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Ann Joo to benefit big-time from India coal shortage and China power outage? The energy outage has forced some steelmakers overseas to temporarily shut down electric arc furnace, thus creating very tight supply for steel. In addition, 4Q is normally very high demand season for steel as China gets past rainy season and reenters construction and manufacturing peak period. These factors have caused steel price to shoot up recently. Steelmaking spreads (i.e. profit margin) of steelmakers are also sky high now as a result, even higher than 2017. Ann Joo almost hit RM4 in 2017 but now it's only at RM2.65!
Solarvest's return? Why is share price down almost 50% despite extremely bright outlook?
Solar or renewable energy (RE) is among the hottest industries to invest in because it offers one of the brightest outlooks in the current environment. In Malaysia, we have numerous government initiatives such as LSS, NEM, SARES and GITA/ GITE which are aimed to push RE generation mix to 31% by 2025. For solar specifically, installed capacity is expected to triple from ~1GW in 2020 to ~3GW in 2025 (25% CAGR), creating RM4-5b worth of EPCC jobs over the next 5 years.
From LSS4 alone, Solarvest is confident of getting 200-300MW (or RM600-800m) worth of jobs by end of this year, plus 100MW (or RM200-300m) from commercial & industrial segment. This means Solarvest has around RM1b potential jobs in the pipeline, which is 4-5 times more than last year’s revenue of RM224m.
So why has Solarvest’s share price dropped almost 50% from the peak even though solar industry outlook remains so robust? This is likely because of MCO which stops site activities (cannot construct solar plants) and also rising solar panel prices. So investors know that short-term earnings will be badly affected and became impatient. But are we really willing to let go or penalize such a good company for temporary factors? MCO will eventually be lifted; and Solarvest has very good bargaining power to control solar panel prices as it is one of the biggest buyers in Malaysia.
Besides, institutional funds are increasingly receiving mandates to only invest in companies that have good environmental, social and governance (ESG) practices, and sell those which don’t. That’s why TNB, which generates bulk of its electricity from coal-fired power plant now, sees its share price falling relentlessly despite low PE of 14x and high dividend yield of 8%! In other words, funds are penalizing companies that harm the environment, but are willing to pay premium for companies with good ESG practices. This creates an ESG angle for Solarvest given its leading position in the renewable energy space. Also remember that Solarvest has applied to transfer from ACE to Main market on 24 May. Once completed, more funds will be able to buy.
EPCC jobs from LSS4 are already starting to be dished out. Solarvest just announced one 10.95MW (RM42.9m) package on 5 July and another 20.76MW (RM87.5m) on 15 July. If the target is to secure 200-300MW before year end, it means there are plenty more contract announcements coming. Not to mention, share price has fallen from RM2.2 to now only RM1.22. We personally think it’s attractive and started reentering the stock. Don’t take our words for it, ask their major shareholder Chin Hin who just bought back 5.5m shares last week. Cheers and happy investing.
Sharingan,
Please follow us on TeIegram – SharinganInvest
DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).
JAG just announced 30% private placement. People sometimes react negatively to such corporate exercise bcos it dilutes shareholdings. But we need to understand the rationale behind. Inside the long announcement, they mentioned the money raised will be used for expanding capacity and working capital (e.g. handle more copper inventory). After the placement, capacity will TRIPLE from 2 metric ton/day to 6 metric ton/day! 1 month+ ago the company just bought a piece of land for greater storage capacity to collect larger amount of e-waste. Looks like the company is very confident on the future outlook due to a double boost from skyrocketing demand for electronics (5G, EVs etc.) and copper (needed for renewable energy like solar panels). The company already reported 2 consecutive quarters of record profit. Even if they just continue to make RM5.4m like last quarter, multiply with 4 quarters = RM21.6m, which means now PE only 10x! ????
Sharingan,
Please follow us on TeIegr@m – SharinganInvest
DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).
China's Ministry of Industry & IT sent investigation teams this week to ensure steel players in Tangshan do not overproduce, in order to control air pollution. This is what they call Supply - Side Structural Reform. Normally, lower production/ supply is good for steel price. That's why China steel rebar shot up above CNY5000, already above 2017's level. Share price of China steel companies such as Angang Steel and Bao Steel have been running up. This should be good news for Malaysian steel players like Ann Joo and Lion Industries as they've started exporting steel to China last year.
Sharingan,
Please follow us on TeIegr@m – SharinganInvest
DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).
China's Ministry of Industry & IT sent investigation teams this week to ensure steel players in Tangshan do not overproduce, in order to control air pollution. This is what they call Supply - Side Structural Reform. Normally, lower production/ supply is good for steel price. That's why China steel rebar shot up above CNY5000, already above 2017's level. Share price of China steel companies such as Angang Steel and Bao Steel have been running up. This should be good news for Malaysian steel players like Ann Joo and Lion Industries as they've started exporting steel to China last year.
Sharingan,
Please follow us on TeIegr@m – SharinganInvest
DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).
JAG of all trades? Our personal favourite. JAG does electronic waste recycling. They take wastes from big tech companies like Intel and Infineon, and extract metals from the wastes to resell - mostly copper, followed by Tin, Nickel etc.
The stock was trading above 60 sen in 2017, but now only 40 sen, which doesn't make sense. Now both copper price and JAG's profit are already above 2017 level. And tech industry has enjoyed many years of booming volume, means there will be lots of e-wastes coming. And JAG just doubled their capacity few months ago. Plus now more people focus on sustainable investing (ESG), and recycling company like JAG is good for environment.
We think copper price still has alot of upside bcos it's the most supply constrained commodity in the world. Most of the new mining capacities will only come onstream after 2023. Copper inventory now is also extremely low. And more importantly now we have new demand from new sectors - renewables and EVs which are very copper intensive. Last copper bull run from 2009 to 2011 lasted 26 months and went up almost 4x. We r only halfway there now. Last bull run was driven by synchronised economic recovery globally. And this time is similar bcos Covid-19 provided an economic reset point for all countries, and so fiscal policies and recovery will be unified this time as well.
Market has been left clueless for the past 2 months. Investors haven't decided which is the next big sector to play for 2021 after glove and tech bull run last year. We started off the year with continued interests in tech and renewable energy, but towards February investors began to switch focus onto recovery play (commodity related like Ann Joo, travel related Genting). Well, JAG is best of both worlds bcos it benefits from both high tech manufacturing volume and high commodity price.
Sharingan,
Please follow my channel – SharinganInvest
SHARINGAN: EYE OF MIDAS: Seeing It Before It Happens
DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).
SMIC, China’s largest contract semiconductor manufacturer, received licenses to import US equipment on Monday.
SMIC could benefit significantly from the global chip shortage as (1) Huge CAPEX will be required for capacity expansion. (2) The Chinese government will “vigorously support” its semiconductor industry, according to China’s Ministry of Industry and Information Technology (MIIT).
Kelington Group Berhad (KGB) will be a potential prime beneficiary of SMIC's massive expansion. I believe Kenanga's Target Price of RM3.10 is fair and could potentially exceed.
Sharingan,
Please follow us on Telegr@m – SharinganInvest
DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).
Trading Buy with FV of RM3.60 (27% upside). Enterprise segment (2x higher GPM than ICT distr.) will be a key earnings driver as corporations scramble to upgrade critical back-end infra to (i) tighten network security, (ii) support workforce mobility and (iii) quicken data processing speed. This leads to massive increase in web traffic and a surge in demand for cloud/data center software and hardware. As such, VSTECS even expanded its portfolio offering with ~5 new enterprise brands in 2020 and is in talks to bring in Alibaba Cloud which could serve as another share price catalyst.
Lead time for laptop/tablet doubled due to immense demand from the WFH trend and is expected to remain elevated following the PERMAI (tax relief on laptop purchase) and CERDIK (free laptop for 150k students) initiatives.
As a potential beneficiary of the RM1.16b NIIS project by IRIS (customer), VSTECS’s current fwd PE of 12.5x serves as a laggard play to the tech sector’s monster rally. Our Trading Buy with FV of RM3.60 is based on FY21E PER of 16x.
