KAREX Preliminary Study – 26 Sep 2017

Analysis file – https://lcchong.files.wordpress.com/2017/09/karex-fy17-q4.xlsx

In short, despite Karex prices dropped from 2.60 to 1.48 (taking bonus shares into consideration), in my opinion, Karex is still overvalued. DCF is not really suitable for KAREX.

  1. EBITDA Multiple – Referring to the following EBITDA multiple, if compare to manufacturing companies in Malaysia and US, KAREX’s EBITDA multiple is very high. This is an indication of overvalue.
    1. My estimation – 32x
    2. WSJ’s estimation – 30x
  2. If you can’t comprehend EBITDA Multiple, then you check out KAREX’s P/E which is 53x. If we convert this to Earning Yield, 53x is equivalent to 1.9%.

I have been toying some high growth rates, but I just couldn’t “make Karex undervalued”. Therefore, I will pass KAREX for the time being, but I will keep it in my watch list.

I want to thank my relative who shares EquitiesTracker’s study on Karex with me. This saves my time a lot.

If you ever open my analysis file, you will see quick and dirty assumptions for many items, such as:

  1. Segregation of debts for FY2017
  2. Interest rates for cash balances
  3. Interest rates for debts
  4. And others….

Anyway, all of these quick and dirty assumptions won’t impact the valuation a lot (thus won’t change my view) unless their 2017 Annual Report releases something extremely off from my assumptions.

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BURSA Updates – 26 Aug 2017

BURSA Analysis File – FY17 Q2http://wp.me/a17Hxk-2IN

In the foreseeable future, I think BURSA won’t have significant catalysts to boost up its growth. This year may have higher market activities due to the coming general election.

Having said that, BURSA will still be able to achieve steady performance. Also, BURSA dividend payout is more than 90%. At 10.12, valuation of BURSA is not really attractive where I believe its fair value is around 11.20 (±0.50). The uncertainty risk of buying at the current level is more towards medium.

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 Updates – 21 Aug 2017

PADINI Analysis File – http://wp.me/a17Hxk-2IK

I have updated analysis file of PADINI based on FY17 Q3 results.

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

At 4.23, in my opinion, PADINI almost fully valued where its fair value around 4.45. I will continue to hold and won’t accumulate PADINI for the time being.

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DIGI Updates – 24 Jul 2017

DIGI Analysis File – http://wp.me/a17Hxk-2IA

As a follow up to DIGI Updates – 21 Apr 2017, based on Q1 and Q2 FY17 results, I have updated financial modelling for DIGI by making couple of major adjustments, such as:

  1. Higher depreciation
  2. Higher capex
  3. Lower revenue projection 😦

After the adjustments, fair value of DIGI is around 4.6 which is overvalued (4.8 as of 24 Jul 2017). As of now, I won’t consider to accumulate DIGI, but to hold it for extremely high dividend yield as my average cost for DIGI is almost free.

VITROX Updates – 23 Jul 2017

VITROX Analysis File – http://wp.me/a17Hxk-2Iw

I sold off my VITROX shares in May 2015 at around 3.6-3.7 as I didn’t expect 46% revenue growth in FY16. As of 14 Jul 2017, VITROX share price was at 7.78 (before issue bonus 1:1). Hindsight is always 20/20, so I won’t regret my action.

Moving forward, I still bet on good growth drivers in VITROX business as Global Sales Report 2017 by World Semiconductor Trade Statistics shows positive outlook in the Semiconductor industry. The uptrend market outlook in the semiconductor and electronics assembly manufacturing sectors in the next 2-3 years coupled with ViTrox’s strong line-up of innovative, advanced and cost effective machine vision inspection products, and dedicated sales channel partners worldwide, ViTrox is well positioned to capture bigger market shares in both sectors in the next few years.

To be conservative, I don’t project 30%-50% revenue growth in VITROX business, but approx. +17% and +6% growth rate for FY17 and FY18 respectively. With this assumption, fair value of VITROX range from 7.1 to 8.1 (after 1:1 bonus issue, around 3.3 to 4.05). In my opinion, as of 21 Jul 2017, at RM4.00, I believe investors has already factored in its growth drivers. Thus, VITROX is fully valued.

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KMLOONG Updates – 11 Jul 2017

KMLOONG Analysis File – http://wp.me/a17Hxk-2He

In my opinion, KMLOONG is overvalued where its fair value range from 3.2 to 3.4.

At 3.9 (11 Jul 2017),

  1. if based on fair value projection for FY17, investors assume CPO production of KMLOONG is 289,634MT and average selling price of CPO is 2,782-2,882. However, in FY17, the actual CPO production is 250,197MT and average selling price of CPO is 2,682. This is a strong signal of overvalue.
    KMLOONG Sensitivity 2
  2. if based on fair value projection for FY19, investors assume CPO production of KMLOONG is 355,448MT which is unrealistic for the size of plantable area owned by KMLOONG. This is a strong signal of overvalue.

KMLOONG Sensitivity

As of now, I won’t consider to accumulate KMLOONG, and offload KMLOONG gradually. CPO industry is cyclical, so no point to hold for long term.

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CARLSBG Updates – 25 Apr 2017

CARLSBG analysis file – https://doc.co/vYKN41

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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