Friday, January 25, 2013

Bright Packaging: Interesting tussle and perhaps below can provide some idea

Never really try to bother about the company except that I have heard it over BFM many times - and again today I was listening to the tussle over the radio. Some basics - the tussle have many issues to it:

  • 4 new shareholders (challengers) are proposing for appointment of themselves as directors in replacement of 4 existing directors representing Demi Maju. The tussle becomes interesting due to both parties have almost the same number of shares (those that are visible, Non-visible I am not able to predict). Those headed by Syed Ali has 31.19% while under Demi Maju (existing controlling shareholder) has 30.58%.
Part of Top 30 for ending 2012. Look particularly at No 1 vs No 2 - 5

  • Who are the current management? They look like pure and genuine business people who may not have really care about share price (probably their mistake). The business is supplying aluminium foil packaging to the tobacco industry and it seems like the business has managed to turnaround since 2005 although not spectacular. The current market capitalisation for the company is RM86.57 million from a traded price of RM2.00. How did the turnaround happened? Gearing reduced and mainly due to them halting the fibre optic and cable business which was a problem to the company.
Basic Information
  • The worry about RM8.6 million owing to parties related to the major shareholder. Well, let me show something over below and shareholders might have the chance to understand them clearer.
Part of 2007 Balance Sheet. Notice the massive reduction in borrowings from 2006 to 2007
My guess is that from the borrowings in 2006 which was exceeding RM21.2 million, it has reduced to slightly more than RM3 million in 2007. Other payables however increased and that was where the RM8.6 million came about to pare off the borrowings hence gearing which was a problem to the company was cleared. It looks like genuine. Read the director's statement in 2007 as below. If its really happening, I guess we cannot fault the related party owing. This interest free payable looks like an honestly good thing for the shareholders.

Part of 2007 Chairman's statement
Sundry payables which the shareholders are concerned about. Happened in FY2007 and still existing until today
  • Who are representing the challengers team? Syed Ali Al-Habshee (as below). It may be true they may not have the relevant prior experience in the aluminium packaging business as claimed by the current directors. You might to check out the background yourself via googling. In terms of these kind of exercise though i.e. company raiding, I think the challengers are perhaps way more experience than the current team of directors based on background. But do you want pure corporate people to head this company? 
The question is if the company is for the long term, you may want to ask where do the new board members (if appointed) stand.

The four challengers probably have gone in at price between RM1 - RM1.75 with I think their average purchase price around RM1.20 based on below chart. If that is the price, they went in, the team may have made some genuinely decent investment (for long term though which may not be the case) based on the declaration of the company's directors committing to pay all profits as dividends. 

  • How strong is the company? Decent, with a specialised focus in providing solutions to the tobacco industry. The company obviously has a clean balance sheet after cleaning them off in 2007. However, it is not amazingly interesting for me though the business it is in and at current price. Whether the current price is justifiable for you? It depends. But just some information as below.

  • How the h*** did the company change its auditor from Ernst and Young to a small outfit. You will have to ask the current directors.
Note: I am not being paid by any party for this...


Bright Packaging Shareholder said...

This is great analysis. Worth noting that the Director's fees has increased significantly for the past 4 years. MD is paid almost 1 million.
Also worth noting that the company disposed off core assets recently. Next year, I would be surprised if there are any profit. The MD went on papers to claim that the company is truly profitable, but upon closer inspection. He increased his own fees and the profits stems from disposal of assets. Also they changed auditors. I think E&Y was their auditors for more than 10 years. Upon getting raid, MD tried to sway investors by announcing dividend when it never paid a single dividend in history. Too much of a coincident here.

felicity said...

be careful what you wish for if you are a shareholder of Bright Packaging :)

felicity said...

Looked through the salaries and remuneration - the slightly less than RM1 million is for 2 person (executive directors) - don't think it is too high. One must know that the package including all allowances (cars, housing etc) and employer's EPF portion are included in remuneration portion for directors.

Also I do not see that the disposal of land was done wrongly based on the disclosure. It was valued by a very decent valuer and the sale was from a subsidiary in which the business was stopped.

As for no dividends, I think you have to ask why, but seemed like the business has managed to conserve cash only recently (last 2 -3 years)

Bright Packaging Shareholder said...

Yup, will be interesting an EGM. Would be keen to know your thoughts on what happened to the proceeds of the sale of land and subsidiary. And what were the initial thoughts of the Board before getting raid.

Unknown said...

A five year plan to payout all dividends is unrealistic. No public company has ever made that kind of commitment. It reflects either a lack of judgement and foresight, or worse a desperate measure. This is compounded by the fact that the company risks significant working capital deficiency should the MD and a company associated with him (WYLong Holdings) decide to withdraw. Amount due to them is more than RM10 million and about 25% of the company's paid up capital! Could this be the reason why they changed auditors? If we look at each item individually, everything looks fine. But once we consider the items together, a slightly different picture emerges. According to Bursa filings, the company posted net profit of RM 2.7 million for 2011 of which a total of RM 1,152,592 stems from disposal of assets and interest income and for 2012, the company posted net profit of RM 3.78 million of which RM 1,115,826 came from other sources of income. As the profits are already boosted by the one-off disposal and other income. I seriously question the board's ability to meet next year's financial obligation let alone committing to payout dividends for 5 years. Having looked at the director fees, they have increased by half or 50% every year. This can be justified if Bright had organic revenue growth with increased operating margin which is not the case at all. Having considered all these facts alongside your analysis and the comments highlighted by the previous poster, I can perhaps see why the company made such an announcement.

felicity said...

Yup they do sound desperate.

Bursa Investor said...

Great article! And I also really like a lot of your other posts. A lot have been said about the Board of Bright Packaging Industry Berhad. It seems no one has really focused on the investors trying to oust the board at BPI. I had a look at the some of the companies that Syed Ali Alhabshee controls. Apparently he owns more than 1/3 of Redtone International via his investment vehicle Indah Pusaka Sdn Bhd. Since his appointment as Chairman of Redtone last year 2012, it has turned around Redtone and being awarded more than 100mil project from MCMC and LTE Spectrum of 20MHZ in 2600MHZ region. Kenanga has forecasted it will earn in excess of RM23mil profits in 2013 (as highlighted in another of your posts). Similarly, as Chairman of AMedia even before the company got listed, it has registered 16m in net profit with a CAGR of about 70% year on year. I believe AMedia also has license in broadcasting. Perhaps he already has plans to turn this company around?? And judging from past experience and the fact that he spent significant resources in building up his stake of Bright Packaging Industry, I wouldn't bet against him. The current Directors at Bright do not seem to have the vision or corporate expertise or else they probably wouldn’t be in this predicament in the first place. I wouldn’t be surprised if the new Board announces ‘a new major contract’ once he takes over.

Bursa Investor said...

I had some time to investigate the other investor as well, Ang Lay Chieng who is also seeking a board seat a Bright Packaging Industry Berhad. She previously worked in PwC and Affin Merchant Bank and is listed as a Chartered Accountant and a Fellow of Chartered Certified Accountants. She alongside Alhabshee appears to have the corporate experience and connections to take Bright Packaging Industry to the next level of growth. Not much is known about the current directors at Bright Packaging, there is literally no information on them. Word on the trading floor appears to favour the new investors. I think if one got in early enough, this stock is worth holding for the long term if you can withstand the volatility in the mid-term. My thoughts are, if the investors take control of the board, the stock should spike up and I am pretty sure the new board will announce something positive. Logically, the investors would have thought this through and must have something on the cards. It’s always worth trading with the ‘big boys’ rather than against. If your analysis is right and that the four challengers have gone in between RM1 and RM1.75, those who are in at this price range should also be hoping for a spike up after the EGM. It will be worth paying close attention to the volume in the coming days leading up to the EGM.

felicity said...

The challengers are all market players if you need the exact answer from here!

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