Tuesday, December 2, 2014

Shifting portfolio

The past 2 trading days have seen huge drop especially to O&G companies. Not surprising, other stocks are getting some hit as well. With that, I am making some change to my portfolio. It is still a boring change though with the switch from Jobstreet to Keuro. (Yes, I am buying same same company.)

Jobstreet has already sold its main business to Seek and I do not see much upside anymore. The most it can go is probably to RM3.00.

Keuro, on the other hand I see huge potential. I have figured out that perhaps the holding of 40% in Bandar Rimbayu alone for Keuro could potentially be worth around RM0.9 billion at least. Yesterday, Gamuda had bought a piece of land adjacent at RM35 per sq ft and that is an agricultural land which will need some additional spending and work on (calculation below). Hence, if anyone is claiming that the purchase of Canal City land by Ecoworld at RM35/sq ft is expensive - it probably is not. Tropicana got it cheap.

Calculation of purchase price by Gamuda on an agri land near Kota Kemuning
Purchase price of - RM392,172,858.00
Total hectares - 104.1 hectares = 11,205,220 sq ft
Price per sq ft - RM35 per sq ft

Calculation on Rimbayu
Total acre - 1878 acre
Total sq ft - 1878 x 43,560 = 81,805,680 sq ft
Discount - 20% for an associate stake
Price per sq ft - RM35 per sq ft
Total Value - 81,805,680 x 80% x RM35 x 40% = RM916,223,616

At current price, Keuro is trading at around RM1.05 billion where the 40% ownership of Rimbayu is probably already worth that much. Additionally, I still think that the West Coast Expressway will be worth more than the Rimbayu stake. The drop in oil and other commodities may even help Keuro in having the construction costs lower as there is somewhere that I have encountered that in building of roads, around 70% are in the raw materials - cement, steel, bitumen (petroleum by products). Do check out where the prices of these items have been heading over the last year. I am not sure for Keuro's case, would raw materials comprise 70% of the costs. Any civil engineers here that can help to clarify? Do note that Malaysian government is taking up the costs on land acquisition in this project.

Hence, I have made some adjustments to the portfolio.


Akagi Shigeru said...

I am a civil engineer. it will be misleading if we assume a certain percentage of construction cost from the material itself because projects specification varies from project to project. But for a developer most of the developer land cost at prime area is one of the major cost. But as rule of thumb normally a construction company will price the net margin at about 8-10 % while developer will be ar aboiut 15-20%. That is my understanding. Further clarification is needed for verify that. On the side note, I will suggest that you add BJAuto into yur portfolio. Happy investing

felicity said...

Thanks Akagi. WHat about roads. The main costs is the WCE which is understandably costing around RM5.8 Billion. If there are savings, it is substantial, even at 5%.

paperplaneinc said...

i THINK joBST still a good buy. It has remaining assets worth ard RM0.40 after the Jobstreet bought out.

Now pending the major holder's plan only what they intend to do in future for company

panaceaasia said...

Berjaya Corp placed out a 5% stake in BJ Auto in early Nov 2014

felicity said...

BJ Auto looks ok, but I could not get over the fact that it can be more valuable than Tan Chong in terms of market value.

Bn911 said...

Hi Felicity, since Rimbayu worth around RM0.9B, how much u think WCE worth at least upon completion? Thx

felicity said...


It is hard to predict a value when there is no data. But I do not think it will be small for someone to be willing to invest for at least a 5 year period. It is not a short highway and will pass through Port Klang. Should have substantial value.

Akagi Shigeru said...

Fel :
TanChong is far way out compare to BJAuto currently. If you look at the BJAuto fix asset ( plant and etc ) it is only 60Million ++. But if we anuallize it's recent quarter result it is about 200++ plus.
Mazda skyactive techonology is well accepted and it's performance is better than Nissan. With the promising growth ahead, BJauto deserve a much better premium than Tchong. But the way BJ AUto free cash flow is excellent and it is debt free. I am not trying to convincing, wish me luck on this bet. Thnaks for sharing your thought.

felicity said...

I have to agree that I do not know much about cars as its Skyactiv technology but wouldn't it be too much to depend on this. Berjaya as yet has very little assembly in Malaysia with the cars mostly being imported from Japan or Thailand. Tan Chong on the other hand has much much more, distribution network much better than Berjaya, assembly plant, service network etc. etc. The only problem is that Nissan in malaysia are old and Tan Chong will need to beef up on its old ways of doing business.

Mazda for Berjaya is like it is a new kid on the block with Mazda doing the right thing for its recent model using the Skyactiv technology but usually for cars, one will need much more than that - you need distribution, marketing, network, after sales service etc.

Still with that, I am not able to get over Berjaya Auto being more valuable than Tan Chong. No discredit to Berjaya in successfully bringing the brand and sell it well but I am not comfortable with Berjaya able to do everything from retail to selling car to its MOL Global etc.

Akagi Shigeru said...

I do agree with you that TChong need to think for new way of doing the business. Normally i will never touch any counter start with the name Berjaya. But I am giving BJAuto exception. yeap I do agree that BJAuto doesn't have the assembly plant. But that is the thing I like about it. Bring a car that can sell well and leave the plant which need capital expansion from time to time. I am just taking the oppurtunity on this " new kid on the block ". I never have faith in Mr. Tan'c group of company. he is the "snake" in the market. On the other hand I do respect the CEO of BJ Auto who brought in Hyundai years ago. I am in the believe that as long as your product sell, the company will do just fine. let us see how it goes. Thank you.

felicity said...

I do not think T Chong is bad - unless I do not know what other people know - my understanding is that they are careful and conservative business people, which does not go well with the new generation. Imagine their mistake of having the same Nissan Sunny for 20 years - I remember back in the 80s and 90s. That's their style of doing business which is old school.

Someone has to take over and change this. I happen to come across of their third generation who may have the capabilities to change but look at who is still at helm...

Akagi Shigeru said...

Fel :
I do not think Tchong is bad as well. it is a fairly run company as this point of time. it needs to change in order to lure investor. I am just saying that at this point of time BJAuto is more promising.

felicity said...

Good luck. I like the Mazda external outlook