Thursday, 16 January 2014
Protasco Berhad recently proposed a private placement of 50mil new
shares which comes with 2 free warrants each, plus a bonus warrant of 1
free warrant for every 10 ordinary shares.
The placement shares represent 15.93% of current total shares while
total warrants issues will be 100mil + 33.5mil = 133.5mil.
The exercise price of warrants is proposed at RM2 with an exercise
period of 5 years. If all the warrants are converted into shares,
Protasco's total shares will reach about 539mil (including ESOS, &
treasury shares), compared to 332mil shares at the moment.
This represents a dilution of about 62%. Will Protasco's net profit
attributed to shareholders increase by at least 62% in 5 years time?
Protasco is a diversified group with businesses in:
-
Maintenance
- Road maintenance service
-
Construction
- Construction of new roads & building
-
Engineering service
- Road, traffic & construction related
-
Education
- Infrastructure University Kuala Lumpur (IUKL)
-
Trading
- Construction related materials
- Property
The maintenance segment is Protasco's bread & butter in which
for its first 9 months of FY2013, 60% of revenue and 98% of PBT come
from this segment.
For 9MFY13, Protasco's revenue and profit after tax & minority
interest increases by 20% (RM484.0mil to RM581.7mil) and 7% (RM30.7mil
to RM32.8mil) respectively compared to previous year's corrsponding
period.
It is not easy to predict Protasco's FY13Q4 results as its quarterly performance fluctuated a lot historically.
Nevertheless, I believe Protasco's PATAMI can reach at least
RM42mil for FY2013. This represents an improvement of 12% from RM37.5mil
in FY2012.
Protasco's financial performance 2008-2012
At this earning level and current total shares of 332mil, EPS will
be 12.7sen. If we give a fair PE ratio of 10x, then the target price
will be RM1.27. Currently Protasco is trading at RM1.42, with a forward
FY13 PE of 11.2x.
In other words, Protasco's share seems not very undervalued at RM1.42.
If Protasco's share base is to be increased by 62% in 5 years
time, can its PATAMI increase 62% as well to RM68mil in the same period
of time?
Maintenance work
While the maintenance and construction arms continue to contribute
recurring and consistent profit, Protasco's "62%" increase in earning
may depend on:
- Property development
- Oil & Gas
Property
Protasco has completed its maiden property project Unipark
Condominium in Kajang in 2012. Currently it is working on its second
property project on the same site - De Centrum City, which sits on a
100-acre land which includes IUKL in Kajang.
The whole project is worth about RM5bil and will take 10-15 years to complete.
Phase 1 of De Centrum City, known as De Centrum with a GDV of
RM239mil will take up only 4.6 acres of the land and was launched in
2012. It comprises 192 units SOHO, 320 units serviced apartments, 60
units 3-storey shoplots and a 3-storey mall with an NLA of 76,000 sq ft.
De Centrum, Kajang
From internet search, currently the construction progress is only
on ground level for the 12-storey SOHO (on 3-storey mall) &
20-storey apartments (on 8-storey car park & 1-storey facility
floor).
From the circular to shareholders in relation to the private
placement, the management mentions a proposed development of 2 blocks
(Block C & D of De Centrum) of 20-storey apartments comprises 240
units apaerments & 80 units duplex with a GDV of RM130mil (cost
RM117mil). It is expected to commence in Q2 FY14 and might be part of
the phase 2.
De Centrum City may be more resistant to property slow down as it
has great location. It is surrounded by IUKL, UPM & UniTen, and is
at the junction of KL-Seremban Highway, SKVE, SILK and Besraya Highway.
De Centrum City: at the junction of major highways
De Centrum City Masterplan
According to its MD Dato Sri Chong KP, Protasco is looking to
increase property contribution to 10-15% of group profit in 3-5 years
time (currently 5%), and targeting a minimum of 40% contribution in the
long run.
The management has acted on its words by acquiring a 14.4 acres
leasehold land in Pasir Gudang from JCorp through its 64% owned
subsidiary Sun Rock Development for RM22.5mil. Protasco plans to develop
the land into a mixed development which carries a GDV of RM505mil. The
development should start after 2015.
Oil & Gas
Protasco has announced its proposed venture into oil & gas
sector since December 2012. It was initially expected to be completed by
2013 but has been delayed.
From the proposed acquisition, Protasco will acquire 95 million
shares or 76% of PT Anglo Slavic Indonesia (ASI) from PT Anglo Slavic
Utama (ASU) for USD55mil (RM170.5mil).
PT ASI was incorporated in Indonesia on 6 Sep 2012 and is involved
in oil & gas assets investment. PT ASI holds 95% of PT Firman
Andalan Sakti (FAS), which holds 70% of PT Hase Bumou Aceh (Haseba).
The jewel here is PT Haseba, who has been granted rights by PT
Pertamina (state-owned) to develop and produce O&G in Kuala Simpang
Timur field at Nanggroe Aceh Darussalam Province, Indonesia. However,
the 10-year agreement from 14 Dec 2004 will expire in the end of 2014.
PT Haseba is understood to be in negotiation with Pertamina for an
extension.
So, Protasco will have 0.76 x 0.95 x 0.70 = 50.54% stake in PT Haseba.
For its FY2009 ended Dec09, PT Haseba registered a PAT of RM95mil
out of a revenue of RM274.0mil. However, I'm not sure what kind of
corporate exercise was done as it suffers total RM237mil loss in 2010
& 2011 with almost zero revenue.
If PT Haseba is to maintain its FY2009 performance after Protasco
acquisition, then it will be 95 x 0.5054 = RM48mil net profit a year to
Protasco, which is higher than its overall estimated PATAMI of FY2013!
However, PT Haseba's profit is hard to predict at this stage.
In the agreement of acquisition, a profit before tax guarantee of
USD50mil (RM155mil) in 4 consecutive financial years is given for PT ASI
by PT ASU. By average, this would be RM39mil PBT a year.
As Protasco will own 76% of PT ASI, it will be RM29mil average
annual PBT for Protasco. This figure is close to Protasco's FY13Q3
single quarter PBT of RM30.4mil.
With the contribution from future O&G and property segment,
Protasco should be able to increase its PATAMI by at least 62% discussed
above. With the management's ambition to become a prominent property
player, the future earning prospect of Protasco is quite impressive.
Thus, even though all warrants are converted into shares in 5
years, Protasco should be able to provide a higher EPS compared to now.
For its bread & butter business, Protasco has secured a few contracts in the past one year.
- Dec 2012 - maintain roads in Perak for 7 years, RM29.6mil for first 2 years
- May 2013 - upgrade roads in Kedah in 9 months til Feb14, RM37mil
- Jun 2013 - construct roads in Johor in 12 months, RM50.4mil
- July 2013 - maintain roads in Sarawak, RM23mil
- Oct 2013 - construct 1680 apartment units in Putrajaya in 24 months for 1M Civil Servants Housing Programme, RM578.5mil
For the construction contract in Putrajaya, it is mentioned that
the development cost is RM520mil. So perhaps it is roughly a PBT of
RM58mil in 2 years or RM29mil a year, which should contribute massively
to the group.
Besides, IUKL has been upgraded to full-fledged university status
since Sep 12. With better academic status and the development of De
Centrum City, IUKL might attract more students in the future.
Historty of IUKL
Protasco is currently in net cash position after a private placement in early 2013. At 9MFY13,
- Cash & bank balances: RM56.3mil
- Deposits with license banks: RM67.6mil
- Short term borrowings: RM43.3mil
- Long term borrowings: RM4.0mil
- Bank overdraft: RM13.9mil
Net cash = RM62.7mil
However, after the acquisition of Oil & Gas company and Johor
land, its cash is expected to diminish quickly. That's why it is calling
for another private placement and warrants.
For FY2012, Protasco gave away 8 sen dividend + special dividend 6
sen, altogether 14sen single tier. This represents a mouth-watering 10%
yield at RM1.40.
I think investors can expect at least 8-10sen net dividend for
FY2013, which is 5.6%-7% yield if you buy the share at RM1.42. So far
4sen has been paid.
Thus, Protasco is another company with both good dividend and growth potential.
MD & founder Dato Sri Chong Ket Pen
Back to the proposed private placement & free warrants, the
placement share price is at least RM1.65 and the warrant exercise price
is at RM2. Both are significantly higher than current share price of
RM1.42.
Does this mean that Protasco is at least worth RM1.65 in 2014?
I've been waiting for Protasco's share price to drop to my desired
level for the last 3 months but apparently it doesn't happen, and will
never happen I guess, especially when the O&G acquisition is
finalized probably in the first quarter of 2014.
No comments:
Post a Comment