IPO – Binasat Communications

It has been awhile since we found solid IPOs that are worth to subscribe. Binasat seems to be interesting with its prospectus. The attachment below contains things that are important and extracted from the prospectus so you don’t have to go through 350 pages of it.


As usual this is how we start and rate the fundamentals.


Growth 7/10

The story for growth is strong where in the pre-prospectus stage, we see the company talking about expansion into frontier markets like Myanmar, Vietnam and Laos. If you are positive on the ability of the company to growth there, then this would be a good choice.

Furthermore, the fibre optic segment is still something that many have yet to tap on for the South East Asian region. We forecast that this would be the difference maker in the future comparing to how much the company relies on satellites for its current revenue.

Industry 7/10

Unlike telco service providers that we dislike to invest, this seems like a a telco company but the different is totally different from the likes of Maxis or Digi phone line providers. Binasat is more towards a service provider for telco companies.

Maxis in particular uses the satellite services at the current moment where the services includes satellite.

Extracted from The Sun

Domestically, the group claims to have a 57% market share for maintaining satellite ground stations located at petrol stations and 64% market share for O&M for all satellite ground stations.

Financials 8/10

Indeed very solid margins and we can only hope that the company continues to perform so. The consistency can be seen over the years not only the year prior to IPO. Basically we do not sense any form of beautifying the income statement just for the current IPO.

Moat 8/10

Going back to the extract above, it stated that they have 57% market share for ground stations. We believe this form of moat is high and its customer base has one of Malaysia’s largest telco operators which makes it hard for other opponents to enter the market.

Proceeds 8/10

Top class proceeds where we always like to see. Most of the money goes into investing in assets that provide a continuity to the business and long term gains. Only 27% of the proceeds would be used on working capital. It is very unlikely that this would be used to pare down debt since the amount of borrowing merely hits only 28% debt to equity.

Valuations 5/10

Although all the other fundamental numbers are more than satisfactory, we felt that the stock is listed at the more expensive end of things. You might question paying only PE of 11 is quite low seemingly the KLCI PE is somewhat close to 16. As a matter of fact, we have to factor in that IPO valuation needs to be much lower in term of premium to buffer our investment.

We have ensure that there is a likelihood of a quick flip on the first day or being really cheaply priced for long term holding in the case where it doesn’t boom in the first day. We felt that a PE of roughly below 9 is much better to get a higher valuation score.


Average valuations suggest that we do not go all out on the subscription, we suggest that you subscribe 70% of what you are used to for this issue. We felt that on the first day of listing, it might spark a 8-9% gain. Considering as well new year and many investors are seeking new things to put money into.



CS Expects Bank Negara to Raise Rates 1Q18

It looks like our interest rates will raise again following the US and this time, the sentiment shows positive results than before.

Consumer inflation from fuel prices had already turn into something that we can’t get away from and MYR had strengthened once again. Although we are indifferent than was it was a year ago, the consuming index continues to improve.

A simpler way to put this “Life goes on…”

Take a look at the report from Credit Suisse


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


Insurance Sector New Rule by BNM

Under the latest Bank Negara compliance issue, foreign insurers listing in Bursa Malaysia requires a 30% shareholding by local investors. In the report below by CIMB, they view that we would likely see IPOs coming in for large cap insurance companies such as AIA, Great Eastern and Prudential coming into the market.

They would be required to open up their holdings to local investors let it be retail or institutional.

Another alternative would be seeing more and more M&A activities happening. Nothing much to recommend here but its a good head up for now.


Unisem Nice Chart Good Industry!

UNISEM just posted the latest quarterly report with record revenue. Higher revenue growth but lower earnings is always a good sign and it could signify that the earnings lagged due to reasons such as deferred cost, etc.

Once margin normalizes, it would grow accordingly catching the growth in revenue. If the revenue grow or maintain in for the next quarter’s earnings report, then we should see share price reacting aggressively catching the ideal price to earnings target eventually.

Note that we always prefer signs of revenue growth rather than stagnant revenue. The reason being revenue can be used as a key estimate for actual size of the business. Higher earnings without revenue growth would actually mean that the size did not grew but just operating efficiently. A simple value trap scenario that we commonly see.

Chart wise, we see some pull back after the earnings were report a couple of days ago. But we are confident that this pullback is temporary and has the legs to trade the stock above RM4.00 permanently.

Any entry price below RM4.00 seems to be good for the time being.

Have a look at the latest CIMB Report on Unisem