Feb 25, 2016
Hi all,
WHAT? CASH CALL? Sure or Not?
This is my initial thought too after study the superb result of Q4 followed up by another bursa annoucement by Tien Wah on rights issue call.
Having done some calculation and i find this is probably a SUPER DEAL for me and perhaps one of the most promising investment in 2016.
First, let get into the Q4 result. What is going on inside actually? I find reading Tien Wah's financial statement a little bit tricky but i think i managed to dig out a clearer path.
To understand the figures, i use below rules:
1) I only study latest 2 Q simply because it fully reflect the post-restructuring era
2) I use: EARNING + DEPRECIATION - FOREX GAIN - DISPOSAL GAIN to see if there is any significant changes within these 2 quarters after i exclude above non-operational item. These are the factors that i think affecting "short term" Tien Wah's financial performance and was repeatedly mentioned in the report.
3) Having able to determine the situation, i will do some prospecting on Tien Wah's full year earning.
Below table listed out Tien Wah's latest 2 Q key result:
Tien Wah has many times in their report specifically mentioned about depreciation charge.
On surface, we see a decrease in the profit figures. But in actual, the "lower" profit is due to higher "depreciation" charge.
The "NET EFFECT" actually are almost similar after excluding forex gain for Q3 and disposal gain for Q4, and add back forex loss for Q4. I see it as Tien Wah is able to maintain its revenue performance and operating earning. This is very important for me to continue holding Tien Wah in my portfolio.
Judging the current ringgit weakness and their current unexpired contract, i believe they can achieve similar or better results.
Now, since the net effect are about the same, i prefer to add together 2 quarters earning and derive half yearly EPS.
So, 12.21 + 15.14 = 27.35 sen for 6 months. If you annualized it, that make to 54.7 sen EPS.
To me, the result is still within my acceptable level.
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Initially i have no intention to add more position because i have position at much lower price when i notice Tien Wah.
http://klse.i3investor.com/blogs/TIENWAH/86119.jsp
But having reconsider the rights issue proposal and do some calculator punching, i have added more position.
REASON: RM 1 investment for RM 3 NET GAIN!
I noted several interesting points which i think many forum members have noticed too.
1) The proposal mentioned that the cash call is for business expansion. But, no concrete business proposal can justify the cash call. Middle East? Indonesia? Maybe, i am not sure.
2) Tien Wah's balance sheet, cash level, current ratio, debt/ equity are all in healty level. Todate, they have RM 71 million cash.
3) Size of the cash call also very small in size with the Rights price set at RM 1.00 per right share ONLY
4) The management EXPECT the whole cash call is to complete only in 3rd Q of 2016. The are not in hurry i guess.
Below most likely scenario:
5) They may use the money to pare down the borrowing which will add about RM 600k per quarter into profit from interest saving.
6) Because of the rights shares, the total outstanding shares will increase and this suppose help the share price.
( Tien Wah has the ability to issue bonus issues from share premium and share split from the RM 1 PAR Value to further increase its share liquitity. )
Below my speculation:
1) ever since the new singapore management team taking over the business, they are showing 2 consecutive quarters to improve both revenue and profit (net effect).
2) if they managed to maintain the current performance, i think is fair if we annualized the 2 quarters earning and derives full year EPS of about 55 sen.
3) If the share price able to hit at RM 5.50 in 8 months, the theoretical ex-price will be RM 4.00 per share. (1 rights for every 2 shares)
4) based on RM 1 rights issue price, if you choose to exercise it, you can resell the rights-converted shares at as high as RM 4.00 and you gain RM 3.00 from it. If you choose not to exercise it, you can still sell within 5 days during OR trading and the gain should not run far from RM 3 too.
5) How possible? I do not know. But the Rights issue exercise will only be complete in 3rd Q 2016 (July to Sept 2016). We still have enough time for the share price to appreciate.
If you ask me, i certainly willing to wait 6 - 8 months for 300%- 400% gain. On top of that, my investment in Tien Wah also appreciated more than 100%, Therefore, i have every reason to bet on this!
LAST BUT NOT THE LEAST,
50% dividend policy
55 sen EPS gives 22.5 sen dividend per year.
22.5 sen per current share price of RM 2.87 = approximately 8% dividend yield. YOU DON'T WANT ar??
Cheers,
YiStock.
Additional Note:
All my articles are for reading pleasure only and should not be treated
as buy/ sell call on any particular company mentioned in the articles.
I can never be 100% sure on the data i sourced and correctly predict
the performance of the company I invest in. My investment strategy is
very simple, If the business fundamental has not change, i will buy in
whatever amount i can when there is a price correction. On the other
hand, once i start noticing sign of deterioration, i will immediately
cut the profit / losses. I only take care of downside, the upside will
take care of itself
If i missed any investment opportunity, i will acknowledge i missed it.
If i make a mistake on judging the source of info or material i read on
certain company i invest in, i will only blame myself and vow to do
better in future.
My strategy is FA come first, and forever FA.
I only have 2 sifu, one is KCChong, One is OTB. Take courses from these
2 sifu, and do your own practice. I believe in: the master leads you to
the door, the rest is up to you.
I have 2 idol, Mr ColdEye and Bursa Dummy.
I have an enemy: FEAR
TIENWAH (7374) - RM 1 for RM 3 NET GAIN?- YiStock
http://klse.i3investor.com/blogs/TIENWAH/91852.jsp
