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.

Paying income tax with online banking

If you are still required to pay for remaining tax after PCB deductions, the deadline to pay the tax is the same as the deadline to submit your BE Form, which is 30-April.

Currently, there are at least 3 banks providing the conveniece for you to pay income tax with their online banking facilities. The 3 banks are CIMB, Public Bank and Maybank.

Here is the procedure to pay your remaining tax with CIMBClicks.

• Login to your CIMBClicks account.
• Select "Pay Bills".
• Select "Lembaga Hasil Dalam Negeri (LHDN - Semenanjung)" from the Payee List. If your income tax account is with the Sabah or Sarawak branch, then select the LHDN payee account for the corresponding state instead of "semenanjung".
• Key-in your income tax account number as well as the amount of tax you want to pay.
• On the next screen, select "084 - Bayaran Ansuran Cukai-Individu" for Kod Bayaran.
• Key-in "2008" for Tahun Taksiran.
• Key-in "99" for No. Bilangan Ansuran.
• You need to request for TAC to complete the transaction.
• You will be charged 50 sen as bank commission for this payment.

Scrapping of 30% bumiputra quota for 27 sub-sectors

With the recent announcement by Prime Minister (and also Finance Minister) Najib Razak, there will be no more 30% bumiputra equity requirement for 27 sub-sectors in the service industry with immediate effect, which covers the health and social services, tourism services, transport services, business services and computer and related services.

The 27 liberalized sub-sectors are:

Computer and related services

• Consultancy services related to installation of computer hardware
• Software implementation services – systems and software consulting services; systems analysis services; systems design services; programming services and systems maintenance services
• Data processing services – input preparation servies; data processing and tabulation services; time sharing servies and other data processing services
• Database services
• Maintenance and repair services of computers
• Other services – data preparation services; training services; data recovery services; and development of creative content
  

Health and social services

• All veterinary services
• Welfare services delivered through residential institutions to old person and the handicapped
• Welfare services delivered through residential institutions to children
• Child day-care services including day-care services for the handicapped
• Vocational rehabilitation services for the handicapped
  

Tourism services

• Theme park
• Convention and exhibition centre
• Travel agencies and tour operators services (for inbound travel only)
• Hotel and restaurant services (for 4 and 5 star hotels only)
• Food serving services (for 4 and 5 star hotels only)
• Beverage serving services for consumption on the services (for 4 and 5 star hotels only)
  

Transport services

• Class C freight transportation (Private carrier license – to transport own goods)

Sporting and other recreational services

• Sporting services (promotion and organization services)

Business services

• Regional distribution centre
• International procurement centre
• Technical testing and analysis services – composition and purity testing and analysis services, testing and analysis services of physical properties, testing and analysis services of integrated mechanical and electrical systems and technical inspection services
• Management consulting services – general, financial (excluding business tax), marketing, human resources production and public relations services
  

Rental/Leasing services without operators

• Rental/leasing services of ships that excludes cabotage and offshore trades
• Rental of cargo vessels without crew (Bareboat Charter) for international shipping
  

Supporting and Auxiliary Transport Services

• Maritime agency services
• Vessel salvage and refloating services
  

This policy of 30% bumiputra equity requirement for companies listed publicly in Kuala Lumpur Stock Exchange (KLSE) and also for foreign companies that wish to operate in Malaysia has long be criticized by both local and foreign investors, and deemed as the major hindrance for them to invest and run business in Malaysia. It was also one of the major cause for certain existing investors to exit their business from Malaysia and gone to other places like Singapore, Vietnam, China, Thailand, etc.

Nevertheless, with effect from 17 June 2003, the 30% bumiputra equity requirement has been no longer applicable to all sub-sectors of manufacturing sector for foreign investors. It is good that another 27 service sub-sectors are free now.

Over the last decade, Malaysia has lost too much opportunities to neighbouring countries due to certain protective policies. This has been a barrier to the performance of KLSE as well as the economic growth of the country. I believe the bumiputra should have good wisdom to reason that instead of insisting on "guaranteed" 30% of a small cake, why not invite more investors to come in and make the cake grow bigger and bigger by releasing the restrictions on them? They might need to work harder to obtain a "non-guaranteed" 30%, but what you prefer? A "guaranteed" 30% of 100 or a "non-guaranteed" chance of 30% of 1000? Even in the worse case scenario, you only managed to get 10% of that 1000, it is still much much more better than the insisted 30% in the 100, isn't it?

Therefore, I view this move as a win-win-win situation, for the bumiputra, non-bumiputra, as well as the foreign investors. It would be better if the 30% requirement be totally scrapped for all sectors to bring back live to the KLSE as well as the economy activities.