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Hong Chew Eu
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Retired Group CEO of i-Bhd. Now a full time blogger
Asia File growth 2 decades ago was driving by the stationery business. But we all know that this sector is facing some digital disruption. The company has long recognized this threat and ventured into the consumer and foodware products in 2017/18 to mitigate this.
From 2018 to 2024, the revenue from the filing segment declined from RM 352 millon to RM 268 million, a RM84 million decline. Based on the 6 months ended for 2025, we will see a continuing decline.
But the revenue from the consumer and foodware products segment has not grown enough to offset the declining filing revenue. I projected that the 2025 revenue contribution from this segment would be at best RM 50 million. At the same time, the segment margin is not as good as that for the filing segment based on 2024 results.
If I want to be positive, I would say that the declining filing segment trend seems to be slowing down looking at the middle chart. But your guess is as good as mine where the bottom will be.
From a big picture perspective, the company currently falls into the Goldmine quadrant - low investment risk, good fundamentals. The market price has also declined from the past 3 years high.
So there is still an investment case for investors with a long-term outlook and a focus on undervalued opportunities. But you must believe that the company still has time to meet the digital disruption challenge.
Eksons Corporation: A Cash Trap Waiting to Break Free?
In October 2023, I noted that Eksons was a classic cash value trap—rich in cash but lacking substantial business operations. Fast forward to today, and not much has changed.
The company still struggles with meaningful operational improvements, which has hindered its ability to achieve sustainable growth. This is why it remains in the "Turnaround" quadrant of the Fundamental Mapper.
However, Eksons' deeply discounted valuation relative to its net assets and cash reserves presents an intriguing opportunity. For investors who believe in the management’s ability to execute a turnaround, this is a classic deep-value play with an asymmetric risk-reward profile.
The charts provide clues on what to watch for as potential catalysts for a re-rating of Eksons' stock:
• Revenue and profit growth: Signals of stabilization or upward trends.
Over the past five years, ExcelForce has maintained a consistent focus on its core strategy of providing innovative, high-value software solutions. Its strategy has generally revolved around technological improvement and market adaptation, with sustained efforts to balance innovation with profitability.
There were significant revenue and profit increases, particularly during 2020 and 2021 following this. However, there was some contraction in 2023/24 suggesting a potential market or operational challenge.
For the fundamental investors, the key is identifying catalysts that can unlock EForce’s intrinsic value over time. Here are some announcements to monitor:
• Development of new software solutions or platforms leveraging emerging technologies like AI, cloud computing, or blockchain.
• Entry into untapped regional markets or sectors beyond financial services (e.g., healthcare IT or government systems).
• Implementation of cost-efficiency programs to enhance operating margins.
These are good indicators of potential growth in the topline and bottomline
Perstima returns over the past decade had been declining. Its 2024 and projected 2025 returns are negative. It falls into the Quicksand quadrant in the Fundamental Mapper.
Looking at this picture, you may think that there is no hope. But the Fundamental Mapper is based on trend projection. It would also not be realistic to simply project continuous declining returns. Management is not going to sit quietly without some turnaround plans.
In the case of Perstima, the performance over the past 2 years were dragged down by the start up of its new plant in Philippines. Furthermore the declining returns was because while there was revenue and profits growth, there was faster growth in capital as funds were needed for the Philippines expansion.
The future is not going to be the same as the past decade. As such I would expect a turnaround and a return to profitability in the not too distant future. Are you going to wait for this to happen before entering, or would it be better to enter now when the market has yet to recognize this turnaround potential?
Bursa Malayan Flour Mill returns over the past 12 years showed a declining trend. The company also falls into the Turnaround quadrant in the Fundamental Mapper.
You could be forgiven in thinking that this is not a company to consider. But a detailed fundamental analysis showed that it can be considered fundamentally sound given its solid foundation and a strong market presence.
While there are profitability and operational efficiency challenges, it has demonstrated the ability to generate consistent positive cash flows, indicating underlying business stability.
EP Manufacturing (EPMB) has being in the news recently with the production and launch of its Malaysian assembled electric vehicles (EV). This auto parts and components manufacturer has adopted a new business direction by going into the EV market.
We all know the interest Tesla has generated over the years for investor. Certainly, EVs are hot items and rather than guess the impact on EPMB, I decided to ask the AI for an opinion
I fed the charts below from Xifu to my free version of ChatGPT.
I won’t go into its details of what the AI said, but its conclusion is summarized as
“EPMB shows signs of turnaround potential with improving profitability and revenue recovery. At a PE of 8.2, it could be undervalued to its fundamentals. However, given the moderate risk and historical price decline, investors should approach cautiously, ensuring continuous improvement in financial performance. It may appeal to value investors with a higher risk tolerance.”
It is close enough to my own fundamental analysis. I think the analysts are going the way of the Dodo. You can try it yourself with other charts from Xifu.
Bursa plantation company, KL Kepong (KLK) returns over the past decade has shown a declining trend. And it currently falls into the Turnaround quadrant in the Fundamental Mapper. The Fundamental Mapper gives you a first-cut picture. You probably would not consider KLK looking at just the Fundamental Mapper. https://i.postimg.cc/kGJSrjGB/FM-KLK.png
But digging deeper, the main reason for the declining return is because KLK has been expanding into the manufacturing sector (oleo and related chemicals).This expansion enabled KLK to capture additional value but with lower returns. So while it got bigger, the returns declined.
I suspect that as the Group improves its efficiencies, we will see a turnaround in its return. The current market price of KLK reflects a significant discount compared to estimated intrinsic values. That is why I think this picture is good for the contrarian investor https://www.i4value.asia/2024/12/is-klk-investment-opportunity.html#more
The problem social investing sites is that every one has the same information. As such I am not so sure it is easy to make money. That is why I prefer to take a contrarian view and hunt where the crowd avoids. https://i.postimg.cc/zDdywbfx/FM-Khind.jpg
A good example is Khind. You probably would not consider Khind looking at just the Fundamental Mapper. But following a detailed analysis, I found that it is financially sound with a history of returning capital to shareholders through dividends.
From the provided image, INNO is positioned on a Fundamental Mapper, a tool that evaluates investments based on Business Fundamentals (x-axis) and Investment Risk (y-axis). Here's a quick assessment:
Position Analysis:
• INNO appears in the Goldmine quadrant (lower right), which suggests strong business fundamentals and low investment risk.
• This quadrant generally indicates companies with solid profitability, stable cash flows, and good management practices.
Investment Perspective:
• The placement implies INNO might be a relatively safe investment with good potential for returns.
• If the plantation industry aligns with your investment goals, INNO seems promising, especially in a long-term, fundamental investing strategy.
Next Steps for Due Diligence:
• Analyze Financial Metrics: Check ROE, ROA, EBIT margin, and free cash flow to confirm its business strength.
• Industry Comparison: Compare INNO with its peers in the plantation sector to see if it consistently outperforms.
• Valuation: Ensure that INNO's current valuation is reasonable (P/E, P/B ratios).
• Market Trends: Monitor external factors like palm oil prices, regulations, or climate impact.
Would you like me to analyze specific metrics for INNO or provide insights into its industry?
If analysts do not provide in-depth insight about a company, they will be replaced by the AI much faster than the taxi drivers being replaced by the Grab drivers
Opensys share price has come down from its past 3 years high. Is the market thinking that that the company no longer has business prospects?
Opensys is an IT solutions provider that derive the bulk of its revenue serving banks with its cash and cheque processing equipment. With the growth digital banking, would might think that it is in sunset sector. But while growth may be challenging, cash and cheques processing will not disappear overnight.
The analogy is like thinking that retail outlets will not longer be relevant given the advent of digital commerce. But as the mall and shopping centres are still with us.
