Tuesday, 13 September 2016

Stock Review – CCK(7035)


image source from Big Chart Marketplace

image source from Big Chart Marketplace
Bursa Malaysia - 7035
Bloomberg - CCK:MK
Yahoo - 7035 .kl

Webpage - http://www.cck.com.my/

Key Value Investor Criteria: -

Description
Value
Criteria
Point
Price to Tangible Book Ratio
0.78*
< 1
5/5
Return on Asset
3.06*
> 0
4/5
Return on Common Equity
7.32*
> 0
5/5
Quick Ratio
0.58*
>1
0/5
Total Liability / Total Asset
34.82 %
<50%
3/5
Continue Dividend over Past 10 Years / Since Inception
Yes
Yes
1/1
Historical Dividend Yield
4.85 %
>3%
1/2
Cash From Operation
Positive > 5 years
Positive
5/5
P/E
12.22
10
0/2
Total Point


24/35
Note:
 *            Data obtain from Bursa Marketplace on 12/9/2016

Company Profile

CCK had three major business segments as follows:
1)   Poultry (28.48% of 2015 revenue)
2)   Retail (54.56% of 2015 revenue)
3)   Corporate (10.60% of 2015 revenue)
4)   Prawn (5.26% of 2015 revenue)

1) Poultry

CCK poultry division is capable to process 4000 birds per hours. CCK poultry is the only poultry abattoir in Sarawak with a HACCP certificated which enable them to have competitive advantage in the domestic and international market.
These division is mainly focus on chicken meat and eggs. Besides that CCK also have beef and lamb product.
PROS:
  • CCK poultry abattoir is Hazard Analysis Critical Control Point (HACCP) certified which allow them to have advantage in the domestic and international market.
CONS:
  • CCK is located in Sarawak which give them an disadvantage in peninsular market.

2) Retail

This division contributed the largest revenue for the financial year 2015 (56.56%). This division focus of trading cold storage product such as CCK fishball, CCK mix vegetable, CCK Nugget, CCK crab meat, CCK golden fish cake and CCK chicken satay. CCK consists of 40 wholesale and retail stores in Sabah, Sarawak and Peninsular Malaysia.

3) Corporate

CCK did not state clearly what is the main business for these segment in the annual report only state it is provisional for management services. It might be the management service provided to the associate company and joint ventures; CCK-BME Sdn Bhd, Mukah Seafoods Industries Sdn Bhd and PT. Central Coldstorage Khatulistiwa (Indonesia).

CONS:
  • Annual report did not state clearly on the business nature of these segment.


4) Prawn Segment

CCK also consist division for produce and rearing of prawns and other seafood product. CCK has 45 ponds in operation to breed prawns. Most of CCK prawn will be export globally such as Australia, Hong Kong, Japan, Dubai, Vietnam and Indonesia.

PROS:
  • Weakening of Ringgit Malaysia might increase the foreign exchange gain.
CONS:
  • CCK is located in Sarawak which give them an disadvantage in peninsular market.


Financial Statement

From the annual report 2015, CCK Property, Plant and Equipment had increase from RM 129,905,181 (2014) to RM 199,224,168 (2015) but the increase is due to revaluation. CCK had done revaluation to their freehold land and leasehold land of RM 8,975,537 and RM 54,898,984 respectively. Besides that, RM 42,000,000 of the RM 59,375,858 current ban borrowing is revolving credit which mean CCK only had to pay the interest of the revolving credit when it is utilised.

The Operating cash flow had increase from RM 12,339,863 (2014) to RM 23,327,504 (2015). Other than that, the earning per share for the company had increase from 5.33 sen per share (2014) to 8.70 sen per share (2015).

PROS:
  • RM 42,000,000 of the RM 98,916,024 (42.46%) is revolving credit
  • Operating cash flow had increase by 89.04%
  •  EPS has increase by 63.23%

CONS:
  • In 2015 CCK reported a huge revaluation gain these is just a paper gain that lands might not value that much.

Director and Shareholder

CCK is controlled by its founder Datuk Tiong Su Kouk and his family. Datuk is assists by Mr Chong Shaw Fui which has 44 years of experience in the field of poultry business who oversee the poultry division. Besides that, Datuk Tiong Su Kouk is also assists by his two sons. In one of The Star interview last year, Datuk said that he will make sure his business to the best performer between his three sons, daughter and son in law.

PROS:
  • Datuk Tiong Su Kouk, the founder of CCK is still on the board of directors.
  • Poultry division is oversee by Mr Chong Shaw Fui who had 44 years in poultry business
  • Datuk Tiong make sure his business is pass down to the best.

Bonus Issue & Share Buy Back

On 1st July 2016 CCK share had increase to 315,359,400 shares due to the 1:1 bonus issues. On that day itself the price of CCK went down to RM 0.46 and bounced back and closed at RM 0.52. When a company issue a bonus issue the company share is diluted and the asset per share of the company is reduced hence theoretically the price per share will be reduced as well. However CCK share price is able to maintain close to its price before bonus issue. After further study, CCK share price is maintain mainly because of the share buy back. These means that the management is using the company to buy the diluted shares which is not a good sign unless the company is really undervalue.

CONS:
  • Bonus issue but the share price maintained which mean it is more expensive to buy the stock compared to before.
  • Share buy back after the share is diluted.

Conclusion

After the review on CCK, I will recommend SELL to CCK. This is because of the revaluation and the share buy back after the bonus issue which had diluted the share.

Summary of Stock Reviews

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