FIAMMA: the Double edged Sword

Fear and then relief gripped the markets this week, testing investors’ nerves. The problems were not particularly new -- concerns about a China-led global slowdown, collapsing oil prices and the end of Federal Reserve support had been rattling traders for months, leading to a plunge in equities back in August. The same issues reached a crescendo again by Wednesday before a rebound on central-bank optimism. ( This showed the turbulence of Human's emotion as well)


The slower pace of growth in China’s economy puts into question the outlook for demand from the world’s biggest consumer of commodities. A supply glut that torpedoed the price of oil made things worse, wreaking havoc on markets and especially the metals, mining and energy industries. Volatility also jumped, a sign market jitters were entrenched across the board among all asset classes. A relief rally eased concerns later in the week. Things started looking better by Thursday, when European Central Bank President Mario Draghi floated the prospect of more economic stimulus as early as March. 


So, what are your strategics for current turbulence market? 
1. wait and keep your bullets? ( bottom fishing?)
2. nibble bit by bit the stocks with good potential growth?
3. play safe by investing in high dividend stock/ Defensive stocks?

Well, it is a difficult decision to make. But, YOU MUST make a decision! 

Let's discuss about FIAMMA:

This Group has 3 reportable segments, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed based on the Group’s management and internal reporting structure. The following summary describes the operations in each of the Groups’ reportable segments:

1. Investment holding and property investment (1%)
2. Property development (9%)
3. Trading and services ( 90 % of  company's revenue) 

The Group recorded a lower revenue of RM333.488 million for the current financial year compared to RM338.161 million achieved in the preceding financial year. This is mainly due to lower contribution from the property development segment. (8.6% of net revenue). The Group recorded a higher profit before taxation (“PBT”) of RM75.415 million for the current financial year compared to RM63.182 million achieved in the preceding financial year. The PBT of RM75.415 million comprise RM50.577 million arising from operations and RM24.838 million from increase in fair value of investment properties.

The Group’s revenue is derived primarily from the trading and services segment which contributed 90.7% of the Group’s net revenue. The segment recorded a net revenue of RM302.542 million as compared to RM274.440 million recorded in the preceding financial year, representing a growth of 10.2%. Consequently, this segment recorded a higher PBT of RM44.770 million against PBT of RM41.436 million for the preceding financial year, representing an increase of 8.0%. The current financial year’s PBT from this segment represented 59.4% of the Group’s PBT.

Do take note that there is a recent JUMP in its EPS for its investment holding segment. The investment holding and property investment segment contributed 0.7% of the Group’s net revenue. This segment recorded a higher PBT of RM27.567 million against PBT of RM2.019 million for the preceding financial year, representing an increase of 1265.4%. Included in the PBT of RM27.567 million is an amount of RM24.838 million arising from the increase in fair value of investment properties located in Jalan Tuanku Abdul Rahman. The current financial year’s PBT from this segment represented 36.5% of the Group’s PBT.


Looking forwards: ( is there any potential growth for this company?) 

1. The relocation and centralisation of the existing warehouse in Bandar Manjalara to a new and larger capacity warehouse in Bukit Raja Industrial Hub, Klang (Phase 1) has been completed in October 2015. This is expected to improve operation efficiency as it will cater to all the Group’s logistic operations under one roof. In addition, the new warehouse is expected to provide additional income stream from the provision of storage space and logistic services to third party customers. ( How much will this new warehouse contribute to the subsequent financial quarter? ) 

2. More contribution from property segment despite the property market slowdown?

The proposed redevelopment of the existing warehouse land in Bandar Manjalara, Kuala Lumpur into commercial properties targeted in early 2016 will contribute to the Group’s revenue and profit in the coming financial years. The proposed new commercial development in Jalan Yap Kwan Seng and the proposed new mixed development in Jalan Sungai Besi, both in Kuala Lumpur are expected to contribute to the Group’s future income stream once the proposed developments are launched and sold. 

 

What makes this STOCK defensive ?
1. Dividend play: Pending 7.5 cents dividend in Feb/ March awaiting AGM approval in Feb 2016.
2. Share split and bonus issue play: Most likely will be materialise in ? March 2016. 

(i)         proposed share split involving the subdivision of every one (1) existing ordinary share of RM1.00 each in Fiamma (“Fiamma Share(s)” or “Share(s)”) into two (2) ordinary shares of RM0.50 each in Fiamma (“Subdivided Share(s)”) held on a split entitlement date to be determined and announced later (“SplitEntitlement Date”) (“Proposed Share Split”);

(ii)        proposed bonus issue of up to 177,555,700 new Subdivided Shares (“Bonus Share(s)”) to be fully credited as fully paid-up, on the basis of one (1) Bonus Share for every two (2) Subdivided Shares held on a bonus entitlement date to be determined and announced later (“Bonus Entitlement Date”) (“Proposed Bonus Issue”);

Company Announcement

* please study and make your own judgement before buying or selling stocks, BUY at your OWN risk* 

Why Both Fong Siling And Koon Kew Yin Chose EG?

EG Industries Berhad ("EG "), headquartered in Sungai Petani, Kedah Malaysia, was listed on the Bursa Malaysia Securities Berhad in 1992 as an investment holding company. Through its two largest subsidiaries SMT Technology Sdn Bhd at Malaysia and SMT Industries Co., Ltd at Thailand, the company specializes in the provision of electronic manufacturing services ("EMS") for world-renowned brand names of electrical and electronic products.  

We specialise in ELECTRONICS MANUFACTURING SERVICES ( EMS ) of high - end PCB Assemblies and OEM product manufacturing. We are fast, flexible, responsive and offer full turnkey solutions for your manufacturing needs. We have the expertise to handle all types of surface mount and plated through hole assemblies. Our state - of - art equipment can handle the smallest chips component from 0201 to BGA / CSP and QFR packages with up to 12 mils leads pitch. 

Their products ranging from:

1. Computer
2. Smart phones
3. Medical equipments
4. Measuring equipments industry
5. Audio Video industry
6. Automobiles
7. Aviation
8. Power supply

Where are the potential growth of EG?

1. Foreign exchange gain due to strengthening of USD
2. Higher profit margin for the products (Box Building)
3. Expansion plan: To invest RM30m in new plant. EG Industries plans to invest about RM30m in a new manufacturing facility in Sungai Petani, Kedah. The new facility would boost its production floor space in Malaysia by 50% to 229,557 sq ft. EG Industries group CEO and ED Alex Kang said that the new manufacturing facility would be dedicated to plastic injection moulding operations.

You can see from the annual report year 2015 that due to the factors I mentioned above, its EPS has increased significantly! 

As for the Major shareholders, you can see Mr Koon Yew Yin and Mr Fong Siling are among the major shareholders for both EG!
( But, please notice that there are a lot of PLEDGED  Securities accounts for these stock as well. These are MARGIN accounts! When the market slumped, these are the potential shareholders that MIGHT sell their shares to prevent the high interest rate of these MARGIN accounts)

* please study and make your own judgement before buying or selling stocks, BUY at your OWN risk* 

KESM: riding on Rumour of Bonus issue and Share split? > 10 % gain in a week

KESM optimistic as auto industry gears up for driverless cars

BY CHEN SHAUA FUI
KUALA LUMPUR: KESM Indus- tries Bhd, which saw its net profit in the first quarter ended Oct 31, 2015 (1QFY16) almost tripling to RM8.07 million, expects the global automotive industry’s move to- wards increasing electronic con- tent in vehicles to drive its perfor- mance going forward, especially as the industry readies itself for the much vaunted driverless cars.
As such, it is positive on its financial performance in FY16, for which it has earmarked RM82 million — the same quantum as the year before — to expand the capacity of its integrated cir- cuits test segment to meet the requirements of its clients from the automotive semiconductor manufacturing industry.
KESM executive director Ken- neth Tan told reporters after the group’s annual general meeting yesterday that many carmakers have laid out their roadmaps to get their respective driverless car on the road in 10 to 15 years, and that KESM can leverage on that trend to grow its business further.
Tan expects the electrical con- tent in a driverless car 15 years from now will be double that of today’s conventional car.
However, he declined to give any forecast for the company’s financial performance in FY16, though he indicated that the group’s 1QFY16, “which turned in very decently” could serve as a guidance of sorts.
KESM provides specialised

electronic manufacturing activ- ities, primarily the provision of burn-in services — the process of stressing semiconductors to weed out potentially weak cir- cuits — with a focus on the au- tomotive market.
In 1QFY16, KESM’s net profit jumped 192.4% to RM8.07 million from RM2.76 million in 1QFY15, largely due to the reduction of expenses and a foreign curren- cy translation of RM4.44 million. Revenue rose slightly to RM70.18 million from RM69.16 million.
Meanwhile, Tan said the ca- pacity expansion the group is looking at this year will mainly come from the test area.
“There are test requirements that need us to continue investing in testing, in order to support our customer’s requirements. These are all customer-driven capacity requirements,” said Tan.
Meanwhile, KESM’s average capacity utilisation at its three factories — two in Malaysia and one in Tian Jin, China — is now about 80%. The Chinese market accounted for 22.33% of its total revenue in FY15, while the re- mainder came from Malaysia.
Tan said the group is open to any possibility of overseas ex- pansion, provided that there was demand from its customers such as those in China.
KESM dipped 10 sen or 1.72% to close at RM5.70 yesterday, val- uing it at RM249.50 million. Its share price has risen about 2.4 times from a year ago, when it was trading at RM2.34.

* What do you think of KESM? despite the market retreat, it goes against the wave to reach almost 10% gain compare to last week* 

How to Make $$$$ in 2016!!!

After Strong Run by Tguan From RM 2.74 to current RM 3.4 ( > 30% gain)!! Congratulation to those who bought and keep under your pillow!  What will be the next one in the making?
check out Post o Tguan

Previous post on KESM

What to look for in year 2016?

What Business is KESM in?

KESM PROFILE

KESMI is associated with the Sunright group of companies, which is incorporated in Singapore. The KESMI Group comprises KESM Industries Berhad (KESM), KESM Test (M) Sdn Bhd (KTM) and KESP Sdn. Bhd.(KESP).

KESM and KTM is strategically located in one of the prime industrial hub in the Sg Way Free Industrial Zone in Petaling Jaya and KESP is located in Penang.
KESM has been engaged in specialized electronic manufacturing activities since 1978. KESM's primary objective is in specialized electronic manufacturing activities and serves as sub-contractor to electronic multi-national corporations. In particular, it is in the business of providing "burn-in" services to the semiconductor industry. KESM has experienced steady growth in business and was successful in becoming a public listed company in 1994.
In working closely with world class semiconductor manufacturers, KESMI has successfully introduced programs jointly with customers to support their operations. These programs involved extensive training to raise awareness, improve skills and intensify participation, so as to meet steadily rising requirements on quality and delivery. As a result of our achievements, it has given the company great satisfaction in receiving many business dealings and is poised for greater growth.

KESM ACTIVITIES Our Activities KESM is principally involved in specialized electronic manufacturing activities. More specifically, the company is engaged in providing burn-in services. The company has business dealings with virtually all the American semiconductor manufacturers. Our Services Semiconductor burn-in services Electrical testing of semiconductor IC Tape and reel assembly Burn-in The production of semiconductor devices is ever increasing and creates a continuous flow of demand for burn-in. An integrated circuit may be defective at the time it is produced or it may have a latent defect which permits it to operate according to specifications for a period of time but eventually causes it to fail. Burn-in is a process of stressing semiconductors to weed out potentially weak circuits. The technique involves subjecting a device to heat and voltage stress for several hours or days and exercising it through the limits of its electrical performance. The only effective method of assuring high reliability of semiconductor is to perform burn-in. As the demand for telecommunications, computers and consumer electronics increases, the wide range of assemblies become ever increasing. Electrical Testing Testing service is provided by KESM Test (M) Sdn Bhd

So, how does KESM make money in year 2016? 
What is the growth propeller? 

• Reduce human workforce due to more automation ( please refer to its latest annual report 2015)
• forex gain from Stronger USD
• increase demand for its service especially the testing of semiconductor chip! 

" The testing of semiconductor chip is our growth engine. " 

 This is the exact sentence used by the company in its latest Annual report! 

Expanding Test Services
The testing of semiconductor chip is our growth engine. The bulk of our expansion is testing devices for the automotive market. We are optimistic of a steady growth because the number of chips used in a car is increasing and even the mid-range cars are incorporating more chip contents in their car design. The number of cars is expected to grow too.
In making cars smarter and safer, new features are added into the "microcontrollers" which are widely used for integration. A single "microcontroller" combines the functions of a processor, memory and other peripherals. These chips are found in the engine control systems, Advanced Driver Assistance Systems “ADAS” applications, and also widely used in infotainment systems. The demand for "microcontroller" is increasing and this device is of relatively high value. Testing of microcontrollers for cars is one of our target markets for 2016.
With the expanding Internet of Things “IoT”, "microcontrollers" have become an even higher- volume component of the semiconductor market. These chips are used in digital cameras, mobile and wearable devices which are in high demand.
02 KESM INDUSTRIES BERHAD ANNUAL REPORT 2015

   

Strengthening Burn-in Services
Our business is about quality. The extension of test after burn-in offers our customers tremendous “value-add”. Increasing demands for intelligent cars are attracting emerging technologies. To ensure absolute reliability of the chips, the process of burn-in or stressing of chips at elevated temperature is not good enough. Automotive makers are looking at ways to test during burn-in "TDBI". "TDBI" performs tests using high temperature and critical testing patterns to accelerate the defective failures of integrated circuits. This improves quality. A new generation of chips with higher quality expectation would drive the demand for "TDBI" processing. This is a costly investment requiring very high degree of process control.
For the last 4 years, we embarked on a program to develop proprietary process tools beyond the tracking of devices flowing through our manufacturing floor. Last year, we completed the final phase of our development, providing a fully integrated flow which monitors and controls the “TDBI” process. Our system identifies how, when and where devices or equipment may fail before, during or after the burn-in and test process. This combined proprietary process offers assurance and confidence to our customers for “TDBI” processing. 

What are others factors that will propel the price higher?

This stocks are invested by Mr Koon Yew Yin, Ooi Teik Bee Technical analysis wise: it is breaking new high with huge volume today!

Will KESM continue its uptrend? Let's wait and see.

Let's take a look at its earning! 

You can see that the earning in last 2 quarters shooting up nicely! 

PS: I am not asking you to buy. If you buy, you are doing it at your own risk.