Thursday, April 7, 2011

Koon update and other ramblings

2 topics: Koon updates and Eratat
A couple of blog readers and close friends have asked me on Koon updates and here it is. This stock is undoubtedly small cap and illiquid, however provides good upside for enterprising investors with minimal downside. The key is to be patient, if you are a income investor (I.e safety investor, I suggest then to only allocate a small part of portfolio to this counter.

For Koon, noted that the firm bought over the entire JV for the Vietnam project so that hints at the management's confidence at pushing it through and executing the project. Do also note that I mentioned, even if the firm does not have the Vietnam port order book, while order book is reduced substantially, the current valuations are so low that it has priced in the failure of the Vietnam port order book. 

Koon also clinched a S$15.25mm project from JTC for Tampines logistic park, being roads, drains and sewers works. This is also positive not only it disproves the firm's ability to clinch projects but also this field is actually outside the usual marine engineering scope of the company (previously management talked about expansion)

2H2011 will also see completion of one of the 9.9MW diesel plant in Australia. To let you know more, attached is the link for the most recent presentation. KOON Presentation LINK

Eratat (F08 SGX) just did a private placement of 45mm shares at a 9.78% discount to market price, or at S$ 0.202 per share. This will also provide additional infusion of capital of net S$ 8.78mm. This is after the firm failed to list 81.9mm shares to private investors in just Jan 2011. 

On the financials, the firm reported a net cash position of RMB 159mm or about S$30mm with no debt. I also noted a considerable run up of 36% in receivables from RMB 269 to 366mm (Mar to Dec 2010) while topline rose 9.7% and bottom line 44%. Note that 44% profit rise was from a 26% reduction of Selling and distribution expenses, and receivables should not have grew by more than 10% imho. Last but not least, if you claim your stock is cheap, then why dilute it further? It was in my list of S chips that I mentioned required additional care and groundwork to invest in. 

Their actions really just bewilders me and is out of this world. It fusses me to find out which institutional guys actually subscribes for this. Theres no "save the world" breaking edge technology, neither is there a revolutionary tap on human behavior and habits.  

The author holds positions in Koon and not in Eratat.



Mervyn Teo (MT&Co) said...

I did some calculations and estimated that profits for 2011 will be in the range of S$ 4 - 4.5 million barring any exceptional gains or losses.

Reason being
- Construction order book ($70+m)over 2 yrs
- Precast order book ($30+m) over 1.5 yrs
- Only 1 power plant will be built in 2011
- Land based rentals constant
- Assumptions of 5% margins for construction, 10% for land based rentals and power generation and 10% for precast.

Anonymous said...

Hi Mervyn, thanks for yr post. Just 1 thing - yr profit estimate of 4-4.5 m looks very low, and is much lower compared to previous year's profit. U hv any updated figure>?

MTH Investments said...

Hi Anon, Ill update the list shortly. Thanks!


Great undertaking

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