. https://www.i4value.asia/2024/10/is-facbi-value-trap.html#more
Bursa MNRB is a leading provider of reinsurance and retakaful as well as takaful. You would have thought that with a captive reinsurnance market and being a poineer in the takaful sector, it would be a roaring success.
While MNRB had been able to grow its revenue at 5.2% over the past decade, PAT only grew at about half the rate. When I compared MNRB's performance with those of the other Bursa insurance companies, I found that it is at best just below the panel average.
There was a run up in its share price a couple of months ago following a very good first quarter result. Unfortunately this was not sustained in the second quarter. So the company is still trading signficantly below its book value.
MNRB's problems are more about poor operating fundamentals – profitability, underwriting performance, and investment. If these could be improved we will have fantastic performance. So maybe the market waiting for this to happen before any re-rating. https://www.i4value.asia/2024/02/is-mnrb-value-trap.html#more
Harrisons – is slow infrastructure development its moat?
You would have thought that with the growth of online business, the fortunes of distribution companies like Bursa Malaysia Harrisons would be distrupted. But over the past decade, Harrisons revenue grew at 5% CAGR with its profits growth at 8% CAGR.
Harrisons main distribution business is in Sabah and Sarawak. I suspect that because these states are less developed, the last mile service critical to online business is not so well developed. So there is greater reliance on the brick-and-mortar outlets. This is Harrisons forte and you could say that slow infrastructure development is its moat.
Bursa FM Global Logistics suffered in 2023 due to plummeting freight rates. But there seem to be a rate recovery in 2024. With its established market position, diversified operations, and strong financial base, the company should be able to capitalize on this and turnaround FMGL’s current valuation metrics suggest that the stock is undervalued from a cigar-butt investment perspective. https://www.i4value.asia/2024/09/is-fm-global-investment-opportunity.html#more
