MAS in Spotlight - For the WRONG reason

Good news !!!  MAS announced a profit before tax of RM39.103 million for the 3Q ended Sept 2012, after 6 consecutive quarters of losses. Its Group Chief Executive Officer, Ahmad Jauhari Yahya said revenue initiatives have started to gain traction in the market, and combined with the improved utilisation of the fleet and manpower, the airline is beginning to see RESULTS of all this HARD WORK.

Bad news !!!  Proposed reduction of RM0.90 of the par value of each existing ordinary share of RM1.00 each, proposed reduction of share premium account to be utilised towards setting off against the accumulated losses of MAS and to undertake a renounceable rights issue of new shares to raise gross proceeds of up to RM3,100 million (RM1334 mil for working capital, RM986 mil for capex, RM777 mil for repayment of borrowings).

Rationale !!! To show a stronger financial position moving forward and to improve liquidity and financial flexibility. (in short, to clean up the books).

Just when you thought it's safe to jump back to the water,  the share plummeted to an all time low of 80 sens before closing at 84 sens. Further downside is still anticipated in the next few days. Among the significant sellers for the past 2 months, EPF disposes off more than 14+  million shares in the month of Oct and another 12+ million shares in Nov.

The share traded at its highest point in Feb 2012 when it announced a collaboration with AirAsia which did not materialize. Being a GLC, the counter had been a total flop and a major letdown. So, how do MAS reward and cool down its die hard investors. By giving some sweetener in the form of FREE flight vouchers (call them if you did not received) to compensate for all their LOSSES. Vouchers are NOT exchangeable for CASH.

Will this corporate exercise help MAS to recover and regain its past glory, will it be taken private or will this only prolong to inevitable death of MAS. If the business does not improve, losses will still be accumulated. Only time will tell.

Meanwhile, i'll leave you with a song by Eric Clapton - Tears in Heaven. This song was written in memory of his 4 1/2 years old son who died in a tragic accident when he fell out of an open bedroom window of the 53rd floor of a Manhattan apartment building.

Market Summary

Equities in KLSE began the week on a cautious note as uncertainty crept back into the market. The KLCI extends its losses for the 5th consecutive days. At 12.30 pm, the KLCI fell 8.15 points to 1599.73, slipped below the 1,600 support barrier. Losers led gainers by 477 to 143 while 273 remains unchanged with a total volume of 580 mil shares valued at RM575 mil. The KLCI had been trending down since early November.

On political front, the upcoming 13th general election is anticipated to be very closely contested and the results could go either way, with BN return to Federal Power or Pakatan Rakyat replacing BN to break Umno hegemony to form the central government in Putrajaya. Umno youth chief Khairy Jamaludin is confident that BN's performance in the 13th general election will fare better and will win with a higher majority than 2008.

Overseas, political turmoil in Egypt entered its fourth day Monday, after President Mohammed Morsi’s surprise power-grabbing decree galvanized the opposition and set off rounds of street violence, at a time when the nation needs unity to make difficult economic decisions. Egypt’s economy was already in trouble, with foreign reserves having fallen 40 percent since the uprising and growth projected to be less than 2 percent this year.
The market sentiment is anticipated to remain weak till the end of 2012. It is advisable to trade cautiously and protect your capital during this period. Don't get overly stressed. Chill out.

Below is a lovely song by Eric Clapton - Wonderful Tonight

HIAP HUAT - An Impressive Debut

The much awaited listing of HIAP HUAT got off from to a flying start with the share being the TOP GAINER and most actively traded in Bursa Malaysia today.

The waste recycling group's share opened at 32 sens or 12 sens above its IPO price of 20 sens, for a 60% impressive gain. The were 16 mil shares transacted at the start of the trade. This is a classic example of how an IPO should be. It looks good not just for the Group but for investors and the market as well. Such strong apetite is a reflection of confidence in the Group's business.

The counter traded at a high of 37 sens before the weak market sentiment weighs it down. It ended the day at 25 sens or 25 % above its IPO price with a total 195 mil shares traded. With such a high trading gap, investors who timed the purchase and sales right will rake in some good profit margin.

The strong start out of the gate no doubt bodes well for the company. The cash raised from the IPO issue will be used to boost up its growth and expansion plan for existing and to tap on new market opportunities overseas as indicated in the prospectus.

HIAP HUAT - A GRAND ENTRY TO KLSE

Nothing gets the blood of an ardent investor pumping like the prospect of a new IPO which clearly indicates huge market demands. In this case, we are talking about Hiap Huat Holdings Berhad , which recently saw an oversubscription of its public portion of 5 million shares by a whopping 136.10 times. For those of you who managed to get a piece of the pie, some decent 'ANG POW' money should be going into your pocket next week. Fret not for others as there are ample opportunities to pick up from the market when it opens.

In this article, we will look at some salient points into the company's business as well as its future plans, which should also shed some light to the reason behind such strong interest in its IPO.

Hiap Huat’s principal activity is in the niche business of collecting, recycling, re-refining and producing recycled products from waste oil, waste solvent and used drums and containers that they are licensed to collect, treat and process. It boast a 17 years proven track record in the oil recycling industry and is recognized as the top 3 major players (by way of revenue) in Malaysia in year 2011. The group's recycled end products are sold under their own "AF1", "Top Up", "NEKKO", "Cap Rumah" and "Flag" brand names, contributing about 82% of the Groups Financial Period Ended 2012 revenue.

The Group was recognized and awarded an accredition by Moody's International Certification.

The Group has 8 wholly owned subsidiaries under its umbrella, namely, Hiap Huat Chemicals Sdn Bhd, Transada Chemicals Sdn Bhd, Topmark Petroleum Products Sdn Bhd, Xia Fa Hardware Sdn Bhd, CNT Hardware and Petroleum Sdn Bhd, Hiap Huat Petroleum Sdn Bhd, Hiap Huat Services Sdn Bhd and Hiap Huat Chemicals (Labuan) Sdn Bhd. It has its headquarters located centrally in Kepong, Selangor and has 2 treatment plants located in Bentong, Pahang and Gopeng, Perak, with total existing capacity of 51 million litres for waste oil and 15 million litres for waste solvent. It had also invested some RM25 million to setup the thrid treatment plant in Pulau Indah, Westport which is expected to start production in the first quarter of next year. Mr Chan Say Hwa, the Group Managing Director indicated that with the introduction of the third treatment plant, the production capacity should be doubled and also hope to increase the Group's market share which currently stands at about 20% to 26%.

Zulkifly Zakaria, Hiap Huat's independent non-executive chairman, said in his speech at the prospectus launch, “We have always capitalised on our ability to identify the potential in the oil recycling industry and this makes us different from our peers. Today, Hiap Huat has grown into one of the few businesses in the oil recycling industry that is equipped with the capabilities to produce and market finished recycled products that can be directly used by end consumers. This success further reinforces our strength as an integrated licensed waste oil recycler.”

As to the Financials, the Group posted a healthy Profit After Tax (PAT) of  RM2.74 million against a revenue of RM18.285 million FPE 2012 with an indicative Gross Profit Margin of 41.52% and a PAT of 14.99%. The main revenue contributors (more than 50%) are from recycled fuel oil and recycled lubricant products with 95% of the revenue predominantly derived from Malaysia.

Moving forward, the Group had also identified several key strategic initiatives that it will implement post listing to support its future growth plans.

1..  Increase in Production Capacities

2.  Expanding & Reinforcing the Group's Supply Chain

3.  Setting up of Pulau Indah Production Plant to be completed and operational by 1st quarter of 2013

4.  Oversea Market expansion to Indonesia, Vietnam, Myanmar and Indonesia

The Group is expected to raise a gross proceed of 17 million for its public issue. The proceeds are expected to be utilized in the following manner.

The Major Shareholders are :

Chan Say Hwa  -  20.82 %

Soo Kit Lin - 20.82%

Chan Ban Hin - 17.85%

Hiap Huat will have a market capitalization of RM66,660,266 upon listing, based on a total enlarge issue of 333,301,330 shares at RM0.20 per share.

I have a good gut feeling that the stock will show a strong debut on its listing day, in consideration of the following factors :

a)  Hiap Huat has a proven track record of 17 years and is ranked among the top 3 major players in the oil recycling industry in Malaysia in 2011 in terms of revenue
b)  90+% of the Group's revenue is currently derived from Malaysia. With the oversea's expansion plan, we can look forward to a substancial increase in revenue and profit in the near future.
c)  a strong Management team with expertise in oil-recycling business
d)  massive oversubscription of its public share offering

The stock will be listed on 26th Nov 2012 under the stock name HHHCORP.

HIAP HUAT - UPCOMING COVERAGE

I will be featuring an in-depth article on HIAP HUAT this week.

This counter was oversubscribed by an overwhelming 136.10 times on the public portion of 5 million shares. In addition, the private placement amounting of 80 million shares and offer for sale of 50 million shares were all successfully taken up, making this perhaps the HOTTEST IPO counter this year.

HIAP HUAT will officially be listed on ACE MARKET on the 26th November 2012.