Under-valued stocks

There are still a lot of under-valued stocks in Bursa Malaysia

Nextnation Communication Berhad

This leading mobile application service provide (ASP) continues to post ~MYR4mil net profit per quater. It is among top companies in term of net profit. However, looking at Friday closed price of .68, the stock is still under-valued as compared to it's impressive net profit and the potential growth. Nevertheless, the market capitalisation of this stock is not among top in Mesdaq market although it is proven that the net profit recorded by them is among the best.
Meanwhile, Nextnation is the progress to acquire subsidiaries in Indonesia and China. As of April 2006, Nextnation messaging platform covers 30 mobile operators worldwide across Asia, Europe and North American. South East Asian operators includes Singtel, MobileOne and StarHub in Singapore; Maxis, Celcom and DiGi in Malaysia; Telkomsel, IM3, Satelindo and Excelcom in Indonesia and AIS, DTAC in Thailand.
You can imagize the potential growth of this company ....
Meanwhile, I have 2 major concerns in this company: high operating costs and cash balances. Looking at the recorded revenue, it is really impressive as it can match the top performer of Mesdaq market, Green Packet (I want to jump from Penang Bridge for not investing in this company!!). However, the net profit of Nextnation is no match to Green Packet due to higher operating costs which brings down the net profit directly. With only ~MYR20 million of cash balances, will Nextnation have sufficient cash for future expansion to cope with the growth of mobile service market? It is understand that the purchase of subsidiaries in PRC and Indonesia will cost about MYR14 millions - ~MYR10mil for PRC and ~MYR4mil for Indonesia.
Nextnation proposed private placement additional 10% shares of it's exisiting issued and paid-up share capital has been approved by SC. Nextnation will be able to have more cash with this private placement. Higher net profit is expected in the future to overcome the effect of dilution as a result of larger paid-up capital.

Titan Chemicals Corporation Berhad

Titan, the largest polyolefins producer in South East Asia faced difficult situation in Q3 and Q4 in 2005. The higher production cost as a result of higher world oil price has squeezed it's net profit in last 2 quaters into a very low level.
However, Titan is able to record a very strong results with a record revenue of RM4.5 billion. A total of 6 cents dividend of financial year ended 2005 is another highlight which is higher than the estimation in their IPO prospectus.

Trubulence is still ahead due to the following uncertainties:
1. % change in higher revenue did not match with % change in higher net profit. Without strong result of first two quarters of 2005, the company will not be able to achieve their record revenue!
2. If you make a quick comparison of Q to Q of net profit in 2005, you will run away. The % of decrease is unbelieveable. If the situation does not change, will Titan turns into red in Q1'06?!
3. With the proposed final dividend of 3 cents for financial year ended 2005 - that is about MYR52mil dividend payment, does Titan have the sufficient cash to fund their operation? I am very concern with their cash balance after the dividend payment!
4. The information provided by the top management was not 'accurate' and 'misleading'. First, it was stated that higher oil price will not impact Titan performance as the higher cost will pass to the customers. However, they stated that the variance between the actual performance vs estimation in their IPO prospectus is caused by higher oil price. What is this ??!! They forgot what did they say 6 months ago?
During their earning release conference session, they keep on mentioning about their record revenue .. bla bla bla. They rarely mention that the net profit drop so much from Q to Q. We all can simply know that the acquisition of PT Peni will enable Titan to become the largest polyolefins producer in South East Asia. However, I am hardly to find out from the top management how they are going to turn PT Peni from red to profit. It is a big question mark. If PT Peni is operating at loss, it will definitely impact Titan financial report in consolidation level!

Meanwhile, the stock price is still trading below their IPO price for almost 9 months since it is listed in Bursa Malaysia. With the growth potential, acquisition of PT Peni to increase the production and high barrier of entry into this industry, I strongly suggest it is under-valued.