CARLSBG Updates – 25 Apr 2017

CARLSBG analysis file –

I don’t expect significant growth in CARLSBG (and HEIM) business in foreseeable future. In my opinion, at 15, valuation of CARLSBG is fully valued where I believe its fair value range from 15.3 to 15.6. Its dividend yield is around 4.5%.

As of now, I won’t consider to accumulate CARLSBG, but to hold it for extremely high dividend yield as my average cost for CARLSBG is almost free.

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HEIM Updates – 7 Apr 2017

HEIM Analysis File – FY16 Q6 –

In the foreseeable future, I think HEIM won’t have significant catalysts to boost up its growth. Having said that, HEIM will still be able to achieve steady performance even if alcoholic beverage industry is a highly regulated industry, and also faces contrabands issues. At 17.98, valuation of HEIM is not bad where I believe its fair value range from 17.9 to 20. Besides, if you buy HEIM now, dividend yield is less than 4% (excluding special dividends).

As of now, I won’t consider to accumulate HEIM, but to hold it for >6.5% dividend yield based on my average costs.

There is one slight issue in my analysis file, but the issue doesn’t impact valuation very much. In its Cash Flow Statement, you can easily spot one item called “Amortisation of prepaid contractual promotion expenses”. In the footnote (AR 2016, page 129, Note 7.2), HEIM stated:

Included in prepayments of the Group are prepaid contractual promotion expenses for promotional activities of RM43,531,000 (30.6.2015: RM49,015,000) of which RM20,125,000 (30.6.2015: RM26,218,000) are to be amortised over a period of more than 12 months. The prepaid contractual promotion expenses are made to the Group’s distribution channels to carry out promotional activities specified in the contract. The amount is amortised to profit or loss based on the volume purchased by outlets from the distributors or the time period as stipulated in the contract.

Unfortunately, HEIM didn’t disclose how they allocate “prepaid contractual promotion expenses for promotional activities“, and how they amortised the expenses based on the volume purchased. Thus, there is no way for me to make projection. Although the figures were quite large, it didn’t impact valuation significantly.

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BURSA Updates – 29 Mar 2017

BURSA Analysis File – FY16 Q4 –

In the foreseeable future, I think BURSA won’t have significant catalysts to boost up its growth. Having said that, BURSA will still be able to achieve steady performance. Also, BURSA dividend payout is more than 90%. At 9.88, valuation BURSA is not compelling where I believe its fair value range from 9.4 to 10.3. Besides, if you buy BURSA now, dividend yield is less than 4%.

I will continue to accumulate BURSA if there is any significant correction.

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PADINI – Fundamental Analysis (16 Mar 2016)

I have updated analysis file of PADINI based on FY17Q2 results.

In this release, I have made some corrections and fine tuning to the modelling.

At 2.9, in my opinion, PADINI is still slightly undervalued where its fair value range from 3.1 to 3.5. I will continue to hold and accumulate PADINI whenever possible.

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DLADY Analysis File – FY16 Q4

DLADY Analysis File – FY16 Q4 –

In my opinion, in long term, DLADY is still slightly undervalued where I believe its fair value range from RM60-65. I will continue to accumulate DLADY for my kids.

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WELLCAL – FY16 Q4 (2 Feb 2017)

Before CNY, I have accumulated some units of WELLCAL. Here is my analysis file:

I believe that with the recovery of US economy and rise of construction projects, demand for industrial rubber hoses will continue to see a gradual recovery. Meanwhile, the additional capacity from Plant 3 supports WELLCAL in further strengthening its position in the market with a wider range of industrial hose.

In terms of valuation, at the level RM2.0, I think WELLCAL valuation is quite attractive, even if in the bad scenario.





HAIO – FY17 Q2 Updates (22 Jan 2017)

I would like to provide some updates about my action plan on HAIO. Since Mar 2016, HAIO has been very astonishing, increased from 2.4 to 4.28, close to 78% increase.


This is beyond my expectation. Now, I have a happy problem to solve. That is I have to decide whether I should continue to accumulate the stock, sell the stock or hold the stock.

To make decision, I have to look into three aspects. Firstly, the growth drivers that support the price performance. Secondly, challenges that will probably suppress good story of HAIO. Lastly, the valuation. Is it fully valued, overvalued or undervalued?

Growth Drivers

  1. Based on the recent quarterly results, for MLM division, revenue and pre-tax profit increased by about 70% and more than double to RM77.5 million and RM 16 million respectively as compared to FY16 Q2. Additional sales from new products and higher recurring sales of consumer products from member customers and the increase in monthly recruited new members had helped to boost revenue and profit for the division. The new members recruited had increased by more than double to approximately 40,000 which had contributed to a higher sales to the MLM division.
  2. 6 Sep 2016 – The group aims to expand to the Middle East, China, India, Sri Lanka and Europe via partnerships to explore the market for products for women, such as fashion, accessories and cosmetics.
  3. A short term (possible) boost – As Chinese New Year festive season is approaching, the Retail division will carry out an extensive CNY promotion campaign and is expecting to bring in more revenue in the next quarter. As reported in recent quarterly results, Currently, the Retail division has started recruiting more Chinese physicians for its outlets to enhance its image as a healthcare service provider and to attract more crowd. Whereas for the MLM division, it will continue to intensify its new members recruitment program and to roll out more new products in the second half of the year.


  1. Performance of the wholesale and retail division still weak.
    1. Wholesale division – Revenue decreased by about 30% to RM 11.7 million as compared to FY16 Q2 of RM 16.8 million. The decrease in revenue was mainly attributable to lower sales generated from duty-free goods and Chinese medicated tonic as most of the medical halls had reduced their stockholding level since the increase in selling price early of this financial year.
    2. Retail Division – Despite continuous weak consumer sentiment in the domestic market, revenue decreased marginally by about 2.6% to RM 9.3 million as compared FY16 Q2. The pre-tax profit declined by approximately 31% mainly due to lower A&P income subsidy from suppliers and a drop in sales of the higher margin house-brand products.
  2. The Wholesale division will continue to be affected by the weakening of RM currency as about 40% of its purchases are imported. The division sees that its profit margin will be adversely affected in the near future and has looked into more trade settlement using RMB currency instead of USD with the traders in China.
  3. Weak purchasing power of consumers.

Malaysia Consumer Confidence Q3 2016.PNG


Refer to my updated financial modelling, I opined that HAIO is currently (but not extreme) overvalued at 4.28 based on the following blended valuation (DCF, earnings and dividends)


What is market expectation on HAIO at 4.28? My guess: High dividend payout and resilient company – HAIO committed to give 100% payout, but yet to become a policy. I think that due to uncertainties, investors are looking for conservative and dividend stocks. Some investors are probably willing to pay premium for HAIO. If just looking at valuation from dividend perspective,

  1. Baseline – 3.9-4.1
  2. Good – 4.0-4.5

Action Plan

Refer to the above table, my holding price is in the range of 2.1 and 2.3 (the ugly scenario). Besides, my dividend yield is around 9%.

Protected by high dividend yield and good scenario (3.9 – 4.2), I will continue to hold and monitor HAIO. Another qualitative factor is ever since Mr. Tan Kai Hee (or the old senior management team) let go responsibilities in managing company to the younger management team, I feel that the new management team demonstrated higher energy and more active leadership. I am OK to give HAIO the “benefit of doubt” where I underestimate their future earnings and cash flow.