Bonescythe Stock Watch
MJPerak had been buoyed with inconsistent revenue and profits due to the changing season in the property market in the past. However, the group managed to scrap through the FYE 2014 with a net profit of RM 4 million.
In need of addressing the absence of recurring revenue in the group, and with the challenging time ahead, what would be the next course of action for MJPerak?
With the latest market outlook, let's have a glimpse of the latest chart movement of MJPerak.
MJPerak had saw huge volume buying as of late 2013 and early 2014, putting the share rising above RM 0.60. However, the volume of the counter subsided in a verge for a consolidation purposes for a period of almost 1 year. However, the recent activities could reignite the spark it needs to take MJPerak back to the trading range between RM 0.45 and RM 0.50, fuel with it's latest announcement of a land disposal to the Perak State Agricultural Development Corporation (PSADC).
A Huge Chalking Windfall Profit
MJPerak had announced it's intention in a land disposal to the Perak State Agricultural Development Corporation at the sum of RM 42.5 million to be satisfied in cash. The recap, the land which is held under PT 829, H.S. (D) 4413, Mukim Lenggong, Daerah Hulu Perak, Perak had been bought in by the company at 2011 at the price of just RM 4.4 million. The sale will see a net income of approx RM RM 38.3 million into the group balance sheet after deducting on the administration fees and RPGT.
The revaluation of the said land will be bringing in huge impact to the NTA of the group in the coming quarter. With the huge increase of the land valuation, the group can easily hive up an EPS of up to 20 cents (RM 38.3 million / 184.8 million shares)
MJPerak still had under it's portfolio several commercial building and complexes that had yet to be revalued since 1987. According to the current market valuation, MJPerak NTA can be looking at RM 2.60 per share (as of current outstanding share of 184.8 million shares).
Realigning Towards Recurring Income Projects
MJPerak foray into the renewable energy is not a new thing to the group. It had on 2014 obtained the approval to build and operate a 1MW hydro electric plant in Perak, in which it had started commencing operation in 2015. With the continuous effort in the country to bring in more renewable energy in the growing energy demand, the demand of renewable energy is still there.
MJPerak will continue to expand heavily in the sector in order to create a reliable recurring income in nature for the group in the long run. The renewable energy project will include hydro electric, biomass and solar plant. As of 2014, the group had vested more than RM 10 million into the purchasing and preparation of the solar farm. While the capacity is still unknown, MJPerak could be looking into operating a 1MW to 3MW solar farm soon.
Amprop is a good example of a developer cum solar farm player in the market. Currently, Amprop is operating a 10.25 MW solar farm which had been providing steady recurring income to the group. Is MJPerak share price going to follow suit what had been in Amprop?
Insider accumulation through Conversion of ICPS
MJPerak had been seeing continuous conversion of the ICPS before the announcement of the proposed land sale. The conversion of the ICPS at a premium had put certain attention towards the incoming development of the company in the coming days.
Taking an average of 30 cents as the cost of acquiring the ICPS (MJPerak-PA), at the exercise price of RM 0.70 at the conversion ratio of 10 ICPS : 7 shares, the insider is paying a hefty price of RM 0.528 for a mother share in MJPerak. Assuming a lower cost of acquiring the ICPS at RM 0.25, it will still translate to a price of RM 0.457 paid for each share.
Example of calculation based on ICPS acquired at RM 0.30
[(RM 0.30 x 10) + Exercise Price RM 0.70] / 7
= RM 0.528
The conversion of the ICPS had certainly raised eyebrow of a potential one off special dividend which could be speculated at 5 cents per share to be rewarded to the shareholder after the completion of the RM 42.5 million land sale, which will put MJPerak in a net cash position.
Given at the current market price of around RM 0.40, MJPerak could be an attractive take in the open market.
MJPerak will be an interesting company in the coming days based on
- Good land banking in Perak
- Windfall profit land sale to sought approval in the coming AGM
- Concentration on renewable energy project for the company recurring income
- Huge revaluation reserve in the company investment property portfolio as well as development land. The latest 5000 acres Agricultural Land that is proposed to be disposed could reflect it's valuation increase in the coming quarterly result.
- Trading at more than 80% discount from it's RNAV of RM 2.60
- Insider accumulation of mother share through conversion of ICPS in a considerable premium
- Potential special one off dividend from land sale profit
Maju with MJPerak? You decide.
Bone's Short Term TP: RM 0.60
Cheers and have a nice day
Regards,
Bone
MJPERAK (8141)
Bonescythe Stock Watch
http://bonescythe.blogspot.com
