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IDEAL PROFILE
Ideal Group of Companies ("IDEAL Group") was established in 1994 and listed on the ACE Market of Bursa Malaysia Securities Berhad under the name Equator Life Science Berhad (ELSB) on 25 May 2005. On 27 October 2011, Equator Life Science Berhad ("ELSB") changed its name to Ideal Sun City Holdings Berhad ("IDEAL").
In the first quarter of 2012, the IDEAL Group has started diversification of business from propagation of ornamental plants into the Project Management Business for commercial and residential property development industry to diversify its earnings base and hence.
IDEAL Group's full scope of project management services includes Project Design Evaluation, Project Value Engineering and Project Construction Management. Project Design Evaluation Services evaluates the clients existing project design to increase the net saleable area of the project. Project Value Engineering reduces the construction costs and implementation time of the project. Project Construction Management Services ensures that the project’s objectives and implementation is smooth and timely.
SUMMARY
IDEAL SUNCITY had return profitable for last 2 years (after posting back to back profit in 2012 and 2013 and had performed well in the first 2 quarters in 2014 recording incredible growth in both revenue and net income and is expect to perform much better.
In 2014, IDEAL SUNCITY’s share price rise had been meteoric and had been very volatile. Despite its volatility I expect to see further upside on IDEAL share price.
What did I see in IDEAL that convinced me that IDEAL share price remain bullish? Here are the 3 key drivers:-
In FY2014, secured projects that generates RM48m in revenue, estimated 2 – 3 years order book, on the assumption that yearly revenue will not exceed MYR15m.
Diversification in to property development to funded by private placement of 30% of the issued paid up capital. The company had proposed to purchase RM26m worth of property. The proposal was submitted to Bursa and expected the proposal approved by Bursa.
IDEAL is committed to regularize its financial health evident by the following events
Ideal Sun City Sdn Bhd major shareholder of IDEAL SUNCITY BERHAD had entered into a “profit guarantee agreement”, guaranteeing the listed entity will achieve a minimum MYR5.2m net income and had pledge MYR5.2m into the company as collateral which can be deducted if IDEAL SUNCITY BERHAD fail to achieve MYR5.2m target.
Execute corporate exercise by raising MYR11.8m to replenish the depleted shareholders funds, which immediately result in the company exit from GN3 on 7th May 2014. The Corporate exercise was concluded in April 2014.
Diversification into property development to be funded by private placement will further enhance the Company’s revenue and profitability in FY2015 and beyond.
How are these going the affect the share price? Well it’s simple
Secured projects will translate to steady income for the next 3 years from its core business.
Property development is expected to generate new and steady income stream. In addition to that funding to purchase MYR26m worth of property will come from private placement that will not exceed 30% of issued paid up capital which is around 45m shares. The key lies in the issued price of the private placement shall not be lower than 10% of the 5 days average share price, i.e. the higher IDEAL share price the higher the private placement issued price.
Exit PN17 status is imminent, and this do not need further explanation since it is obvious that any company regularize its financials are expected to experience favorable share price movement.
If one analyses IDEAL share price movement since Mar 2014, there are 3 spikes in its share price and each of them may correlates with the announcements or rumors of IDEAL future plans,
In the period 7 – 14 April 2014 - Share price jumped from 20 sens to 54.5 sens before dropping back below 30 sens, likely on the back raising new capital (MYR11.8m) and possible exit from GN3 which eventually announced on 7th May 2014. *Note share price slowly climb to 55 sen level by Aug 2014*
In the period 8 – 19th Aug 2014 – Share price jumped from 53-54 sen level to high 84 sen, share price plunged back to 53-54sen after UMA of which IDEAL replied that they are unaware of any material development. The spike was likely due to rumor that IDEAL was expected to execute some new strategies to regularize.
In the period 12 – 18th Sep 2014 – Share price jumped from 53-54 sen level to 75 sen before trending down to 47.5 sen on 17th October. The share price spike was due to approval of the board to diversify into property development and acquiring 2 properties worth MYR26m. Property 1 is expected to generate RM90,000 per month base on RM3 per sqft, which translates to RM1,080,000 per annum which is around 15% of FY2014 projected net income. *Note the drop in share price coincides with KLCI and global stock market on downtrend.*
ANALYSIS OF THE IDEAL FY2014 PROFITABILITY AND BEYOND
YTD Q2 2014 IDEAL recorded MYR5.6m revenue and MYR3.3m net income and it’s highly certain that the Company will achieve a projected revenue of MYR11.2m and MYR6.6m net income.
New income stream from property development will affect FY2015 revenue and income, unlikely to have any impact in FY2014.
I am expecting IDEAL revenue and net profit continue to experience high growth in FY2015 and beyond
INCOME STATEMENT ANALYSIS
Base on YTD Q2 2014 result, IDEAL had achieve 2/3 of FY2013’s revenue and 72% of FY2013’s net income
IDEAL is projected to record 31% revenue growth and 45% improvement in net income.
Reviewing last 5 quarters, FY 2014’s Q3 and Q4 revenue is expected to exceed MYR3.0m per quarter and expected the quarter’s net income will benefit from higher revenue.
BALANCE SHEET
ASSET STUCTURE ANALYSIS
In Q2 2014, compared to 31st Dec 2013, balance sheet grew by 234% to MYR29.3m from MYR8.7m.
Majority of the growth in assets were fueled by
Cash balance benefited from the capital injection had shot up to MYR19.1m from 2.9m
Trade receivables increased by MYR4.74m to MYR8.41m
LIABILITIES STRUCTURE ANALYSIS
In tandem with balance sheet expansion, total liabilities amounts to MYR7.4m, had increase by MYR5.4m.
Large part of the increase in liabilities were derived from an increase of other payables.
The increase in other payables are mainly due to Ideal Sun City Sdn Bhd major shareholder (32% - owned by Chairman and Executive chairman Dato Ooi Kee Liang and Datin Phor Li Wei) deposited MYR5.2m to guarantee IDEAL will achieve a minimum MYR5.2m.
PREPARED/ANALYZED BY KH WONG
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1 comment:
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