Oriental Food Holdings - Poised To Benefit From Lower Commodity Prices

Background:

Oriental Food Industries Holdings Berhad (OFI) is mainly involved in manufacturing and marketing of snack food and confectioneries (MMSC). Recall that MSCC division contributed RM225m or 99.5% of the Company’s revenue in FY2014 (end March). Also, MMSC division generated RM20m PBT or almost 100% of the Group’s PBT. Another division is property development which contribution to earnings is much smaller.

Some of the Company’s brands include Fudo (cakes), Super Ring (corn based), Jacker (crackers), Rota (potato chips) and Jacker (chocolate wafer).

FY14 earnings jumped 25% to RM15.9m

Key driver behind the earnings jump is the MMSC division which has registered 32% jump in PBT to RM20.2m. The MMSC division sales have increased 9% to RM225m while its PBT margin has improved to 8.9% (from 7.3%). PBT margin increase should be caused by lower material cost such as corn, palm oil and sugar prices.

Strong net cash of RM20.9m or 35 sen per share.

OFI has RM27.6m cash, Long Term Debt RM3.9m and Short Term Debt of RM2.8m. This means net cash of RM20.9m or RM0.35 per share. As the share price is RM3.00, this means 12% of the share price is in cash.

Looking ahead to better FY15 (Year End March)

Conservatively, FY15 earnings should grow 10% to RM17.5m. Key earnings driver should be the lower raw material prices. Globally, corn, palm oil and sugar prices have been lower than last year due to higher supply.

Still cum 3.5 sen dividend with ex-date 29-Aug

This makes its whole year dividend of 9.5 sen or dividend yield of 3.2% historically. For FY15, the Company should be able to deliver better dividend of 10 sen expected due to better earnings prospect.

OFI theoretically worth RM3.21

Based on 11x Fwd. PE to its food business plus the RM20.9m net cash, the Company is worth RM3.21. The 11x Fwd. PE is same to Small Cap Fwd PE. This means potential upside of 7%. Added with the dividend of 10 sen expected or 3.3%, total return is 10.3%.

Items	Value (RM m)
Food business valued at 11x Fwd. PE	192.5
No of shares	60
Value Per Share (RM)	3.21

ORNA 2Q14 Result +43% YoY

1. 1H14 EPS jumped 43% to 6.6 sen as revenue jumped 20% YoY to RM140.5m. The good revenue was due to higher sales volume resulting from strong orders from customers.
2. Book value increased to RM1.69 from RM1.63 on Dec-2013. The increase is mainly come from the better EPS of 6 sen. Current share price of RM1.23 is still 27% discount to the full book value of RM1.69.
3. Cash amount surge 50% to RM15.7m. This is on the back of Operating Cash Flow (RM7.8m), Cash Flow Investing (RM5.8m) and Cash Flow Financing (RM1.6m).
4. Theoretical Fair Value of RM1.40 based on 10x FY15 Fwd. PE. Assuming ORNA can deliver same performance for 2H14, its FY14 EPS should be 13.2 sen. For FY15, also assume a conservative earnings growth of 5% to arrive at EPS of 13.9 sen. Based on 10x Fwd PE (similar to Small Cap PE), this stock is easily worth RM1.40 or 14% upside from current price of RM1.23.

CBIP - Unique Palm Oil Mill Player

Background:

CBIP is mainly involved in palm oil mill construction (POMC), special purpose vehicle retrofitting (SPVR) and plantation. PATAMI contribution is POMC 85% and SPVR 15%. Plantation division is still making losses as it has yet to produce fruits. The Company made PATAMI of RM98m in FY2013.

Strong orderbook of RM656m

As of end-2013, CBIP’s POMC division has orderbook of RM440m while its SPVR division at RM216m. The very strong orderbook means the Group no need to worry about sales until end of FY15. For plantation division, 4400 ha is planted as of end-2013 and total landbank is 65,000 ha.

1Q14 earnings jumped 25% to RM23.3m

Key driver behind the earnings jump is the POMC division which has registered 29% jump in PBT to RM23.7m. The POMC division seems to benefit from better sales and profit margin as its key product of Modipalm mills gain more traction in the market..

Strong net cash of RM141.0m or 52 sen per share.

CBIP has RM145m cash and only RM4m debts. With 272m shares, 11% of the share price is in cash.

Looking ahead to better FY14 (Year End Dec)

Roughly, FY14 earnings should grow 6% to RM100m based on many analyst estimate. Again, higher orderbook from POMC is expected to be the key driver for earnings.

CBIP theoretically worth RM5.15 short term and .

Items	Value (RM m)
Current business valued at 12x	972
Plantation landbank (4400 planted)	66
Plantation landbank (60600 planted)	364
Total Value	1402
No of shares	272
Value Per Share (RM)	5.15

Short term potential return is good at 11%.

Items	Value (RM m)
Current business valued at 12x	972
Plantation landbank (50000 planted)	2000
Total Value	2972
No of shares	272
Value Per Share (RM)	10.93

Long term (5 years time); looking at value of close to RM11.00 or DOUBLE.

3 Insights from Singapore Top 10 Richest Person

Source: Forbes website; http://www.forbes.com/singapore-billionaires/#tab:overall

1.       Eduardo Saverin is the youngest billionaire who are still “Single” and his age is only 32

I am sure you are thinking what I am thinking now. But after dreaming for 5 minutes, it’s time to get back to work. Maybe his class and status is just too far away!

2.       Invest wisely in property is the long term goal to wealth.

Robert & Philip Ng (the richest in Singapore) made his fortune from property investment in Australia (Sydney + Perth). Maybe we have yet to be able to invest in Australia, but still the fact that the richest person is doing great in property makes one think that Generation Z should really starts to invest in property smartly.

3.       The fact that you are reading this blog is because you are not yet a billionaire (or even millionaire).

Sad but true, no further comment on this.

FIBON - The Silent Performer

Background:

FIBON is mainly involved in chemical, electrical and finance business. Its business base covers 28 countries in 6 continents across the globe. The Company is engaged in the formulation of advanced polymer matrix fiber composites, manufacturing and sales of electrical insulators, electrical enclosures and meter boards.

4Q14 earnings increased 13% to RM1.16m

FIBON recently announced its result on 31-July 2014. Although FY14 earnings declined 18% YoY to RM4.00m, one should not miss it that FIBON’s 4Q14 earnings actually up 13% YoY to RM1.16m. The increase in 4Q14 profit YoY is due to higher sales and lower admin expenses. Worth mentioning is that 4Q14 earnings is the 1^st earnings growth after 2 consecutive earnings decline.

Strong net cash of RM22.04m or 22.5 sen per share.

This is an increase of 10% from RM20.0m as of end FY13. Compared to its share price of 49 sen currently, 46% of the share price is in cash.

Cash flow control is good.

For FY14: Operating Cash Flow is RM3.5m, Capex RM0.4m, Financing Cash Flow RM1.2m. Effectively, the Company is doing the right thing by generating positive cash flow to shareholder.

Looking ahead to better FY15 (Year End May)

Recall that FIBON secured the factoring business in Aug 2013 and I think FY14 is the gestation period to get the business running efficiently.

FIBON theoretically worth 67.5 sen.

Items	Value (RM m)
Current business valued at 9x	44.1
Net Cash	22.0
Total Value	66.2
No of shares	98
Value Per Share (sen)	67.5

WOW, potential return is 38%.