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Sunday, June 24, 2007

18-06-2007: Portfolio review & strategy

Stock prices on Bursa were mostly range-bound last week, although the Kuala Lumpur Composite Index (KLCI) managed to chalk up a decent gain of 8.3 points or 0.6% to end the week at 1,360.7.

Equity markets in the region have been tracking Wall Street's volatile performance over the past two weeks, when The Dow Jones Industrial Average started making triple-digit daily movements. After falling 410 points over three days in the previous week, the Dow Jones Industrials staged a strong comeback to recover about three-quarters of its earlier losses.

The recent volatility is attributed to rising US bond yields, which stayed above the 5% level last week. However, investors took heart from the release of May's producer price index (PPI). Although the PPI reading of 0.9% was higher than expected, prices excluding food and energy costs rose just 0.2% after a flat showing in April. This suggests inflation remained under control.

Despite fears of rising interest rates, Wall Street and global equity markets have been quite resilient this around, as investors appear to be embracing those expectations.

There are several schools of thought to this. One is that the whole world is entering into a new inflationary phase, as evidenced by rising interest rates across much of the globe, and higher commodity prices across the board - from crude oil to agricultural products. An inflationary environment supports higher asset prices, and that includes stocks and property.

Another argument is that rising interest rates are indicative of stronger economic growth ahead — and that translates into better corporate profits. Indeed, some argue that the US economy may have already escaped its worst period, such as the protracted housing slump (especially in the sub-prime market) and a slowing of GDP growth to just 0.6% in the first quarter of 2007.

The local market has also been resilient due to positive domestic economic fundamentals and investor sentiment. The ability of the KLCI to stay above the 1,350-point level is also lending confidence, as that level had earlier proven to provide some strong psychological resistance.

Portfolio review
Our model portfolio performed exceptionally well last week, beating the KLCI squarely and reaching a new record high. Our basket of 16 stocks surged by a significant 3.4% last week — one of its strongest weekly performances. This was nearly six times better than the KLCI's 0.6% gain.

The portfolio's total value, including cash, rose by 2.7% during the week to RM553,713 — a new record high and surpassing the RM550,000 mark for the first time in history. This is a significant 3.5 times more than the RM160,000 we started with a little over four years ago.

Total cumulative profits stood at RM393,713. Compared with our starting capital of RM160,000 on March 3, 2003, we have generated a hefty return of 246.1%. We continue to outperform the KLCI significantly, which is up by 110.4% during the same period.

We had 10 gainers, two decliners and four unchanged stocks last week. Our gainers were very significant, with four stocks gaining over 9% each. Tanjung Offshore and its warrants surged 9% and 11.1%, respectively. They are now yielding us returns of 276% and 2,000%, respectively!

The other major gainers were Muhibbah Engineering (up 10.8% for the week, and 742% from our cost) and DiGi (up 10.7% for the week, and 680% from our cost).

Buying Tekala Corp
We are buying 20,000 shares of Tekala Corp at Friday's closing price of RM1.29 for a total of RM25,800. This will raise our equity weighting from 81% to 86%. After this, we will still have surplus cash of RM78,618 for future investments.

Tekala is shaping up to be not just an undervalued plywood-producing timber company, but also an emerging oil & gas (O&G) play as well.

The company has been benefiting from rising plywood prices and recently posted very strong results for financial year (FY) March 2007. Revenue rose 35% year-on-year (y-y) to RM161.2 million, while net profit surged from RM1.6 million to RM23.1 million, or 15.4 sen per share. This places its trailing P/E at just 8.4 times.

There was a sharp improvement in four-quarter (4Q) FY07 profits, which augurs well for the current financial year if plywood prices hold up and its O&G division makes further inroads. 4QFY07 turnover almost doubled to RM45.8 million, with net profit at RM8.8 million, or 5.9 sen per share.

Tekala has a 25% stake in Offshore Works, which provides services to the O&G industry via four main businesses: (1) construction & engineering services, (2) underwater & ROV services, (3) geo-hydrographic services and (4) ship management and chartering services. Its clients include Petronas Carigali, ExxonMobil, Sarawak Shell, Murphy Oil and Talisman.

The stake was acquired in September 2005, and it is now starting to contribute more positively to Tekala's bottom line, with associate net profit contribution of RM1.9 million in FY07.

Given the strong growth prospects — and rising valuations and investor appetite — for O&G-related stocks, Offshore Works could potentially look exciting for Tekala. This division also provides it with more buffered earnings as compared to other pure timber plays.

Tekala has a very strong balance sheet relative to its small market capitalisation of just RM196 million. It has a sizeable net cash of RM77.1 million, or a significant 50.7 sen per share.

At RM1.29, Tekala's shares are trading just marginally above their NTA of RM1.21. Dividends are also generous, with a net dividend yield of 4.7%. Tax-exempt dividends totalled 6 sen for FY07, including a just proposed, and yet-to-be paid, final tax-exempt dividend of 4 sen. — InsiderAsia

Posted by Home at 6:31 PM
Labels: Global Market

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Blog Archive

  • ▼  2007 (30)
    • ►  July (13)
    • ▼  June (15)
      • 18-06-2007: Portfolio review & strategy
      • Sarawak Wants Construction Sector To Rely Less On ...
      • At the Johor State Assembly yesterday: Johor to wo...
      • SpotLight: Opening doors to foreigners in real estate
      • How Integrated Building System (IBS) Works
      • Look No Farther
      • Building Better, Safer Longhouses
      • Sarawak Wants Construction Sector To Rely Less On ...
      • HSL to start RM600m project
      • Tenants at Kuching’s KMC Flats to pay 30% more
      • ABOUT US
      • Making sure developers behave
      • BDC interchange ready by end of Apri
      • 'Give people new lifestyle at reasonable cost'
      • Big market for student hostels
    • ►  May (2)
 

ABOUT US

ORICON Sdn Bhd has been in the business of the Development of Housing since 1984. Among the distinguished projects are the Satok Parade and Menara Zecon, both are located in Satok, a busy business area in Kuching. Wisma Sultan Tengah, the Head Office for the Perbadanan Pembangunan Perumahan (Housing Development Corporation) was also completed in 1998. And many others.

ORICON SDN BHD has diversified its nature of business to become a Contractor herself (and still holding a Developer’s core business tag). We are one of the local Bumiputra firms, with its core business in Project Development and Construction, has managed to sustain the business until to-date. This were due to the commitment given by the staff in the effort to always meet the minimum standard set by the company.

Oricon has grown to become one of the well known and established Development and Construction companies principally involved in project development and construction, project management, design/build projects, subletting of properties, provision of management services, acquisition and development of land for commercial and residential development and investment.

OUR COMMITMENT

Our experience and performance record has earned us reputation among corporate clients, financial institutions, and government agencies. We have consistently demonstrated the ability to construct projects that are functional, economical, and aesthetically pleasing. From offices to retail facilities, our company has emerged as a leader in the Housing Developer’s community. Our firm is a licensed building contractor in the state of Sarawak. All construction is supervised and coordinated by our own personal staff, and performed by some of our local's best subcontractors. By being our own contractor, we are able to control the timing and quality of our jobs. It also enables us to reduce overall cost, resulting in the most economical lease rates/purchase prices for our clients. We take pride in that we are able to fast track a project without having to sacrifice quality or cost.

OUR SERVICES

Our established rapport with the local authorities enhances the smooth flow and speed in the implementation of our project planning. ORICON SDN BHD provides a service for the entire project cycle: strategic planning, site selection, the disposal and acquisition of sites, feasibility studies, site plan approval, cost estimating, value engineering, management, development, operation, shell1/interior build-out, project management, field supervision, site development, scheduling, cost control, maintenance and estate assessment. With experience ranging from the construction of low-cost houses, to the restoration of residential units or urban redevelopment, ORICON SDN BHD has provided clients with time, cost and quality effectiveness. ORICON SDN BHD has an obligation to continuously improve the designs, outlook and general beauty of its property development.

THE PROJECT EXPERIENCE

Completed Projects

Year 2007

5 HDC's mini libraries - Bandar Semariang, Tondong, Palma, Demak Laut & Landeh. The first in the State of Sarawak using pre-fab systems (the Integrated Building Syetems). Very fast.

Year 2005

Rancangan Perumahan Rakyat, Taman Sepakat Jaya. Proposed Construction of 304 units Single Storey Low Cost Terrace and 138 units Double Storey Cost Plus Terrace.

Year 2003

(1) Taman Haji Ludin, Lot 2182, Jalan Semariang, Petra Jaya, Kuching. 4 units Semi Detached House and 19 units Terrace.

(2) Tabuan Desa Utara II, BLK 11, MTLD. (Joint Venture project with BLESSED REALTY S/B). 5 units Double Storey Semi Detached House.

Year 2002

(1) Tabuan Desa Utara, Lot 640, 4286 & 4287, Block 11, Muara Tebas Land District. 7 units Double Storey Terrace House, 5 units Double Storey Terrace House.

(2) KUCHING COMMUNITY COLLEGE. Has completed a RM7.0 million KUCHING COMMUNITY COLLEGE, Jalan Sultan Tengah, Petra Jaya, 93050 Kuching, Sarawak for Ministry of Education, Malaysia.

Year 2001

(1) Menara Zecon, 9 Storey Office Tower, Lot 370, Jalan Satok, Kuching. Proposed 1 unit 9 -storey Office Tower.

(2) Wisma Sultan Tengah, Interior Renovation, Car Shed, Guard House & Fencing. Renovation works of WISMA Sultan Tengah, SHDC, 6-Storey Office Building at Jalan Sultan Tengah, Off Jalan Kuching-Santubong, Petra Jaya Kuching.

(3) RPR, Matang Malihah Phase 2. Construction of 988 units 2 Bedroom Flats for Sarawak Housing Development Commission.

Year 1999

(1) Taman Sukma II, Block 14, Salak Land District, Jalan Sultan Tengah, Petra Jaya, Kuching. 27 units single storey terrace house, 26 units Single Storey Semi-Detached House (Mutiara Model), 10 units Single Storey Semi-Detached House (Delima Model), 10 units Double Storey Semi-Detached House (Kenyalang Model), 6 units Double Storey Semi- Detached House (Kenari Model), 40 units Semi-Detached Double Storey House.

(2) Tabuan Desa Indah, Lot 2995 & 5394, Block 11, Muara Tebas Land District. 12 units Double Storey Semi Detached House.

Year 1998

(1) Satok Parade Commercial Centre, Lot 350-369, Jalan Satok, Kuching. Proposed 20 units 4-Storey Shophouse.

(2) Wisma Sultan Tengah. Construction of WISMA PERUMSAR, SHDC, 6-Storey Office Building at Jalan Sultan Tengah, Off Jalan Kuching-Santubong, Petra Jaya Kuching.

Year 1996

TAMAN PELITA JAYA. Oricon has completed a RM1.25 million consisting of 1½ Storey Semi-Detached (6 units), Single-Storey Semi-Detached (6 units), Single Storey Detached (3 units) at TAMAN PELITA JAYA, Jalan Sultan Tengah, Petra Jaya, 93050 KUCHING, SARAWAK

Year 1991

TAMAN SRI SENA. Oricon has completed a RM0.88 million Double Storey Semi-Detached (4 units) & Double Storey Terrace (27 units) at TAMAN SRI SENA I, LOT 1329, JALAN SEMARIANG, Petra Jaya, 93050 KUCHING

Under Construction

Year 2006

(1) Taman Sukma Commercial Centre, Lot 1406-1463 & 1465, Block 14, Salak Land District, Jalan Sukma Dua, Off Jalan Kuching-Santubong. 8 units 3-Storey Shophouse (Blk A) & 6 units 3-Storey Shophouse (Blk B) & 8 units 3-Storey Shophouse. 8 units 3-Storey Shophouse. 8 units 3-Storey Shophouse & 6 units 3-Storey Shophouse.

(2) PJ Heights, Lot 402, Jalan Sultan Tengah, Petra Jaya, Kuching. 4 units of Semi-Detached.

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FOR SALE
: << Double-Storey Semi-D >><< 3-Storey Shophouses >>
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