Sunday, 31 July 2016

Stock Review – ATRIUM(5130)


image source from Big Chart Marketplace

image source from Big Chart Marketplace
Bursa Malaysia - 5130
Bloomberg - ATRM:MK
Yahoo - 5130 .kl

Webpage - http://www.atriumreit.com.my/

Key Value Investor Criteria: -

Description
Value
Criteria
Point
Price to Tangible Book Ratio
0.76*
< 1
4/5
Return on Asset
2.54*
> 0
4/5
Return on Common Equity
9.03*
> 0
5/5
Quick Ratio
0.04*
>1
0/5
Long term Debt / Total Capital
8.59*
<50%
5/5
Continue Dividend over Past 10 Years / Since Inception
Yes
Yes
1/1
Historical Dividend Yield
7.85%
>3%
2/2
Cash From Operation
Positive > 5 years
Positive
5/5
P/E
8.8
10
1/2
Total Point


27/35
Note:
 *            Data obtain from Bursa Marketplace on 28/7/2016

Company Profile

ATRIUM is a REIT focus on warehouses. Table below summarised the warehouse own by ATRIUM

Warehouse
Occupancy
Tenant
Tenant Expired
Atrium Shah Alam 1
100 %
Marelli Asia Pacific Sdn Bhd
31-5-2021
Atrium Shah Alam 2
71 %(1)
SSGSCL(1)
31-3-2019
Atrium Puchong
73 %
Tiong Nam Logistic Sdn Bhd
31-6-2016
Atrium USJ
100 %
i) SAF- HOLLAND
ii) Century
iii) 20 Cube
i) 31-8-2017
ii) 31-12-2017
iii) 31-7-2017

NOTES:
1.      According to announcement make by ATRIUM on 31 March 2016, SSGSCL had rented Atrium Shah Alam 2 phase 1 commence on 1st April 2016 and phase 2 will commence on 1st January 2017 for 3 years

ATRIUM had long term 6 years tenancy agreement with Marelli Asia Pacific Sdn Bhd until 31st May 2021 with will give Atrium a stable income. Besides that ATRIUM manage to find a tenant for ATRIUM Shah Alam 2 until 31st March 2019. ATRIUM Shah Alam 2 will be fully occupied on 1st January 2017.

However Atrium Puchong tenant is still a temporary, the management required to find a long term tenant for Atrium Puchong.

PROS:
è Long term tenancy agreement for Atrium Shah Alam 1 will give ATRIUM a stable income
è Managed to find new tenant for Atrium Shah Alam 2 until 31st March 2019.

CONS:
è  No long term tenant for ATRIUM Puchong.

Financial Statement

After obtaining tenant for ATRIUM Shah Alam 2, the revenue of ATRIUM will increase and hence the distribution income is expecting to increase more than 1.30 sen which distributed last quarter. Besides that, the new tenant increase the long term liability of RM 2,380,673 to RM 5,702,224 as a deposit. These deposits indirectly increase the cash of ATRIUM as these deposit will not give back to the tenant until the end of tenancy agreement, hence ATRIUM management can invest the extra cash to bank deposit or other cash generating asset to increase the income of ATRIUM.

Compared to 2014, the cash generated from operation for 2015 had decrease from RM 13,693,208 to RM 6,723,070 these is mainly because of disposal of ATRIUM Rawang and vacant of ATRIUM Shah Alam 2 in 2015. However the management manage to get tenant for ATRIUM Shah Alam 2 from Q2 of 2016 will increase the cash generated from operation for the next quarter.

With bank negara cut the Overnight Policy Rate by 0.25% to 3.0% will reduced the financial cost of ATRIUM when renew their short term revolving credit (STRC) of RM 39,600,000 which renew yearly. Besides that, ATRIUM had a term loan which required to paid in one lump sum cost of RM 20,000,000 in October 2018.

PROS:
è New tenant for Atrium Shah Alam 2 might increase the distribution to shareholder each quarter.
è Extra RM 2,380,673 deposit to invest in safe asset for extra income.
è Reduction of OPR by 0.25% will reduce the financial cost of ATRIUM in the future.

CONS:
è Cash generated for 2015 had reduce by 50.09% compared to 2014.
è Term loan of RM 20,000,000 which required to be paid on October 2018.

Conclusion

After the review on ATRIUM, ATRIUM had a dividend yield of more than 7% which is a very good dividend yield. In my opinion. with the volatility and the uncertainty of the stock market today investor will start looking into a stable asset with dividend yield. Hence I will recommend BUY to ATRIUM.

Summary of Stock Reviews

Saturday, 25 June 2016

Stock Review – WTK(4243) - 2


image source from Big Chart Marketplace

image source from Big Chart Marketplace

Bursa Malaysia - 4243
Bloomberg - WTKH:MK
Yahoo - 4243 .kl
Webpage - http://www.wtkholdings.com/


Recommendation: -
Date
Status
Price
Current Price (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
14/2/16
BUY
1.37
1.01
0.00
-26.27%

On 14th February 2016, I had first written about KIMHIN and recommended a buy at RM 1.37. Now WTK is down by 26.27%, these does not mean that WTK is not a good company to buy. For those interest to read the first review on 14th February 2016 you can find it here.

Annual Report 2016

From 2016 WTK annual report, WTK operates in five major segments as follows:
1) Timber – 79.16 % of revenue
2) Manufacture – 8.71% of revenue
3) Trading – 6.57% of revenue
4) Oil & Gas – 3.52% of revenue
5) Plantation – 1.52% of revenue

The adjusted earning per share on 2015 after the adjustment for non-recurring income (gain on disposal, foreign currency gain and etc) is 9.72 sen compared to 9.13 sen in 2014 (unadjusted). WTK cash and bank balances for 2015 has increase from RM 272,588,000 to RM 352,626,000. Besides that WTK had enough cash to cover all the loan and borrowing with the amount of RM 310,682,000 as reported in annual report 2015.

However WTK has RM 71,214,000 investment in an associate of which RM 53,465,000. The associate company is Alanya Marine Ventures Sdn Bhd which chartering and managing oil and gas exploration support vessels. Base on annual report 2015 the oil and gas sector making revenue of RM 25,545,000 which contributed to 3.52% of the company 2015 revenue. If the associated company can maintain its revenue WTK can get back the premium they paid for the company in about 2 years.

PROS:
è The adjusted EPS for 2015 is higher than the unadjusted EPS for 2014, 6.46% increase.
è Cash and bank balance for 2015 has increase by 29.36%.
è WTK had enough cash to settle all the loans and borrowing.

CONS:
è WTK has RM 53,465,000 of Goodwill from the purchase of 49% of the oil and gas associate.

Quarterly Report for First Quarter 2016

WTK quarterly report for period end 31 March 2016 show that its cash and bank balance increase to RM 423,949,000 from RM 352,626,000 as report in annual report 2015. However its loan and borrowing had increase to RM 334,349,000 from RM 310,682,000. The increase of cash is more than increase of loan and borrowing. The cash flow from operation is RM 55,602,000 which is about 61.79% of the cash flow from operation for the entire year 2015.

PROS:
è WTK cash increase by 20.23% in just three months.
è The cash flow from operation for the three months in 2016 is about 61.79% of the cash flow from operation for the entire year 2015.

Family Tussle

The news from the Edge Malaysia regarding multiple lawsuits between the family member of the late founder of WTK. According to the news report there are 34 ongoing cases. The lawsuits  is about the share in the family private investment arm W T K Realty Sdn Bhd which owned 13.80% of WTK (base on 2015 annual report).

CONS:
è 34 ongoing lawsuits between the board of director.

Conclusion

After review the annual report 2015, I still believe that WTK is a good company to invest in. Hence I would maintained my recommendation as BUY to WTK.


As a value investor, I definitely had add some risk premium to WTK because of the multiple lawsuits. After adding the risk premium, WTK still shows a good company to buy. Even with the lawsuits which had go on for years, the WTK still able to grow hence I personally still has trust on the management of WTK and believe the Plantation sector will contribute ore profit in the near future when the oil palm trees are mature.

Summary of Stock Reviews