One Month Before INARI’s Earnings

So Apple will announce Q1 2018’s earnings on February the 1st. This is where the official numbers for iPhone X would be out. A source from Fortune covered this.


You can click on the link above and read about it but here is what the preliminary numbers are at.

The tech giant sold 29 million iPhone units in the fourth quarter. That was enough to make the iPhone X the most popular iPhone Apple sold during the period, topping the iPhone 8 and iPhone 8 Plus.

As we know, INARI has a very strong relation to Broadcom which is Apple’s top supplier for RF Chips and the highly anticipated iPhone X remains the top product that could help Broadcom in breaking its historical barrier.

In relation to that, Apple’s iPhone X sales is what made us held on to INARI all this while and we didn’t bother to sell although it went all the way to RM3.80. Previous quarter’s results reported by INARI have yet to include 100% of the numbers by the latest iPhone X and we think that this quarter should show clearly the inclusion.

It would be a week from now till Feb 1st until we get the latest numbers of the iPhone X. We should be able to see spikes within this week and possibly pushing the price to close to previous high of RM3.80.

Putting a bet that iPhone X sales would be good, we think that the holding period continues up till the week prior to INARI’s results release. Which meant that it all comes down to the week right before Chinese New Year.

We would revalue then… For now the wait begins!


OLDTOWN – The Harsh Reality of Takeovers

Roughly a 10% gain for the offer price of RM3.18 from previous close of RM2.88. By far this isn’t the biggest gain we see from a takeover. We see an immediate gain of 20% from IGB then and this isn’t close to what we expect. At least they could have offered a price above  Not much premium to talk about here and this is why there’s a harsh reality when takeover happens giving your rubbish prices.


Pretty much around 3 quarters ago (Sep 2017), we see price dropping continuously and volume is still intact in a small range not to overly do the sell off or ignite somewhat any alert with huge spikes that bring in attention. The key here is to lower the price slow or slightly.


Days before the acquisition announcement turns official, we usually see volume and price spikes

This is the most common case since things tend to leak on the way to submission either its from the valuators, accountants or anyone dealing with the company. If you work in the HQ of Oldtown and see people walking in to your office every day, you can already tell that something is brewing (pun unintended; not coffee obviously) and words around office spread like wildfire,

That is why the lower the stock price goes before a trading halt is put into place, the bid price would seem to be giving more premium.

In the case of Oldtown, being such a big company has its cons where something like an acquisition involves a big group of people. More people knowing equals higher possibility of leak.

Lower last traded price = Lower acquisition price

Who doesn’t want to buy cheap?

Indeed there are cases where some acquisition can be planned over the course of few years because the main shareholders are huge and with the power to depress the price further.

It’s a major advantage where they can properly time the acquisition with the ideal price in favor of an expected huge rise in revenue or profit. Truly an unfair advantage but is likely going to happen only to smaller companies.

The next time you are buying a stock just because they have 50 – 70% of cash value, think again. Before you know it, they have the power to privatize and you are merely holding to a few thousand units which is not significant to make a difference.

This guy here… we still think that they list to get money and institutions are buying back at a cheaper price than listing.


More room for price revision

This is just in case, where if the acquisition fails to get through they could bid higher slowly rather than already paying the maximum that they can afford.

The Harsh Reality?

In our books, Oldtown is a very good counter with tonnes of growth ahead. If you bought Oldtown earlier hoping that their growth into China would make the stock a multi bagger returner, your hopes had been shortened and expected profits had been reduced by a huge fraction.

Fundamentally the company also has a very strong cash holding with little debt to cover. Another good factor to take into account where these could be consider a strong buffer for a company entering a new market increasing its risk exposure.

The offer price is definitely lower than the expected FY2019, FY2020 price at current PE. We expect FY2019 to be somewhere around RM3.50 a share (assuming all plans executed). There isn’t much you can do other than hoping for a price revision in the case where most shareholders reject the offer bid.

Probability of a Rejection?

Old Town International Sdn Bhd is the biggest shareholder with a whopping 40.99% in the latest annual report. Based on this shareholding, we can only conclude that the deal will likely go through as the Sdn Bhd itself might want to take it private as well.


Revenue and profit just started to stabilized and with such a rich cash holding (approx RM200 million) in their books, they have more than enough for the expansion in new markets. So why share with the public shareholders for the coming returns? Furthermore, the assets could sustain without increasing its debt exposure.

If the company requires funds to expand again, then it might list once more but until then this might be a good bye if you are very positive on making huge returns from OLDTOWN.



INARI Another Record Breaking Quarter

What wasn’t said had already been said by the stock price that flies this morning. It is easy to read when quarterly reports post higher revenue and higher profit where there’s no argument to be made clear unlike the TUNEPRO review (< click for link) that we posted earlier.

Although this is the record quarter for Inari, we think that it is not over for the obvious fact that Q1 2018 which ended in September 2017 doesn’t factor in the iPhone X yet. The teardown for the latest iPhone X has already been done and I count 3 parts in the preliminary teardown.

Broadcom BCM59355 wireless charging controller

Broadcom AFEM-8072, MMMB power amplifier module

Broadcom touch screen controller, labeled BCM15951B0KUB2G.

Not sure how these parts contribute to INARI but the whole list isn’t detailed yet in this teardown.


Meanwhile, here is a report from CIMB on Inari Amertron


Another Weak Quarter for TUNEPRO? Not Really

The EPS recorded this quarter was 1.69 cents which brings our forecast for FY 2017 forward PE ratio to 15.63. The deletion from MSCI Small Caps is already taking a toll and weakened the stock further but we still find value in this stock. Below are the few reasons why we still remain positive for this stock.

Business Not Growing?

Our previous article on TUNEPRO got bashed with comments especially from klse.i3investor saying that people who fly Air Asia are cheapskates and they would never buy travel insurance ever. We found that this claim is worst than saying Malaysia is going to bankrupt.

The revenue numbers for TUNEPRO continues to grow and Q3 2017 recorded the highest revenue ever at RM 140 million and this just proved that the public continues to be aware that there is a need for travel insurance even though you are not flying with Air Asia. The fact that EPS does not follow merely has one reason in our view.

But first, just to list things out, the few setbacks from this quarter’s report are:-

  1. Claims increased by about RM 600k
  2. RM 12 million for reinsurance expenses
  3. Management expenses of RM 2.6 million

I guess reinsurance is a major factor that caused the growth in gross premiums not translating itself to profits for the company. Reinsurance is a strange thing where it tests your tolerance as an insurance company towards the original premiums written.


Think of it as a hedging tool if you don’t plan to increase your exposure, you buy some reinsurance opportunities to low the risk and manage what you can handle. Smaller insurance companies see this problem early in the game but eventually with the growth of assets and higher buffer zones, less reinsurnace transactions are needed to be done.

Obviously, an explosion in new premium earn but without the key people behind managing it properly meant that most of the original written premium goes to waste where the money can’t be put to good use such as generating higher returns.

Again, this takes time and this is why insurance is a long term business. From hiring to right person to manage the portfolio to slowly decreasing the rate of reinsurance, this definitely isn’t a two quarters game.


Management expenses increases this is the part where money is well spent. Did you realize marketing had been stepped up recently for Tune Protect? Large billboards, TV spots are going on for marketing initiatives getting people to know the brand better. Since the customers shouldn’t only come from Air Asia, we think that ads will be beneficial even for others.

Other forms of general insurance would eventually benefit from a large-scale marketing campaign. A simple question survey shows that people have no idea the Tune Protect offers other form of insurance rather than travel. When the public gets accustomed to the available products, it is merely time when the business sees organic growth.

In the mean time, we recommend that you continue to accumulate on stock prices weakness in the coming months.

Our forecast for Q4 revenue to hit RM148 million with EPS coming in at 1.77 cents.

For more information on details in the breakdown of revenue, you can see the latest report by CIMB


New Myvi & Perodua’s Suppliers

Pecca Group

This is a good stock to look at, if you are expecting to sell plenty of the new Myvi models which indeed looks promising. Selling plenty of cars mean more seats are needed and Pecca Group is closely related to supplying Perodua on its Bezza models previously.

Perodua Bezza drives Pecca to highest level since IPO – The Edge

We aren’t sure about current Myvi model taking up the seats from Pecca but the likelihood is high. Pecca’s customer base is still diversified throughout different car makers but Perodua still contributes a big chunk close to 30% of their revenue. Note that Pecca will only

A quick check from the chart, we found that the stock price continues to see weakness after the Malaysian automotive sales numbers continues to decline and expect an even slower growth ahead.


Technical analysis showed that MACD is currently turning up which makes it a good time to collect, OBV already saw a good support and the volume from current drop is much lower compared to the stock going upwards.

The downside in technical analysis could be show clearly here. We can’t determine a cut loss point due to insufficient data since the company just launched its IPO last year.

Cut loss point would have to be determined by your tolerance and understanding towards the stock. Recorded results from future earnings would be able to assist in finding more accurate valuations.

APM Holdings

Another company to benefit from the latest Myvi would be APM Holdings where it derives a huge chunk of its revenue from Perodua. APM supplies interior equipments, suspension, electrical & heat exchange equipment to the Perodua.

Again, we do not know whether the new Myvi comes with parts from APM Holdings but based on limited suppliers in Malaysia, it is likely that the use previous suppliers.


Stock chart looks fine, but liquidity is still a major concern. We think that you would need a lot of patience buying into this counter as mostly move movements are hard to read and transacted volumes are small.

We recommend buying based on fundamentals but not our most preferred due to liquidity risk. Stick with Pecca at the moment…

The Switch into MGM China

Our position leveraging on the 2017 Golden Week Holidays with people visiting Macao turned out pretty well going with Sands China returning a 20% gain in merely a quarter. The biggest highlight in 2017 for Macao’s gaming sector is now over after the Golden Week Holidays which also meant that it is time to re-strategize our position.

We moved our exposure in Macao gaming from Sands China to MGM China and the highlight is definitely their latest project, MGM Cotai. MGM Cotai is a newly developed floor space situated in Cotai, Macao where it gets its name. Along with other iconic places such as Studio City, this area of Macao could be considered the latest addition to the Las Vegas of the east.


MGM Cotai would triple the available floor space that they own now for their property in Mainland Macao. The price to earnings ratio have yet to factor in this enormous gain in floor space but this is common for all gaming stocks.

Gaming stocks would usually look upon the first quarter’s earnings contribution from the new property to determine whether it is boom or bust scenario. One might have double the floor space but not double the revenue due to the composition of retail, hotel and gaming in the particular building.

Late last year when Studio City opened, the stock price only moved after around 6 months from the grand opening. The stock price had tripled with just a 100% addition of floor space!

A Bump on the Road

We quickly shifted into MGM from Sands as we fear that things might boom in the beginning of Q4 2017. The thought was logical since the expected opening was somewhere in November or December this year

Apparently luck wasn’t on our side where a week after we entered, the announcement came in saying that they had moved the opening to 28 January 2018. Much of this delayed was due to the tycoon which hit Macao at level 13, indeed one of the worst in many years.

January 2018 isn’t that far away and we are exactly 3 months to the opening. Stock price had stabilized above $17 in comparison with what we bought at $17.92. Merely less than 5% drop is still manageable and an additional drop nearing 10% would have me adding another position of the same value to the portfolio.

The Waiting Begins

The good thing is that Chinese New Year 2018 falls a little late in February meaning that the opening of MGM Cotai isn’t too near as mostly it takes time to populate the retail and getting many things up and running.

We shall see that the new addition would contribute plenty in the Chinese New Year visit rather than this year end’s Xmas by tourist other than China. (note that China isn’t on Holiday for Xmas)

CIMB on Bumi Armada Oct 2017

Well we still like Bumi Armada compared to other operators such as Sapura Energy. We think that the future prospect for Bumi Armada could be considered neutral but the current premium that it is trading is much cheaper than other operators.

But this report from CIMB gave us the heads up from this paragraph.

Bumi Armada Berhad (BAB) may need rights issue, on top of partial Olombendo stake sale

So I guess the weakness in terms of the stock price not moving with the increase in the price of crude comes with the reason of analyst anticipating a rights issue ahead. We would love to acquire after the stock goes Ex. Simple as that!