Stock Screening

Wednesday, October 29, 2014

MMODE FUNDAMENTAL WRITE-UP

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MMODE BHD




BUSINESS BACKGROUND – SOURCE - http://klse.i3investor.com/

M-Mode Berhad (M-Mode) is a Malaysia-based investment holding company. Through its subsidiaries, M-Mode is engaged in the provision of mobile contents and data application services with platform connected to mobile network operators in Malaysia and China. As of December 31, 2009, M-Mode's subsidiaries were M-Mode Mobile Sdn. Bhd., Mobile Multimedia Sdn. Bhd., Dalian M-Mode Dreamfun Technology Ltd., Cede Communications Sdn. Bhd., M-Mode Media Sdn. Bhd., M-Mode Systems Sdn. Bhd. and Beijing M-Mode Digital Technology Co., Ltd. On June 4, 2009 and August 14, 2009, M-Mode acquired the remaining issued and paid-up capital of M-Mode Media Sdn. Bhd. and disposed its 50% equity interest in PT M-Mode Indo, respectively.

SUMMARY

MMODE share price taken a plunge since July 2014 and in my opinion it is a good time to go long on this counter.

Why do I think MMODE is a good time to buy now? Here are why.

MMODE has 2 primary driver in my opinion which are

1.      Transfer from ACE MARKET to MAIN MARKET
2.      Share buy back up to 10% of paid up capital i.e. 16m shares.

TRANSFER TO MAIN MARKET

MMODE had submitted the proposal to SC on 29th May 2014 and it is expected to be completed by 3rd quarter.

Normally listed companies are expected to report their quarter result within 2 months after their quarter ends. For e.g. if the quarter is 30th Sep 2014, most companies will report their quarter result in second half of Nov 2014.

MMODE reported their Quarter 3 result on 17th October 2014, which is more than 1 month earlier than previous years’ quarter 3 result reporting as well as prior quarters. This strongly suggest that the approval from SC to transfer to Main Market is imminent.

Since their Quarter 3 result came on17th October 2014, MMODE share price rebounded from its low 48 sen to current as high as 58.5 sen on 28th October 2014.
SHARE BUYBACK UP TO 10% OF PAID UP CAPITAL

Since 2012, MMODE had secure the mandate for share buyback.

This is not catalyst to share price appreciation, however it can at least give comfort and security that if the share price drops too low MMODE may execute share buyback to support the share price or to buy their share price at cheap price.

Do remember that MMODE is holding on to MYR41m in cash. What are they going to do with the cash? Share buyback or M&A?


INCOME STATEMENT ANALYSIS
·        MMODE revenue recorded a tremendous growth in FYE2011 from FYE2010 from below MYR30m to MYR60m-MYR75m, while its annual net profits hover around MYR11.7m –MYR13m since 2011.
·        MMODE’s FY2014 Q1 and Q2 results were within expectation chalking up MYR43m in revenue and MYR6.2m PAT.
·        However its Q3 result reported a dropped in revenue as well as PAT declined by nearly 50% compared to previous quarter. This had dragged down MMODE’s performance in FY2014.
ESTIMATED FYE 31st December 2014 NET INCOME

·        In FYE2014 MMODE is expected to record an increase in revenue by an estimated 12%, however MMODE PAT is likely decline to MYR10.6m (vs FY2013 PAT @ 11.7m).
·        To continue to grow modestly MMODE needs to maintain a gross profit margin above 30% and quarterly revenue above MYR20m.

BALANCE SHEET

ASSET STUCTURE ANALYSIS
·        Balance sheet as of 30th Sep 2014, grew modestly by 4% to MYR72.3m from MYR68.9m.
·        Key MMODE asset component are
o   Notably MMODE has a high cash reserves of MYR41.m which accounts for 57% of the total assets.
o   MYR10m in trade receivables, nearly MYR1.4m increase from 31st December 2013
o   MYR8.3m in PPE, with relatively small increase from 31st December 2013
o   Goodwill and development cost account for MYR9.9m

LIABILITIES STRUCTURE ANALYSIS
·        MMODE is light on liabilities with mere MYR5.9m total liabilities.
·        Majority of MMODE assets were funded by its shareholders funds.      
       
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