IBM - accumulating.

I've been accumulating IBM since its last earning report. At its last close it's trading at USD176.08.

The company's stock price have taken a beating due to limited revenue growth in past 2 quarters, but I believe the lack of sales growth is due to the company shedding some high value, low margin hardware business.

Wall street is not paying much attention to this share, and its forward earning is around 10x PE. Paying out a decent 2.16% dividend.

I believe the market is underestimating the innovation coming out of IBM because they can't understand it - just take a look at Watson and do your best to guesstimate the potential, my gut feeling is that this product will be HUGE and more than enough to offset any earning decline in its traditional hardware business.

It's a top investment in Berkshire Hathaway and Mr. Buffett himself praised IBM after its share slump.  I think if your portfolio include shares in the US, you should look at adding some to your position. 

I will accumulate gradually below USD 180, the next earning release may not do the share price much good but I think this is a solid blue chip company for my portfolio for  5-10 years.

YTL Power 2014 forecast

I revisited my initial post on YTLP back in Jan 2013, in it I forecasted 2013 profit to be 1.33B, it came in at 1.33B.

For 2014, I've forecasted a slightly lower adjusted profit of 1.28B and with the lower share count, the adjusted EPS is forecasted to be 0.19cent.

Based on historical Y/E PE range of 9.2 to 11.28, the expected price range would be 1.75 to 2.14. The industry segment PE according to reuters is 15.88, giving a share price of 3.01.  

Based on hsitorical trading range of 10x-16x PE, YTLP's share is worth RM1.9 to RM3.04

YTLP Q1 2014

Summary: YTLP announced a rather ordinary set of result with a 60M drop in profit due to a rather mystifying bunch of impairment. 43M impairment in receivable and 24M impairment in investment in associate. There is no detail on these impairment.


YTLP announced its Q1 result on 21 Nov 2013.

I still LOVE the strength of its operating cashflow and free cashflow! Instead of spending it on on dividend, they have been buying back their shares - ceteris paribus, this is awesome for its warrant holder.

Ok, back to the current result.

Overall the group result is down by about 60M compared quarter to quarter. This is mainly due to the decline in the merchant and investment holding segment offset by an improvement in the water & sewerage segment. The IPP and mobile broadband segment shows marginal improvement in its result.

Power Generation

Improvement is due to increase volume. IPP contract will expire soon, hence expect contribution to tail off in 2017.

Merchant

The merchant segment experienced a decrease in revenue and a corresponding drop in profit. With the intensifying of competition in the Singapore electricity market the margin is also suffering.

Water & Sewerage

Rate was allowed to increase by 6% from April 2012, but I believe the recent strength could also be due to the appreciation in GBP to 5.2 from about 4.8.

Mobile
More customer, less losses. LTE implementation is rather simple for its network, its rollout could be a major boost.

Investment holding
This is the most interesting part of the result, with a 100M loss for the quarter.

Impairment in associate is only 24M. However there's a 43M in receivable impairment and 14M in inventory obsolescence. There's no further detail on this impairment of receivable.

These are YTLP's associate per their annual report. The mobile division is considered a subsidiary.

I don't know what's the detail relating to the impairment and the lack of transparency on this rather material figure is not great.

The valuation for the company is still rather undemanding, sentiment for the company may improve if they successfully bid for the IPP contract but its contribution is likely to be minimal given the size of the current YTLP's offshore business.

YTLP-WB

On the 23rd September I posted a recommendation to add YTLP-WB to your portfolio.

It traded at 51.5 cent that day.

Today I've just disposed off some of my YTLP-WB at 80.5 cent.

In the 2 month period since my recommendation, YTLP-WB have risen 29 cents or 57%.

I will still retain the vast majority of my WB at this stage. I believe the valuation for YTLP is undemanding given its resilient cashflow and the strong buyback being executed by the management.

If you are holding onto some WB, I suggest you take some profit at this stage - the upcoming earning announcement might take some air out of its recent momentum.

China Stationery Limited - oddity

Mr. Tong have kindly enlightened us in his article of some rather odd peculiarity in the company, an excerpt can be found below with a relevant link.

Link

I've attempted to draw the attention of Bursa to this article and hope they will compel the company to answer queries raised in the article.

The relevant person in charge of this company is: Tang Eng Kean <tangengkean@bursamalaysia.com>

Do drop them an email if you are a minority shareholder and is as concerned as I am.

Demise of the China Stationary CEO

First of its kind change of boardroom report I read

Question is when did he actually pass?

YTLP - update from 23 September

In the 2 weeks since my last post on 23 September on YTLP buyback, they company have been continuing its rather aggressive buyback program.

As of 7th October, the company have cumulative treasury share of 218,103,045 shares - with its latest buyback at price between 1.80-1.82.

This represent an increase of 126,582,500 shares from my last update 2 weeks ago. Assuming an average price of 1.75, this buyback is worth approximately RM220million.

All in 14 days.


YTLP-WB is trading at 0.56 and YTLP is trading at 1.82.