Thursday, April 23, 2015

How to interpret company announcements - Koon Yew Yin

How to interpret company announcements - Koon Yew Yin

Author: Koon Yew Yin | Publish date: Tue, 21 Apr 2015, 04:13 PM

According to Malaysian Securities Commission’ rules all listed companies have to make announcements of their quarterly results and other business activities that are unusual to their daily business operations.
I would like to share with you my experience on how to interpret and take advantage of the various announcements as follows:
  1. Announcement of quarterly result: this is often a catalyst to move share price. If the profit is good, the share price will go up but if the profit is not good the price will likely come down.
  2. Announcement of purchasing a large piece of land for development eg MRCB’s recent announcement of signing the S&P agreement to buy the Germen Embassy land in KL for a few hundred million Ringgit. Many investors would think that it is a wonderful deal to be able to own and develop the property right in the heart of KL. But smart investors with some imagination must consider this purchase very risky in view of the oversupply of properties in KL. Moreover, it will take about 7 years to complete the project from planning approval to construction and sale of all the properties before you can see the financial result. At the mean time, investors are exposed to 7 years of risk.
  3. Announcement of company share buyback is tricky to interpret. It can mean that the management wants to buy back its own shares because it is undervalued. But sometimes the management wants to prop up the price to stop the price from falling because of poor quarterly result. Investors must look at the profit growth first before buying the share. You may be tempted to buy because the chart says so. Share prices can be manipulated if the daily trading volume is small.
  4. Announcement of right issues with free convertible warrants can be tempting to many investors. You must be careful to examine the true reason for calling the right issues. Do not subscribe blindly. Quite often due to poor management, the company has poor cash flow and the business has too many challenges. As a result, the company needs more cash. Moreover, this kind of announcement will push up the share price, offering you a chance to sell at a better price. You must remember that good profitable companies do not need to get money from calling for right issues.
  5. Announcement of bonus issues is usually a good sign that the company is able to accumulate sufficient profit to issue more shares to benefit shareholders. This announcement will push up the share price. Of course the price will be adjusted soon after the bonus issue and the price will go up again if the company continues to show good result.
  6. Announcement of share placement of not more than 10% of the total issued shares is a good sign that there is demand by fund managers to own these shares. If they buy them from the open market, it will cost more. This is reassuring to all existing shareholders because the big buyers would have studied the operation of the company in great detail before making such a big financial commitment. They should not think that their interest is being diluted. They must bear in mind that the company will have more cash for expansion which will benefit all the shareholders.
  7. Announcement of a new substantial shareholder who bought all his shares from the open market is a good sign. According to S.C. rules, any investor who owns more than 5% of the total issued shares has to declare his interest. He has also to announce if he subsequently buys or sell the shares because his action will affect the decision making process of other investors.
  8. Announcement of Company Directors’ buying or selling shares is a good indicator of the true value of the shares. All company directors have to make announcement when they buy or sell their shares. If they continue to buy more shares, it is a healthy sign, provided you know that the company is really doing well and that they are not buying them to simply push up the share price.
  9. Announcement by a contractor of securing a large multi million Ringgit contract for the construction of a big project through the open competitive tender system will often encourage investors to rush in to buy the shares in anticipation of the company’s profit growth prospect. Many would think that the contractor with additional work would naturally make more profit. You must remember contracting is a very risky business because of the open tender system. The contractor has to take a lot of risk to submit the cheapest price to win the tender. That is why there are so few really successful listed contracting companies. Very often building contractors are also property developers.
  10. Announcement of dividend is a good indicator of the company’s performance. The company that declares increasing dividend is definitely a good company. This shows that it has positive cash flow and can afford to benefit all its shareholders. This sort of company will not need to call for right issues to raise cash for expansion.
  11. Announcement of privatization of the listed company is rare but when you see this type of announcement, you can make money if you know how to position yourself. The controlling shareholders offer to buy up all the outstanding shares that they do not already own, usually at a higher price than the current market price. As soon as you see the announcement, you can buy it before the price go up to the offered price. If you consider the offer is unreasonable, you can wait until they offer a better price. You must bear in mind that the better offer may not come and it may be more advantage to accept the cash offer and use the cash proceeds to buy other shares.
Conclusion: There are about 1200 listed companies and many of the companies are making announcements every day. It is impossible to read all the announcements. After you have read the above guidelines, you can select the useful announcements to read to save time.
Under the current condition, I will not read announcements by building contractors and property developers. I am not interested to know about huge land transactions.
I will also not read companies that have poor profit growth prospect.
As you know, our Ringgit is the lowest in the last 5 years and readers should look at announcements by companies exporting their products in US$.

Tuesday, April 7, 2015



When you’re present, aware and actively creating; there’s nothing really to regret. You see that the mistakes you’ve made are lessons to learn that helped create who you are today. It’s never too late to start living from the heart, for that is a place where regret simply does not exist!

1. Pretending to be something you’re not.

What does it mean to truly be yourself? It’s speaking from the heart and having the awareness that lets you know when to engage and when to listen. If you’ve ever held back something you wanted to say because you’re scared the reaction; you’re still not being your self fully.
Think about the energy you let off in your interactions and see how it’s effecting your peers. The point is to allow your expressions to flow while still having the awareness of knowing what to say and how to say it.

2. Letting others choose your life for you.

This is a big one we all need to understand, especially if you’re a parent! We are our own teachers, guiders and mentors. This can look like a lot of different scenarios from your friend who is a bit too pushy to parents who make you go to university. Communication is key, expressing what you want in the moment is so important to make sure everyone understands where you are coming from.

3. Being unaware.

Our world is filled to the brim with unconsciousness; and it manifests in so many different ways. When we can practice awareness on the smallest scale, like picking up after ourselves, seeing what needs doing and just doing it; urlhaving that knowing of what needs to get done.
Cooking for a group when you see everyones hungry, knowing you’ll need something ahead of time and preparing it; just being aware. When this is practiced enough, it becomes habit and translates over onto a global scale!

 4. Keeping negative company around.

This can be a tricky one, and as always, communication is key to understanding. If there’s someone in your life who is causing you distress and you are able to talk to them about it, do it! If the lines for communication aren’t secure enough, don’t feel bad about ejecting yourself from someones life. If they are mistreating you, being unaware or even simply not engaging with you, they might not see it. You can choose to be a facilitator of growth for this person if they will allow for that transformation.

5. Avoiding personal growth.

This is something we’ve all been guilty of; perhaps some more than others. What does this look like? It’s specific to you and your life, the choices you make and the lessons you choose to learn.
When you make a mistake and get called out for it, don’t defend it, just listen and grow from it. Defending, denying or ignoring the problems you create does not facilitate growth.
Seeing what you’ve created and being able to see a solution and how not repeat your mistakes is the greatest recipe for growth.

6. Giving up.

Don’t do this! There is a difference between giving up on something and taking a break from it. When you’re working hard and you need to stop for the night, great job! You deserve that relaxation. When you set a goal for something and don’t complete it – that’s okay, you can continue it later. When you refuse to continue working on something wether its work, relationships, a hobby, etc, that is giving up. Finish what you start because it always feels better.

7. Overthinking everything.

In the design of our society, it’s almost impossible to not overthink things. There is so much stimulation, a never ending stream of thoughts is always flowing through our brains. Take a breath, use this moment to slow down and focus on your breathing, the physical environment and your physical body. This is grounding and will help take you out of your head and into your body.

 8. Not speaking from the heart.

At the end of the day, if you’ve worked hard to make people feel good, you usually feel just as good. When you speak truthfully, from a space of acceptance and true understanding; everything you say resonates with everyone.
Truth is universal and everyone will understand where you’re coming from when it’s from the heart.

9. Waiting for the next day.

Bring yourself back to the present. Focus on your breathing again, focus on what needs to get done this moment. If you’re constantly wanting the day to end, to be somewhere else or dying to crawl back into bed, evaluate what you’re doing with your life. Where is your attention going, do you enjoy the jobs or tasks you preform each day? We have a lot more freedom than we realize; do what you love. 

ACGPET_2037322c10. Being unproductive.

What are you bringing to the world? Create from your soul! What brings you the most joy, makes you the most excited and inspires you immensely? The world needs creations from the heart, ideas that shift us into the next stages of consciousness. What are you bringing to the table?
Most of us aren’t in our purpose so navigating life can leave us feeling lost. Follow what brings you joy, that thing that you want to share with the world.

Saturday, April 4, 2015

Rubber Gloves - More Upside from Earnings Growth!

Rubber Gloves - More Upside from Earnings Growth(finally !!!)

We maintain our OVERWEIGHT rating on the rubber gloves sector. Rubber glove stocks under our coverage have performed well YTD, led by KOSSAN (+30%), SUPERMX (+26%), HARTALEGA (+23%), and TOPGLV (+21%). Nevertheless, we believe they still have further upside moving into 2Q15. The stage is set for rubber gloves makers to post decent-to-solid quarterly earnings growth over the next few quarters. Our investment case is based on: (i) resumption of earnings growth in coming quarters, underpinned by new capacity expansions matched and fueled by sustained demand for rubber gloves, led by nitrile gloves, (ii) favourable USD/MYR exchange rate, and (iii) the sustained low raw material prices especially latex. We expect glove makers to announce good sets of 1QCY15 numbers due to the commencement of new capacity starting from Jan 2014 and a favourable forex rate. As an indication, the recently announced Top Glove’s 2Q15 results which topped expectations were boosted by the strengthening of US dollar against MYR. In the meantime rubber glove players indicated that customers have been found for their new plants’capacities. Our Top Pick is HARTALEGA with a TP of RM9.50. We continue to like HARTALEGA for its: (i) highly automated production processes model, (ii) solid improvement in its production capacity and reduction in costs leading to higher margins compared to its peers, (iii) innovation in producing superior quality nitrile gloves, and (iv) positioning in a booming nitrile segment with a dominant market position. We also have OUTPERFORM calls for KOSSAN (TP: RM6.68) and SUPERMX (TP: RM2.75).

Mixed bag of 4QCY14 results. Results of the glove makers from the 4QCY14 results season were mixed. Both Supermax and Hartalega posted results which came in below expectations. However, Kossan Rubber came in within but Top Glove topped expectations. Hartalega’s results were lower due to higher-than-expected operating expenses arising from new recruitment of labour for the incoming NGC project. Supermax saw lower-than-expected sales volume and start-up costs incurred in new plants. Kossan interestingly saw a 7% QoQ volume growth driven by maiden contribution from additional new 5 lines in Plant 1. However, the best performer was Top Glove in its recently announced 2Q15 results which topped expectations, due largely to an 8% strengthening of US dollar against the RM.

New in-coming capacity to drive quarterly earnings growth in FY15. Concerns of oversupply appear to have dissipated as earlier highlighted. In fact, in-coming new supply had been slower-than-expected. However, after a year of slowdown in most of 2014, all four players namely Hartalega, Kossan, Top Glove and Supermax have started commissioning their new plants gradually in end 4QCY14, albeit at a slower pace. As such, the slower-than-expected ramp-up in new production capacity further reinforces our positive outlook on the sector by allaying concerns on competitive pressure and oversupply issues. Apart from favourable forex, we expect new capacity to drive earnings growth of rubber glove stocks under our coverage over the next few quarters. Hartalega’s NGC plant has commissioned production in end Dec CY14 and currently with six running production lines. We expect Kossan to register solid growth in both revenue and earnings for 2015 with additional capacity of 6b pieces of gloves added after the full completion of three plants with 17 double-former high speed technological advanced production lines running in full force. We understand that customers have been secured. This brings the three new plants’ installed capacity to 22b from 16b per pieces of gloves per annum. On Supermax, we understand that two lines, from the new plants namely Lot 6059 and Lot 6058, are expected to start commissioning soon. From our channel checks, demand for nitrile gloves is strong.

Weakening of MYR vs. USD is short-to-medium-term positive to rubber glove players. Taking a que from Top Glove’s recent 2Q15 results, we expect other glove makers to report good sets of 1QCY15 numbers underpinned by the strengthening of USD against MYR. YTD, the USD had risen by 7% against the RM (USD1 = MYR3.69). Generally, a weakening Ringgit is positive for glove makers. Since sales are USD-denominated, theoretically, a depreciating ringgit against the dollar will lead to more revenue receipts for glove makers. Ceteris paribus, a 1% decline of RM against USD will lead to an average 1%-2% increase in the net profit of rubber glove players. However, we believe the impact from currency movements to glove players’ earnings is neutral over the long-term. This is because glove players typically hedge the currency on a consistent basis, hence in theory any negative or positive impact will be neutralised over time.

We like KOSSAN, maintain OUTPERFORM and TP upgrade to RM6.68. We are raising KOSSAN’s TP from RM6.00 to RM6.68 by upgrading our PER from 16x to 18x (at +2.0 SD above its historical forward average) as its prospect is enhanced by the new production lines that could potentially lead to higher margins. We believe KOSSAN’s new gloves production lines could potentially lead to higher margins from improvement in productivity and efficiency as the lines are designed to focus on larger orders with fewer clients (compared to previous production scheduling model) for a single product type and specification, thus reducing idle downtime from frequent machinery setting adjustments to accommodate diverse specifications. This could lead to an output of 35,000 pieces of gloves per hour, which is higher than its existing average production line speed of 29,000 gloves per hour, a robust 20% enhancement. Its current production style comprises shorter production lines catering to a large customer base with diverse products, which reduces reliance risk on few larger clients. However, such an arrangement also limits margin expansion due to more downtime on frequent machinery setting adjustments.

Maintain OVERWEIGHT. Our TOP PICK is HARTALEGA with an OUTPERFORM and TP of RM9.50. We raised Hartalega’s TP to RM9.50 from RM8.20 based on higher FD CY16 PER of 24 compared to 21x previously (at +2.0 SD above its historical forward average) due to its solid management and its ability to consistently remain head and shoulders above its peers in terms of better margins, solid improvement in production capacity and reduction in costs. We like HARTALEGA for its: (i) highly automated production processes model, (ii) solid improvement in its production processes and reduction in costs leading to higher margins compared to its peers, (iii) innovation in producing superior quality nitrile gloves, and (iv) positioning in a booming nitrile segment with a dominant market position
Related Posts with Thumbnails