22 March 2014

OXLEY LAUNCHES ROYAL WHARF TO RESOUNDING RECEPTION - 21 Mar 2014

Singapore, 21 March 2014 – Homegrown lifestyle property developer, Oxley Holdings Limited (“Oxley” or “the Company”), has launched Phase 1 of its premier London waterfront development, Royal Wharf, in London and Singapore to resounding market response, collectively selling more than 50% of 811 units on the first day of its launch in each location.

The launch, which took place in London on Thursday, 20 March 2013, saw a queue forming outside the London sales gallery as early as five hours before the opening – which was an unusual occurrence in the city. In Singapore, close to 200 cheques were collected prior to the launch at 2pm on Friday, 21 March 2013.

The units launched comprised 68 townhouses, 132 3-bedroom units, 268 2-bedroom units, 296 1-bedroom units and 47 studio units. Most popular were the townhouses which saw more than 50% of available units sold, and almost all studio units have been taken up following keen interest from buyers.

Apart from UK-residents and Singaporeans, the launch also attracted buyers from the region including Malaysia, Indonesia, Hong Kong, Myanmar and China. Prices for the units ranged from £235,000 (S$495,000) for a studio apartment to just over £1 million for the most expensive townhouse.

Mr Ching Chiat Kwong, Chairman & CEO of Oxley, said, “Royal Wharf is our first development launched outside of Singapore, and also our most exciting project to date because it offers buyers not just a house, but a refreshingly new waterfront lifestyle concept. We are extremely encouraged by the response to the launch in both locations.”

Located a mere twenty minutes from Central London by train, Royal Wharf, which is the centerpiece of the regeneration of Royal Docks in East London, will be transformed by the development of the £1 billion Asian Business Park, along with investments by ExCeL London, The University of East London and other prominent entities such as the London City Airport.

The 999-year leasehold land parcel, which extends nearly 150,000 square metres and stretches 500 metres along the River Thames will accommodate approximately 3,400 homes, a new school, a retail high street along with space for restaurants, cafés, offices and bars, as well as a new waterfront park when completed.

Royal Wharf will also be well-connected to the City of London via the existing Docklands Light Railway (“DLR”) and future Crossrail station, which also enables easy international access via the London City Airport.

The Royal Wharf represents Oxley’s endeavor at taking its signature lifestyle concepts to the wider international market. Although the Company only completed the purchase of Royal Wharf at the end of last year, development works have already commenced on site, with the first phase of Royal Wharf expected to see completion in the summer of 2016.


About Oxley Holdings Limited

Oxley Holdings is a property developer specialising in the development of quality mixed-residential, commercial and industrial projects at competitive prices. Oxley’s developments cater to the growing needs of young and trendy home buyers who value quality living and a finer lifestyle, as well as small and medium enterprise owners looking to purchase their own office premises. Oxley’s property developments are usually located at prime areas that are easily accessible and which feature prominent lifestyle elements. The Company’s distinctive portfolio of developments includes KAP Residences/KAP, Midtown Residences/The Midtown, Devonshire Residences, Loft@Holland, Viva Vista, Oxley BizHub and Oxley BizHub 2 as well as Oxley Tower and Robinson Square. Beyond Singapore shores, Oxley also has a total of 15 projects in the pipeline in the UK, Cambodia, Malaysia and China.

Source: http://infopub.sgx.com/FileOpen/MediaRelease.ashx?App=Announcement&FileID=287434

My View

There are many foreign buyers to acquire a piece of property in London. In fact, London property price has soared up since few years back and recovered quickly from the financial crisis. We have seen many developers from Malaysia and Singapore venture into London property market, for example SP Setia from Malaysia and Oxley from Singapore.

It is a brave move by Oxley as they are quite aggressive and adopt quickly to the market sentiment by adjusting their business strategy (partly due to the slow down of Singapore property market since this year onward). Some analysts forecast that Oxley would be generating some S$0.9B net profits in next couple of years time. It is one of the counters in my watch list and I would update my target intrinsic value later.


21 March 2014

Sim Lian Group introduces strata offices, medical suites and F&B spaces with Vision Exchange in Jurong Regional Centre - Mar 2014

Singapore, March 20, 2014 – Sim Lian JV (Vision) Pte. Ltd. will on Saturday launch for sale the first phase of Vision Exchange, a 25-storey office tower with two levels of food & beverage (F&B) space and medical suites. The 99-year leasehold commercial development is strategically located at the heart of Jurong Gateway which is set to become the biggest commercial hub outside the city centre.

Vision Exchange features 740 units consisting of 640 offices, 53 medical suites and 47 F&B units on a 124,097 square feet (11,529 square metres) site along Venture Avenue, and is slated for completion in 2018. The development has a total Gross Floor Area (GFA) of approximately 688,890 square feet (64,000 square metres). A total of 250 units will be released in phase one with average prices of S$2,150 psf for office units and S$4,498 psf for medical suites and F&B units.

The development provides businesses direct access and connectivity to:
 A resident catchment population of one million
 Global companies at the International Business Park with Sony, Acer, Dell, German Centre for Industry and Trade, and The Nordic European Centre,
 Medical facilities such as Ng Teng Fong General Hospital and Jurong Community Hospital,
 Visitors to nearby attractions including the Jurong Lake, Science Centre Singapore and shopping options nearby, and
 Tertiary institutions and research hubs such as the Nanyang Technological University (NTU), National University of Singapore (NUS), One-North and the Science Park.

Designed to suit multiple needs, unit sizes at Vision Exchange range from 183 to 1,690 Sqft (17 – 157 square metres) with the option of combining units for larger work or retail spaces. Buyers will be exempted from Seller‟s Stamp Duty („SSD‟) and Additional Buyer Stamp Duty („ABSD‟) with no restrictions on ownership, and foreigners are also eligible to purchase. The showroom is located at Venture Avenue (entrance via Jurong East St 11) and is open daily from 10am to 9pm. 

Mr. Kuik Sing Beng, Executive Director of Sim Lian Group said, “Vision Exchange is one of the few strata offices in Jurong Regional Centre, and businesses will benefit from being at the heart of this thriving commercial and leisure destination in Singapore. We are confident that Vision Exchange will be a good investment to owner occupiers and investors, and will complement the „live, work, play and learn‟ environment  for the community.” 
Vision Exchange is a sustainable and energy efficient building with Building & Construction Authority („BCA‟) Green Mark GoldPlus with full height facade glazing offering an expansive view of the lush greenery around Jurong Lake World-class Connectivity Businesses will benefit from Vision Exchange‟s close proximity to more than 3,000 global and local companies around the International Business Park as well as the Jurong and Tuas Industrial Estates. The statutory boards Agri-Food & Veterinary Authority of Singapore (AVA) and Building & Construction Authority (BCA) will also relocate to the area by 20156
Ease of Commuting 

Vision Exchange is easily accessible both by public and private transportation, offering excellent connectivity within Singapore and across the causeway with Iskandar Malaysia, Johor. It is minutes away from the PIE and AYE, and is also connected to both the Jurong East MRT station and bus interchange via sheltered pedestrian walkway. Approximately 1.8 million commuters pass through these transportation nodes monthly.
Connectivity of Vision Exchange will be further enhanced with the upcoming Tuas West extension (TWE) on the East-West train line in 2016. This will be followed by completion of the Jurong Region line by 2025.  

Access to Amenities 

Vision Exchange is at the centre of activities in Jurong. It is a short walk from shopping centres such as JEM, Westgate, IMM and JCube, as well as Ng Teng Fong General Hospital and Jurong Community Hospital. Other amenities nearby include the CPF Jurong Building, Jurong Country Club, as well as an upcoming 550-room hotel by Genting Group.

Celebrating Nature 

In addition, a stone‟s throw away from Jurong Lake, Vision Exchange includes a large landscaped sky terrace on the fifth floor featuring a gymnasium, multi-purpose pavilions, fitness station, event plaza, a jogging track and an outdoor lounge. There are also designated bicycle parking spaces to complement the Jurong Lake „Remaking Our Homeland‟ (ROH) Primary Cycling Path and the Park Connector network. 

Vision Exchange is Sim Lian Group‟s first development in Singapore primarily focused on commercial spaces. It follows successes in the development of residential and projects across Singapore and Malaysia over 13 years. In the last 12 months, Sim Lian Group acquired a prime freehold commercial development in Sydney as well as a retail portfolio of five neighbourhood shopping centres in East Australia







































My View:

My estimation of the total GDV is in the range of about S$1.3B - S$1.7B. As Sim Lian's management revealed that it would be completed by 2018, so I think the group could get around 20% net profit margin (it would be around S$300M net profit depending on how efficient the group could manage the operating efficiency).

It is the group's first foray into commercial property development, so I think it would strengthen its position as a niche player in Singapore market. The location of this project is quite strategic as it is close to Jurong MRT station as well as the shopping area nearby. I believe that Jurong East would be a good satellite town in Singapore and we would see a lot of game changes projects to be launched here.

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20 March 2014

Riverstone - Niche Player in Glove Market

Background of the Company

Malaysia based Riverstone is a global market leader in the manufacturing of nitrile and natural rubber clean room gloves used in highly controlled and critical environments as well as premium nitrile gloves used in the healthcare industry. The company's proprietary "RS Riverstone Resources" brand is the preferred cleanroom glove for use in high-tech manufacturing industries. The company also manufactures cleanroom consumables such as finger cots and facemasks. Its customers are global leaders in the HDD, LCD, semiconductor, consumer electronics, pharmaceutical and healthcare industries. The company employs more than 1,000 people throughout its five manufacturing facilities in Malaysia (3), Thailand (1) and China (1) with an annual production capacity of 3.1billion gloves as at 31 December 2013. It also has an established global network of sales offices to serve its customers in Singapore, Malaysia, Thailand, the Philippines, China and the U.S. Riverstone was listed on the Mainboard of Singapore in 2006.

Financial Statement Analysis (FY2013)

The group recorded 15.53% growth in revenue and 36.67% growth in gross profits compared corresponding period FY2012 mainly due to to improvement in productivity and favourable raw material prices. The net profit grew 46.21%, however due to the dilution effect of warrant conversion last year, the EPS growth is estimated at around 30.43%. ROE was estimated at around 20% - 25%.

The group recorded a healthy free cash flow level at around RM40M (Net Operating Cash Flow - Net Investing Cash Flow), which indicates that there is little issue of the group to continue its dividend payout policy of at least 40%.

Liquid Ratio (Cash & Equivalents / Current Liabilities) stood at more than 1.0X, indicates that the group have a healthy financial condition and it could allow the group to grow even further as the glove industry is expected to grow about 10% CAGR until year 2020.

If long term growth rate is about 10% - 12% and we value the counter using dividend growth model, the intrinsic value would be in the range of 50c to 90c. The share price is now trading at around 13.3 trailing PE.

Chart



Riverstone stock price performance is quite in tandem with the financial performance for the past 1 year as the stock price rose about 60% compared to 46% rise in net profits. Nonetheless, I would think the share price is quite fairly valued at this level. As you can see from the chart, the MACD signal turned negative since middle of March 2014.


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17 March 2014

Iskandar Malaysia News - March 2014

Some of the news for Iskandar Malaysia in March 2014:

To summarize, the momentum of property market in Iskandar Malaysia remains healthy as there are more developers to venture in this region. Nonetheless, we would have to be mindful of the new price cap of RM1.0 million implemented this year. I am also looking forward to news on confirmed location and services of rapid transit system in between Johor Bahru and Singapore.

    15 March 2014

    Ezion issued S$55M 5.10 per cent. notes due 2020

    Ezion Holdings Limited (the “Issuer”) is pleased to announce that it has issued S$55,000,000 5.10 per cent. notes due 2020 (the “Series 006 Notes”) under its S$500,000,000 multicurrency debt issuance programme (the “Programme”). The Programme was established on 9 May 2012. The Series 006 Notes will bear interest at 5.10 per cent. per annum and will mature on 13 March 2020.

    The net proceeds of the Series 006 Notes will be used by the Issuer for general corporate purposes, including the financing of investments in offshore and marine assets and general working capital of the Issuer or its subsidiaries.


    My Notes

    This is the sixth round (which I believe is the last round) Ezion holdings issued the notes under S$500 multicurrency debt issuance programme started on 9 May 2012. Below is the summary of the various notes issued during this two years period:

    20140314 - S$55M interest rate 5.10%
    20140123 - S$50M interest rate 4.85%
    20130820 - S$60M interest rate 4.6%
    20130522 - S$110M interest rate 4.7%
    20120905 - S$125M interest rate 7.8%
    20120522 - S$100M interest rate 5.25%

    As mentioned by the management, the proceeds would be mainly used for financing of investments in offshore and marine assets as well as served as working capital. As the interest rates of the debts range within 4.6% and 7.8%, I believe the weighted average capital cost  Ezion would be easily lesser than 10%. As most of the projects would yield more than 10% net ROI, so I believe that the net book value of Ezion could be strengthened accordingly and it is not surprised to see that Ezion is trading around 2 times above book value.

    Based on my own understanding, most of the newly taken projects of lifeboat services would be financed at 30% Equity: 70% Debt basis, so it could explain why the total debt ratio of Ezion could be at this high level. As long as the interest coverage ratio is still in healthy level, I still think Ezion is a good opportunity to invest provided the oil & gas market still in a good shape (crude oil price always above US$90 per Barrel level).

    We have to monitor the progress of U.S. shale oils as some claimed that U.S. to be top oil producers. As far as I am concerned, Ezion did make it as leader in niche industry and I am happy to see it to evolve to be a bigger player in the region. 

    07 March 2014

    Roxy Pacific - Transformed from Hotel Operator to Full Set Property Player - Mar 2014

    Company Background:

    Roxy Pacific is a listed company in Singapore Stock Exchange which focus mainly on property market. The business consists of property development, hotel management and property investment. Below is a snapshot of from annual report 2012:

    Roxy-Pacific Holdings Limited is a homegrown specialty property and hospitality group with a track record that extends back to 1967.

    Listed on the SGX Mainboard in March 2008, the Group is principally engaged in the development and sale of residential and commercial properties (“Property Development”) and the ownership of Grand Mercure Roxy Hotel and other investment properties (“Hotel Ownership and Property Investment”).

    In Property Development, Roxy-Pacific is an established brand name for small and medium size residential developments with unique design features. The Group’s developments offer desirable living environments which epitomise quality and innovation and are targeted at middle to upper middle income buyers.

    Between 2004 and 2012, the Group developed and launched 32 small to medium size developments comprising a total of more than 2,000 residential and commercial units. The Group also owns the Grand Mercure Roxy Hotel, managed by the international hotel operator, Accor Group. Strategically located in the East Coast area, the hotel is close to the CBD, the Changi airport and the Marina Bay Resort Casino. The hotel enjoys high Average Occupancy Rate (“AOR”) averaging 89.0% and good Average Room-Rate (“ARR”) averaging S$153.3 between 2004 and 2012.


    Source: Company


    Income Statement


    Balance Sheet















    Cash Flow





    Management Comments

    Property Development

    The Singapore Government has forecast Singapore’s GDP growth for 2014 to be between 2% to 4% as
    compared to the estimated growth of 3.7% in 20131. Based on advance estimates by Ministry of Trade and Industry Singapore (“MIT”) on 2nd January 2014, the Singapore economy grew by 4.4 per cent on a year-on-year basis in the fourth quarter of 2013, compared to 5.9 per cent in the previous quarter.

    Based on the latest statistics released by Urban Redevelopment Authority (URA) on 24th January 2014, for the year 2013 as a whole, price of private residential properties increased by 1.1%, lower than the 2.8% increase in 2012. The various property cooling measures, including the TDSR framework has affected the overall property market’s sentiments.

    As at 6 February 2014, the Group has a balance amount of attributable progress billings of approximately $922.4 million from the following projects, the profits of which will be recognised from 1Q2014 to FY2017

    Ongoing Projects:

    Source: Company

    My Own Personal View

    As the company is have about S$922.4M order book on hand which could last until year 2017, so I believe the gross profit for next couple of year (inclusive of 3 divisions) could reach about S$100M. The company's JV just acquired prime commercial property in Hong Kong and it is leasing fast to bring in more recurring income. With projected PE of about 7X to 10X, I believe it is at reasonable price range. The catalyst is whether the company could sell the projects faster and replenish the land banks with reasonable price.




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    06 March 2014

    Mermaid Maritime - Changes in Progress (Mar 2014)

    Background of the Company

    Source: Company
    Source: Company

    Source: Company
    Source: Company
    The Fundamental of the company has changed after the changes of board of directors since few years ago. Mahagitsiri family took control of the company and managed to grab more offshore business from around the world due to better business relationship with the customers as well as focused on the niche markets - subsea & tender rig services.


    Simple Financial Ratio (Estimated by Jack Phang)

    No of Outstanding Shares:1,416,701
    Shares Price:0.475
    Market Cap (S$000)672,933
    NAV (US$)0.3815
    NAV (S$)0.4845
    P/B Ratio:0.9805
    Estimated Annualized EPS (US$)0.0371
    Estimated Annualized EPS (S$)0.0472
    Estimated Annualized PE Ratio:10.07
    Estimated DPS (S$)0.01
    Estimated Dividend Yield2.11%

    Income Statement

    Company reported net profit for quarterly report ended 31 Dec 2013 of US$13M on the back of revenue of US$84M, a significant improvement compared to corresponding period last year. This is mainly due to the surge of contribution from both subsea and drilling services. Net profit margin stands at a healthy 16% due to other income such as US$7M increase in income from associates as well as gross profit margin improvement to around 20% due to product mix changes.

    The company is quite confident in next 2 - 3 years as there is a US$750M back log income apart from the associate's business. Below is the breakdown of the order book achieved by company so far:


























    The utilization rate of the tender rigs is now at more than 85%, which indicates a market with strong demand in subsea services. With company's order of 2 tender rigs targeted to be delivered by 2016, the revenue from tender rigs would be doubled from 2016 onward.


    Balance Sheet

    Below is a snapshot of balance sheet of company ended 31 December 2013:

    Assets. Source: Company, Jack Phang Compilation






















    Liabilities & Equity. Source: Company, Jack Phang Compilation

































    So far the company managed to have a healthy balance sheet with welly managed debt level (about 20% total debt to asset ratio). Note that the company raised the fund from shares right issues last year to support the growing business & working capital needs as it has also placed an order on January 2014 for two more drilling rigs and 1 multipurpose subsea dive support & construction vessel. Nonetheless,I believe that the company may not issue the rights this year unless there is any further business opportunities the company must seize.


    Cash Flow

    Company managed to report a net cash flow from operating of US$18M, about US$3M improvement from corresponding period previous year. I believe that the company would be able to maintain free cash flow status until year 2016 due to improved net cash flow from operating.

    Cash Flow Statement. Source: Company, Jack Phang Compilation































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    04 March 2014

    Straco - Cash Cow Company Still - Mar 2014

    Straco released the full year report last month. Below is short summary of Straco and my own data compilation.

    No. Outstanding Shares843,739,580
    Share Price0.50
    Market Cap421,869,790
    EPS0.0404
    PE Ratio12.37
    EPSG72.45%
    PEG Ratio0.1708
    DPS (latest year)0.02
    Dividend Yield4.00%
    BPS (latest year)0.1907
    PB Ratio:2.62

    Income Statement
























    Net profit improved to S$35M on the back of revenue S$73M which is compared to S$20M and S$55M last year. Gross profit margin stands at 80% while net profit margin recorded an impressive result of 47%. EPS improved by 72% to 4.04 cents from 2.34 cents a year ago.

    Balance Sheet



























    Equity attributable to owners of the company improved by 23% to S$161M from S$131M last year. The company has around S$108M cash which is enough for dividend distribution or business growth in future. As the debt level remains low (around 10% of total assets), I believe that the company has little credit risk.


    Cash Flow Statement



























    The company managed to generate free cash flow for many years including year 2013 (S$34M) and 2012 (S$26M).


    Company Comments
    The Group is principally engaged in the development and operation of tourism-related attractions. Retail, food and beverage are auxiliary goods and services arising from the operations of the above facilities.

    The Group has one reportable segment, as described below, which consists of the Group’s strategic business units which are managed separately. For each of the strategic business units, the Group’s Executive Chairman (“EC”) reviews internal management reports on a monthly basis. The following summary describes the operations of the Group’s reportable segment:

    • Aquariums – Operation of aquatic-related facilities and tourist attractions, including dolphin and sealion performances. Retail, food and beverage are auxiliary goods and services arising from the operation of the above facilities.

    Other operations include the operation of cable-car facility and show performances. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2013 and 2012.

    Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group’s EC. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.



















    My Personal View
    ROE of the company is now around 20% - 30%, which I think is quite impressive. As the company managed to generate free cash flow for many years, I believe the company would have little credit risk in managing working capital as well as capex needed for future business growth.

    As this is a China-related company, the company is trading at around PE of 13X and enjoys around 4.00% dividend yield (including special dividend).

    Risks

    • accelerated competition among theme park players especially Disney land in Shang Hai is currently under construction and it maybe tougher for the company to increase the average ticket selling price in future
    • depreciating renminbi against Singapore dollars and it would reduce the DPS indirectly
    • liquidity issue as the company is now trading at low volume
    I would consider to buy the counter if the P/CF ratio is below 10X or around 40 cents. But if you are long term investors, you may do your own forecast (e.g. if long term growth rate is 10% for next 5 years and 5% after that, and discount rate is 15%, the fair value would be S$300M - S$400M etc). 


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    03 March 2014

    Silverlake Axis - SEA Finance Software Giant In Making (MAR 2014)

    Background of the Company
    Silverlake Axis Ltd (SAL) is a leading provider of digital economy solutions and services for major organisations in Banking, Insurance, Payments, Retail and Logistics industries. The Group's Silverlake Axis Software and Services Solutions are delivering operational excellence and enabling business transformations at over 100 organisations across Asia, including 40% of the largest banks in South East Asia.

    Under Axis Systems Holdings Limited, the Group was listed on the SGX-SESDAQ on 12 March 2003. It was renamed Silverlake Axis Ltd in 2006 following the acquisition of SAACIS, the Company that owns the Silverlake Integrated Banking Solution (SIBS) and the listing was transferred to the Main board of the Singapore Exchange on 22 June 2011.

    Simple Financial Ratio (most of the figures are estimated figures)
    No. Outstanding Shares: 2,244,149,108
    Last Closing Price (28 Feb 2014): S$0.895
    Market Cap: S$2.0B
    Estimated latest annualized EPS: S$0.0415
    Estimated EPSG: ~ 15%
    Estimated PE: ~ 21.55X
    Latest DPS Declared: 0.9 cents
    Estimated Annualized DPS: S$0.034
    Estimated Annualized Dividend Yield: 3.8%
    Estimated ROE (roughly calculated): ~ 40%
    Estimated PEG (roughly calculated): 1.45X (good if the PEG ratio is below 1.0X)
    Estimated Dividend Payout Ratio: ~ 82%

    Latest Quarterly Report Performance Summary
    Singapore, 11 February 2014 – Singapore Exchange Mainboard listed Silverlake Axis Ltd (“SAL” or the “Group”), a leading provider of Digital Economy Solutions and Services to major organisations in Banking, Insurance, Payment, Retail and Logistics industries, today announced a strong set of financial results for the second quarter and six months ended 31 December 2013.

    Q2 and 1H FY2014 Results Review

    Business conditions in the region remained positive in Q2 FY2014. Against this background, SAL secured a major ISIS software licensing contract and new project enhancement contracts in Singapore and Indonesia. These new contracts underpinned the healthy revenue growth in software licensing as well as maintenance and enhancement services. The Group also benefited from two large sales of hardware products to customers and boosted revenue from sale of software and hardware products significantly. During the quarter, the Group remained focused on the execution of software implementation service contracts. However, revenue from software project services was lower compared to the previous corresponding period as a major project was progressing towards completion stage. Together with the new source of revenue from insurance processing by Merimen Group, total group revenue climbed 24% to RM125.2 million.












    Buoyed by higher revenue, gross profit rose 27% to RM77.4 million in Q2 FY2014. Given the change in revenue mix towards higher margin activities such as software licensing, the Group recorded a slight improvement in gross profit margin to 62%. In addition, better performance by GIT InfoTech Co. Ltd during the quarter added substantially to the Group’s share of profit of associates and contributed to a robust increase of 33% in profit before tax to RM68.8 million. Although improved profitability and higher effective tax rate due to lower tax-exempt income resulted in higher income tax expense, the Group still achieved a healthy 23% growth in net profit to RM60.6 million in Q2 FY2014.

    For the six months ended 31 December 2013, the Group recorded 25% increase in revenue to RM226.4 million. In line with the higher revenue, net profit grew 26% to RM111.7 million. To reward shareholders for the solid performance, the Board has proposed a tax-exempt second interim dividend of Singapore cent 0.9 per share for Q2 FY2014. This is 29% higher than the second interim dividend of Singapore cent 0.7 per share for Q2 FY2013.

    Prospects

    The Group expects the Asian financial sector to remain resilient in 2014 and will maintain its efforts to capitalise on the business opportunities presented in the region. Dr. Raymond Kwong, Group Managing Director of SAL, commented, “For the rest of the financial year, we will continue to strengthen our order book of software implementation service contracts. We are currently working to pursue new software projects and at the same time, looking to enhance our suite of business enterprise software solutions and services through selective acquisitions. This broadening range of mission critical business and technology capabilities will enable us to provide our customers operating in multi-industries with solutions to excel in a digital economy.”

    This press release should be read in conjunction with SAL’s Q2 FY2014 results announcement released on 11 February 2014 to the Singapore Exchange

    Use of Proceeds from the Placement of 100,000,000 shares

    On 11 June 2013, the Company allotted and issued 100,000,000 million ordinary shares at an issue price of SGD 0.75 per share. Out of the total net proceeds of RM180.3million, RM39.3 million and RM11.2 million have been disbursed and utilised towards the first payment for the acquisition of Cyber Village Sdn. Bhd. on 3 July 2013 and the second tranche payment for the acquisition of 80% equity interest in Merimen Group on 19 November 2013.

    The use of the net proceeds is in accordance with that previously disclosed in the Company’s announcement dated 29 May 2013, 3 July 2013 and 19 November 2013. The remaining proceeds from the placement of RM129.8 million is currently being placed as fixed deposits with financial institutions. The Company will continue to make periodic announcements on the utilisation of the proceeds as and when the proceeds are materially disbursed.

    My Personal View
    As the company is approaching SEA banks for replacing the older system & software infrastructure, and around half of the revenue of the company is from the recurring income basis, I believe that the company could still grow at the pace of double digit for next couple of years. As the company is a cash cow company (generate free cash flow), I believe the dividend yield could be higher as time moves on.

    As the estimated PE is above 20X (above my comfort zone), so I would prefer to buy it at PE of below 15X. Nonetheless, I would adjust my own judgement for any catalyst (e.g. project clinched / net profit margin improvement / acquisition and merger activities / dividend policy changes).

    This counter is suitable for investors who wish to seek for higher capital appreciation as well as a moderate dividend yield as the company set to maintain a high dividend payout ratio policy for coming years.

    The underlying risks come from slowing pace of the SEA banks to adopt Silverlake's finance service solution or any further EPS dilution comes from corporate action (e.g. shares placement happened on June 2013) as well as iliquidity of the counter.

    I would do more thorough analysis on how the company could win the contracts from SEA banks from such a short time (it is not easy for a start ups to clinch projects as such fast pace), and how the company could maintain such a high profit margin and recurring income (from their business model analysis) and check if any intangible assets inside the company before making a good decision on this counter.

    02 March 2014

    Iskandar Malaysia News Update - FEB 2014

    Some of the FEB 2014 news which I compiled from various websites:

    Summary: Despite rising concerns on weaker property market in Iskandar Malaysia, especially from Singapore investors, the truth is that Malaysia property developers are still venturing here, due to several reasons:

    • Limited land banks in Greater KL and Penang, and Johor government took action to lure more property developers to take greater risks in venturing Iskandar Malaysia (e.g. exemption of the floor price of RM1.0M property purchase in Medini etc.)
    • Cooling measurements introduced by Singapore government have pushed several investors or people (especially Malaysians) working in Singapore to buy a property in Malaysia and you would not be surprised that the traveling hour during peak hours in between the causeway could reach more than 1 hour. 
    As the property prices have gone up more than 100% in certain area (e.g. Horizon Hill, Bukit Indah, Tebrau etc) in just 3-5 years time, I do not believe that the price could rise for another 100% in 4 years time, as more and more citizens just could not afford to it as the increase of disposal incomes cannot catch up with the pace of property prices rising here. 

    Nonetheless, I believe that as long as the public infrastructure especially MRT could be linked to Johor Bahru CIQ, there would be higher chances that the number of travelers to Singapore could increase by at least 30% further. 

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