GADANG (9261) - SOS Gadang, is it end of the road at RM1.27? Part 10
MRT2 CONTRACT ANNOUNCED ON 9 MARCH 2017
1. 7-14 Days prior announcement - 1.10
2. Few days after announcement - 1.23 to 1.31
3. Today 24 March 2017 - 1.27
4. Basically, after the announcement till today, price has increased 17 sen x 649m shares = RM110m
5. Contract for MRT2 is RM952m, based on track record, 10% PAT is achievable = RM95.2m for 4 years project.
6. Profit contribution from MRT2 is about RM23.8m x PE12x = RM286m
7. Upside still have about RM286m less RM110m = RM176m or 27 sen to go.
8. Hence, the new TP is RM1.54 (RM1.27 + 0.27) which is quite closed to RHB's TP1.55
HOW MUCH RHB VALUED ITS UTILITY & PLANTATION
1. Water - RM27m + Hydro - RM5m + Plantation - RM42m = RM74m
2. Plantation comparison - Innoprice has 11,000 ha and market cap is RM565m. Average price = RM51,000 per ha.
3. Small plantation EV/ha = RM30,000 to RM50,000. Using average of RM40,000 per ha, Gadang plantation should be about RM80m.
4. As for Water & Hydro, Gadang has invested around RM60-70m for their equity portion. (For reference only, SILK toll road, invested equity is RM160m, PNB bought it recently for RM380m. SILK was loss making for last 15 years, NPV/Equity invested = 2.375x). For Gadang, it is very conservative to use 2.5X multiple. Hence, the NPV should worth about RM162m.
5. Hence, for Water & Hydro (RHB's value is RM32m), market is given about 2.5X of invested equity, it should worth RM162m. Upside another about RM130m.
6. Total additional upside is about RM170m, with 649m = 26 sen.
7. As usual, valuation should always be conservative. Let's give it a discount of 20%, hence upside is 21 sen.
SO, IS THE NEW VALUATION REASONABLE?
1. Adjusted TP is RM1.75 (1.54 + 0.21) to RM1.80 per share.
2. Based on today's closing at RM1.27, upside is 38% to 42%.
3. Gadang's tender outstanding still have about RM4 billion. There is only about 2 months left for FY2017. Will it get another contract?
4. Although management's guide to analysts is RM500m contract per annum. Based on discussion with my fund manager, they are not surprise if they can get RM1.0 billion contract (as some of their tender is pre-selected tender). Well they have another 12-15 months again to attain it. Hope this round they do not wait until end of FY18.
5. Don't count the chicks before it hatches, but can "hope" for another 20sen upside.
DISCLAIMER
This is not a buy, sell or hold call. Gadang's share price, will goes up and down, Alibaba came, and he left. Some makes tonnes of money, some donated tonnes to them. As long as we don't play with fire, we can avoid being burnt.
WHAT ABOUT CENTURY LOGISTICS?
1. Some friends asked, at 99 sen today, boleh kah?
2. Disregard the price volatility during Jack Ma's visit on logistics and technology companies, Century's fundamental is very average.
3. Plus point is they pay about 3% dividend.
4. Just a quick review, and after reading some "bones" report, Century's catalysts for growth is interesting:
(i) New multi-level warehouse in Klang is ready soon. Century has invested about RM50m (if not mistaken) in the warehouse
(ii) Management announced that they will leverage on CJKE expertise in their latest quarterly result.
5. Let's see what CJKE can offer. One of the TV series I watch, it says "Success equals to desire in action". CJKE intention to expand in SEA is, one, buy Century Logistics, two, partner with Lazada, three, find a big warehouse, four, start a......a.......a...B2C? I am not an expert in logistics, I live it to CJKE.
GADANG (9261) - SOS Gadang, is it end of the road at RM1.27? Part 10
http://klse.i3investor.com/blogs/sosfinance/119079.jsp
