Salcon Berhad (Salcon - 8567) will be bracing for a better year ahead as earning will start to turnaround in 2016. For the past 2 year, Salcon earnings is hampered down with a series of delay from the construction of Langat 2 Water Treatment Plant. The construction had finally saw full green light late last year when all the supplementary agreement had been signed between the Selangor state government and the Federal Government.
However, the delay of construction in Langat 2 Water Treatment Plant had created a critical supply issue in Selangor that need to be addressed immediately before the projected commencement of Langat 2 Water Treatment Plant that is pushed back by 2 years to 2019.
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The Selangor state government had identified 2 new plant to be built, 1 at Semenyih 2 plant at Jenderam Hilir, while the other at Labuhan Dagang at Kuala Langat. Both the project will carry a total value of RM 800 million, in which Selangor is committed to see the project taking off in the middle of 2016 with no delays, and slated to see commencement in 2017. Labuhan Dagang will hold 200 MLD while Jenderam Hilir will have 100 MLD capacity. (MLD refers to million litres per day)
Massive Treasury Share Buy Back and Major Shareholder Share Buy Back
The market had saw massive treasury share buy back on Salcon recently. Salcon had been buying back in an active manner at the region of RM 0.60. The latest recorded buy back saw Salcon taking in almost 2% of outstanding share into their treasury holding.
Aside from treasury share buy back, the major shareholder had been seen buying in huge stakes as well. Infra Tropika Sdn Bhd had acquired more than 5.6 million of share in the month of March 2016.
Both the buy back activity from company and shareholder will continue to outline the confidence of the director and major shareholder in the underlying project and upcoming prospect of the company in the future.
Salcon will also be looking to see a finalization in the asset disposal in China at the end of April 2016. The completion of the disposal see Salcon significantly lighter by RM 138 million of debts, while cash will increase to near RM 300 million.
This will see net cash per share of almost RM 0.30, which is 50% of the current market value of it's share price. The latest NTA of Salcon is RM 0.85.
Technical Outlook
Salcon had successfully defended the major support line at the price range of RM 0.56. Currently, Salcon had form a solid consolidation at the price range of RM 0.60.
According to the chart, Salcon will see an intersection of a long term down trend line against the support price range at RM 0.60. A strong breakout at RM 0.60 will be a significant technical development for Salcon as being breaking away from the long term down trend resistant as well as breaking up after a consolidation effort at the RM 0.60.
The uptrend technical development will be supported with underlying fundamental as well as coming prospectus in addressing the water supply issue in Selangor.
To further back up, the strong volume presence in KPS recently resemble a good indicator for more interesting development in the Water Industry, especially with Selangor committed in spending RM 800 million for 2 water treatment plant.
At the current price, Salcon continue to be a good buy, given its strong financial balance sheet, strong book order from Langat 2 as well as strong prospectus in the RM 800 million construction packages in the 2 water treatment plant in Selangor.
Salcon short term target remain at RM 0.65, while a medium/long term target will not be shy of RM 0.75 to RM 0.80
SALCON (8567) - Salcon - Uprising Water Dragon
http://bonescythe.blogspot.my/2016/04/salcon-uprising-water-dragon.html
