Despite Facebook's IPO, I am bullish on 3 other tech stocks

According to CNBC's interview, Facebook do not need the money from its IPO. Apple is holding about 100B in cash and yet to spend on something.

CNBC's interview also states that Facebook will go more into mobile.

Therefore i'm bullish on 3 tech stocks that will grow with the abundance of cash these tech giants will spent on.

Harddisk Stock - To support Apple on cloud storage expansions and to facilitate the increase of facebook users.

 To Tap on facebook's mobile growth as well as global demand for smartphones.

Dukang reported 3Q2012 exceeds FY2011 results

Dukang's 3Q12 earnings were about 96% of FY2011

Their business grew about 10% or more each year

Asian Stocks drop on JP Morgin US 2B loss

Silverlake, a hidden gem

Silverlake is one of my favourite companies to invest in. They released their 3Q12 ending 31 Mar 12 yesterday and posted a Revenue increase of 21% and net profit increase of a whopping 63%.


About Silverlake
Silverlake Axis Ltd (SAL) is a leading provider of digital economy solutions and services for major organisations in Banking and Financial Services,
Payments, Retail and Logistics businesses. The Group's Silverlake Axis Software and Services Solutions are delivering operational excellence and
enabling business transformations at over 100 organisations across Asia including 40% of the top 20 largest banks in South East Asia.

Their Products

Singtel Announce FY11-12 Results

Singtel's revenue grew by 4.2% while its net profit grew by 4.3%.

Their Global footprint from SGX:

Heeton Releases 1Q12

Heeton Q1 net profit rises 31% due to the absence cost for Juluca but posted a 6.6% decline in revenue. However they will have more projects on hand, and managed to step up their borrowings to about 700M to fund them while now the interest rates are low.

Heeton Holdings also declared a dividend of $0.011 per share

Facebook IPO

Facebook's had 2 core business which about 84% from advertising while Zynga contributes about 16%. They target to go on IPO on the 17 May 2012.

Facebook's initial IPO may attract investors from all over the world. The starting price may fluatuate a lot due to speculations. However, this IPO may attracts more shareholders from its competitors like YAHOO, GOOGLE, and thus the share price of these companies may drop 1-3mths after facebook's IPO.

Hu An Cable

News
According to OCBC research,
Infrastructure expansion in China.
Hu An Cable (Hu An) is one of the top 10 largest integrated cable manufacturers in China. Under the 12th Five Year Plan for China (2011-2015), RMB5.3t will be spent on capital expenditure in the power industry. This represents a 67.7% increase from the RMB3.16t that was earmarked for 2006-2010 under the 11th Five Year Plan. For 2011-2015, China will spend approximately RMB610b on power cables (+103% from the 11th plan), RMB500b on ultra-high voltage power cables (+2400%) and RMB521.6b on rural grid power cables (+38.5%). Urbanization in the form of 400m migrant workers becoming city-dwellers within the next 20 years will greatly boost electricity demand.

New factory for mid- & high-end cables manufacturing.
The company group to enter the high-end cables market to boost its profitability. It is building a factory with the capacity to manufacture mid- and high-end cables at a location close to its current factory in Yixing City, Jiangsu Province. The capital expenditure of RMB430m will be funded by internal cash, bank borrowings and IPO proceeds from the SGX listing. Two production lines for mid-voltage power cables and one production line for high-voltage power cables were installed as of Oct 2011. We believe that production will start sometime during the middle of this year.

Undervalued compared to peers.
Hu An appears inexpensive compared to its peers which are listed in China and Taiwan. It is trading at a P/E of 3.6x, P/B of 0.6x and offering a dividend yield of ~4.6%. In contrast, the overall medians for its peer group are as follows: P/E of 22.8x, P/B of 1.4x and dividend yield at 1.0%. We note that Hu An is also trading at an attractive estimated FY12 P/E of 3.1x.

Analysis
With reference to the OCBC reseach, the company is expanding with the setting up of new factories to manufacture higher end cables. The expansion plans were also strongly supported by the 12th five-year plan with RMB5.3 trillion (SGD$1.04 trillion) on the power industry. Capital will flow into this company as the years pass. Be patient.

Dividend Yield
Approx. 4% with the price of $0.162 a share.

PE Ratio
Based on the shareholder’s valuation, PE ratio of this company is at a low 4.


About Hu An Cable (From SGX)
On 26 May 2008, the Company was incorporated in Singapore as a private company limited under the name of China Hu An Cable Holdings Pte Ltd. On 27 January 2010, the Company converted into a public limited company and changed its name to China Hu An Cable Holdings Ltd.The Group is a fully integrated manufacturer of wire and cable products in China. Its core capabilities include the design and development, manufacture and supply of a wide variety of low, mid and high end wire and cable products used across many industries (in particular the infrastructure development as well as other important industrial markets) in China’s national economy.

The Group’s wire and cable products are widely used in power generation plants, including traditional power plants (such as coal fired plants) and alternative power plants (such as nuclear power plants, wind and solar power plants), power transmission and distribution grids, coal mining and ship-building industries, transportation networks and real estate projects, various electrical equipment and devices for industrial and household uses.

The Group also has the capabilities to manufacture a variety of other products such as aluminium rods, copper rods and plastic cable materials including insulating materials, sheath materials and other auxiliary materials which are used in the production of wires and cables.




Published on 06 May 2012

Dukang Distillers

News
• 2Q2012 revenue up 22.0% yoy to RMB540.0 million; ASP and volume boosted by
Luoyang Dukang’s strong branding and an extensive distribution network
• Net profit up 55.2% yoy to RMB94.4 million on further margin improvements

Outlook
"We delivered record sales volume, revenue and net profit for the past quarter," said Mr. Zhou Tao (“周涛”), CEO of Dukang Distillers. "In short, this quarter’s results bear testament to the strength of Dukang’s brand, the Group’s marketing creativity and its extensive distribution network.” China’s bajiu industry has maintained the growth momentum experienced during the last five years with the industrial production volume witnessing a 30.7% 1 yoy growth for the calendar year ended 31 December 2011. The Group’s 10.7% yoy growth of sales volume in 1H2012 lagged behind industry due to its limited production capacity of grain alcohol for Luoyang Dukang.  In order to capture the growing demand for Baijiu, the Group recently added another 50% of capacity with the revival of 1,470 unused fermentation pools for the production of Luoyang Dukang grain alcohol.
In 2Q2012, its 2,968 fermentation pools with an overall production capacity of 7,610 tonnes of grain alcohol were almost fully utilised.  After a 60‐day fermentation period, the grain alcohol is aged between 7 to 24 months before it is ready for sale.

Analysis
With the increase in net profits and strong branding, this company is able to minimise its reliance on bank loans. With the full utilisation of the fermentation pools, they are also able to further increase their profits for the 3rd quarter. However, they are likely not to payout dividends within these few years.

Dividend Yield
No dividends. I emailed their investment relations officer, Yit Sung.He wrote me a detailed reply.

“We have a dividend policy to distribute 5%- 20% of the distributable earnings for the year as cash dividend since 2011, this is required by TWSE when we list our TDRs.

According to the CEO, for 2nd tier baijiu enterprise like us in growing stage, our annual growth will be more than 30% for several years consecutively. So it would be wise to reinvest the cash in a compounding machine, where we believe the growth in business will bring value to investors in terms of more premium share price. The board has discussed this matter before as well, like giving out S$0.01 dividend. With approx. 800m shares, the company will need to pay S$8m (~RMB40m). And with RMB40m, we can actually dig 1000 new fermentation pools to increase our grain alcohol production cap, which is our plan in 2012 (We plan to dig 1500 new fermentation pools). This does not include the cost for land, fermentation pool shelter and other peripherals like excavators and distillation lines.

As you can see, paying out dividend now will actually set us back on our expansion plan. If we were to payout now, we will need to raise funds elsewhere, which may dilute the interest of existing shareholders. Many investors don't understand this and I am glad to that I have the opportunity to explain to you.

Nonetheless, we understand where the investors are coming from and we do hear your voice. The board will be reviewing this issue during the approaching board's meeting together with other agenda like share buyback scheme.

I will be in Zhengzhou this May, will check on few concerns from investors and do some channel checks. Feel free to let me know if you have any concern that I can bring up to the management. Will keep you posted.”

PE Ratio
13

Net Asset Value
The price of $0.25 entitles you 144.31% of their assets


About DuKang Distillers (From SGX)
The Company was incorporated in Singapore on 7 July 1976. On 26 December 2002 it was Dukang Distillers Holdings Limited (previously Trump Dragon Distillers Holdings Limited) is a leading producer baijiu in Henan Province, the PRC. The Group carries a broad range of baijiu products that are sold and marketed under two distinct brands, ‘Luoyang Dukang’ (“杜康”) and ‘Siwu’ (“四五”). Named after the forefather of baijiu and supported by a history of over two thousand years, ‘Dukang’ (“杜康”) is a well‐established national brand with a rich cultural heritage that focuses on the mid to high‐end baijiu market in the PRC.    
With its extensive range of affordably priced products, the Group’s ‘Siwu’ (“四五”) brand targets the mass to mid‐end baijiu market and has an established consumer base in Henan Province.   
The Group’s products are sold through distributors to hospitality establishments, supermarkets and specialty stores selling tobacco and alcohol products in the PRC. With the acquisition of Luoyang Dukang complete in May 2010, the Group has significantly increased its production capacity, and is primed to strengthen its market position and competitive edge in baijiu industry within Henan Province as well as across the PRC. The Group has been listed on the SGX Mainboard since September 2008 and on the Taiwan Stock
Exchange via Taiwan Depository Receipts since March 2011.




Published on 06 May 2012

FDI in Singapore (Global Recession Timeline)

FDI figures are taken from http://unctadstat.unctad.org

2007 Foreign direct investment in Singapore in approx. $37B USD.

8 February 2007: HSBC WARNS OF SUBPRIME LOSSES
2 April 2007: NEW CENTURY GOES BUST
9 August 2007: CREDIT MARKETS FREEZE
14 September 2007: RUN ON THE ROCK

2008 Foreign direct investment in Singapore in approx. $8.5B USD.

17 March 2008: BEAR STEARNS RESCUE
7 September 2008: FANNIE MAE RESCUE
15 September 2008: LEHMAN BROTHERS GOES BANKRUPT
17 September 2008: LLOYDS TAKES OVER HBOS
3 October 2008: $700BN BAILOUT APPROVED BY CONGRESS
13 October 2008: UK GOVERNMENT RESCUES RBS AND LLOYDS-HBOS
16 December 2008: FED CUTS KEY RATE TO NEAR ZERO

2009 Foreign direct investment in Singapore in approx. $15.2B USD.

14 February 2009: US CONGRESS PASSES $787BN STIMULUS
2 April 2009: G20 SUMMIT IN LONDON
22 April 2009: UK BUDGET REVEALS HUGE DEFICIT

2010 Foreign direct investment in Singapore in approx. $38.6B USD.

Summary
Between 2004 to 2006, US interest rates rise from 1% to 5.36%. Homeowners, who have problems paying their mortgage loans when the interest rates were low began to default on their mortgages. Therefore in 2007, foreign direct investment total up to about $37B USD does not justify the fact that world economies are doing well at that time but rather an indication that problems are coming. Reference

The high amount of foreign investment in 2007 was a prerequisite of the sub-prime mortgage crisis in US. Huge amounts of loans were left unpaid, but Collateralised Debt Obligations(CDOs) which bundles loan securities, bonds and assets resulting from unpaid loans were sold to many financial institutions, banks. Credit markets freeze as banks do not want to lend to each other fearing the huge amount of debt loans / CDOs they owned. Reference

In 2008, a $700B USD was approved by the congress to rescue the US financial sector. I believed that parts of the bailout funds were parts and pieces of the $8.5B USD that made up the amount of foreign investment in 2008.

There were 2 liquidity injections made in both 2008 and 2009, a bailout and a simulus plan respectively.  In 2008, an approx. $700B USD bailout was approved by the congress to rescue the US financial sector. In 2009, a $787B USD was approved by the congress said to save or create more than 3.5 million jobs in the US.

Both the bailout and simulus may contribute to a slightly higher FDI in the year of 2009 amounting to approx. $15.2B USD and subsequently a higher amount of $38.6B USD of FDI in 2010.

Impact of cash injections on the STI index by ECB
According to this BBC article dated 1 Mar 12, last December 11, 489B Euros of liquidity was injected to banks by ECB and this year 29 Feb 12, another 529.5B euros of low-interest loans were lent to 800 banks across Europe. According to bloomberg charts, STI index hit one of its lowest point on 19 Dec 11 at 2618.09 and rose about 14.3% to 2993.49 last friday on 2 Mar 12.

Outlook of STI
According to this BBC article, Greece are prepared to get the 130B Euros bailout. However, the bailout will not proceed till the deb swap with private bondholders on 8 Mar 12.

My Assessment
I mentioned that there were 2 liquidity injections in both 2008 and 2009 previously in this article. The impact of the liquidity injections were only visible on 2010, with reference to the FDI figure of $38.6B USD. The duration of the impact is about 1 year. If the same effect takes place this year, stocks are expected to rise till end of 2012, with or without the consideration of the bailout deal in March 12.


Global Recession Timeline
taken from http://news.bbc.co.uk/2/hi/8242825.stm


8 February 2007: HSBC WARNS OF SUBPRIME LOSSES

HSBC reveals huge losses at its US mortgage arm Household Finance due to subprime losses, in one of the first signs that the US housing market is turning sour, and that it could have a knock-on effect on the global financial sector.

2 April 2007: NEW CENTURY GOES BUST

New Century Financial, a leading subprime lender, files for bankruptcy. It is the first signal that something is seriously amiss at US mortgage lenders. Shares in other US mortgages banks like Countrywide come under pressure.

9 August 2007: CREDIT MARKETS FREEZE

Credit markets go into freefall after Paribas announces that two of its hedge funds are frozen due to "complete evaporation of liquidity" in asset backed security market. European Central Bank injects 170bn euros into the banking market and Fed lowers interest rates. Bank of England refuses to intervene in credit markets.

14 September 2007: RUN ON THE ROCK

Savers in beleaguered UK former building society Northern Rock begin withdrawing their savings after the BBC reveals the bank has received emergency financial support from the Bank of England. Northern Rock is in trouble as it was heavily reliant on the wholesale money market to fund its operations, and these markets have dried up.

17 March 2008: BEAR STEARNS RESCUE

US investment bank Bear Stearns is rescued by rival bank JP Morgan Chase after the US government provides a $30bn guarantee against its mounting losses. It is the first sign that, rather than easing, the financial crisis is getting worse but investors are relieved that US government prepared to act as lender of last resort.

7 September 2008: FANNIE MAE RESCUE

US government rescues giant mortgage lenders Fannie Mae and Freddie Mac, taking them into temporary public ownership after they reveal huge losses on the US subprime mortgage market. Their failure would have triggered a run on the dollar as many foreign governments had invested in their bonds, believing they were already guaranteed by the government.

15 September 2008: LEHMAN BROTHERS GOES BANKRUPT

US investment bank Lehman Brothers goes bankrupt after the US government refuses to bail it out. Merrill Lynch is bought by Bank of America after revealing it also is facing huge losses. Insurance firm AIG, which issued credit guarantees for subprime mortgages, is rescued the next day with an $85bn loan from US Treasury.

17 September 2008: LLOYDS TAKES OVER HBOS

Lloyds agrees a £12.2bn takeover of the ailing Halifax Bank of Scotland (HBOS), the UK's largest mortgage lender, after its shares plummet amid concerns over the firm's future. The UK government invokes a national interest clause to bypass competition law, as the new bank is responsible for close to one-third of the UK's savings and mortgage market.

3 October 2008: $700BN BAILOUT APPROVED BY CONGRESS

The biggest financial rescue in US history is approved after a gruelling debate in Congress, and initial defeat a week earlier. Republicans and Democrats alike were reluctant to bail out the banks with such large sums while ordinary citizens were suffering in the recession. Both presidential candidates endorse the bail-out.

13 October 2008: UK GOVERNMENT RESCUES RBS AND LLOYDS-HBOS

Two of the UK's major banks, RBS and HBOS, are in major trouble as financial markets collapse. Having merged with HBOS in September, Lloyds is hit by the huge debts built up by its new partner in the mortgage market, while RBS is struggling with its expensive merger with ABN-AMRO. The UK government injects £37bn to stabilise both banks.

16 December 2008: FED CUTS KEY RATE TO NEAR ZERO

The US central bank cuts its interest rate to 0 - 0.25% in an attempt to stem the deepening recession, and begins to consider a programme of quantitative easing to throw money into the economy to help make borrowing easier. It is the lowest interest in the history of the Fed.

14 February 2009: US CONGRESS PASSES $787BN STIMULUS

President Obama wins his first major victory in Congress as it passes a huge economic recovery plan aimed at preventing the US falling into recession as a result of the credit crunch. Much of the money will go to the states to prevent them laying off public sector workers, but some will be invested in infrastructure projects like roads, schools and green energy.

2 April 2009: G20 SUMMIT IN LONDON

World leaders pledge an additional $1.1 trillion to help emerging market countries and promise coordinated action to fight the slump and improve regulation. Gordon Brown emerges triumphant from a global summit, which he claims is a turning point in the crisis, and stock markets begin to revive. However, not all the money pledged is actually delivered.

22 April 2009: UK BUDGET REVEALS HUGE DEFICIT

The UK Chancellor Alistair Darling reveals that the credit crunch will lead to the largest budget deficit in UK financial history of £175bn, with total government debt set to double to £1 trillion by 2014. Mr Darling admits it will take two Parliaments, or 10 years to get the budget back to the position it was in before the credit crunch.



Published on 04 Mar 2012

Memstar

21 Sep 2010, Memstar secured 4 Transfer-Operate-Transfer(TOT) projects in China to to treat municipal and industrial wastewater with a total design treatment capacity of 200,000m3/day.
The projects are expected to be funded using a combination of internal resources
and bank borrowings. “The projects expansion is
expected to be completed by the
end of 2010 and will contribute positively to our revenue for the financial year ending
30 June 2011” as stated by Dr Ge Hailin, CEO of Memstar.

31 March 11, Memstar’s 3rd quarter results show that non-current assets TOT receivables includes $225,584,000RMB, out of the total $349,214,000RMB. TOT receivables make up 64.5% of the total non-current assets.

Share price at that point hit a low price of $0.050 a share.

The first sign a company is doing well when they own patent rights to their products to ensure that they protect it from being duplicated by other company.  The group also owned patent rights to their products amounting to $1355,000RMB. The ability of the group to protect their products in the market allows the group to increase the value worth of the brand.

Subsequently, due to the high TOT receivables shown in their 3rd quarter results,  their final results for 2011 shows a high revenue increase of 194.4% for their last quarter, giving them a 158.7% increase in profits for the year as compared to last year. Their TOT receivables remain higher at $239,870,000RMB. There their next first quarter earnings are expected to maintain as increase in profits.

Finally, on 25 Oct 11, Memstar Inks OEM Supply Agreement with Hydranautics, subsidiary of
Japan’s leading diversified materials manufacturer. Under the terms of the agreement, Memstar will provide high performance hollow fibre membrane products to Hydranautics.  The development and manufacture of the membranes will take place at Memstar’s facilities in Singapore, Guangzhou and Mianyang City, China. Hydranautics is a global leader in membrane technology, thus provide a good opportunity for Memstar to prove themselves as a leading provider of hollow fiber membrane in the water treatment sector.


Dividend Yield
Dividend yield still remained unattractive at 0.65%.

PE Ratio
PE ratio stays at 23, in which in my opinion is not undervalued yet. A PE ratio of less than 10 would be fairly undervalued. But of cause, there as much more clauses to be factored into consideration for an undervalued stock.

Earnings Yield
After their release of their full financial report for the year of 2011, their Earnings Per Share(EPS) went up to $0.00305 from $0.00182 a share, an significant increase of 167%.

Net Asset Value
The net asset value of Memstar is at $0.055 of the current share price. Meaning if you buy
the share at its current price of $0.072, you are actually owning 76.39% of its assets.

Conclusion
Despite a significant increase in earnings for Memstar, its Price to Earnings(P/E) ratio proves the current price of the share severely overvalued.  Dividend yield for now still remains very low and thus might not be a good choice for investors going for long term dividend yields. It is possible that dividend yields may go up next year if their company maintain its consistency in net profits.
My max target price to enter would be $0.03.

Notes
The Group has concession arrangements with the government of the People’s Republic of China (the “grantor”) to operate wastewater treatment plants.  Under the terms of the concession arrangement, the Group will modify and operate the treatment plants for concession period of up till 25 years and transfer the plants to the grantors at  the end of the concession period at no residual value.

About Memstar
Main board listed Memstar Technology Ltd is a Singapore home grown PVDF hollow fibre
membrane and membrane product manufacturer. Its ultrafiltration (UF) and microfiltration (MF)
membrane products have been used in water treatment, wastewater treatment and material
separation.  
Memstar has two manufacturing facilities in Guangzhou City and Mianyang City respectively.
Its headquarter and R&D centre is located in Singapore.  




Published on 5 Feb 2012

Thai Beverage

Government Benefits
The production of bio-gas
(a) exemption from payment of import duty on machinery approved by the Board;
(b) exemption from payment of income tax for certain operations for a period of eight years from
the date on which the income is first derived from such operations;
(c) a 50% reduction in the normal tax rate on the net profit derived from certain operations for a
period of five years, commencing from the expiry date in (b) above; and  
(d) exemption from income tax on dividend income derived from certain promoted operations of its subsidiaries for a period of eight years.

The production of beverage
(a) exemption from payment of import duty on machinery approved by the Board;
(b) exemption from payment of income tax for certain operations for a period of eight years from
the date on which the income is first derived from such operations; and
(c) exemption from income tax on dividend income derived from certain promoted operations of its subsidiaries for a period of eight years.
As promoted companies, the aforementioned subsidiaries must comply with certain terms and
conditions prescribed in the promotional certificates.

Significant Agreements
Glass bottle purchase and sale agreement
Thai Beverage Recycle Co., Ltd., the Company’s subsidiary, entered into the glass bottle purchase and sale agreement with Berli Jucker PCL., a related party, to purchase various types of new glass bottles in order to sell to other subsidiaries within the Group for a period of two years and eight months, effective from 1 May 2007 to 31 December 2009, under the prices and conditions stated in the contract. On 23 December 2009, the subsidiary entered into a new glass bottle purchase and sale agreement for a period of three years, effective from 1 January 2010 to 31 December 2012, under the prices and conditions stated in the contract.

License agreements
- Three subsidiaries entered into license agreements with Beer Chang Co., Ltd., Archa Beer Co.,
Ltd., and Thai Beverage Brands Co., Ltd., the Company’s subsidiaries, for rights and obligations
for the sale of drinking water, soda water, beer, draft beer and lager beer under the trade names of "CHANG", "ARCHA" and "FEDERBRAU".  The subsidiaries are committed to pay fees at a rate of 2% based on net sales at price, ex factory, excluding VAT and after deducting excise tax,
contributions to the health promotion fund and Thai Public Broadcasting Service. - Sura Bangyikhan Co., Ltd., the Company’s subsidiary, entered into license agreements with 12
subsidiaries for the rights to use trademarks for white spirits and Chiang - Chun blended spirits as stipulated in the agreement.  The trademark fee is from Baht 0.50 - 1.50 per bottle, based on the contents and size of the bottle.  With effective from January 2010, the trademark fee was adjusted to Baht 0.50 – 1.20 per bottle, based on the contents and size of the bottle.

Biogas purchase and sale agreement
Thai Beverage Energy Co., Ltd., the Company’s subsidiary, entered into biogas purchase and sale agreements with three related companies for a period of 19 years, effective from the year 2009 to 2028, to supply biogas to use as a fuel source  in spirits distillery process under the price and conditions stated in the agreements.  Subsequently in 2010, the aforementioned agreements were made with additional two related companies for a period of 18 years, effective from the year 2010 to 2028.

Revolving loan agreement
In June 2011, the Company entered into revolving joint loan agreement with subsidiaries for lending loans with joint credit limit not exceeding Baht 10,000 million, interest rate 5.00 % per annum and repayable at call. Subsequently in September 2011, the Company entered into revolving loan agreement with a subsidiary to lend loans with credit limit of Baht 15,000 million, interest rate 5.00% per annum and repayable at call. In 2011, the Company entered into revolving loan agreements with subsidiaries to borrow loans with total credit limit of Baht 55,900 million, interest rate 5.00% per annum and repayable at call.

Current Price
$0.340

Dividend Yield
2.65%.

PE Ratio
17

Net Asset Value
26.47% of share price

Summary
Both the bio-gas and beverage productions were exempted from tax for 8 years and import duties on machinery were exempted with approval by the board. This tax benefit by the government will allow the company to be in a very good position to grow. The beverage production section also sees a exemption on income tax on dividends in 8 years. This policy will benefit both the company and the shareholders in the long run because it will allow the company to maximise their payouts of dividends and thus, will be more attractive to shareholders in the long run.

Apart from the tax benefits they received from the government, the company also went to various agreements. One of the agreements was the revolving loans which allows the company to cap its borrowing interest rates to 5% per annum. This will help to better plan the company finances with fixed interest rates and also allow the company to steer in the direction of growth and maximising profits.

The second agreement was the license agreement for rights to sell its products under the brands “CHANG”, “ARCHA” and “FEDERBRAU”. The cost of the agreement was brought down to BAHT $0.5 to $1.20 per bottle after 2010 from BAHT $0.5 to $1.50 per bottle. This reduced in cost will allow Thai Beverage to reduce more of its operational costs and increase its profits.

The third agreement will impact the bio-gas sector of Thai Beverage. They entered into a 19 years contract with 3 related companies with effect from 2009 to 2028. In 2010, they forged another contract with 2 related companies for a period of 18 years. With the deals they sealed with various companies to provide bio-gas, profits are guaranteed at least till 2028.

I’ve mentioned 4 advantages of Thai Beverage to impact its profits in the future years. Firstly, the tax benefits from the government. Secondly, the revolving loan agreement with its subsidaries to cap the interest rates at 5% per annum. Thirdly, the reduction of about BAHT $0.30 per bottle costs to protect its trademark brands. Lastly, the contract to provide bio-gas to other related companies for long periods could improve their profits in the long term. Below is a brief description of how their bio-gas business is related to their core beer producing business.

Bio-Gas Business with Beer Business
Waste water resulting from ethanol distilleries are the by-product of beer production. However, 50% of the generated bio-gas can be used to run the distilleries, thus displacing the reliance on pentroleum fuel. The production of bio-gas reduces the cost of purchasing petroleum fuel and also becomes an income generating business for the company.
Reference: http://www.adi.ca/pdf/GTI_Thai.pdf dated 17 Aug 2009

About Thai Beverage (From SGX)
The Company was established on 29 October 2003.
The ThaiBev Group is the leading producer of beer and spirits in Thailand and one of the leading brewers and distillers in Southeast Asia according to Canadean Limited, a global beverage research company. Its main products are beer and spirits, which have a strong brand identity in Thailand with a reputation for quality and taste. The ThaiBev Group also produces drinking water, soda water, industrial alcohol and by-products from the brewing and distilling process. Its signature beer, Chang Beer, is the best-selling beer brand consumed in Thailand. Its well-known spirits brands include Sangsom, Mekhong and Mungkorn Thong. The ThaiBev Group has a far-reaching distribution infrastructure in Thailand and also imports its beer and spirits to 19 other countries.

As at 31 December 2005, the Group owns three state-of-art breweries with a total installed capacity of approximately 10,900.0 thousand hectoliters and 16 well-equipped distilleries with a total installed capacity of approximately 87,777.8 thousand cases. Over the years, Thai Beverage has established a far-reaching integrated distribution network with long-standing customer relationships covering approximately 400,000 points of sale in Thailand.

The ThaiBev Group has offices in Thailand, Singapore, Hong Kong, Cambodia and Malaysia.



Published on 14 Mar  2012

Hock Lian Seng Group

Major Completed Projects

Contract size: $100.8M
MRT Contract 405 Construction, Completion & Maintenance Of Viaducts & Tunnels And Bukit Batok, Bukit Panjang Stations in 1990 for Mass Rapid Transit.

Contract size: $330M
Taipei Metropolitan Area Rapid Transit Systems, Nankang Line Contract 255 Stations BL10 and BL11 And Line Section / Pedestrian Mall BL10 TO BL11 in 2000 for East District Project Office Department Of Rapid Transit Systems, Taipei Municipal Government Taiwan, China.

Contract Size: $166.381M
*MRT North East Line Contract 702 Construction And Completion Of Sengkang And Buangkok Stations Including Tunnels in 2002 for the Land Trasport Authority.

Contract Size: $296.5M
Contract 821 Construction And Completion Of Kim Chuan Depot in 2007 for Land Transport Authority.

Contract Size: $348.4M
Contract 901 Construction And Completion of Marina Bay Station Including Associated Tunnels for Downtown Line Stage 1 completed in 2013 for Land Transport Authority.

Contract Size: 305M
Contract 481 Design, Construction And Completion of Marina Coastal Expressway (Marina Wharf) in 2011 for Land Transport Authority.

Contract Size: $410M
*Contract 911 Design and Construction of Depot for Downtown Line completed in 2015 for Land Transport Authority.

Outlook

Financials
22 Feb 12, Hock Lian Seng released their FY2011 financial report with a 29% decreased in revenue due to the lack of new orders on hand. Civil Engineering remained as their core business with 93% of their total revenue followed by the sale of building materials and misc which make up the remaining 7%. According to the report, despite a lower revenue, gross profit increased by 35% due to the full operation of the worker’s dormitory which generated a gross profit of $5.5M as compared to the start up in 2010 which reported a loss of $0.2M.

They now have a current book order of $227M which made up of mainly the balance work for the Circle Line’s Depot and Marina Costal Expressway Projects.

Future Challengers
In the coming months will be a number of projects called for tenders by the Singapore Government. However, the group states that it will face stiff competition from large foreign contracts as well as high construction costs and a shortage of foreign workers.

Dividend Yield
With the share price of $0.265 per share and the dividend payout of $0.02 cents a share made up a very decent return of 7.55% yield.

PE Ratio
The higher the PE ratio indicates an expensive price with more expectations for the company to perform. At the PE ratio of 4, the market valued this company 4 times its earnings. It is below the 8 mark which in my opinion is an undervalued stock taking into consideration that the company will earn more project orders in future.

Net Asset Value
Net asset value per share of a company is equivalent to a company’s assets - liabilities which make up the asset/liabilities in which a share is holding. With the NAV of $0.22 and the current share price of $0.265, one share is worth 83% of its assets.

Summary
With a 7.5% dividend yield, PE ratio of 4 and an attractive 83% worth of its asset per share, is an undervalued stock at the current price of $0.265 per share.

However, growth in this company remains uncertain with no current orders on hand. And furthermore, it had many competitors to competite for projects.

With more than 40 years of experience with its business with the government, i believe that it will do well in the years to come. The company now is in a very healthy financial position with $172M cash on hand and only $72,000 worth of debt.
About Hock Lian Seng (From SGX)
The Company was incorporated in Singapore on 20 May 2009 under the name Hock Lian Seng Holdings Pte Ltd. On 3 December 2009, the Company was converted into a public limited company and changed its name to Hock Lian Seng Holdings Limited.
Since its establishment in 1969, Hock Lian Seng Holdings Limited has undertaken and completed a wide range of civil engineering projects for both the public and private sectors in Singapore. The Group carries out civil engineering works for bridges, expressways, tunnels, Mass Rapid Transit (“MRT”), port facilities, water and sewage facilities and other infrastructure works. Its past projects include:

• Changi Airport Terminal 3 Project
• Sungei Serangoon Bridge Project
• Jurong River Bridge Project
• Telok Blangah Expressway Project
• Kim Chuan Depot Project
• Toh Guan Road Extension Project

The Group's major customers include government and government-related bodies of Singapore, such as the Land Transport Authority of Singapore, the Housing & Development Board (“HDB”), PSA Singapore Terminals (formerly,Port of Singapore Authority) and the Civil Aviation Authority of Singapore.



Published on 26 Feb 2012