Profit from CPO Rise with TSH Resources

Not often big banks cover small companies and at times we fear that this could be a form of research where retail investors being urged to buy with the unloading end by those banks posting a very well written research.

But this company seems to be interesting and new to us!

First of all, the share price over the past year seems to have followed CPO prices including the recent rise in CPO price.


Based on the technical analysis chart above, we are looking at high levels of volume in last week of January this year. This could be the sign of increasing interest.

While it trades a little higher than the previous transacted prices, it is still a wait and see strategy for us.

According to the report by DBS, it is definitely packed with good fundamentals such as high margins (years with higher CPO price). Not a loss making company in 2018 with CPO dropping like a dead bird. Having young biological assets compared to most plantation players at only 8.5 years average (peak 12 years).

However, we are not happy with the premium of 30 times earnings that the market is paying.

The debt to equity ratio nearing 100% is common for most plantation companies. In fact, it should be higher for smaller companies with younger trees in their portfolio. The loans are structured so that they can pay when the time is right/when the yield of CPO is at the highest.

Again, a good recommendation by DBS research for a company that is usually under researched and something to keep in your watchlist.

Check out the report below.




Who Is On The Other Side?

The ability to buy low and sell high is only possible due to a vast variety of information that everyone has causing fluctuations in the market.

Stock market movements often deemed to be efficient and directly reflects the current condition of the particular company tends to have some flaws in the model itself due to inefficiency and un-balanced info.

The article below is from a notable investment writer previously from Credit Suisse, Michael Mauboussin which talks about “Who is on the other side?”.

If you are selling and someone is buying, either one has more information than you or the buyer of the stocks you own have no clue what they are buying into including their intention.

Have a look!


DBS on Muhibbah Engineering

We were looking at this company for quite a while but nothing interesting seems to come by. Based on the daily chart, it seems though the price had stabilized at the current level and we believe that the current valuation is cheap.


The share price had been consolidating around this level and we felt that it is waiting for a catalyst to move it up. Revenue and earnings had stabilized, and risk factors would likely be unfortunate situations or political problems rising which we can’t control.

According to the report and our take on the company, the value lies with the concession from the Cambodian airport rather than construction. The report actually compared Muhibbah to operators like Malaysian Airports and Airports of Thailand.

The share price reaction would agree to this as well when majority of the constructors in Malaysia fell after GE14 where cuts happened for infrastructure investment.

But we aren’t collecting this counter just yet! It has been under the radar for far too long, but it is good to be kept as part of your watchlist. What do you think?


Did PH Spend More Just Like What Najib Posted?

We rarely comment on political posts but the latest post by Najib on his Facebook page definitely spark a rage as we believe the public should understand how real/original data can provide a different conclusion just by adjusting the time frame referencing.

In his explanation, the PH government stated that expenses should be cut in order to reduce our debt but the fact is that in the 2nd half of 2018, they actually spend more than the previous government.

The numbers below obtained from Bank Negara shows proof of the additional spending.


To an un-trained eye, the total expenditure might seem clear that the PH government had spent RM 4.6 billion extra in 2018 compared to 2017 just by taking [157,545 – 152,863].

In fact, even if you would to calculate percentage wise of the government spending, you will find that:-

2017: Expenditure is 112.33% of Revenue (152,863/136,080)

2018: Expenditure is 112.65% of Revenue (157,545/139,842)

Not that made us wonder…

In the snapshot above, the month of May was included in the post.

The election happened on 9th May 2018 and the PH government took over somewhat middle of the month. Even then, it was almost end of the month to even brought up the issue of problems in the financial structure itself.

The expenditure for May 2018 was higher by RM 5.98 billion compared to 2017.

Could this be the expenditure by the previous government prior to election?

Only the people keeping books could tell.

But we ran the numbers again excluding May 2018 and this is what we found.


In 2017 (Jun – Nov 17): Expenditure was 111.55% of govt revenue. (129,472/116,056)

In 2018 (Jun – Nov 18): Expenditure was 107.70% of govt revenue. (128,166/118,993)

Not only the value declined, the expenditure was 3.85% less although the revenue generated was higher for 2018.

Our quest is to educate the public on how to investigate and analyse numbers to make sense rather than feed on what’s given. In fact it doesn’t require calculations as complicated as additional mathematics to see a problem with what was claimed in the post.

Ace Market’s Orion IXL? The Future in Fintech?

Not often do we see a random report without target price or whatsover for a company from a bank. But prior to the release of this report, stock price of ORION had spiked and profit taking happened yesterday.

We have yet to determine whether this is a boom or a bust but the report below certainly packs a punch on the information provided. Rather than the usual coverage that we see, we believe this is more of a promotional coverage for them.

Have a look!


Penang Transport Master Plan

Plenty of cuts in the government’s construction plans but the Penang Transport Master Plan seems to be the shining star for this year’s construction sector.

Public Transportation


Starting with public transportation, SRS Consortium got the award as the project delivery partner for the LRT in Penang.

GAMUDA comes into mind with its 60% shareholding in SRS Consortium it is definitely a positive factor for them moving forward. Furthermore, the expertise of building urban rail network seems to be specific only to Gamuda at such a huge scale. Tunneling expertise are one of the uniqueness for them.

IDEAL on the other hand holds 20% of SRS Consortium and this is something that we can look out for. If the project continues and the payment comes in the form of land given to them by the government. It is likely that we see new reclamation of lands popping out on the right and bottom of the Penang island.

On completion, the project would produce lines which looks something like this.


New Highways


VERTICE and VIZIONE would be the highlight as they have already started the construction of the elevated bypass from Air Itam connecting to the main highway named Tun Dr Lim Chong Eu.

Undersea Tunnel



Consortium Zenith Construction had gotten the contract and the feasibility study itself had been paid out with two parcels of land in Tanjung Pinang.


The RM6.3 billion project which consist of roads and the tunnel itself would be 110 acres more of reclaimed land in Tanjung Pinang and 30 year concession for the company operating the tunnel.

Overall, MRT projects in Kuala Lumpur would likely continue by with a price revision but the projects in Penang seem to be moving forward quickly as the price was set by the current Pakatan government.

No doubt political factors might be the catalyst moving things forward quickly up north but it is definitely not a lackluster year for the construction projects in Penang. The spillover effect from this benefits non related but Penang based operators as well.

IJM who have a project stuck would likely see that it resumes with plenty of positive catalyst coming into place.

How Do We Deal with Big Dive Like Inari?

Certainly as you all can see, our long-term pick INARI had prices crashing deeply with multiple bad news queued all the way to Apple cutting its production.

With our initial reference price call at RM 1.96, it had dropped significantly by more than 30%, but hope is still there. It is better to deal with it using a smarter way rather than cutting loss on the position that might be worth a lot more in the future.

Times like this, it is important that we re-evaluate the sanity of the targeted numbers.


We look at the current price of RM 1.30 trading at PE of 17 with a market capitalization of RM 4 billion. At one time, it was trading at a market cap of RM 7.6 billion and that meant the company lost almost of its value in Q4 2018 alone.


Markets do get over-bought during a boom and similar goes to being over-sold during a boom. Certainly, we felt that it gets oversold this time around. But is this the bottom?

Nobody can quite tell us because market forces are determined by the bigger holders of the share rather than so called ‘natural forces’ you see for forex markets, etc.

More efficient markets like forex would see prices jumping quickly when it gets oversold. For shares, larger shareholders kind of control the movements within a certain band when they rebalance their portfolio.

We believe that the share entered the oversold territory with continuous negative news battering it in the market. But we are not adding into our position just yet! The continuous negativity might not be over yet and if you think that Apple’s news is already bad enough, it might not be it.

We chose to stay cautious before adding more to our portfolio. Much similar to the reaction of not catching a falling knife in the world of technical analysis.

Is the Earlier Buy Safe?

We think that the revised target (due to Apple numbers) are too high for FY2019 to see the share price going above RM2.00. But this is still not a call to cut the position as we believe the re-rating would only come in 4th quarter of 2019. That would be reporting period for August 2019 in our calendar.

The original buy call was placed due to the upcoming contract by Osram rather than the continuous revenue generation through Broadcom.

Certainly, the Apple cut was a pain where the Osram part built might make its way into Apple’s phone or wearable devices in the future such as facial recognition and health sensor. But the revenue revision from Apple isn’t that big after all (6% of revenue reduction).

In short, you will not see prices jumping above RM2.00 in the near term.

EPS Targeting

Take this scenario, even if we lower the EPS generously by 20% based using FY2018 numbers to 7.144 cents a PE targeting of 20 and could still achieve a target price of RM1.42. Which is why we felt that the counter had became oversold at this point and undervalued.

We believe the Apple revenue revision isn’t affecting Inari as what the market sees and initial targets still hold with a zero growth FY2019 but a 20% growth in EPS for FY2020.

With a PE targeting of 20, our target price for 2019 would be RM1.78 for 2019 and RM2.14 for year 2020.


Although it seems these numbers are estimates and worse could still be happening, we believe that the prize would be the capacity increase in year 2020. New revenue streams would begin to pour in and so as the growth in EPS.

Three of the biggest plant in the portfolio of Inari each with over 200,000 sqft in built up area would be constructed and this is where the expansion of revenue would come from.

Obviously the risk is being built and no contracts come into place but at the moment, the Osram contracts seems solid.

Sell side analyst reports had revised down the target for FY2019 but we think that as a personal investor, it is a great time to pick up oversold items.

CIMB Starts 2019 with Banks Again

Happy New Year and this is our 1st post for the year.

The deal is almost clear that all loan growths would be low. Now this isn’t to tell you how banks would perform and whether it is invest-able or not, but more likely the banking data expectation would be a leading indicator for the economy of Malaysia.

Take a look at their expectation ahead