Background
(source from klseinvestor)
Ahmad Zaki Resources Berhad (AZRB) is a Malaysia-based
company engaged in investment holding, providing management services and as
contractors of civil and structural construction works. AZRB operates in four
segments: construction, which is engaged in civil and structural construction
works; trading in oil and gas and other related services, which include dealing
in marine fuels, lubricants and petroleum-based products; cultivation, which is
engaged in oil palm, and other operations, which is engaged in property
development, investment holding, provision of management services and dormant
companies. During the year ended December 31, 2009, AZRB's projects include
Design and Built Complex Kerja Raya 2, Federal Road 3 Pekan to Kuantan,
University Darul Iman Building Works, Maternity Hospital Terengganu,
Rectification Works at Dataran Putra Precint 1and others. In August 2011, the
Company sold 21.57% interest in Eastern Pacific Industrial Corporation Berhad.
FINANCIAL PERFORMANCE AS OF 31st DEC 2015
For the year ended 2015, AZRB’s profit for the year nearly
doubled to RM21.5m from previous year made possible by the substantially
improved other operating income AZRB despite incurring RM46.7m interest
expenses (more than 2x of previous FY.
In terms of balance sheet, AZRB assets had grew to RM1.7b
from RM1.5b primarily from larger trade receivables (current) and additional
capex + acquisitions. While its networth stood at RM338.7m
In the last 2 years AZRB had grown its order book
substantially and its current order book able to sustain AZRB income for the
next 3 – 4 years.
Construction, and O&G segment continued to generate
profitability supplemented by property sector, while its plantation operations
continued to incur substantial losses.
At current price level at RM 0.725 per share, AZRB is trading
at nearly 16x P/E and its NTA stood at RM0.69 per share and more or less
reflects AZRB’s current financial position. Base on current earnings level, NTA
is expected to grow at 0.62 sen per quarter or 2.48sen per annum.
However it is AZRB future prospect that is more exciting, its
profitability is expected to improve by leap and bound beyond FY2017, likely by
end of FY2020 its net profit would be in excess of RM100m per annum. It is
likely by end of FY2020 40% – 50% of its profits before tax would be from
operations that generates recurring income.
Here are the facts that substantiate the above statement.
PROSPECTS
CONSTRUCTION
SEGMENT
·
AZRB is extremely connected and is likely to be able to
secure construction jobs at regular basis to maintain healthy order book hence
construction segment will at least maintain current profitability.
·
Awarded part of MRT SSP line (4.5KM) worth RM1.44b that is
expected to start in 2H 2016 and expected to be completed by 2022, estimated
that translates to RM221.5m revenue per annum till 2022, expected to increase
its construction segment revenue by at least RM110m in FY2016 to excess of
RM800m.
PLANTATION
SEGMENT
·
(Palm oil) Plantation planting activities started in FY2013
and had planted 5,500 hectare by end of 2014. Planned to plant additional 5,000
hectares in 2015 and 2016. The first 5,500 hectares are expected to produce
fruit bunches at 30 months age till 25 – 30 years old. Hence by end of FY2017,
plantation segment will turnaround and generate income. It is likely by FY2017
planting activities may taper down reducing operating expenses.
·
1 hectare of oil palm trees estimated to produce around 3 tonne
of CPO and 1 tonne of palm kernel. In FY2017 plantation segment is expected to
generate around RM25m revenue and double in FY2018. Plantation revenue is
expected to continue to grow markedly until 2020 as more oil palm trees
matures.
·
AZRB currently has an estimated 16,000 hectare land in West
Kalimantan Indonesia, of which an estimated 7,500 had been planted. The oil
palm plantation is estimated to worth USD80m which translates to around RM320m
or around RM0.65sen per share.
Toll
Concession (EKVE)
·
EKVE construction began in FY2015 and expected to be
completed in 3 years’ time, by FY2019.
·
Expected 140,000 motorist will travel in EKVE, estimated to
generate revenue in excess of RM150m.
PROJECTIONS
·
Several assumptions were made base on the facts above to make
the projections
o Construction Segment –
§ Revenue grow at 5% per
annum
§ Additional revenue from
MRT (SSP line) worth RM220m per annum
§ Maintain its current net
profit margin.
o O &G Segment - growth
at 4% per annum + maintain its current net profit margin.
o Plantation segment
§ – oil palm trees maturity
in stages FY2016/1,500 hectare, FY2017/4,000 hectare, FY2018/6,500 hectare,
FY2019/8,500.
§ Revenue calculated using
CPO price at RM2,500 P/MT.
§ CPO production cost at
RM1,100 per MT.
§ Planting activities
continued at 2,500 hectare per annum cost RM35m.
o Property Segment – Growth
at 10% per annum + maintain its current net profit margin.
o EKVE will start in 2H
2019, expecting at least 140,000 motorist per day averaging RM3 per motorist.
In summary
AZRB’s profitability jumping several folds entirely dependent on
1. Turnaround in plantation
segment with expectation that oil palm trees planted in 2013 and 2014 will
mature in FY2016 and FY2017 until 10,000 hectare oil palm trees producing fruit
bunches + CPO prices maintain at RM2,500 P/MT.
Maintain reasonable growth rate for all segments
especially construction sector.
Many people committed to buy stock is very easy, when come to profit taking and cut loss is one of the most difficult part in trading world, talking about profit taking is dealing with greed and stop loss is dealing with fear, cutting loss is a must in trading world because it stopping my capital continue to loss, in order to stay alive in trading world... it is a must !!! it is not an option, else I suggest you get out of the trading and you are not suitable.
I wanted to used simple example to share on the cut loss ... you bought an egg and prepare to used it for fry rice, some how you notice/suspect the eggs you pick was/may turn bad.... the question now is shall out throw/scrap the bad one and pick another .... or nevermind bet or hope the suspicious "bad" egg will be good and risk the good rice which is ready to cook ? you make the call... I am believed in order to win I got to know how to prevent I am loss in the market... if I notice I am wrong... I got to admit and cut the loss and make a next move.
As a reminder for myself
I am always remind myself If the trend is go again me and violated my SL limit, I will cut loss base on the risk preference.
Stop Loss is painful process because I making loss, but it is necessary to take it, it is very important because it protect my capital to ensure I am stay in the market.
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