Friday, December 28, 2007

Mega First Corporation Berhad (3069) MFCB

Business Summary:

Mega First Corporation through its subsidiaries, builds, owns, and operates power plants. It also involves in the engineering, design, and manufacture of components for automotive, transportation, building, and security industries. The company also engages in quarrying limestone, and manufacturing and trading of fine calcium carbonate powder and lime based products. In addition, it engages in the property management and development operations; and trades in building and construction materials, and food and beverages. Further, the company provides maintenance services for power plants, management consultancy services, and secretarial services. It operates in the People's Republic of China, Malaysia, the United Kingdom, and South Africa. Mega First Corporation is based in Kuala Lumpur, Malaysia.

Power Division

Mega First Corporation currently owns two power plants, one at Shaoxing China (60%), another one at Tawau (51%). The power division contribute 90% of the net income for 2006 financial year.

Property Division

Mega First Corporation is also involved in developing residential properties, namely Taman Bertam Jaya in Malacca and Taman Mawar in Sepang, Selangor. This division also joint venture with IJM in the "PJ8" project (beside the Federal High Way, near to PJ Hilton). This division also involve in the shophouse project at Greenhouse, Ipoh.

Engineering Division

Through its subsidiaries in Malaysia, UK and South Africa, MFCB is engaged in the engineering, designing and manufacturing of automotive and transport components and the manufacturing and trading of security seals. (This division remain weak, internal restucturing exercise in progress)

Limestone Division

The company undertakes quarrying activities and is involved in the manufacture of quicklime, hydrated lime and calcium carbonate products via its 99.6% owned subsidiary, Syarikat Cheng Sun Quarry Sdn Bhd and its 38.5% owned associate, Rock Chemical Industries (Malaysia) Bhd.


Financial Performance:

Years 2002 2003 2004 2005 2006 Average
ROE 12.58 11.84 11.78 11.17 14.65 12.40 > 10
ROA 4.46 4.49 4.32 4.58 6.78 4.92< 10

Total Liabilitiees : Equity = 34 : 66
D/E Ratio = 0.11
P/E Ratio = 7.01
DY = 3.6
Average Revenue growth rate = 32.54% > 10 (5 years)
Average Earnings growth rate = 18.35% > 10 (5 years)


Supporting Value:

1. NTA (as at 30/9/2007) = RM1.48 > RM 1.38 (current price as at 27/12/2007)

2. Share buyback starting from March of 2007 until present.

3. The management level staff especially the director level of MFCB constantly increasing or acquired their shares in MFCB.

4. MFCB constantly come out with Employee Share Option Scheme in year 2007.

5. MFCB have a strong management team who have experience background in utility, property & other field. (can also refer to the strong ROE)

6. RM100million cash on hand. (rich cash flow)

7. Pickup in the property sector.


Upcoming Project:

1. Mega First Corporation is considering taking in a partner to undertake the proposed RM1.05 billion hydroelectric project in Laos given the huge cost involved. The Laos plant is expected to supply power to the Thailand, Cambodia and Vietnam power grids due to its location in southern Laos. It would be set up on a build, operate and transfer basis for a 25 to 30 year concession period. Mega First had already signed a memorandum of understanding with the Laos government for a 240mw hydroelectric power plant along the Mekong River. The feasibility studies are being finalised with a report to be out very soon.

Though operating in places such as Cambodia or Laos could be deem as risky, and may explain why there are not many institutional followers of the stock: not many are aware that the controlling shareholders (Goh family) have been running a huge beer brewing and distribution business from Cambodia for the longest time. Hence its like operating from their backyard.


2. Mega First Corporation was also reactivating feasibility studies on its 50:50 copper mine JV with Australian mining company Perilya Ltd in Ranau, Sabah. The copper mine project had had been shelved some five to six years ago as world copper prices then did not make it feasible. With the current high prices, feasibility studies would be undertaken on setting up a mine in Ranau.


Project Risk:

1. The Don Sahong dam project in Laos is a project that the Laos people strongly oppose, as the dam will block fish migrations from Laos to Cambodia and negatively impact the lives of hundreds of thousands of people.If this project goes ahead, it will face fierce opposition from local people, as well as people in the neighbouring countries of Thailand and Cambodia, which will also be negatively impacted by the project. It will be the first mainstream Mekong River dam ever built outside of China, and so will have many serious negative impacts.
www.worldfishcenter.org/resource_centre/DonSahong-final.pdf

2. The reactivating of the copper mine cost RM349 million. It will be a huge investmen & burden for the corporation.


Conclusion:

Mega First Corporation is a company which recover from a huge dept 4 to 5 years ago. The corporation currently achieve a 5 years ROE of above 10%, with a healthy cash flow. It had showed a high effeciecy of the management team. This is one of consideration as a fundamental investor. The stability growth of the power, limestone and property divisions, Mega First Corporation will achieve a good result in the coming year. (Especailly the property division, PJ8 will be launch by mid-end of 2008 & the upcoming projects, assume that the power division contribution remain the same). As a conclusion, Mega First Corporation is a undervalue stock in the current market.

16 comments:

jeff7 said...

MFCB come to an attractive price of RM1.28. RMo.20 discount from it's NTA.

tan81 said...

新年快乐,万事如意!还欠你的事情,我记得。这个月会有空了。

忘记你有买MFCB这支股。请小心中国的情况。
因为MFCB的利润,80%来自于中国。而中国目前缺煤。清查清楚它们是用煤还是水力发电。

不然,会对MFCB的来季业绩,有很大的影响。

投资者抛售它,是有值得担心的理由。

还有,Keladi,我决定卖了。因为管理层的背景,是我不欣赏的。

jeff7 said...

Finally,

MFCB has signed of Project Development Agreement with the Government of Lao People’s Democratic Republic for the development of the Don Sahong Hydropower Project.

For further information, pls fefer to http://www.bursamalaysia.com/website/bm/listed_companies/company_announcements/announcements/index.jsp

May it have a bright future!

jeff7 said...

Tan81兄,

谢谢您的回复。

中国的暴风雪问题的确会影响MFCB下一个季度的收入,不过如果从另外一个角度去思考,它却为大家带来了廉价购买的机会。

暴风雪在短期内总会过去,如果大家都因为暴风雪的原因抛售MFCB,这也不是一件坏事。(如果以反方向投资)

希望给与意见!

tan81 said...

你误会我的意思了。中国缺煤,在最近,的确是暴风雪的因素。但,如果长期缺煤呢?
我是最近在报纸上看来的。中国的煤,产量正在减少。煤的价格也一直飙升。中国的市场,不是自由资金市场。所以,发电厂未必可以起价。

如果MFCb的发电厂是用水力,没有煤,那么可以继续投资。可是,如果是用煤,真的要探讨中国的煤价和产量了。

我不是指暴风雪这个单一事件。你针对暴风雪的看法,完全正确,是买入机会。

jeff7 said...

Tan81兄,

明白您的意思了。我会尽快寻找更多资料。

jeff7 said...

MFCB在中国的电厂是以煤矿为燃料,而沙巴州的却以Diesel为燃料。

不过Shaoxing Mega Heat & Power Co Ltd却能够在两到三个月间,要求调整电费,如果燃料价格有很大的变动。

资料来自于Aseambankers, Malaysia Equity Research。

tan81 said...

我在最近到访了一家上市公司,如果你有看我的分享,应该知道过程。这次体验,有一点是可以和你分享。
我发现,很多事情,的确不是小股东可以在财务报告看到的。就以我的例子,采访过后,才知道他们的业绩只依赖一个顾客。这,就是风险。
MFCB可否调高价钱,煤的本钱是多少,合约的详细内容,我们都不知道。除非你可以证实以上的事实,我才鼓励你继续买进。
我不知道你觉得这些事情重要或不重要。我会建议你向管理层发问,甚至要求他们给你详细的资料。这样做,可以对你的投资更有保障。
对不起,多事了。

jeff7 said...

Tan81兄,

没问题的,不需要说对不起。您的坦率正是我敬佩的。我就是需要这样的战友,这样才能够互相学习,互相提醒。

很感谢您的建议,我会用心调查,希望会有更多的分享。

并肩作战,这样才有意思!

Jeff上

alenkhoo said...

Jeff, 支持你 :)

jeff7 said...

Dear Alen,

Thanks fo ryour support.

A bit busy these few months, planning & starting on some busniess.

Hope to share more with you in the future.

Thanks!

lancer7 said...

Hi,

today is my first time that i browse your blog. Finally i can find another people like you who is a value investors.

So, let's discuss and exchange the information about the company that we researched.

jeff7 said...

Dear lancer7,

Nice to have you in, man. Nice to meet you. Let's share together & learn together. If you have any potential research with you, we can share together here. (If you do not mind)

Hope you will get something from here.

Good investing!

Lady in Pink said...

Hi Jeff.. can i know the Mega First - incorporation date, listing date in Bursa Malaysia, its external auditors and its subsidiary companies? if you dont mind. Help me alot. thank you

jeff7 said...

Dear Lady in Pink,

Sorry for the late reply, a bit busy these few months.

Below are some information you requested:
MFCB listed on KLSE since 7/6/91. It's external auditor is Horwath. Regarding the it's subsidiaries, you can try to search from it's current financial report, page 86-89.

Hopefully the information above can help you further.

It was great that you take a deep study on a company. Hope you all the best.

Currently MFCB is in a very attractive price level with stable income, strong cash flow, high ROE.

Good Investing!

skattan said...

Mekong river hydroelectric dam threatens livelihoods and endangered species in landlocked Laos

http://www.guardian.co.uk/environment/2009/mar/13/laos-hydroelectric-dam