E&O - RM1b property portfolio

According to The Edge, E&O plans to assemble an array of properties worth RM1bil that it hopes will give it a steady recurring income.
Executive Director, Eric Chan says that this move will reduce the dependence of income generated by E&O Prop. The creation of a property investment portfolio would add more depth and generate returns at E&O level.
E&O remains undervalued due to its status as a holding company. E&O's market value is RM1.11bil while its 64% stake in E&O Prop alone is worth RM1.5bil.
For your information, E&O has proposed to dispose of up to 90mil shares, represents 13.8% stake in E&O Prop and its entire 50.8% stake in Putrajaya Perdana Bhd. The proceed may be used to fund the property investment portfolio.
E&O itself is developing an office tower project on the 1.15-acre site, in downtown KL. The development cost is about RM150mil and the project is not for sales will go into the property investment portfolio.
Adding to this will be a retail component at the marina of STP which will eventually be sold by E&O Prop to E&O. There will be another shopping mall for lease to Tesco near STP project as well. It will be sold to E&O as well.
Eric Chan also says that E&O is expecting a return of RM80mil or more a year and this should be good enough by considering E&O's net profit was RM60.9mil last year.


Meanwhile, E&O closed at RM3.02 with high volume today. E&O Prop hit it historic high at RM4.06 but failed to sustain and closed at RM3.86 today. E&O looks interesting at this point of time. However, there is another factor to consider where Goldman Sachs has disposed some E&O's shares last few days.

In short term, E&O will continue to depend on the income generated from E&O Prop ...

Mah Sing: Hijauan Residence

I saw this advertisement in this week The Edge:


It is the latest project launched by Mah Sing. It looks really nice ....

LCL Corporation Berhad - Goldman Sachs

Filing to Bursa Malaysia shows that Goldman has emerged as the substantial shareholder of LCL. Goldman bought 900,000 shares on 7 June 07. After the purchase, Goldman has 2.3mil shares, represents a total of 5.52% in LCL.


LCL was traded between the range of RM4.66 to RM5.10 on 7 June 07. LCL closed at RM5.95 last Friday. Perhaps we can buy in if there is a correction in LCL where the price will come down a bit?

RCE Capital

Below is the article publised in today's The Star newspaper. Short term target is RM1.20 while the next projection is around RM1.40-RM1.50. Meanwhile, Oriental Business also published an article about RCE and target price is RM1.33 from an unnamed analyst. Base on the short term target price, an investor would be able to enjoy ~20% return. RCE should a rising star for 2007. Goldman Sachs is another important factor that has raised the profile of RCE.


RCE Capital Bhd has been on the steep upward momentum on persistent follow-through buying interest over the past several months, navigating the shares into the unknown territory to establish a fresh all-time high of RM1.01 during intra-day session yesterday.

Based on the daily bar chart, prices had climbed quite substantially since staging a major breakout of the 52 sen level sometime in February, but they show no sign of abating just yet, at least for now.

Perhaps, investors who are already in it can consider holding on to their shares for more capital gains.

Technically, the oscillator per cent K reversed upward from the neutral zone and crossed over the oscillator per cent D of the daily slow-stochastic momentum index to trigger a short-term buy on Thursday.

Similarly, the 14-day relative strength index headed higher towards the bullish territory.

In addition, the moving average convergence/divergence indicator continued to expand positively against the signal line.

On the back of the bullish reading, prices are likely to move forward, targeting the RM1.20 mark in the short-term.

The next upside projection is seen around the RM1.40-RM1.50 band.

As for the downside, initial support is anticipated at 95 sen. An additional floor is pegged at the 90 sen level.

Salary play

WHILE civil servants are celebrating an upcoming salary revision, companies such as RCE Capital Bhd are rejoicing as well. The company, which has its mainstay in the provision of consumer credit facilities for Government servants seems a likely beneficiary of the pay hike.

According to research house Aseambankers, RCE Capital’s loans book has grown substantially over the past few years. As at March this year, RCE Capital’s principal amount of its total loan was about RM500mil, up from less than RM70mil in 2002.

Aseambankers says, “With the regulated personal loan and consumption credit market in Malaysia worth approximately RM25bil, this implies tremendous opportunity for RCE Capital to grow its market share and loans book further. And, given higher consumption power that could be derived from an upcoming salary revision in the civil service, we expect RCE Capital’s position to strengthen significantly.”

Mah Sing: The Icon @ Tun Razak

According to the research report from Aseambankers, The Icon, located along Jalan Tun Razak, which is five minutes away from the Petronas Twin Towers, will comprise two 20-storey office block, is close for sale soon.


The selling price is expected to set a new benchmark around the KLCC area, with an asking price of more than RM600 per sq ft. The costruction work is expected to commence next week. It is the debut for Mah Sing in commercial building. The completion of each tower block is expected to take only 18 to 24 moths as super-structure work can be completed quickly.
The management is expecting good margins of between 30% to 36% for this project. As previously reported in other research report, there is a shortage of Grade A offices at KLCC area and I believe Mah Sing would be able to benefit from the current situation.

SMS Scam

As most of the nX's investors are aware, 2 subsidiaries of nX were in the list MCMC for non-compliance issues.
After doing some surfings in the internet, I found 2 interesting blogs, writting about this issue. The first one is Screenshots and another one is antijeffooi.


Both of the bloggers are having war against each others and you may read them out when you are free. You will gain a lot of knowledge about SMS but I am not sure how true and accurate is for the scam mentioned there.
nX is less being mentioned in the blogs as the main 'agenda' is about MacroKiosk.
Who is right and who is wrong? I have no idea and I will continue to support and believe the management team of nX.

Mah Sing: Rights Issue status

Mah Sing Rights Issue is oversubscipted by a total of 56.24%. You may refer to the below table further information and this can be found in Bursa Malaysia website:


This situation indicates the high confident level that the current shareholders have towards the future of the company. I believe it can go further under the management and leadership of Datuk Leong. This is boost by the efforts from the government in promoting properties sector in Malaysia.
Did you submit for the excess applications? I did and the chances for me to get it is almost impossible now ....

RCE crossed RM1

Finally, RCE broke RM1 level this morning. However, it could not sustain and closed at RM0.965.


With reference to the research reports from S&P and Kenanga, there is a huge potential for RCE in the medium term. They rate RCE as a 'buy' with target price of RM1.05 and RM1.20 respectively.
RCE could reach the target price of Kenanga in the medium term as long as there is no sudden crash in the market.

Mah Sing: Southbay Penang

According to The Edge Daily website, the proposed acquisition of lands by Mah Sing Group is in Batu Maung area. It will be a mixed developement, comprising commercial and residential components. It is expected to be completed in five to seven years.
Managing Director Datuk Leong said it is just 10 minutes from Penang Bridge via the highway and only five minutes from the proposed second Penang Bridge. Mah Sing plans to introduce up-market Lagenda@Southbay and Residence@Southbay. The other major point is the group plans to cooperate with institutional investors to develop hotels which optimise its location.


Personally, I think the proposed second Penang Bridge plays an important role to ensure the first development at Penang by Mah Sing will be successful. I would say Batu Maung area is not that really 'prime' at the moment as there is nothing much major development. There is not major hotspots as compared to E&O's STP (Gurney area) or IJM's condominium projects along Jelutong Express Way and Tesco area.

However, it should be a good move for Mah Sing into Penang market where the land is a scarce resource. The next phase of developments in Penang should be at south area since the town area, Gurney area and Batu Feringghi area are almost developed. SP Setia and IOI Properties have projects at south area as well.

Lastly, Aseambanker is considering to upgrade the target price for Mah Sing ..

Please Welcome Mah Sing To Penang

Finally, Mah Sing has proposed acquisition of Prime Freehold Land measuring approximately 351,251 square metres (86.78 acres) in Penang via its Subsidiary Companies, Vienna View Development Sdn Bhd, Enrich Property Development Sdn Bhd and Vienna Home Sdn Bhd from Kembang Biru Sdn Bhd For Total Cash Consideration of RM115.75 Million or the equivalent of approximately RM30.61 per square foot


The management team is yet again to deliver their promise. People from Penang will be able to enjoy quality homes from Mah Sing. Looking forward for the coming projects at Penang.

Green Packet Berhad

Filing to Bursa Malaysia shows that OSK Ventures International Berhad has disposed off 3,000,000 shares of Green Packet on 6 June and 7 June. However, OSKVI still holds 16% of GPacket after the disposal.
Is there any hidden indicator in the disposal?

mTouche

Below are the recommedation and valuation from Kenanga on mTouche:

The Group is targeting 1.0m-subscriber base (less than 1% of Japan’s mobile phone population) at a subscription charge of around USD3/user/month, which is in line with the market’s average mobile value-added service fee. That will translate into a revenue of USD3.0m per month should the target be achieved. In a recent meeting, MTB’s management hinted that the group would focus on expanding organically and consolidating its existing operations. Until M-Bit and the push of mobile value added services in new markets and interactive TV ventures abroad prove themselves, we are maintaining our FY07 and FY08 earnings forecasts.
As such, we are maintaining our HOLD-rating on MTB with a revised 12-month target price of RM1.99 (-2.9% from RM2.05 earlier), which is based on industry average FY07 P/E of 7.0x. Limited earnings visibility remains our biggest concern going forward.

Looks like mTouche has to depend heavily on their new software 'M-Bit Network' for greater future earnings. M-Bit is the first global P2P Search and File Super-Distribution network that allows the sharing of content files between mobile phones via transmission over wireless mobile networks.

I am not sure about the mobile phone users at Japan. In my opinions, this is not going to work at local market. Our market is not yet developed until such a lavel where we need to rely on this type of network to transfer our contents.

'Uncertainty' is the best word to describe mTouche at this moment ...

Sunrise Bhd

There are a total of 3 research houses covered Sunrise Bhd recently. They are Aseambanker, Hdbs and RHB. Below are the target prices from each of them:

Aseambanker - RM4.62
HDBS - RM4.88
RHB - RM4.27

Major points from HDBS' report:

Sunrise is venturing into developing its maiden commercial development in the city center, agreeing to buy a 1.65-acre land near Jalan Sultan Ismail for up to RM35.0m or RM487psf depending on the approval of Development Order by September 2007. Otherwise, Sunrise would only pay RM25.1m for the land. Sunrise also announced the completion of its disposal of investment assets in Plaza Mont’ Kiara for RM90m to Quill Capital Trust.

We are positive on this considering KL’s shortage of Grade A office space. We believe Sunrise is able to leverage on its strong brand name to sell the new project. The purchase also means the proceeds are immediately put into value accretive land acquisition.

We maintain our Buy recommendation on Sunrise with a RNAV-based TP of RM4.90. The acquisition is expected to complete by 2007 and we believe Sunrise is planning to launch the project earliest by next year.

As HDBS mentioned there is a shortage of Grade A office space in KL area, I would think Mah Sing will be benefit from this situation too since they are ready to develop their first commercial project area too - The Icon @ Tun Razak.

While there was no surprise in quarterly results announced by most of the major players last month, most of the research hourses are confident that 2H 07 would be very exciting for property players after a series of good news and incentives announced by Government in the first half of 2007.

Crisis at Megan and MBF Corp

The above companies are being suspended at this moment. Megan case is a hot topic recently where it has announced that accounting misstatements in its books go back to its 2005 financial year - by overstate its trade receivables, revenue, cost of sales, inventories and deposits and prepayments. Meanwhile, MBF Corp is facing the possibility of being delisted as SC has rejected its request for more time to fix its financial position after being designated a Practice Note (PN) 17 company a year ago.

In Megan case, it has raised another great concern about the quality of audit report. The external auditor for Megan is not a small or medium audit firm, it is another Big Four - KPMG. They never raised any concern about company's accounts before this. They are the external auditor for Megan since it was listed in 2000. Megan is currently being investigated by SC. If KPMG failed to show that they have actually carried out sufficient audit trials during the audit, should we see actions to be taken against the partner from KPMG who signed off the previos report? Megan is another sinking ship due to not honest management team. I wonder what is going to happen to this company as the top level management key personals have left the company one by one. The worst case is it will be delisted. According to a source, Megan's records for the periods prior to 2005 were 'accidentally destroyed'. It is just another biggest joke in the town ....

It was reported in The Edge that MBF Corp Bhd's suspension is good for the major shareholders and bad for the minority interest. It is mainly due to there is a hidden jewel in the company - QBE Insurance Bhd. Some parties have offered a great price tag to purchase the 49% of QBE which owns by MBF Corp. However, the deal was dropped in April. Everything will be different if MBF Corp had sold QBE as this would help the cash position of the company. Again, I believe this crisis is caused by the management where they do not care about their minority interest. According to The Edge, if Loy (the majority shareholder) makes an offer of 10 sen a base, which is at 25% premium to its share price pre-suspension, he would have to pay about RM17mil for the 60% of the shares he does not own to take over the company. Guess what he will get? It is a total control of the valuable 49& stake in QBE, which is worth close to RM90mil.

Base on the above 2 cases, I would think its very important to look at the management team before investing ...

Master of Maya

I saw this advertisement in this week The Edge:


It is another effort to introduce mobile gamings to Malaysia mobile phone users and hope nX can benefit from this.

Another important Quarterly Result - nX

It would be another important quarterly result from nX, which is due in this month (June'07). Although there is no news release reporting the high receivables of the company, it remains a major concern for investors like us. High receivables has became a major highlight with the cases like Transmile, Megan and Nasioncom. Both Transmile and Megan which drop into the troubles (either poor accounting record for Transmile or false accounting records for Megan) have one similarity. Nevertheless, the similarity is they have high receivables balances. As a result, it has triggered many questions among the investors about the situation of nX. It's trade and other receivables stand at 67mil as at 31 Jan 07, increased by 28mil from last year financial report (as at 30 April 2006) which has been audited.

In my opinion, there may have 3 possible situations for nX regarding its high receivables.

1. It is a norm in the communication industry. In other words, all the balances will be collected eventually. I could not find another competitor for comparison. Some may argue that mtouche and AKN Mess Tech do not have such a high balace of trade receivable. However, I would think we are not comparing an apple to another apple in this case. Both mtouche and AKN Mess Tech do not have the growth level like nX. Of course, I think it would be fair to say that AKN Mess Tech is at its downtrend and would not be able to compare with nX at this moment.

2. nX is facing difficulties in collection. They provide platforms and services to other parties and the customers are not able to pay back to them. If this is the case, nX may face a major impact to their financial condition as they need to write off the bad debts. Any write off would definitely give a bad hit to the financial result as trade receivables is the highest current asset for nX. It will result a lower trade receivables which will be transferred to profit and loss account. With a net profit of RM5mil+ per quarter, I wonder how much nX can absorb this ...

3. The worst case is nX also involves in creating false accounting records. Everything is gone if this is real. Nothing else needs to be mentioned other than cut loss by selling off before it is too late.

Personally, I have full confident over the management team. Therefore, scenario 3 is very unlikely in my opinion.

I hope nX will report another impressive quarterly result in this month. My expectations are higher revenue recorded and higher net profit than previous quarter. nX recorded 28mil revenue and 5.7mil net profit in last quarter.



I also hope that CEO Mr. Tey will come out and explain about the high receiveables.Mr Puan from GPacket has done it and why not nX also do the same thing?

Airocom Technology Berhad

While I was trying to compare nX with it's competitor, I discoverd this company - Airocom Technology Berhad.
Here is some backgroud about the company - It was established on Nov 1990 as software application developer and integrator specializing in SMS solutions.
I believe this is another listed company that should not be touched as I think this company is a joke. Latest quarterly result shows that it has recorded only 56k revenue. I have no idea why this company got listed with this type of track record. A normal not listed company may simply record a higher revenue than Airocom.


In conclusion, it is another lack of quality company listed in Mesdaq ...

Ozura-ChinaByte Mobile Tournament Games

China's First Mobile Gaming Community which support Mobile Tournament Games is powered by Ozura's funlogiX platform.
I visited the website again recently and noticed that more games were being introduced at the portal, for example, The Duel Online and Gempak (which has been converted to Chinese version. I also found that the forum is quite active with the participations from the gamers.


I would say this portal is quite successful and hope it keeps growing and bring in more revenue to Ozura. Meanwhile, Maxgames, a local mobile games portal has been proven as a great one with so many activities have been carried out by Ozura and Maxis.
Mobile gaming is definitely a booming market where Ozura can continue to tap in other markets by partnering with the content providers or telcos from other countries to run a similar type of mobile tournament in the future.

While blogging this posting, I spent RM6 to try my luck by sending 2 SMS to the game show from Astro, Fun Fun Fun. If there is more and more this type of game show from TV producers, I am sure this is another market where it will benefit Nextnation as they do provide this type of platform.

RCE Capital Berhad

Kenanga Research gives a buy call for RCE, with a target price of RM1.20. They have issued a total of 9 pages research covering RCE Capital Berhad. If you have access to Kenanga portal, you may go ahead to download and read the report. I would say it is a very comprehensive research report.

Below are some of the highlights from the report:

- Low risk of defaulted payments with automatic salary deduction scheme by ANGKASA

- Effective NPLs of 1.7%. The bulk of defaulted payments due to quirks of the deduction system

- Highly conservative general provision of 8% in FY06 to normalise to 2% with FRS139

- Size & speed of loan payout matter more than interest rate to government employees

- Cost-savings from co-operatives’ distribution system

The operating and business model of RCE is as below:

Eastern & Oriental Berhad

Filing to Bursa Malaysia shows that Goldman Sachs International (GS) has disposed a total of 720,000 securities of E&O on 29 May and 30 May. This is the first time GS disposed E&O shares in recent months.
After the mentioned disposal, GS still holds a total of 30,255,300 shares, which represents 8.21% in E&O. I noticed that there were many sellers for E&O in today trading.
Is it the time for us to cash out part of our holdings in E&O now? You should note that the market interest has shifted from major players like SP Setia, Mah Sing and E&O to second liners, such as DNP and Equine. However, in my opnion, they appear to be more speculative than reflecting the value in the companies.
I would think YTLLAND, SDRED, PJDEV and DIJACOR are better options for value investing.