The hottest summer since 1955 in Iowa and Illinois is eroding yield prospects for corn and soybean crops in the U.S., the largest grower and exporter. Signs of diminished output appeared this week during a four-day, seven-state sampling of about 2,000 fields in the Midwest organized by the Professional Farmers of America, which will report its findings later today. A Bloomberg survey of 25 tour participants showed all expected the government to cut its corn-harvest forecasts and 21 predicted a reduction for soybeans. (Bloomberg)
World wheat production will be 0.4 percent higher than a July estimate at 677 million metric tons on better production in the European Union, Russia and China, the International Grains Council said yesterday. The EU estimate was increased 0.5 percent to 137.5 million tons. (Bloomberg)
The new head of the IMF on Saturday, Aug 27 called on global policymakers to pursue urgent action, including forcing European banks to bulk up their capital, to prevent a descent into a renewed world recession...."Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation," Lagarde said, adding that central banks should stand ready to jump back into unconventional policy actions if needed. (Reuters)
The U.S. won’t slip into recession after Federal Reserve Chairman Ben S. Bernanke said the central bank has more tools to support growth if needed, said Templeton Asset Management’s Mark Mobius....Mobius is positive on commodity stocks and expects higher raw-material prices as inflation accelerates...He is “pretty positive” about Southeast Asian equity markets, he added. “Looking at Southeast Asia, it’s Thailand and Indonesia.” (Bloomberg)
August 29, 2011
August 23, 2011
13 Reasons to Invest in Wellcall
I made this list based on an article about Wellcall in The Edge Malaysia yesterday.
13 Reasons to Invest in Wellcall:
1. It is the largest exporter of industrial rubber hoses in Malaysia
2. It is able to pass down the cost to customers if raw material prices (rubber) rises gradually
3. It has the flexibility to switch between natural and synthetic rubber
4. 98% of transactions are in US dollars (advantageous if the US dollar strengthens)
5. Its operations are capital intensive rather than labour intensive, with a workforce of only 400.
6. Its products are more for niche markets, especially in the oil and gas (O&G) sector. Other major application markets include automobile, ship building, mining and food and beverage (F&B).
7. It has no significant competitors in Malaysia due to high cost of equipment.
8. Its current production utilisation is reaching 80% and planning to expand.
9. It derives 90% of its revenue derived from foreign markets, i.e. Asia, Middle East, Europe, North America, Australia/New Zealand and South America. It is expanding its customer base in places such as Africa, Russia and Latin America.
10. 85% to 90% of its sales come from the replacement market because industrial hoses last up to eight months before they are replaced.
11. It does not hold stock of its products because production is based on a job order basis, thus preventing overcapacity and price dumping.
12. The market for industrial hoses has a growth of 4% to 5% a year.
13. High dividend yields and debt free
I like reasons No. 7, 8, 10, 13.
Main risks would be 4 and 9.
Its share in global market is only 0.4%.
Its website comes out in the first page of Google when I searched the term "industrial rubber hoses."
It would be a good buy if the global economy is expanding.
13 Reasons to Invest in Wellcall:
1. It is the largest exporter of industrial rubber hoses in Malaysia
2. It is able to pass down the cost to customers if raw material prices (rubber) rises gradually
3. It has the flexibility to switch between natural and synthetic rubber
4. 98% of transactions are in US dollars (advantageous if the US dollar strengthens)
5. Its operations are capital intensive rather than labour intensive, with a workforce of only 400.
6. Its products are more for niche markets, especially in the oil and gas (O&G) sector. Other major application markets include automobile, ship building, mining and food and beverage (F&B).
7. It has no significant competitors in Malaysia due to high cost of equipment.
8. Its current production utilisation is reaching 80% and planning to expand.
9. It derives 90% of its revenue derived from foreign markets, i.e. Asia, Middle East, Europe, North America, Australia/New Zealand and South America. It is expanding its customer base in places such as Africa, Russia and Latin America.
10. 85% to 90% of its sales come from the replacement market because industrial hoses last up to eight months before they are replaced.
11. It does not hold stock of its products because production is based on a job order basis, thus preventing overcapacity and price dumping.
12. The market for industrial hoses has a growth of 4% to 5% a year.
13. High dividend yields and debt free
I like reasons No. 7, 8, 10, 13.
Main risks would be 4 and 9.
Its share in global market is only 0.4%.
Its website comes out in the first page of Google when I searched the term "industrial rubber hoses."
It would be a good buy if the global economy is expanding.
August 20, 2011
Faber favours Asia
According to a MarketWatch article, Dr.Marc Faber favours emerging market equities and corporate bonds for the long term, and also gold.
"Faber's own stock portfolio is centered on dividend-paying Asian shares, particularly in Malaysia, Singapore, Thailand and Hong Kong. These include a variety of real estate investment trusts and utilities....he's also turned positive on Japanese banks, brokerages and insurance companies....Faber is convinced that the price of gold will continue rising and that any pullback is a buying opportunity."
"Faber's own stock portfolio is centered on dividend-paying Asian shares, particularly in Malaysia, Singapore, Thailand and Hong Kong. These include a variety of real estate investment trusts and utilities....he's also turned positive on Japanese banks, brokerages and insurance companies....Faber is convinced that the price of gold will continue rising and that any pullback is a buying opportunity."
August 18, 2011
Hup Seng
Hup Seng Industries Bhd. is involved in manufacturing and trading of biscuit and beverage (Incomix brand coffee). Besides the domestic market, it also exports it products to over 40 countries in Asia, USA, Russia and Africa. Overseas market accounts for almost 30% of its revenue in FY2009 (no information given for FY2010.)
The ratios I look at (refer to my earlier post).)indicates it is in good financial health. The company has no borrowings.
current ratio = 3.2
working capital - LTD = $75.25m
DE ratio = 0.058
LTD/PAT = 0.37
cash/debt = 1.27
5 year historical average ROE and ROR is 11% and 7% respectively. Revenue and earnings have grown compared to 5 years ago. Profit margin improved significantly in 2008 onwards compared to 2004-07, perhaps due to the crash in commodity prices. The company paid at least 10 cents per share of dividend annually since FY2005. It is already paying dividends totalling 10 cents for FY2011.
Risks to it profitability include raw material cost (palm oil, wheat, fuel) and the government’s gradual withdrawal of subsidies.
It's share is currently trading at a PE ratio of 8.9.
The ratios I look at (refer to my earlier post).)indicates it is in good financial health. The company has no borrowings.
current ratio = 3.2
working capital - LTD = $75.25m
DE ratio = 0.058
LTD/PAT = 0.37
cash/debt = 1.27
5 year historical average ROE and ROR is 11% and 7% respectively. Revenue and earnings have grown compared to 5 years ago. Profit margin improved significantly in 2008 onwards compared to 2004-07, perhaps due to the crash in commodity prices. The company paid at least 10 cents per share of dividend annually since FY2005. It is already paying dividends totalling 10 cents for FY2011.
Risks to it profitability include raw material cost (palm oil, wheat, fuel) and the government’s gradual withdrawal of subsidies.
It's share is currently trading at a PE ratio of 8.9.
August 16, 2011
news bits
The Pekeliling flats area, located along Jalan Tun Razak-Jalan Pahang is to be redeveloped. Now known as Tamansari Riverside Garden City, its developer Asie Sdn Bhd has awarded Mah Sing a contract to build properties for RM900 million. Asie expects to award two more contracts by year-end to build properties worth over RM1 billion. The project has supposedly been put on hold thrice (1976, 1997 and 2008.) (Source: Business Times)
Comment: I hope they look into the traffic congestion problem first.
The business outlook for shipping firms in Asia-Pacific remains weak because of continuing transportation supply exceeding demand. In a statement today, Standard & Poor (S&P) said high fuel prices and economic uncertainties, coupled with other factors such as overcapacity, would continue to hinder the recovery of the main shipping sectors in the region and globally. (source: Bernama)
Comment: This could be favourable for logistics companies.
Chief Minister Tan Sri Abdul Taib Mahmud said today that the Sarawak government hopes to attract at least RM200 billion in private investments for the Sarawak Corridor of Renewable Energy (SCORE) over the next 20 years. RM26.4 billion worth of investments in 13 projects have been approved so far.(source: Bernama)
Comment: This one is sweetener for coming elections or can really score big ?
Comment: I hope they look into the traffic congestion problem first.
The business outlook for shipping firms in Asia-Pacific remains weak because of continuing transportation supply exceeding demand. In a statement today, Standard & Poor (S&P) said high fuel prices and economic uncertainties, coupled with other factors such as overcapacity, would continue to hinder the recovery of the main shipping sectors in the region and globally. (source: Bernama)
Comment: This could be favourable for logistics companies.
Chief Minister Tan Sri Abdul Taib Mahmud said today that the Sarawak government hopes to attract at least RM200 billion in private investments for the Sarawak Corridor of Renewable Energy (SCORE) over the next 20 years. RM26.4 billion worth of investments in 13 projects have been approved so far.(source: Bernama)
Comment: This one is sweetener for coming elections or can really score big ?
August 15, 2011
MRT project
The table below shows the public listed companies shortlisted (marked with blue) for the Mass Rapid Transit (MRT) project in Klang Valley. There are a total of 18 packages (the numbers shown in each category)- 8 for elevated civil works, 8 for stations and 2 for depots. The tenders for the multi-billion public transportation project would be called in stages beginning from next month until December 2012. This will be Malaysia's biggest rail infrastructure project, which would be integrated to the existing LRT, Monorail and KTM services.
(*There are other shortlisted companies or joint ventures which to my knowledge are not subsidiaries of public listed companies.)
(*There are other shortlisted companies or joint ventures which to my knowledge are not subsidiaries of public listed companies.)
August 13, 2011
cement producers
The top 3 cement producers listed on the KLSE are LaFarge Malaysia (LMCEMNT), YTL Cement (YTLCMT) and Tasek (TASEK). LMCEMNT has the largest market capitalization and revenue, followed by YTLCMT and TASEK. However, YTLCMT actually currently makes more profit than LMCEMNT, based on the rolling profit of the previous 4 quarters. LMCEMNT is a subsidiary of the world's biggest cement maker Lafarge SA, traded on the Paris bourse.
The following table compares them (using data from the lastest quarterly and annual reports.)
It can be seen that both YTLCMT and TASEK fulfill all our 5 criteria of financial strength (see my previous post). YTLCMT has the highest return on equity (ROE) while TASEK has the highest return on revenue (ROR). Note that both these figures are 5 year averages.
TASEK tends to have the lower historical PE ratio,perhaps due to its low trading volume and liquidity. The company is a subsidiary of Hong Leong Asia (which is owned by Tan Sri Quek), which holds something like 72% of the shares.
At current stock prices, YTLCMT and TASEK are trading below their average historical PE ratio. However TASEK had a gain on disposal of property amounting to 43m in 4QFY10. Without this one-time gain, it is trading at its historical average PER.
The catalyst for cement producers would be construction activities from the ETP govt projects. Risks include ceiling price by government and energy costs (coal, electricity, diesel).
As I am only sharing information, I will not make any recommendations. I also make no guarantee to the accuracy of the information given.
*Note that the historical PE ratio is calculated based on the financial year end's closing price.
The following table compares them (using data from the lastest quarterly and annual reports.)
It can be seen that both YTLCMT and TASEK fulfill all our 5 criteria of financial strength (see my previous post). YTLCMT has the highest return on equity (ROE) while TASEK has the highest return on revenue (ROR). Note that both these figures are 5 year averages.
TASEK tends to have the lower historical PE ratio,perhaps due to its low trading volume and liquidity. The company is a subsidiary of Hong Leong Asia (which is owned by Tan Sri Quek), which holds something like 72% of the shares.
At current stock prices, YTLCMT and TASEK are trading below their average historical PE ratio. However TASEK had a gain on disposal of property amounting to 43m in 4QFY10. Without this one-time gain, it is trading at its historical average PER.
The catalyst for cement producers would be construction activities from the ETP govt projects. Risks include ceiling price by government and energy costs (coal, electricity, diesel).
As I am only sharing information, I will not make any recommendations. I also make no guarantee to the accuracy of the information given.
*Note that the historical PE ratio is calculated based on the financial year end's closing price.
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