FIGURE 1: MEGA FIRST CORP BHD
LAST 5 YEARS SHARE PRICE TREND
**analysis
based on 2018 annual report.
1.
GENERAL INTRO: MEGA FIRST CORP BHD (MFCB) is an
investment holding company. The group is organised into three main business
segments as follows - Power, Resources, and Property. The Power segment builds,
owns and operates power plants. The Resources segment is engaged in quarrying
of limestone manufacturing and trading of lime products, calcium carbonate
powder, and bricks. The Property segment is engaged in the property development
and property investment. Its primary geographic markets are Malaysia, China,
Laos, India, Australia, New Zealand and other countries. The majority of its
revenue is derived from Laos.
2.
NOTABLE POINTS:
a. In
2018 report, MFCB’s net profit registered a 12.7% decline to RM145.8 million
(2017: RM167.0 million). This was primarily due to the expiry of the Sino-foreign
Joint Venture in China on 22 October 2017 and Power Purchase Agreement in Sabah
on 2 December 2017 which were not extended for commercial reasons. The two
discontinued power plant operations registered a RM13.7 million loss in 2018
(mainly due to oneoff impairment charges), compared to a profit of RM15.0
million in 2017.
b. Power
Division: the completion of the Don Sahong Hydropower Project (“Don Sahong”) in
Laos PDR by the end of 2019 which is expected to bring the Group’s profits and
cash flows to new heights from 2020 and onwards. Don Sahong is the Group’s first
foray into the renewable energy sector and will become the main income
generator for the Group in the coming years.
c. Resources
Division: The RM110 million expansion programme of the Resources Division which
started in 2015 is now complete with Kiln 8 ready for commissioning in December
2018. Compared to 2015, we have in total increased kiln capacity by 1,200 tonne
per day to 1,960 tonne per day at present. With the expansion, the Group now
operates one of the largest lime manufacturing operations in Malaysia.
d. Property
Division: Given the continuing weak property market condition in Malaysia, the
Group does not intend to restart its development segment, which has been
suspended since 2015. At the end of 2018, the Group has RM11 million worth of
unsold property inventory. Efforts will continue to sell the remaining
completed property units in 2019. Rental income from PJ8 and Greentown carparks
is expected to remain stable.
3.
IS THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE
RANGE (RM million): 871.4 million as reported in 2018 annual report, this is a medium
revenue company.
b. SHARE
PRICE: from 2015-2020, share price increased from ~ RM2.00 to RM5.00.
c. EARNING
PER SHARE (EPS): earning per share in last 5 years was overall rising, increasing
from 27.5 to 33sen
d. FUTURE
POTENTIAL/PROSPECTS: share price expect to be stable in the next few years
e. CAPITAL
EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 419.8
million, around 16% of total assets. Expenditure is mainly for the building of
the new power plant in Laos.
4.
IS THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND
YIELD: in 2018 financial year, MFCB declared a dividend payout of 4 sen per
share to shareholders, which amounts to a dividend yield of 0.72%. Last five
years dividend yields ranged from 0.72% to 3.3%.
b. DIVIDEND
PAYOUT RATIO: Hence, in 2018 financial year, MFCB paid out 13% of its earnings
to shareholders in the form of dividend.
c. CONSISTENCY:
the dividend payout was consistent, the dividend paid to shareholders in the last
five years ranged from 4 to 8 sen.
5.
IS THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN
ON EQUITY (ROE): in 2018 financial year, MFCB reported a moderate return of
shareholders’ equity, at 9.6%. last five years ROE ranged from 8.9 to 11.2%
b. COST-TO-INCOME
RATIO: cost-to-income ratio is high, at 342%.
6.
OTHER INDICATORS:
a. CASH
FLOW: cash flow is positive, around RM 122.1 million, equivalent to RM 0.30 per
share.
b.
SUPPORT BY INSTITUTIONAL INVESTORS: this counter
is well supported by institutional investors, there are 20 institutional
investors at top 30 major shareholders list, including few insurance companies/investment
funds. Its major shareholders is Rubber Thread Industries (M) Sdn Berhad (24.12%).
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