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

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] 

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.