KIANJOO – Fundamental Analysis (17 Sept 2014)

KIANJOO Analysis:-

Excel –

My View:-

– Fair value:
  – 5-Y DCF:
    – Base Scenario: 3.93 (Fair Value Uncertainty: LOW)
    – Good Scenario: 4.45 (Fair Value Uncertainty: LOW)
    – Bad Scenario: 3.46 (Fair Value Uncertainty: MEDIUM)
  – Absolute EY%:
    – Trailing:   
      – FY13 (EPS: 0.266) – Fair value 2.97 (Fair Value Uncertainty: HIGH)
      – R4Q (EPS: 0.232) – Fair value 2.59 (Fair Value Uncertainty: VERY HIGH)
    – Forward:   
      – FY14 (EPS: 0.287) – Fair value 3.2 (Fair Value Uncertainty: MEDIUM)
      – FY15 (EPS: 0.318) – Fair value 3.55 (Fair Value Uncertainty: MEDIUM)
    – EPS applied to reach the current stock price (3.01): 0.27   
– I think that KIANJOO is currently undervalued.
– Given the on-going uncertainties surrounding its corporate exercise, I continue to see its share price movement being lackluster.
– If the proposed transaction materializes, you will have a certain RM3.36 per share in your pocket (RM3.30 cash offer + 6.25sen dividend recently paid).
– If not, we will still see that value materializing, but over the longer term as it remains imperative parent-company Can-One squeeze out further operational improvements (and essentially stronger earnings, thereby increasing its intrinsic value) from KJC for greater dividend income.
– I think KJC’s growth prospects will continue to be valid as depicted by its consistent sales growth despite the steep contraction in earnings in 1HFY14 (-24.3% YoY). This was chiefly due to its continuous capacity expansion with the most recent in Indonesia. Although the contraction in operating margin was steep in 1HFY14, it is inconsistent with recent historical trend and as such, it may not sustainable on the back of economies of scale and its price escalation mechanism especially for the aluminium cans segment. On the other hand, KJC is good for healthy balance sheet and dividend yield.
– After studied story of KIANJOO and CANONE, I found that KIANJOO’s management provided very limited access and information flow. Delays in finalizing the privatization deal has also put further pressure on its share price, which closed at RM3.01 (17 Sep 2014), raising the possibility for the privatization to go through at RM3.30/share.
– Due to the uncertainties, I will revisit KIANJOO if the privatization does not take effect and if circumstances are warranted.

Latest Financial – Q2 2014 Financial Report (28 Aug 2014)

At the time of writing, I did not own shares of KIANJOO.


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