Brokers' Digest (The Edge)

Below are the information obtained from The Edge:

Public Bank Bhd - Buy with target price of RM9.20
Hubline Bhd - Strong buy with target price of RM2.60
Dialog Group Bhd - Buy with targer price of RM1.38
MRCB - Buy with target price of RM1.63
DXN Holding Bhd - Buy with target price of RM0.85
TRC Synergy Bhd - Buy with target price of RM2.48
Kinsteel Bhd - Buy with target price of RM4.30
KSL Holdings Bhd - Buy with target price of RM2.37
N2N Connect Bhd - Trading buy with target price of RM3.25

Personally, N2N connect looks very attractive ...

Good results from Nylex, how about Titan Chemicals?

Nylex (Malaysia) Berhad has released a good quarterly result end 30 Nov 06 recently. Nylex, which distributes petrochemicals and its related products in bulk, has two man division - polymer and industrial chemicals.
For the first half ended 30 Nov 06, it posted a higher net profit of RM26mil from RM7mil a year earlier on the back of increased revenue of RM620mil against RM344mil.
Is this situation indicates that Titan Chemicals will announce a very impressive Q4 result too? Let's wait and see does Titan Chemicals result will meet my expectation? (which i have posted in my previous blog)

Titan Chemicals share price has decreased back to RM.1.48, within the range before the sudden increased in last 2 week. Local substantial holder such as Permodalan Nasional Berhad, Yayasan Palaburan Bumiputra and Skim Amanah Saham Bumiputera disposed quite a number of Titan share in Jan 07. Hopefully a foreign fund or investor has bought up the share and will emerge as substantial shareholder in the near future which will increase the profile of Titan Chemicals.
No worry for the disposal by local players as we seldom see they will create any impact ...

Stocks pick by a foreign research house

Read this information in this week The Edge:

Autos - UMW
Banks - Maybank, AMMD, BCHB, Malaysian Planations
Conglomerate - Sime Barby
Construction - IJM and Road Builder
Media - Media Prima, NSTP and Star Publications
Plantation - IOI Corp, KL Kepong, PPB Oil Palm, IJM Plantation
Property - SP Setia, E&O Property, Mah Sing
Telcos - TM and DiGi
Tobacco - BAT
Utilities - Tenaga Nasional
Gaming - Genting
Transport - AirAsia

Surprise ... Titan Chemicals (5103)

Titan share price moved aggresively today. It opened gap this morning at 1.50, as compared to yesterday closing at 1.47. It closed at 1.58 with intra high at 1.61. The volume surged high as well, with 69,503 (lots) done.
I was so surprised and it opened gap this morning. There is no specific development in the company or any good news released. One thing that can relate to the uptrend of Titan would be the decrease of oil price which is the main cost production for Titan.
Anyhow, I still believe that oil price is secondary to Titan. Demand and supply should play the most important role to determine the margin that Titan will enjoy. As stated in my previous blog, higher or lower oil price will have the impact to Titan when they are in the process to pass the higher cost to the consumers and customers. Of course, I hope that lower oil price will provide some advantages to Titan in short term.
Titan Q4 earnings release will be due in Feb'07. Hopefully they will release Q4 result by early of Feb'07. I expect Titan to post a net profit of at least RM100mil and propose final dvidend of at least 3 sen.
It's time to prove that one of the local research house call is totally wrong! It remains its 'sell' recommendation when Titan released Q3 result. Prior to Q3 result announcement, it stated that high oil price will hit Titan. After that, it stated that the selling price for Titan products are lower due to lower oil price. Now, i realise why I hardly see a good call from this research house ...
Let us wait for the Q4 result!

News about E&O subsidiary - E&O Property (3468)

There is an article about E&O Property in this week The Edge paper, with the title - E&O to ride property recovery.
The price targets from Hwang-DBS Vickers speak it all. It ranges from RM2.60 to RM2.85. There is an upside of between 35.8% and 50%, as its current price is RM1.90.
Profit projections from the research houses like JP Morgan and Citigroup are very positive and attractive. As an average, for FY07 - around MYR100mil and its around MYR110mil for FY08. This translates to EPS of 15 sen to 19 sen respectively.
E&o closed at RM1.83 last friday and would be very attractive for value investors to start accumulating it. It is a better way to enter E&O Prop thru E&O in my opinion where E&O has construction arm too - Putra Perdana and hotel operation. One more point to be added, Putra Perdana is operating quite independently from E&O where it does not undertake any major project from E&O. Furthermore, E&O share price is slightly lower than E&O Prop at this moment.

Latest News about Nextnation

Nextnation share price has been dropping consistently over the last few weeks. Selling pressure remains high where there are more sellers than buyers. Last minute buying always happens which keep the price well above 0.60.
Recently, Nextnation wholly-owned subsidiary, Ozura Sdn Bhd has partnered with one of the best telecommunication provider in Malaysia, DiGi in running Mobile Game Tournament. This online mobile game tournament is powered by Ozura's proprietary mobile gaming platform, FunlogiX. More information about the tournament can be obtained at http://www.digi.com.my/whatshot/promotions/coke/index.do and DiGi WAP site. The most excitement for the tournament would be the prizes offered - Proton Savvy cars!
Ozura has provided their technology to more than 5 mobile operators internationally within the past 6 months. FunlogiX is one of the most sought after platforms in the mobile gaming industry.
Peh from Ozura said that Ozura revenue is expected to increase many fold and 2007 will be an exciting year for Ozura.
Looking at the current share price, it is very good offer for investors who are looking for the value and want to enjoy the growth with the company.
I expect Nextnation to post a net profit of at least RM5.8mil for Q3, which will be released in March 2007. For the financial year ended 30 April 2007, net profit of at least MYR20mil is expected from Nextnation.

Eastern & Oriental Bhd (3417)

Buy 1 and get 3

It is a great deal fo any buyer who can get 3 different businesses by buying into 1 stock? If you think so, you may consider about this stock - Eastern & Oriental Bhd.

The 3 different businesses

Hotel
First of all, E&O has a very strong brand name hotel which is located in Penang Island. You may go to anywhere of Penang Island and simply ask anyone, they will know where is the hotel. It is one of the greatest hotel you can find in Penang. E&O Hotel is ready to capitalised higher revenue due to Tahun Melawat 2007 next year.
Meanwhile, it has another hotel which situated in Batu Ferringhi - Lone Pine Hotel. Although it is not as famous as E&O Hotel, it definitely has its own class as well. Once again, it is a very nice hotel that you can find in Batu Ferringhi.

Property
E&O owns more than 70% shares of E&O Property Development Berhad (EOPROP). I believe I do not need to spend much time to write about the introduction of EOPROP. They pride themselves as a developer that caters to the needs of everyone,building premium homes in establishedneighbourhoods.
Their current projects include Dua Residency, Seventy Damansara, Idamansara, The Peak and Seri Tanjung Pinang. It enjoy great sales of all the mentioned projects. Seri Tanjung Pinang is an important project which will contribute to EOPROP result in the future. Construction is very active at the project site at this moment. How much land can you find in a small island like Penang? Let us wait and see how much can Seri Tanjung Pinang project contribute to EOPROP. As far as I know, the cheapest property that available in Phase 1 of the project costs about RM800k. EOPROP managed to convert the land from leasehold from freehold as well.
Looking at all the projects of EOPROP, it has been always my dream to own 1 unit property in each of them. I like Dua Residency and Seventy Damansara the most.

Construction
Putrajaya Perdana Bhd (PPB)is the construction arm of E&O. E&O holds an aggregate direct and indirect interest of about 51% in PPB. Putrajaya Perdana’s current book order exceeds RM1.2bil and the company is undertaking several projects such as MARC Service Residence, Pavilion Kuala Lumpur, Kolej Universiti Teknikal Kebangsaan Malaysia in Malacca and Zero Energy Office for Pusat Tenaga Malaysia.

Recent News

Its shares surged to a high of RM2.01 a few weeks ago, following reports that the company might be taken private. However, E&O has issued not 1, but 3 announcements that no plan for the privatasation at this point.
Its share price is moving sideway in the past 2 weeks, within the range of RM1.83 to RM1.90. It closed at RM.187 at the point of writting.

Undervalued

Do you always think that your investment in stocks is equivalent to your cash? I would consider that as you can always sell your stocks investment easily in the market and receive the proceed after a few days.
If that is the case, E&O is undervalued seriously. Its holdings in EOPROP and PPB worth at least 20% more than the current value of E&O.
Big investment company from US, The Goldman Sachs Group International has been buying into E&O since early of December. It has emerged as the substantial shareholder of E&O, with 20,690,100 unit of shares which represent 5.89% of total E&O shares.

Conclusion

Buy 1 and get 3. Isn't a good deal for the investors who are looking for the value in long term?

Nextnation Communication Berhad (0096)

Q2'06 Financial Result (Ended 31 October 06)
Another strong quarter financial result reported by Nextnation before X'mas holiday. However, there is no X'mas gift for the shareholders as the share price does not reflect the strenght of this company. As a result, it is within my scope for undervalued stock in Bursa Malaysia (Mesdaq).

Heavy selling pressure
Since it hit its high at RM0.78 recently, it has been started to slide consistently over a few weeks (closed at RM0.65 at the point of writting). As a 'loyal supporter' to this stock, I have been monitoring it almost everyday. I noticed that its under heavy selling pressure where the sellers were almost more than the buyers for all the time. No clear indication at the moment as there is no change to the major shareholders. According to the trending, it usually will close higher at the end of the day due to last minute buying (once again, I have no idea which party is doing this). If it opens at a higher price in early trade of any day, it usually will not be able to sustain it for long as many sellers start to sell it.

Overall Q2 result summary
It is not my intention compare Q2'06 result with previous year quarter result. As it operates in a high and fast growth environment, I would prefer to make a simple comparison between Q2 result and Q1 result.
Its revenue has increased from RM23m to RM27m, with an increase of 15.5%. Meanwhile, the net profit has an increase of 11.3%, from RM4.8m to RM5.3m. Everthing looks great but the revenue and net profit from Malaysia has decreased, with Q2: revenue of RM18.3m and PAT of RM5.2m vs Q3: revenue of RM16.9m and PAT of RM3.6m. I am not very confortable with this situation. By making a quick reference to last year Q4 result, their revenue and PAT were even higher, revenue of RM20.5m and PAT of RM6.4! It looks like the revenue in Malaysia has been dropping consistently over the quarters (approx 50% from last year Q4 to this year Q2).
No doubt, Nextnation continues to post higher revenue in Q2. It is mainly due to higher revenue and PAT from other countries. Yes, it is the first time it has managed to record a profit from other countries segment. How nice it will be if Nextnation is able to sustain their segment in Malaysia! For example, PAT of RM6.4m from Malaysia plus PAT of RM1.8m (Q2'06 result) will transform the profit to RM8.2m.

Future strategies

The Mesdaq listed Company has in recent months, announced a series of corporate proposals and acquisitions‚ including a bonus issue and share placement exercise‚ with the objective of building its strong market presence in the key regional markets. They are:

China: The subscription of 50% control in Often Reach Investments Limited. The Company also acquired 100% equity interest in Vision Phoenix Group Limited, which will be the holding company of a wholly-owned foreign entity to be incorporated in China, for the provision of the next generation mobile video streaming technology and high capacity value-added telecommunication services.

Middle East: A memorandum of understanding with Tawasul Telecom Co. LLC for collaboration in research, development, provision of Internet and wireless technologies and value-added services, related software and business ancillary.

Vietnam: The incorporation of Vinamob Venture Company Limited will allow Nextnation an entry into the world’s second-fastest growing economy in areas such as research and development of information technology, Internet and wireless Internet; design, production and provision value-added products and services for mobile and information technology.

Subsidiary - Ozura

Its wholly owned subsidiary - Ozura Sdn Bhd continues to make global presence for mobile games world. It has establised partnerships with Excite Japan Co. Ltd (Japan), AIS (Thailand's largest mobile operator), Mobile2win (India), Handygames (Germany), Info2cell.com (Middle East and North Africa), Indosat (Indonesia).
Ozura's CEO, Peh revealed that over the next 3 years, Ozura expects a boost in revenue of up to USD20m from global sales via these partnerships.

Websites

Here are some of the company's related websites:

http://www.nextnationnet.com
http://www.ozura.com
http://www.fonwar.com
http://www.milkmobile.com
http://www.friendx.com
http://www.popbunny.com

Conclusion

With its high growth potential and overseas expansion plan, it is worth to keep an eye on this stock!

Titan Chemicals Corporation Berhad (5103)

Q3'06 quarter result

Titan managed to post a very impressive Q3 earnings. However, the investors or even local research houses still do not show great interest in this stock. There is even one research house maintains its sell recommendation, with target price of about RM1.03. They stated that its valuations or dividend yields are not exticing enough to compensate the potential downside risk.

opportunity in difficult situation

No doubt the stock is not performing since its IPO, about a year ago - Its IPO price is RM1.77 after the revised of the initial price (above RM2, I cant really remember clearly). However, I continue to see the opportunity in this undervalued stock.
It is one of the largest petrochemical companies in the region. For the nine months to Sept 06, it reported a 17% revenue increase to RM3.92bil from RM3.35bil previously. I would not mention about the net profit of Titan as it had included a non-recurring income of RM341m, as a result of the acquisition of its Indonesia subsidiary - PT Titan. While one local research house keeps saying that petrochemical cycle is in downturn, why Titan is able to record a higher revenue so far?
For its subsidiary, PT Titan recorded a net profit of RM4m in Q3'06, a dramatic turnaround from a net loss of RM18m in second quarter. This indicates that the company has excellent management team. New managing director, Mr Thomas P Grehl was appointed in Q2, to replace Mr Donal M. Condon. The management also believes PT Titan will be continued to be profitable. Another point that shows Titan has excellent management team would be the ability to increase market share of its subsidiary in Indonesia, from Q1-8%, Q2-20% to Q3-25%. Its a very impressive figures!

Major challenge

Titan needs to ensure it is able to enjoy better margins in its complex business nature. Its net profit is very much depending on the margins that they can enjoy. It is clearly indicated that their recorded revenue is higher. However, their net profit is still in yo-yo situation due to the uncertainty of the profit margin. Once Titan is able to pass the higher oil price cost to their customers, they will be able to do extremely well again. Titan is in the proccess of passing these costs that there exists a bit of a time lag.

Target price

Closing price for Titan before X'mas holiday is RM1.32. One of the local research house has a target price of RM1.66 for it. How far do you think it can go?

* This stock is not suitable for short term traders who aim to get profit in short term

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.