BONIA CORPORATION BHD [S] Value Evaluation

Originated from Singapore, Bonia is a luxurious apparel manufacturing company distributing exotic products like leather apparels. As the sole luxury apparel listed company in Malaysia, Bonia faces less local competition. Instead, competitors are mainly from abroad. As the company’s revenue is mainly generated from Malaysia and Singapore, it depends highly on the purchasing power of the locals as well as international tourists. In terms of location, Bonia does a pretty good job in location like Pavillion KL, luxury retail outlet and busy international airports like KLIA and Changi. These locations are able to attract a lot of consumers and in turn directly contribute to the company’s revenue. As for barriers of entry, manufacturing luxurious apparel requires a tremendous amount of capital as well as materials from overseas. Being able to cooperate with Italian designer, Studio Pelletteria Alessandra, it is an extremely rare opportunity which contributes to the company’s product line to cope up with latest fashion derived from European countries. Furthermore, Bosnia has long established its strong branding in Malaysia and Singapore since two decades ago which enjoy certain customer loyalty and good images from the public.

As Bonia’s main target market is the wealthy high class society, this includes large portion of revenue coming from international tourists. Tourism is a very fragile industry in case of global financial crises, terrorism or pandemic outbreak. Also, trend changes in a unimaginable state where outdated design might result in excessive inventories.

According to the cash flow since 2007, it faces a huge fall during 2008 and gradually climb back to the level before after six years which is 0.23 per share. We can see that it takes a long time for the company to climb up after certain crises. Although both ratios show that the company is managing their assets and equities efficiently, the fact of the company's vulnerability is undeniable where in times of good or bad, it needs to continuously invest in its subsidiary and associates which can be up to 50 million per annum. Overall, it fails to show the ability generate steady growing income in the future which doesn’t fulfill the criteria of value investing.

Company: BONIA CORPORATION BHD [S] Stock: BONIA Code: 9288

PADIBERAS NASIONAL BERHAD Value Evaluation

Bernas is the largest partner for paddy and rice manufacturing industry in Malaysia by involving themselves with activities from extraction of paddy to distribution to the consumers. In other words, Bernas is a big organization which helps the local farmers to sell their rice. Knowing that rice is essential to our daily consumption especially in South East Asia countries, Bernas is playing a big role to ensure the supply of rice is sufficient locally and internationally. As the sole largest partner in Malaysia, Bernas faces no competition within the market. Also, barriers of entry is high as Bernas network is huge enough that it actually controls the Malaysia rice supplies. Without these CE, the company will find it hard to survive. If capital is managed efficiently, future earnings are expected to strive as rice manufacturing industry is set to survive permanently on the ground of monopoly. 

As a partner, Bernas need to fork out a lot of capital in order to provide warehouse services as well as infrastructure to smoothen the distribution process of the rice to the consumers. However, the amount spend is gigantic which can be valued to 70 million of capital expenditure annually. In unfortunate event such as flood and drought, productivity will be deeply affected where facilities such as processing factory and warehouses will be left idle and thus wastage of capital.

Based on the ten years cash flow, it is merely staying above positive level. We can see that it fluctuated a lot throughout the years. Both ratios are also not up to satisfactory level where it fails to show the competency of the company in managing their assets and capital. Although the industry possesses a lot of potential, however, poor management of capital fails to maximize the value of the company.

Stock: BERNAS[S] Code: 6866

ASIA FILE CORPORATION BHD Value Evaluation

Asia File is a file manufacturer with its factory located in Penang, Malaysia. Manufacturing all kinds of file including plastic, paperboard and metal based, Asia File also covers other daily stationary needs. Battling in a competition fierce stationary manufacturer industry, Asia File stands out among others in terms of its distribution networks of 650 retailers and office suppliers such as Popular and MPH bookstores. Asia File has also find itself several advantages by possessing a strong branding for its product lines using the ABBA logo which is well known for its long lasting use and quality. As there are not much research works needed for office daily needs, the company barely need to utilize any excessive resource on developing cutting edge products. Furthermore, the use of file is still widely adapted despite electronic evolution. There are tonnes of paper works to be organized and filed each day. Therefore, we can still expect that the future earnings of Asia File will climb steadily. 

As the barriers of entry for stationary industry is low enough, almost anyone can set up a company and manufacture all kind of stationaries. There are lots of competition coming from overseas especially China where the products are very cheap. At the same time, as the major market of Asia File is aimed towards Europe, over 60% of revenue highly depends on the Europe continent. As economic volatility is rather high at some of the Europe countries, it is a high risk to derive major profit from such places. However, the company will still benefit from the recovery of the global economy for now.

Cash flow generated by operating activities is facing huge fluctuations throughout the ten years. Moreover, the cash flow is at the same level as ten years before despite of inflationary pressure. On the other hand, the company’s cash management is good based on the cash flow 2008 where it finances the purchase of its subsidiary valued 61 million by issuing treasury shares and loan worth 40 million. It is shown that the company cash rich position is retained although there are acquisitions along the company expansion. Furthermore, Asia File is also performing well in terms of profitability as net profit to sales is up to 12% although ROE and ROA is not showing satisfactory standard. Bluechip or not? Evaluate the facts and make up your decision!

Stock: ASIAFLE Code: 7129 Company: ASIA FILE CORPORATION BHD

ASIA BRANDS BERHAD Evaluation

Asiabrand (formerly known as Hing Yap) is a huge brand conglomerate with 30 over apparel brands under its flagship. Covering the apparel of baby, casual’s wear and internal wears, Asiabrand is widening its target market and expand its distribution network via consignment, standalone retail and department stores. It hassuccessfully spread its wings across the nation be it Pennisular and East Malaysia. Despite developing a single brand under its flagship, 30 over brands make Asiabrand an industry leader in the garment manufacturer field. They are able to leverage retail space, transportation cost and spread the cost among all the brands while their competitors with sole brand need to bear higher retail space cost. Although not much capital expenditure is needed for R&D purpose for apparels manufacturing purpose, the company needs to fork out a large amount to purchase developed apparel brand from other company. In 2012 alone, the acquisition of Audrey, a famous inner wear manufacturer cost the firm over RM160 million which is substantial. 

As the manufacturing of apparel is always following the trend of consumer, change of season and preference may result in staking of huge inventory for the company which might be troublesome. Company might even decrease their stockpile by offering promotions and discounts which lower their profit margin. On the other hand, as the group only operates in Malaysia, its revenue will still be affected by global economic uncertainties as Malaysia’s retails sales depends highly on tourist purchasing power.

 Free cash flow in the past years is rather not stable at all. A lot of drawdowns of loan is applied in order to finance the acquisition of brand where the company has no sufficient cash level to cover the deal which is risky. Acquisition of Audrey worth 138million makes up 72% of the whole company’s non-current assets. This exposes the company’s financial level at a very high risk. With the book value and market price valued at RM2.7 anRM3.85 respectively, it can be seen that the share is over price some more with high risk acquisition. However, the fact that some popular brands under the company’s flagship is undeniable where the company may be valued at higher in the future. At current position, the company is bearing a high burden that spread to its stakeholders.
Stock: ASIABRN Code: 7722 Company:ASIA BRANDS BERHAD

APOLLO FOOD HOLDINGS BERHAD [S] Evaluation

Apollo is a long time snack manufacturer which is well established in Malaysia for decades. It is also well known among the locals be it children of school ages or even adult. It has a strong branding built by its unique and delicious recipes snack. Apollo further strengthens the image of its snack by sponsoring several cartoon broadcast on local broadcasting centers gaining popularity among the children. This has driven Apollo steps ahead of its competitors in term of positioning their products into the consumer’s mind.

However, recent entries of local and international snack manufacturer have made the industry tougher than ever. Therefore, continuous development of new flavor is conducted to go beyond its consumers’ expectation. On the bright side, Apollo is able to retain its customers’ loyalty by its existing product lines. Internally, rising utility cost such as electric and transportation will be a burden for the industry. Even the purchase of main raw ingredient such as sugar used to be subsidized is burdensome.

First of all, free cash flow shows a gradual upward climb for the past ten years with an annual compounded growth rate of 15.76%. Next, both ratios are showing satisfactory return at 13% and 14% respectively which reflect an efficient company. At the same time, the company is cash rich with RM64 million where no huge drawdown of loan is needed to maintain its daily operation and even expansion in turn eliminate interest expenses. With its book value of RM2.87 and current price of RM4.8, it is still worth it with the company cash position. Also, PE of 12.3 tell us that the market price of the equity is not over expensive which is affordable. In short, it’s a potential company.

Stock: APOLLO Code: 6432 Company: APOLLO FOOD HOLDINGS BERHAD [S]

APEX HEALTHCARE BERHAD [S]

Apex Healthcare Berhad which involves in manufacturing off-patented pharmaceuticals, pharmaceuticals devices and wholesale distributions network in Malaysia. As pharmaceutical industry is expanding in a high rate, few manufacturers are competing aggressively against each other in terms of domestic and export market. Fortunately, it involves high cost such as purchase of patent and expensive medical facilities that provide a high barrier of entry. Another factor favouring the growth of Apex Healthcare is through Malaysia’s Economic Transformation Program, it is selected as one of the manufacturer that obtain contracts from developed countries to manufacture medical devices. Up to date, 20% of Apex Healthcare Berhad is generated from overseas market.

Operating cost has been a huge problem due to increase in electric tariff together with rising carriage cost. As there are full automations in manufacturing these products, the company rely much on these utilities. Over reliance on contracts via government departments will also result in exposure of company vulnerabilities in case there are any global financial crises.

FCF is on an upward trend with a 10% compound growth rate First look into ROE and ROA is satisfactory as it surround the standard rate of 17% and 7% respectively. However, further look into cash flow company recently dispose off subsidiary to purchase investment security worth 30 million. This might result in huge disaster upon economic volatility period.  Since the company is in pharmaceutical industry, they need to fork out average of RM20,000 to purchase intangible assets which include R&D. Alongside, it is a norm for them to purchase their associate companies which might result in high capital expenditure of up to 10 million. As cash generated from their own operation is not sufficient sometimes, company also draw quite amount of term loans to sustain their activities which might result in excessive interest expenses. With its book value at RM2.3 per share and market price of RM4.5 per share, it is overpriced by the market. Overall, pharmaceutical industry is set to grow steadily in the future as it remains a resilient cash generating machine.

Stock: AHEALTH Code: 7090 Company: APEX HEALTHCARE BERHAD [S] 

AJINOMOTO (MALAYSIA) BERHAD [S] Evaluation

Being in the gigantic flavouring manufacturer, Ajinomoto has long established its branding throughout the market. Product such as salt, seasoning, industry use flavouring is well diversified in the company. The only challenging competition for Ajinomoto in Malaysia is Maggie which is a subsidiary of Nestle. As flavouring requires a little R&D which is not survival purpose, Ajinomoto find its way up without much capital expenditure. Establishing a number of subsidiary under the name of Ajinomoto takes a lot of time, hence it is not easy for other firm to enter and dominate the market which is favourable for the existing firm. Despite the stability of food  industry, Ajinomoto faces fallout on 2009 due to 31.69% of its revenue is generated from overseas such as middle east and other Asia countries. Considering its ability to generate increasing earnings in the future is high as the need of preservative is widely recognized especially in the food industry regardless of household or business owners especially with its well established brands together with well diversified of product lines to satisfy customers.

However, there is underlying risks where there is global trend of recognizing healthy consumption practices where flavouring such as MSG( MonoSodium Glutamate) is being boycotted by some parties. Also, it is affected by international financial crises as shown in 2009 where the earnings are dropped to RM0.08 per share as over 30 percent of the revenue is generated internationally.

Based on the Cash Flow from operating activities for the past ten years, it fluctuated wildly during financial crises as some of its holdings may consist of high risk securities. Return on asset and equity is not showing satisfactory rate  as of 7 and 8 percent respectively(standard for both is 15 and 10%)as it reflects low efficiency. Cash flow under 2009 appears to be doubtful as there was positive cash inflow of 10 million resulted from disposal of shares although the company only possess RM4million worth of shares. The company is not consistent with its earnings and efficiency ratios. Price earning is retrieved by using the lowest market price in the past one year divided by operating cash flow per share. The price earning of 8.4 is rather low where it indicates the share is still within the range of affordability. Also, the book value is worth RM4 per share which is lower than the current market price of RM4.88 where it shows the value of net assets is not up to the price of share. Overall, quantitative factor is not showing desirable results where it is up to further timing to consider the investment of this share.

Stock: AJI Code: 2658 Company: AJINOMOTO (MALAYSIA) BERHAD 

Value Investor Club welcomes you!

Dear Valued Investors, GREETINGS!

As the worldwide economics encounters much uncertainties ahead, what real investors look into is the one reliable aspect which is the underlying value of the business industry itself. There may be huge fluctuations in the short term, however only business with outstanding survival features is able to sustain through ups and downs. Looking into the qualitative and quantitative factors aspects, I will show you the technical methods of searching for the ultimate blue chip through value investor club. Aside of that, I will emphasize much on consistency part in determining a true blue chip company.

As value investing method is universally applicable, my first target will be in Malaysia market which is KLSE (Kuala Lumpur Stock Exchange). Stocks and shares are mainly listed through Bursa (www.bursamalaysia.com) where all the information for particular company is available. Also, bear in mind that minimum purchase of one lot in Malaysia stock listings is 100 shares. In other words, for a share of RM1.00, you  need to fork out RM100.00 to place the minimum order exclusive of brokerage fee.

Disclaimer: Value Investor Club do not provide you with a quick-to-get-rich scheme pathway into investing guide. It is a PRACTICAL and LOGICAL ways to look into stocks using business aspects and its ultimate potential to lead to better future earnings where the market will realize company’s strength and drive its stock’s prices accordingly. Also, as the method deem logical, it does not guarantee when and how the market is going to realize the true value of the company. Investors must lengthen their investing time frame and ensure that fund allocated for investing is not mixed with your long term savings.

Timing may be another issue as information posted by me is only related to that particular time line and there might be any extraordinary occasions that disapprove my argument.