Wednesday, May 23, 2012

Gas Malaysia - IPO

Recently, many clients would like to find out details about Gas Malaysia Berhad (GMB). After doing some research, I try to gather the information from bursa's web, below are the summary.

GMB is one of the ISO certified company who operate the distribution of natural gas and liquefied Petroleum Gas to home, commercial business and industries.The company source it's natural gas from Petronas.

Who is the competitor? 

Only 2 company in this industry, GMB and Petronas Gas Berhad (PGB). PGB involve in distribute to customer who consume > 2 MMScfd, whereas GMB involve those customers less than 2 MMScfd.

GMB can consider as one of the monopolistic business in the country. However, GMB can not simply raise the selling price, hence, it would be something similar to PBA or TENAGA upon listing.

Is the company borrow a lot of money?   

No gearing, meaning the company do not have any borrowing. However, the IPO is offer for sales, hence none of the proceed receive from this IPO will go into GMB's book.

Who is GMB's customer?

GMB have about 33,600 customer base, but 94% of sales actually came from 5 main customers from the industry, they are Nippon Electric Glass, Malaysian Sheet Glass, Hartalega, Fatty Chemical and Central Sugars Refinary.

Currently, GMB's market share is about 13.50%, in other words, there's plenty of room to grow if the management do their job, hopefully!

How's the GMB's earning level?

As usual, this is the most important part. GMB record profit of 229 million last year (2011), with total share of 1,284 million (after IPO), we can calculate the total EPS (earning per share) is about 18 sen. Using the IPO price of RM2.20, the PE is about 13x. I know, fom the surface, ya, very cheap, if compare to Tokyo Gas and PGB which currently trade at about 20x PE. However, this is before the revise selling price, remember the profit margin going to cut down by about 44% starting at current financial year.

What the share holder can expect? 

GMB has a dividend payout policy of at least 75%, hence, it's about 13 sen if GMB can maintain last year's earning. Wait, since the profit margin going to reduce by at least 44% as per the latest contract with government which take effective from June 2011, meaning EPS for next year will be around 12 sen and dividend is about 9 sen only. Base on this figure, 20x PE is about RM2.40, any price above this level is consider high end! Due to the overall market is not so good at the moment, I will recommend "sell" on any price above this level for the time being.

Wednesday, May 2, 2012

Some snippets about Maybank

Recently, I received Maybank annual reports, it's a big change. Now no more thick and heavy book, unless you ask for it. It came with thin booklet and a CD. To my surprise, the CD came with CEO presentation, you can view something like “youtube” as the CEO talk to you at front and presenting the annual report. Compare to last year, where CD came with boring PDF file, now this is big improvement!

Maybank was my first investment when I was schooling at form six. In fact, last time I never did any homework. The reason I bought it last time was because it's the first bank I came to know, where I open my first Saving Account and the branch was near my house. Luckily I made the right choice, Maybank still exist today!

Today, I still make Maybank as my core investment, meaning about 30 to 40% of fund park at Maybank's share. After so many years' up and down, I learnt lesson how to handle the share with profit trading. The 1997 crisis and 2008 financial crisis, both sent Maybank's share price down by nearly 50% from the highest. The recent crisis in 2008 was most scary, the market value just gone by 50% in few weeks time. That time, I still remember, almost all news paper advised investor sell Maybank and many brokers gave target price of below RM3.00! The news of Maybank bought Indonesia BII (Bank International Indonesia), they need money for the purchase, so Maybank came out Right Issue at RM2.75. After the announcement, Maybank's share drop by 10%, 20%, 40% and more, people think Maybank had over paid for the deal. I am not sure how many dare to buy Maybank's share at that time! I advised friends buy Maybank stock and keep for long term, but I came to know later that nobody actually interest to buy at that time. 

Today, Maybank is trading at the range of RM8.65 to RM9.00! Many might not know Maybank is still forming up trend movement. It gave dividend of 60 cents last year, with RM8.65, it's about 6.91%. I think people still willing to pay for RM10.10 a share which translate to 5.94%, is quite reasonable. (but again, I will wait for next financial crisis to buy more, now not in any hurry to buy it)

When one calculate the PE ratio, with earning per share of 68 cent, 14 times is about RM9.52. RM10.10 is about 15 times PE.

From the earning side, Maybank's profit grow by 8% annually, last year, a big surprise! As the profit grow by nearly 20%. Thanks for the re branding exercise and purchase of Kim Eng. Now, the "Tiger" grows with "wings", it can fly higher and further.

However, I don't think it will repeat the same growth as of last year. Assume it can't grow and with flag earning for the next few years, with dividend policy of 40 to 60%, one can easily beat the bank's FD rate if buy Maybank whenever the price go down. Also, Maybank reward the share holder handsomely by providing Dividend Reinvestment Plan. Just imagine how nice if you can buy Maybank with 10% discount to current market price. This enable investor to accumulate Maybank's share at RM8.00 when the current market price is RM8.80!

Maybank don't pay me to promote the stock, this is just to share with all how to take investment from business point of view and make huge potential return!