6. Brahim's Holdings Bhd
IN-FLIGHT caterer Brahim’s Holdings Bhd has a two-pronged catalyst moving forward. First, it is exploring ways to increase its market share in the global halal food market, and second, it aims to become the third player to control the Malaysian sugar market.
The company’s core business is airport-centric, focusing on the provision of in-flight catering and restaurant operations. Brahim’s, through its subsidiary, holds a concession with Malaysia Airlines for the provision of in-flight catering and related services.
Analysts have likened Brahim’s business as a proxy to the vibrant airline industry minus the baggage of ticket price war and jet fuel price fluctuations. Currently, close to 90% of its revenue comes from its catering business.
Brahim’s bought a 60% stake in Admuda Sdn Bhd. Admuda has a licence from the International Trade and Industry Ministry to manufacture refined sugar and molasses for Sabah and Sarawak. The licence awarded to Admuda was the third by MITI in 37 years as sugar is a regulated commodity.
Brahim’s is looking to dominate these states by 2015 with the setting up of a RM150mil sugar refinery factory in the Demak Laut Industrial Park in Kuching.
Presently, the sugar market in Malaysia is controlled by Felda Global Ventures Holdings Bhd’s unit, MSM Malaysia Holdings Bhd, and Central Refinery Sdn Bhd, with two sugar refineries each in Peninsular Malaysia.
Brahim’s refinery will have the capacity to produce up to 180,000 tonnes of refined sugar per annum with a potential to expand to 400,000 tonnes.
An analyst from Hong Leong sees Brahim’s pre-tax profit growing 12% to RM57.8mil in FY14 and 32.4% to RM76.5mil in FY15.
Meanwhile, an analyst from Alliance is forecasting Brahim’s pre-tax profit to grow 26.5% to RM64.9mil and 23.6% to RM80.2mil in FY15.
For the nine months to Sep 30, 2013, net profit jumped 163.6% to RM10.19mil while revenue rose to RM285.7mil from RM7.4mil previously.
Catalysts:
- Sustainable earnings from long-term concession agreements.
- Further activities in the sugar refinery business.
- Maiden dividends.
Risks:
- Slowdown in passenger movements.
- Termination of concession agreements.
- Earnings highly dependable on economic conditions/pandemics.
7. MKH Bhd
MKH, previously known as Metro Kajang Holdings Bhd, came under the limelight after Hwang DBS Vickers Research initiated coverage, with a target price of RM5.40, providing 83% upside to its last done price of RM2.95.
The stock had since been on an upward trend, climbing some 65% year-on-year.
Before the research house issued the note, the counter came under the radar of Kenanga Research and SJ Securities Sdn Bhd.
A poll by Bloomberg indicates that there are three “buy” calls on the company.
Hwang DBS Vickers Research highlighted the company’s hidden value under its plantation segment.
The company had ventured into oil palm plantation with an acreage of 15,942ha in East Kalimantan since 2008.
The brokerage notes that the plantation business has posted maiden profits in its financial year ended Sept 30, 2013 (FY13) and is projected to grow at 31% three-year earnings compounded annual growth rate given its young tree profile, when trees are usually most productive.
“Despite the promising prospects, MKH is only trading at five times FY15 price-to-earnings (P/E), an undeserving 70% discount to the Malaysian small-mid-cap plantation peers’ average P/E multiple,” analyst Quah He Wei writes.
Metro Kajang is a well-known brand equity in Kajang and Semenyih. With a land bank of 202.34ha there, it is set to benefit from the rising land prices, given its low land cost and strategic tracts adjacent to two mass rapid transit (MRT) stations, he adds.
Its recorded unbilled sales of RM503mil in FY13 is underpinned by the rising demand for mid-market housing, improved connectivity via MRT and growing affluence in its focus market, Quah says, adding that RM890mil worth of new properties in FY14.
Catalysts
– Fast growing, cheap plantation play.
– Under appreciated.
– Beneficiary of MRT connectivity.
– Record unbilled sales buoyed by strong demand for affordable housing.
Risks
– Heavy focus on Kajang/Semenyih development
– Fluctuation in crude palm oil prices
– Headwinds in the property market
- By Ne Bei Shan
8. Scomi Engineering Bhd
SCOMI has been under the radar for some time. The last two big contracts it bagged were the RM1.85bil Mumbai monorail project in 2008 in a joint venture with India’s Larsen and Toubro Ltd and another job in Brazil worth RM5.6bil in 2011.
The fortunes of Scomi hasn’t exactly been bright. It has been in the red over the last three financial years despite having won big contracts. Its share price is also at one of its lowest points at the 39.5 sen level. Its 52-week low is 38 sen on May 3 last year.
So what is there to look forward to? Proposals have been made for the extension of the KL Monorail to Bandar Sunway. Malaysian Resources Corp Bhd and Syarikat Prasarana Negara Bhd have reportedly submitted their proposals.
Scomi, which built and owns the system of Malaysia’s only monorail, is the technical partner to provide the systems and cars (pic).
For the six months to Sept 30, 2013, Scomi recorded net loss of RM24.97mil on the back of revenue of RM110.85mil.
The results were mainly due to net unrealised foreign exchange losses of RM3.6mil for the quarter and RM18.3mil from both Mumbai and Line 17 projects.
The weakening of the Indian rupee has also resulted in the unrealised losses on the receivables from the client in the Mumbai monorail project.
Scomi’s focus at the moment is to strengthen its presence in Malaysia, India and Brazil amidst intense competition. These countries have committed plans to develop Urban Rail Systems in their major cities.
The rail segment will maintain its focus on the implementation of key projects in Mumbai, Kuala Lumpur and Brazil. Phase 1 of the Mumbai Monorail Project was expected to be commissioned in December 2013.
Catalysts
- Winning new contracts.
- Downside limited as it is already making losses and share price close to 52-week low.
Risks
- Failure to bag new contracts.
- Cost overruns in its existing contracts.
9. Fitters Diversified Bhd
WHILE some investors find the company too diversified for their liking, there are a number of catalysts for Fitters that makes the company one of the smaller ones to watch in 2014.
First could be a listing of its wholly-owned renewable energy unit Future NRG Sdn Bhd, say insiders. Fitters core business is in fire-fighting.
The catalyst in this segment is a potential merger to form the region’s largest fire-fighting business.
However, this was supposed to have taken place earlier with Singapore’s Deluge Fire Protection Pte Ltd but some delays have occurred. Still, a third and increasingly significant division is property, that produced some attractive profits in the company’s last reported quarter.
In announcing its good Q3 FY2013 earnings last November, Fitters also said that it had entered into a Memorandum of Understanding with Molecaor Technologia S.L. of Spain to penetrate the market of PVC pressure pipes in Malaysia and other South-East Asian markets.
Insiders say that this could be a lucrative market for Fitters if executed well, considering that the Spanish company holds patents to state-of-the-art piping that hits the right price points and is the most suitable replacement for aging water pipes around the region. Banking sources said that Fitters was looking to float Future NRG in Malaysia or Singapore, which would raise funds for future expansion.
Renewable energy companies have been enjoying keen investor interest in markets in the United States and the UK.
Future NRG is involved in renewable, alternative and waste-to-energy projects such palm oil green mills, biomass plants and biogas capture plants.
Catalysts
- Unlocking of value from its diversified base via M&As.
- Dividends could be in the offing.
- Possible overseas listing of renewable energy unit and steady earnings growth.
Risks
- Execution risks and delays in unlocking value and property market downgrade.
10. PJ Development Holdings Bhd
AFTER launching a takeover on OSK Ventures International Bhd, people are interested to know what shrewd businessman Tan Sri Ong Leong Huat is up to next.
He emerged in PJD as a substantial shareholder last November and was subsequently appointed non-independent and non-executive chairman on Dec 23.
He is also the managing director and chief executive officer at OSK Property Holdings Bhd. Ong has a 21.4% stake in PJD while he owns 57.8% of the latter.
Following the divestment of OSK Investment Bank Bhd to RHB Capital Bhd, the seasoned stockbroker had expressed OSK Holdings Bhd’s focus on property, among others, to develop the land next to OSK Plaza with a gross development value of RM1bil.
“Due to the lukewarm sentiment in the property market now, it could be a good time for him to carry out a merger and acquisition or some form of restructuring among the entities he own,” observers say.
PJD’s net asset per share was RM2.17 as of Sept 30, 2013, implying a discount of 38% compared to its share price.
Recently, the property player announced the sale of Menara PJD along Jalan Tun Razak, which will see it bag RM101mil that translates into earnings per share of 22 sen.
Catalysts
– Possible merger and acquisition play.
– Disposal of Menara PJD that translates into EPS of 22 sen.
– Discount of 38% to net asset per share.
Risk
– Slowdown in property market.
