Accumulating Wealth

Accumulating Wealth 17

Unfazed by the Turbulence

Traditionally, September and October are bad for the stock market. In early September, North Korea tested its most powerful nuclear weapon; threatening to escalate tensions with Washington and frightened the global stock market. To make things worse, Hurricane Irma swept Florida, USA and caused 3 million families to evacuate.

Interestingly, the market did not react to these few incidents with panic selling. If you were “sold” into one of this bad news, chances are, you’d regret it in the next few days.

In Malaysia, the sentiment has turned positive at the time of writing. The KLCI has once again stood above the MA50 line and poised to break at 1800. With some certainties existing amid challenges, how is our portfolio performing thus far?

Accumulating Wealth 18

Since its inception in November 2015, we have gained 284% of returns until 11th September 2017. As the earnings’ reporting season has just ended, let’s discuss how our companies fared in the latest quarter.

1) HSSEB

While the company recorded its highest revenue of 37.9 million since listed, its net profit is similar to the last quarter which is 3 million. It is expected that HSSEB would show a stronger second half towards the end of the year.

According to its Q2 report, the company has secured a few contracts above RM41.6 million since 30th June 2017. On a positive note, HSSEB has been transferred to the main board on 8th September under trading and service sector. This positive development has bided well for the company’s future.

2) CRESBUILD

Even though its share price is yet to perform, CRESBUILD’s Q2 earnings is impressive, with revenues up to RM110.7 million and net profit of RM7.2 million or EPS of 4.2 cents per share. Earlier, the company MD indicated that 2017 is going to be a good year as the company is looking to complete a couple of projects this year.

With 4.2 cents of earnings per share (EPS), CRESBUILD has definitely met market expectations. If the company is able to sustain its profits in the next few quarters, its forward PE will become 6-7, which is very undervalued.

According to its 2016 annual report, the company has an outstanding order book of 1.3 billion and is still bidding 1.8 billion projects. This shows the company has good earnings visibility

3) JHM

JHM achieved RM63.8 million sales in Q2, which is slightly below its Q1. To many, this is below market expectation. Fortunately, its net profit for Q2 is 1 million higher than Q1. This shows its net margin has improved which is a good sign. Another strength of JHM is that 60% of its raw materials are purchased in USD, therefore, the weakened USD would provide a natural hedge to the company’s earnings.

Moving forward, the management is optimistic of the company’s future owing to growing demands of automotive and motorcycle LED.

4) MMSV

As one of the star performers, MMSV reported exceptional results, achieving RM29 million revenue and 9 million of net profit, or 5.6 cents per share in Q2. This is more than double when compared to Q1.

The management attributed this stellar performance to new customers and higher machine orders from manufacturers of smart devices. Furthermore, MMSV has proposed to transfer to the main board on 25th August 2017. The management expects the rest of the year to be optimistic.

Conclusion

as time go by, you can see the market is less susceptible to events such as wars or natural disasters. This means the market has become more mature now. So long as the company continues to deliver good earnings, the rest is secondary.

Binyuen is the founder of BY Enrich Resources and the author of ‘Life beyond the Comfort Zone’ and ‘Profit from Share Investment’. His books are available in major bookstores in Malaysia, Singapore or online http://www.teybinyuen.com/profitfromshareinvestment

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