Sunday, August 26, 2012

ILB: Part 2 - Fundamental Remains Intact

As I was writing Part 2 of ILB, it announces its second quarterly report on Friday. Things don't look good at first as profit before tax (PBT) plunged 59% to RM0.54mil and profit after tax (PAT) drops into a red with a loss of RM0.356mil. This happens despite higher revenue achieved (13.4% increase).

According to the report, PBT from operation in China decrease from RM3.5mil to RM2.4mil y-o-y. On q-o-q basis, it decreases from RM1.3mil to RM0.5mil. This is caused by higher labour costs and increased financial costs. I assume labour costs make up large sum of the expenditure as financial costs only contributes RM0.2mil on the increases. Labour costs in China has been on a rise especially in the coastal area. This might post some difficulties for ILB profitability as a large sum of its profits comes from warehousing activities where payments have been agreed earlier in the contract. On the inspection of its cash flow, depreciation rose to RM1.4mil.

Higher pre-commencement operating costs of the JV warehouse in the United Arab Emirates has also contribute to the dip. However this is expected to be one-off and will back to normal in the long run.

In the near term, drama in the Eurozone could affect the still export oriented China although US data does look a little better than few months back. But still, problems are yet to be solved. Logistic business is sensitive to the macroeconomic conditions so by investing in it, we should expect the some volatility when investing in it. 

Quarterly report information as always, is never as comprehensive as the annual report. But based on my rough calculation, its NTA still worth at least RM1.08. Book value is about RM2.53 (it has jumped to RM2.50 in Q1 in fact). Decrease in cash level is used to repay debts. Its cash flow is still healthy where in fact its operating profits before the changes of working capital increases from RM9.2mil to RM9.9mil y-o-y. 

Thursday, August 23, 2012

If America was a dictatoship....

"Imagine if America was a dictatorship.You could let 1% of the people have all the nation's wealth.You could help your rich friends get richer by cutting their taxes and bailing them out when they gamble and lose. You could ignore the needs of the poor for health care and education. Your media would appear free but would secretly be controlled by one person and his family. You could wiretap phones, you could torture foreign prisoners, You could have rigged elections. You could lie about why you go to war. You could fill your prisons with one particular racial group and no one would complain! You could use the media to scare the people into supporting policies that are against their interests."

Tuesday, August 21, 2012

ILB: From a Too Cheap to Ignore Stock to A Cheap Way into China

I have to admit, I'm a bit late in covering Integrated Logistic Berhad (ILB). Well, like its title say, it has gone from "too cheap too ignore" to now "not that cheap" but still a "cheap entry into China". It is not cool to be cheap when we hang out friends but it is great to be cheap when buying stock. ILB is currently selling for about RM0.93 rallying from RM0.89 from just about a week ago, appreciating for about 4.5%. But if we were to compare to its current Book Value, RM2.10 it is still a 44% discount to its book value.

There are 2 corporate activities to note:

  1. Their CEO, Mr Tee had just bought a sizeable amount of his company shares at RM0.85 just a month ago.
  2. The company has been actively buying back its shares at RM0.83-RM0.89. Treasury shares now stands at 1.14% over total outstanding shares.

Unlike common believe, value investing works in the opposite. The lower the risk i.e. the lower the price, the higher the upside. If one was to pay for a stock below their liquidation value, the risk will become significantly lower. What's makes it more exciting, ILB isn't a bleeding business, it is a profit making business. (I'll write more about the business in my next post. This post is about "cheapness"). Think of liquidation value like this, one the management wakes up and decided to stop doing business altogether.

Assuming ILB got nothing from their receivables and vehicles (0% is worse than fire sale) and they only got back half of its value from its associate and JV in Middle East, it is still worth at least RM1.00. For a profit making business with manageable debts, fire sale is unlikely to happen. Even if it were to liquidate, it is likely to be gradual and could turn their net asset to cash close to its book value of RM2.10.

Tuesday, May 1, 2012

428, A Day When Malaysians Stand Up and Be Counted

I'm back and I'm writing. Yes, right after 428 (OK, few days after. You have to forgive me. I have to say it is a tiring day but a proud day). I really can't explain the sensation of standing right in the middle, watching what..thousands and thousands of Malaysian singing and chanting "Bersih!" marching towards Masjid Jamek. I was standing with my friend and he was saying "What a crowd. What a massive crowd" and I and can only reply "Wao!". It was an emotional moment I have to say. (This video wasn't any headline video, but just an amazing sight from a person among the crowd 360 point of view)

Okay, I am not going to write about my personal account on what I experienced through that day, but rather a thought about the whole event. I guess mine was no different from others that you have read. Although I have to say, the tear gas felt from as far as almost 1km away (I can clearly see it came from the top of the roof of a building and was carried by the wind towards us) was pretty "hot". Yes, it was burning. It made me wonder how those brave folks who kena direct hit would felt. I can only hell. Again, that was all unnecessary. Police could have warn us to disperse.

I'm not here to defend those who broke the law or so called "created violence", but I have to say, those crowd were no way looked like they are going to create any kind of  "violence". Polices passed through the crowds  for a few times, and I can say, some of us were just smiling and most of us were chanting "Bersih! Bersih!".  It wasn't until the tear gas were fired when we turned a little hostile. But at most, we were just booing the police from what I witnessed. Perhaps those Masjid Jamek crowd managed to keep their feeling controlled. But most of us were confused. It wasn't until I got back home to read the news on the Internet that I realised that we were told to dispersed much earlier (we stayed till 4pm). And it wasn't until I read a comment with some photographic evident that I knew why a friend of mine did not receive any "updates" in Masjid Jamek (she sort of subscribed to some updates from Bersih). - food for thought: why do the government create all the trouble to "protect" an empty Dataran times....we have to question their IQ.

Alright, I cerita too much. Lets us not swayed away by mainstream media about the violence (which might have provocated) and focus on the main thing. The voice of the 99% of the 250 000 people plus all those Malaysians all over the world cannot be ignored. The demand for free and fair election is a fundamental of democracy. If we are as democratic as we preach, why do the government so afraid of an electoral reform? The 8 demands aren't too much and make a lot of sense. So Why?! And for the EC's chairman aren't you supposed to disclose your "terlupa" UMNO membership much earlier? Why wait till people dig it out? And if the rakyat lost confidence in you, aren't you supposed to step down? - You are the EC for god's sake