OFI earnings flat YoY in 2Q15 at RM4.08m

1.  Oriental Food Industries Holdings Berhad (OFI) 2Q15 EPS declined 1% to 6.81 sen as net profit slipped 1% YoY to RM4.08m. For 1H15, EPS is down 10% to 12.20 sen. Key driver behind the slight earnings decline for 2Q15 is the decline in revenue by 3% to RM54.27m due to lower demand from customers in the snack food and confectioneries (SFAC) segment. Recall that SFAC division contributed almost 100% of PBT to OFIH earnings in FY14.

2.    2.0 sen dividend declared. Ex date is 12 Dec 2014. Coupled with another 2.0 sen announced in 1Q15, total dividend declared so far is 4.0 sen. Recall that in FY14, OFIH delivered 9.5 sen dividend representing 3.2% dividend yield based on its latest share price of RM2.97 on 28-Nov-2014.

3.    Net cash position remain resilient. OFI owns RM25.9m cash, Long Term Debt RM3.0m and Short Term Debt of RM1.6m. This means net cash of RM21.3m or RM0.355 per share. As the share price is RM2.97, this means 12% of the share price is in cash.

4.  FY15 earnings growth adjusted down to flat growth (from 10% growth previously). Due to lower than expected earnings growth in 1H15 which is down 10% YoY, FY15 EPS growth is now adjusted to 0% growth. Although demand has been lower than expected as impact of high living cost has weaken consumer purchasing power, 2H15 earnings growth should recover ahead of pre-GST demand

4.  New Fair Value of RM2.92. Still on the same 11x PE on the lower EPS of 26.55 sen (from 29.21 sen), new Fair Value is only RM2.92 (5 sen lower than current Market Price of RM2.97). As a result, this stock is no longer on the BUY list. On the positive side, this stock provide regular income as it deliver dividend 3 times per year. However, low consumer demand means limited earnings growth in the next 1 year.

SYCAL 3Q14 earnings jump 69% to RM6.1m

1.    Sycal Ventures Berhad (SYCAL) 3Q14 EPS jumped 69% to 1.89 sen as net profit increased 69% YoY to RM6.1m. For 9M14, EPS surged 50% to 4.56 sen. Key driver behind the good earnings growth for 9M14 is the Property division which saw its PBT +102% YoY to RM8.3m. Property division is likely to have benefited from better property prices in Kuala Lumpur and Perak. Construction division PBT also jumped 44% to RM7.0m due to increased billing of contracts at Taiping and Ipoh.

2.    Rare construction company with net cash position. As of 3Q14, SYCAL net cash is RM4.6m. This is based on its total cash of RM10.7m, short term loan RM1.4m, long term debt RM4.7m and equity of RM202.3m. Comparitively, many other construction company has high net gearing exceeding 10%.

3.    Trading at only 40.5 sen or 35% below Book Value of 64.0 sen. This could mean the stock is extremely undervalued as its earnings visibility is good at 3 years, strong balance sheet and high earnings growth in 9M14 at 50% YoY.

4.    Theoretical Target Price of 53 sen based on 9x FY15 Fwd. PE. The 9x PE is in line with mid cap construction valuation. FY15E EPS should reach 5.94 sen assuming 8% earnings growth to FY14E EPS of 5.5 sen.

COASTAL 3Q14 earnings increased 25% YoY

1. 3Q14 EPS jumped 25% to 10.22 sen as net profit increased 37% YoY to RM54.3m. The higher net profit is caused by better PBT margin at 24% against 3Q13’s 20%. Again, this is caused by better sales mix of vessel delivered in 3Q14. As for 9M14, EPS gained 38% to 29.35 sen.
2. Stay positive on Oil and Gas outlook. Despite the short term weakness in global crude oil prices, the Company remained positive on oil prices in the long term due to limited supply and increasing demand. Hence, this should lead to continuous order for its vessel in the long run.
3. Book Value enhanced to RM2.51 (Sep-14) from RM2.09 (Dec-13). Note that Company that consistently increased its Book Value and paying dividend is the one that stay committed to increase shareholders value.
4. Theoritical Fair Value of RM4.50 based on 10x FY15 Fwd. PE.

The 10x PE is in line with mid cap Oil and Gas valuation currently. FY15E EPS should reach 45.0 sen assuming 10% earnings growth in FY15E and 30% in FY14E EPS. Such growth estimate is conservative as its 9M14 earnings growth is already at 38%. Based on latest share price of RM3.46 as of 21-Nov-2014, this means 30% upside

SPRITZER - Beneficiary of low crude oil prices?

SPRITZER (7103) – Beneficiary of low crude oil prices

Background:

Spritzer Berhad or SPRITZR is specialised mainly in manufacturing and distribution of natural mineral water. Other products (on much smaller contribution) include sparkling natural mineral water, distilled drinking water, carbonated fruit flavoured drink, non-carbonated fruit flavoured drink, functional drink, toothbrushes, preforms and packaging bottles. The Company derives its 330-acre site of natural mineral water sources here at Taiping, Perak. Operationally, the Company has two divisions namely Manufacturing (production of mineral water and other products mentioned above) and Trading (sale of bottled water and other consumer products). In FY14 (ending May), Manufacturing division contributed RM31.7m or 99% of the Group’s PBT. The remaining 1% or RM0.8m PBT is from Trading.

Beneficiary of low crude oil prices

Sources say that more than 75% of Spritzer cost is related to its bottling process in which the raw material is Polyethylene Terephthalate (“PET Resin”). PET Resin is a by product of petroleum processing and hence the price is correlated to petroleum. As Brent crude oil has declined significantly in October from USD95/barrel to USD85/barrel, SPRITZR is expected to benefit from lower cost of PET Resin. This should bode well for its FY15 and FY16 earnings going forward.

 

1Q15 earnings jumped 27% YoY to RM6.67m

SPRITZR 1Q15 earnings surged 27% YoY to RM6.67m due to higher sales volume, better average selling price as well as the reduction in packaging material cost. Accordingly, the EPS increased 33% to 4.91 sen per share. It seems likely that SPRITZR is likely to register another good year of earnings growth in FY15 and it should be reasonable to assume 15% earnings growth in EPS to 18.71 sen (against 16.27 sen achieved in FY14).

 

Still cum dividend of 4.0 sen

On 31-Oct-2014, the Company has announced its dividend of 4.0 sen in which its ex-date is on 2-Dec-2014.

Featured in The Edge Weekly recently

In the issue 10 Nov to 16 Nov 2014, The Edge Weekly reported an article with the title “Spritzer maintains earnings momentum” on Page 22. This should be positive to SPRITZR as more investors get to know SPRITZR.

 

Theoretical Target Price of RM2.43

Based on Forward PE of 13x to FY15 estimated EPS of 18.71 sen, SPRITZR theoretical fair value is RM2.43. Comparing this to latest share price of RM2.06, this represents 18% upside.