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Stock Review: Bursa Malaysia June 2015

Updated on July 3, 2015

YTLREIT (5109) - Not to Buy

Date Review
Review Price (RM)
Current Price - 1 July (RM)
21/6/2015
1.04
1.04

Pangkor Laut Resort

Melbourne Marriott

Cameron Highland Resort

Hilton Niseko Village

YTLREIT is a real estate investment fund which focuses 100% on hotel properties. It consists of hotels which operated in Malaysia, Australia and Japan.

PROS

  • YTLREIT operated hotels in Australia by themselves base on Tourism Australia the tourists visiting Australia up to February 2015 has increases compare to last year. These will contribute to the revenue of YTLREIT this year.
  • Some large local and foreign funds invested in YTLREIT. These mean that they are thinking YTLREIT is still undervalued and there are still some profits able to get from the REIT.
  • Australia tourists had increases for the year 2015 compared to 2014. Since YTLREIT is operating three hotels in Australia, the hotel revenue is going to be increase.
  • Malaysia hotel are lease to hotel operator hence it does not affect much by decreasing tourists visiting Malaysia.
  • The property YTLREIT increase in fair value for 2015.

CONS

  • Most of the portfolios of YTLREIT are hotel operated in Malaysia. Malaysia tourisms had reduces compared to last year. However all hotel operated in Malaysia are in lease terms which mean it collect rental monthly and does not depend on the occupancy of the hotel.
  • YTLREIT is largely owned by YTL Group and its directors are mostly come from Yeoh family. There might be conflict of interest when coming to decision making.
  • Some of the hotel operators are major shareholder of the company. These might contribute conflict of interest when negotiating the lease term.
  • Most of the Hotel operator either partial owned or wholly owned by YTL group. These might contribute conflict of interest when negotiating the lease term.
  • On average the hotel owned by YTLREIT is 20 years old. There might be some expenses required in the near future to renovate the hotel to make it comparative.
  • Malaysia government implemented GST for beginning April 2015. These will increase the property expenditure cost.
  • Malaysia tourist had been reduced for the year 2015 hence these will affect the property income which include the car park income.
  • Malaysia currency had depreciated in value for the year 2015, these cause loss in currency translation since YTLREIT has property in Japan and Australia.
  • With the expecting of increase of interest rate as announce by the US FED, the financial cost for the floating rate term loan is expecting to be increase for the year 2015.
  • YTLREIT have term loan of RM 1,518,800,000 which expected to be pay on 23rd November 2017. The current cash in bank and cash equivalent only able to pay 10% of the amount.
  • YTLREIT is suspecting to increase the capital of RM 800,000,000 by placement of new shares to serves the loan. YTLREIT is proposing the placement of new shares. One implemented, the share will be diluted.

FIAMMA (6939) – Buy

Date Review
Review Price (RM)
Current Price 1-July (RM)
28/6/2015
1.84
1.86

ELBA

Rubine

Omron

Menara Centara

FIAMMA consists of two main business segments as follows:

1) Trading and services – 84.3% of total revenue (2015 2Q report)

2) Property Development – 15.2% of total revenue (2015 2Q report)

PROS

  • There are many residential properties in Kuala Lumpur and Johor are expected to be completed in 2015 and 2016. These will increase the sales of home appliances, kitchen appliances and bathroom & sanitary ware in these areas. FIAMA might had increase their sales as well due to these reason
  • FIAMMA had many lands in Kuala Lumpur and Johor (Malaysia prime location for property development)
  • FIAMMA is planning to move their warehouse to Klang which is nearer to the port, port Klang which will reduce the logistic cost to shift the goods from the port to the warehouse.
  • FIAMMA is expected to rent out the extra space at their new warehouse to third partly, these will increase their revenue.
  • FIAMMA had reduces its current liability and increasing the non- current liability between the period Oct 2014 to April 2015. This might be a good move by the management as there are expecting the central bank to increase the interest rate.
  • FIAMMA had completed to purchase to more lands in Kuala Lumpur with a reasonable price of RM 450 per sqft.

CONS

  • GST is implemented in April 2015, these is expected to affected the sales and net profit of FIAMMA for both trading & service and property development segment.
  • The depreciation of Ringgit Malaysia might reduce the net profit for FIAMMA since its had subsidiary in Singapore and import their product from other country to Malaysia. Besides that, it also had account payable denoted in USD.
  • GST is implemented in April 2015, these is expected to affected the sales and net profit of FIAMMA for both trading & service and property development segment. This effect will shown on the Q3 report.
  • Until June 2015, there are still 32,830,468 warrant expiring 26 November 2018 is not exercise when it is exercise the will dilute the earning per share.

Disclaimer:

For more detail explanation kindly visits my blog.

As of 1 of July 2015, my portfolio is as follow

Stock Owned
Price Purchased (RM)
Dividend Received (RM)
UPA (7757)
1.57
0.00
FIAMMA (6939)
1.80
0.00

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