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.

Mah Sing eyes Penang market

Mah Sing is eager to make its presence felt in the robust Penang property market. “We
will consider developing a Legenda residential series if we venture to land-scarce markets like Penang island,” president and CEO Datuk Leong Hoy Kum said.
• This year, the company is looking to purchase two to three pieces of land in high growth markets in the Klang Valley, Johor Baru and Penang.
• On its commercial ventures, Datuk said “We are looking at building more Grade A offices that have retail and shop lots to meet the strong demand for such properties now. The occupancy rates for such property have reached 85% to 90%.Our aim is to maintain a 70% earnings contribution from sales of residential properties, with commercial property making up the balance.”

Property Sector

Below is the research report from HDBS Investment Bank:

The Business Times reported that the government is expected to announce a project to turn Malaysia into an international property destination. The project is believed to be able to bring in RM20b in foreign direct investment within 10 years and help create more jobs.Prime Minister Datuk Seri Abdullah Ahmad Badawi will announce the details soon.
The plan is expected to boost the demand of properties in the country. We are seeing all the positive signals from the government to improve the property sector in the country. Within a space of five months, the government has announced the abolishment of RPGT, relaxation of FIC requirements and improvement the overall efficiency
of the delivery system. We maintain our overweight rating on the sector. We continue to like property developers with a strong brand name that would ensure pricing power and sizable prime landbank focusing on mid to high end properties. Sunrise (TP RM4.65) remains our top pick of the property sector.

Latest Press Release from Ozura

Below is the latest press release from Ozura. FunlogiX, a mobile games platform developed by Ozura is a big achievement in the industry as it has been picked by many companies to run their respective mobile games portals.

World's First Mobile Trading Card Game "Master of Maya" Lands in MaxGames

Kuala Lumpur – Ozura Mobile ("Ozura"), a leading international publisher and developer of mobile entertainment, and Maxis Communication Berhad ("Maxis") jointly launched the world's first mobile trading card game, "Master of Maya" in MaxGames, a tournament based mobile gaming and community portal.

Master of Maya, a real time multiplayer game published by Nokia Siemens Networks, collaborates the classic trading card game concept with MaxGames which is powered by Ozura's FunlogiX™ to enhance mobile users' experience i.e. users can play with each other wherever and whenever they like.

"Maxis is very proud to launch this first in the world in Malaysia. It will take our innovative Games Unlimited proposition to the next level. In the world of Master of Maya, players will be faced with epic battles full of dramatic action to take them places they have never experienced before. It features a trading card RPG element and a story about the ancient community of the Mayan people with magical skills challenging their mysterious opponents." states Kee Saik Meng, Head of Games & Entertainment at Maxis.

In Master of Maya, the player takes the role of a Mayan ruler and combines a variety of characters to form a powerful team with which he or she can go up against other players. Special mutation cards enable the characters to be evolved and their fighting and sorcery skills improved. In the multiplayer mode, not only the players can play with theirs friends – regardless of where the players are situated, they also can challenge any player from the Maya community.


Lion Peh, Ozura's Chief Executive Officer recommended that the game has skillfully united the perception of trading cards with the technologies of the current mobile phones.

"We are confident that Master of Maya and our MaxGames portal will pave the way for future mobile games with high-production values. It has real mass market appeal and even people who haven't yet discovered the trading cards will enjoy this gameplay," said Lion.

Master of Maya was launched on 1st of June 2007. Players who are interested can log on to MaxGames via WAP. To learn more about Master of Maya, please visit MaxGames at www.maxgames.com.my to instantly commence familiarizing and acknowledging its contents.

Tong Herr Resources Berhad

Tong Herr is involved in manufacturing and sale of nuts bolts and screws of all types of iron and steel. They are among the biggest manufacturer in the world for these products.
It is another strong fundamental company that still worth of bargain hunting. Below is the quarterly results:


The revenue has been increasing significantly (Q1'06: 47mil vs Q1'07: 111mil). Net profit has been flying high as well, from 5mil in Q1'06 to 19mil in Q1'07. Its dividend payout is considered high as well, with a total of 24 sen for financial year ended 31 Dec 2007.
I believe it can be another Top Glove which can continue to grow steadily in the next 3-5 years.

Audit Fees Issue?

This issue has been brought out as a result of Transmile case. Some argues that the low audit fee in the country has prevented the external auditor to carry out entended auditing procedures.
I think it is very unfair statement from investor's prespective. As the external auditor, their job is to ensure the financial statment is true and fair view when they signed of the report. This is nothing to do how much audit fee does the company is paying to the auditor. If the above arguement is valid, should we assume that higher audit fee indicates the report is more reliable?


With reference to the interim report from Moores Rowland Risk Managament Sdn Bhd, Transmile's 2005 result is in doubt too. In order words, partner from Deloitte & Touche who signed off last year report should be responsible as well? Should investors take action against the external auditor?
Let us wait and read more upcoming report from Moores Rowland ...

Target price for E&O

Kenanga gives a 'buy' call with a target price of RM4.10 based on its sum of parts revised RNAV. Meanwhile, HDBS continue their 'buy' call with a RM3.80 target price, also based on its RNAV calculation.
Personally, I think this stock should be trading within the current range, with no major fluctuation from its closing price at RM2.96 last Friday. I always use the price of E&O Prop as the 'yardstick' for E&O as E&O Prop is the major income driver for E&O. E&O Prop closed at RM3.54 last Friday.
I shall look into E&O again once there is a big gap between the share prices of E&O and E&o Prop.

Inappropriate billing from content providers

I read about the above issue again this morning. This round it is in one of the chinese newspaper, Oriental Daily. Both Macro Kiosk and Nextnation were mentioned in the article. It is stated that both content providers have breached the rules but still managed to continue their business with the provided short codes.
Macro Kiosk (a subsidiary of listed company, Goldis Berhad) is in the highlight in the article. A customer lodged a complain to Screenshots (a blog site) and the blogger uploaded the customer's statement to the blog. After that, the innocent customer was charged RM200++ by Macro Kiosk for being the charges of mobile contents provided.
The article also shows that Telcos (Maxis, DiGi and Celcom) are actually getting 30%-40% from the content price charged to customers. I believe the body in charged should do something as the percentage is too high and this may create unhealthy environment in this industry.
I am not sure about Nextnation case as they have released press statement about this. I have no idea whether this issue continues to happen after the release of press statement or it was actually before this. Anyhow, nX was awarded the prestigious Mobile Content Developer of the Year at the annual Frost & Sullivan Malaysia Telecoms Awards Banque. This indicates that they are actually doing the right things.
Perhaps nX should issue another press statement to make thing clearer?

Upcoming mobile games from Ozura

Nextnation wholly owned subsidiary, Ozura is set to release another 3 new mobile games - Burnee The Cook, Journey to Olympus and Counter Smash.
I believe Counter Smash will receive a hot response from the gamers in Malaysia as badminton is the No.2 sport in Malaysia.
Let's try it out when the mobile games have been released officially ...

Goldman Sachs acquired additional shares in RCE

High profile foreign investment fund, Goldman Sachs acquired another 2,200,000 shares of RCE Capital Berhad. Goldman acquired the shares after RCE announced another good quarter result on 22 May. Filing to Bursa Malaysia shows that they acquired on 23 May (1.40mil units), 24 May (1.13mil units) and 25 May (0.67mil units). After these acquisitions, Goldman Sachs holds 54mil shares of RCE. This represents a total of 8.35% of total paid-up shares of the company.
The trading price range of the above 3 days is from RM0.82 to RM0.89. Goldman is comfortable to add weight in this company at the mentioned range. Once again, looking at the investment track records of Golman, I am very confident that RCE stock price will grow to another higher level. It closed at RM0.81 today and this should be a very attractive price for value investors to buy in now.
Will RCE stock price increase like E&O or AsiaEp?