Tuesday, April 28, 2009

Will Metro Kajang repeat the history of TSH?

Several years ago, I made some big bucks with TSH (陈顺风资源,9059) and its warrant, when they ventured into palm oil business. By that time, it was still well-known as a cocoa products manufacturer then classified in the Industrial sector in KLSE.

TSH's earnings improved significantly when its palm oil business started to bring in revenue, and hence pushed up its stock price as well as its warrant price. Later, it was reclassified under the Plantation sector, and the rest is history.

Now, Metro Kajang (METROK 美景控股, 6114) well-known as a property developer in Klang Valley has also ventured into palm oil business since December 2007 by acquiring 15,942.60 hectares of land in East Kalimantan to plant oil palm. It might take them 3 years until 2011 before the palm oil business begins to contribute to its revenue, and now the time has already gone halfway of the milestone.

East Kalimantan in Indonesia is a strategic location for oil palm plantation as it is expected to have better yield per hectare, lower labour cost, etc. In fact, several public listed plantation companies in KLSE also expanded their plantation business to Indonesia over the past few years.

The 15,942.60 hectares land bank of Metro Kajang is considered small, compared with other public listed plantation companies, such as:

  • ASIATIC (2291) - 80,000 hectares
  • CEPAT (8982) - 10,300 hectares
  • IJMPLNT (2216) - 29,797 hectares
  • IOICORP (1961) - 169,450 hectares
  • KLK (2445) - 210,000 hectares
  • KULIM (2003) - 82,730 hectares
  • TSH (9059) - 20,000 hectares
  • SIME (4197) - 531,300 hectares

however, it is a good size to start with, and probably will be expanded in the future.

It is worth to note that although plantation is considered a new business to Metro Kajang, it is not new to their executive chairman Dato' Chen Kooi Chiew who already has 18 years of experience in that sector.

Unlike TSH (which once troubled by their cocoa business), the core business of Metro Kajang i.e. property development and management remains strong and dynamic. This business has never fail them since commencing over twenty years ago, as they have uninterrupted profit track record from day one. Therefore, the new plantation business is not expected to override their property business like TSH, but would be another good revenue generator beside the property business.

Beside that, Metro Kajang has other kinds of businesses, which contribute not as significant as their property business. That include furniture manufacturing (in China), money lending, lifestock farming and food processing.

In the short term, their lifestock farming and food processing business is seen to be affected by the current swine flu incident. This might cause some effect on their stock price performance, which might provide some good opportunity for continue accumulation. In the long term, we have seen Metro Kajang has been aggressive in buying more land banks for their property development, and the plantation business should start to bring in revenue from next year (2010) onwards. The importance of this new plantation business can be sensed from the cover page of their 2008 Annual Report.

Despite its low share price at RM0.90 only, Metro Kajang has an NAB per share of RM2.73, net cash per share of RM0.20, cash flow per share of RM0.34, and debt/equity ratio at 0.31 only. These mean that they are financially strong. With the prospected EPS of 16 sen for the coming year, the estimated PE ratio stands at 5.62 by today's closing.

Disclaimer: This article is intended for sharing of point of view only. It is not an advice or recommendation to buy or sell any of the mentioned stock counters. You should do your own homework before trading in Bursa Malaysia.


Anonymous said... Reply To This Comment

hi , im new in share investment.
Anyhow thanks for your sharing,
analysis,point of views for metrok.

Base on finacial report 2008 ,
the director remuneration is about
7 mil which are 13% of its net profit 51 mil.What do u think?
And also stake held by top 30 share holder is almost 80%.

Anyhow, with the price/ book value
of 0.33 and the dy of 5.5 % still very attractive.

best regards,

Voyager8 said... Reply To This Comment


Refer to page 16, there are altogether 11 directors for METROK.

The highest pay one is getting less than 2.6 mil or about 210k per month.

I find it quite reasonable. Some of them even get less than me, and I'm just an ordinary executive-level employee in a non-listed local company.

Voyager8 said... Reply To This Comment


Refer to page 130, METROK has around 3000 shareholders, of which 5 of them control 50.909% of the shares.

There are 3 parties in the top 5 shareholders: the founder's family (Chen Choy & Sons), PNB (who is the issuer of all those amanah saham xxx that provide good annual return rates) and Public Bank Group Officers' Retirement Benefits Fund.

A lot of counters in KLSE can't even have 3000 shareholders, especially those small & medium caps where METROK fall into. This mean METROK can attract more retail investors compare with its peer, and more than 2000 of its shareholders are holding less than 10k shares (this shows they are retail investors like you and me).

I find this shareholding structure pretty healthy. You can also find some local and foreign unit trust funds invested in METROK.

Anonymous said... Reply To This Comment


Thanks for your sharing.

best regards,

Anonymous said... Reply To This Comment


If you don't mind, I have a question on your post?

From the article, you mentioned that the plantation is completed in 2011. But how it will contribute to the company's earning in 2010?

Based on your finding, do you know how many tonnes of palm oil can be produced from 1 hectar?

Thank you for your sharing.

Best Regards,

Voyager8 said... Reply To This Comment


In their 2008 annual report, METROK mentioned that they will take around 3-4 years to get the land fully planted, and they already have more than 3,500 hectares planted. By end of 2009, another 6,000 hectares will be completed.

Normally, the palm tree need 2.5 to 3 years to grow before the first harvest.

From there, you can estimate the timing.

According to a report about METROK in The Edge weekly recently, palm oil production in Malaysia estate is average to 25 tonnes per hectare, and production in East Kalimantan can go up to 30 tonnes per hectare.

METROK is projecting for at least 12% ROI in palm oil business from 2012 onwards.

Anonymous said... Reply To This Comment


Did u save the article regarding
metrok kajang at the edge recently bcos it seems like has been removed?

best regards,

Voyager8 said... Reply To This Comment


The article appeared in one of the April issue of the printed The Edge weekly paper.

Anonymous said... Reply To This Comment

Hi Voyager8,

Thanks for your sharing.

"With the prospected EPS of 16 sen for the coming year, the estimated PE ratio stands at 5.62 by today's closing."

The prospected 16 sen EPS is made by you or by any media / source?

In FY09H1, METROK has achieved EPS 8.44 sen.

Best Regards,

Voyager8 said... Reply To This Comment

Hi Loong,

The forecast is mainly based on the propected EPS as in the latest Monthly Digest of Dynaquest.

Get out of Credit Debt said... Reply To This Comment

Metro Kajang Project seems to be promising one and i hope it will turn out well. Thanks for all the comments here, this helps a lot in understanding the factual.

Bunga Raya said... Reply To This Comment

November 22, 2011

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The Centre for Orangutan Protection (COP) criticizes the immoral and cruel ways of Malaysian palm oil plantations which based in Kalimantan, especially Metro Kajang Holdings (MKH) Berhad. This company had cleared the forests and endangered the orangutans’ life and other wildlife in Muara Kaman, East Kalimantan.

Daniek Hendarto as the Orangutan Campaigner of the Centre for Orangutan Protection said:

“The crime and cruel activity that has been done by MKH Berhad, has shattered Indonesia reputation. The forest destruction and many animals being endangered in Indonesia, and these will not provide any disadvantage to Malaysia. In the opposite, it will give much more benefits to Malaysia. The world will recognize Indonesian palm oil industry as a brutal industry. In the end, the consumers refuse to buy our products of palm oil. And the consumers will choose Malaysian palm oil instead of Indonesian. In order to Indonesian products can be sold in the international market, Indonesia palm oil should be bought by Malaysia first, and labeled as eco-friendly product. This is only a repetition of illegal logging crime. Indonesia’s forest are cleared, the logs are sold to Malaysia with the lower price then get eco-label certificate, therefore it will be sold in the world trade as Malaysian environmentally friendly products.”

“MKH Berhad is testing the integrity of Indonesia law enforcement. They are testing our patience and courage of Indonesia as a nation. While the investigation of orangutan killing cases are on going, there was an adult orangutan be found battered in their concession area. The Republic Indonesia’s Law and the Law no.5/1990 concerning Conservation on Living Natural Resources and its Ecosystem have been underestimated by MKH Berhad.”

“Enough is enough. This time for MKH Berhad and others Malaysian companies to pull out of Indonesia. It’s enough for them to create problems in Indonesia.”

These statement were conveyed in a rally in front of Malaysia Embassy. The COP volunteer were wearing costumes Hanoman, Jaya Anggodo, and Suwido, they are the ape warriors in Ramayana epic story.

See more: http://www.orangutanprotection.com

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