UMW Oil & Gas : Accumulate Now

Target RM3.43 (Stock Rating: ADD)

Naga 7 will be delivered by month-end as scheduled, we learned from our recent communication with management. In typical UMW-OG style, the jack-up was snapped up for work six months before the construction is completed. Naga 8, which will be delivered in Sep, is still not contracted, but we think that it will not be for long as management actively bids for 29 contracts worth RM5.6bn. We continue to value the stock at 15x CY16 P/E, on par with our target market P/E. We keep our Add call, with a Middle Eastern foray and a Naga 8 contract as potential re-rating catalysts.

What Happened 

We recently touched base with UMW-OG's management on its two newbuilds, namely jack-ups Naga 7 and Naga 8. Naga 7 is now 99.02% completed and is set for delivery by month-end. The jack-up has been signed up to service a 120-day, US$20m contract with Frontier Oil in the Philippines effective next month, with an option for a 180-day extension. Meanwhile, Naga 8, which is expected to join the fleet in Sep this year, is 66.85% underway. Management has yet to clinch a contract for the jack-up, but it remains very active in the bidding circuit, gunning for 29 contracts worth RM5.6bn. As at Dec 2014, the company had an order book of RM1.9bn. 

What We Think 

We are encouraged that UMW-OG's fleet expansion is on track. Secured in Jul 2014, the early contract for Naga 7 should allay any concerns about the company's ability to deliver Naga 7 and Naga 8. We are also heartened that management has demonstrated an astute pricing power. The Frontier Oil contract for Naga 7 translates into an attractive daily charter rate (DCR) of US$166,667/day, which is higher than the regional average of US$140,000-150,000/day. Furthermore, the company last month landed a 100-day, US$18.7m contract with PetroVietnam for end-client Korea National Oil Corporation in Vietnam starting Jun this year. Excluding mobilisation cost, the DCR works out to US$160,000/day, impressive in the current industry environment and matching the DCR that the jack-up is currently fetching from its PTTEP's Myanmar contract, which was secured in Jul 2014. 

What You Should Do 

We advise investors to accumulate UMW-OG shares. The company has evolved from a local player to a force to be reckoned in Southeast Asia, and is now on the verge of being a global player if it secures a contract in the Middle East by year-end.

Chart	Stock Name	Last	Change	Volume
	UMWOG	2.75	+0.15 (5.77%)	2,727,100

Source : CIMB Research

CIMB Research advises investors to accumulate Perisai shares (Star)

CIMB Equities Research advises investors to accumulate Perisai Petroleum shares as it retains the target price at 63 sen, which is an upside of 46.8% over the last traded price of 43 sen.
“We conservatively removed two idle assets, namely mobile offshore production unit Rubicone and pipelay barge E3, from our forecasts. Should management secure contracts for these assets, the swing in earnings would be substantial,” it said on Friday.

CIMB Research said Perisai’s management has stated it is set to remain on the Securities Commission’s shariah compliance list in the May 2015 review after a successful conversion of US$170mil of conventional loans into an Islamic facility in the final week of FY14.

“We continue to value the stock at 10.5 times CY16 P/E, still at a 30% discount to the oil & gas big caps,”  it said.

In the week of Dec 29, 2014, its management finalised the conversion of US$170mil of conventional loans for jack-up PP101 into an Islamic facility with no change in terms and rates and at a minimum paperwork charge.

With this development, Perisai is set to remain on the SC’s Shariah compliance list in the May 2015 review.   

“We are encouraged that management took the initiative to meet the SC’s requirement for shariah compliance. As at Sept 30, 2014, Perisai’s total borrowings amounted to RM1.1bil, of which most were conventional, while total assets were worth RM2.4bil,” it said.

CIMB Research said the company’s total conventional borrowings over total assets, therefore, stood at 47%, higher than the 33% threshold set by the SC.

After the conversion, Perisai’s total conventional borrowings over total assets should be reduced to an estimated 21% by  Dec 31, 2014, allowing the company to keep its Shariah-compliant status come May.  

Another industry player, SapuraKencana, is in the midst of converting an estimated RM8bil out of RM15.3bil in borrowings (as at July 31, 2014), of which all are conventional, into Islamic instruments...

As for Perisai, CIMB Research is maintaining its  Add call, with the deployment of Rubicone and E3 as potential re-rating catalysts.

Homeriz

Latitude reaching new high

Furniture Stocks

There are quite a number of furniture manufacturers listed in Bursa Malaysia. They are:

1. Latitude Tree
2. Homeritz
3. Lii Hen
4. Poh Huat
5. Hevea
6. Eurospan
7. Heng Huat
8. Tafi

Both Latitude and Lii Hen concentrate on home furniture but Poh Huat manufactures both home & office furniture.

Homeritz is different from all 6 others as it designs and manufactures upholstered home furniture such as leather and fabric-based sofas, dining chairs, bed frames etc. It also has its own brand Eritz since 2009.

Heng Huat engages in the manufacture and sale of mattresses and related products; and manufacture and trade of coconut and oil palm biomass materials in Malaysia. It offers fiber and other mattresses and bedding accessories, including mattresses, divans, and headboards under the Fibre Star brand name; and cushions, pillows, and bolsters under the Xiong Mao brand name to furniture retailers. 

Eurospan

Hevea

Tafi

Performance

Table 1: Share price increase of some furniture companies

Company	Homeriz	Lii Hen	Latitude	Hevea	Poh Huat
Price 8/12/13	0.575	1.65	1.81	0.950	0.910
20/12/2014	0.805	2.72	3.58	1.60	1.31
Gain	40%	65%	98%	68%	44%

Chart	Stock Name	Last	Change	Volume
	HOMERIZ	0.955	+0.03 (3.24%)	1,556,800
	LIIHEN	2.98	+0.11 (3.83%)	110,900
	LATITUD	3.97	+0.10 (2.58%)	134,800
	HEVEA	1.75	+0.02 (1.16%)	144,400
	POHUAT	1.61	+0.04 (2.55%)	324,400

Homeriz (5160)

Background

Founded in 1997, Homeritz is an integrated designer, manufacturer and exporter of a complete range of upholstered home furniture, comprising leather and fabric-based sofas, dining chairs and bed frames. 

The Group primarily undertakes Original Design Manufacturing ("ODM") and Original Equipment Manufacturing ("OEM") activities; where ODM contributed 86% of the group revenue for the financial year ended 31 August 2009.Homeritz has also created its own brand of lifestyle furniture series under "Eritz". 

To date, Homeritz has built a diverse customer base spanning across more than 40 countries, including Europe, Australia, New Zealand, North and South America, South Africa and the Middle East. 

The Group has various accolades in recent years, including the Golden Bull Award in 2008 (ranking 1st out of 100 outstanding SMEs), the Enterprise 50 Award for 2 consecutive years in 2008 and 2009; and the Product Excellence Award and Asian Furniture Leadership Award at the Malaysian Furniture Leadership Awards in 2009.

(sourced by:http://www.homeritzcorp.com/about-us.asp)

HOMERITZ : Furniture Maker

FURNITURE maker Homeritz Corp Bhd has its future expansion plans nicely mapped out, contingent on the global economy condition and buoyancy of the industry.

Homeritz has seen a pick-up in its earnings, thanks to the economic recovery in the West, as well as favourable currency exchange rates.

Speaking to StarBizWeek at the company’s headquarters in Muar, Johor, managing director Chua Fen Fatt says: “We will definitely expand if market conditions are good and continue improving.”

He says the company plans to invest in more new and advanced machinery, which will help increase productivity. “We are on the lookout for advanced machinery so we can increase productivity and still maintain the existing manpower,” he says.

Homeritz has allocated RM10mil to be spent over the next three years up till its financial year ending Aug 30, 2017 on plant and machinery with the aim of increasing its capacity.

It aims to automate some of its processes, and then move towards adding another factory. It currently has five factories with a total buildup area of 455,000 sq ft adjacent to its office at the Bukit Bakri Industrial Park in Muar.

It is not by chance that the company has a vacant piece of land which could be used to build another factory, that is, like the land its existing five factories sit on, just a stone’s throw away. Homeritz acquired the 7,851 sq ft soon after it listed on the Main Market of Bursa Malaysia in 2010.

The furniture player will progressively increase its productivity and capacity to meet its goal of posting RM180mil in annual turnover, hopefully from 2017 onwards.

Homeritz will reassess the market by its financial year end this August before deciding when to make its next move.

“We are very conservative, so we will do this expansion progressively,” says executive director Tee Hwee Ing.

Husband and wife team Chua and Tee has grown the company since inception to where it is now.

Founded in 1997, it specialises in upholstered home furniture comprising leather and fabric-based sofas, dining chairs and bed frames. It undertakes original design manufacturing (ODM) and original equipment manufacturing (OEM).

Tee says the company will continue to focus on the ODM part of the business, which contributes at least 85% to its revenue.

Source: The Star Online