Author: Icon8888 | Publish date: Thu, 25 Feb 2016, 10:21 PM
(Icon8888 is all smile today)
1. Excellent Results
Thong Guan released its December 2015 quarterly result today with EPS of 9.8 sen per quarter (after factoring in full conversion of ICULS).
The EPS of 9.8 sen is very closed to my forecast of 9.4 sen. Please refer to this article.
2. Balance Sheets Continue to Improve
In March 2015 quarter, net cash was RM0.2 mil. It has now increased to RM52.3 mil. Based on 158 mil shares, net cash per share is 33 sen.
3. Interesting Insights From Cash Flow Statement
So far, I have written 6 articles about Thong Guan. But I have never discussed its cashflow in detail.
Dear readers, there is one piece of very interesting information embedded in the cashflow statement below. Do you manage to spot it ? I give you 2 minutes.
Ok, time's up.
The interesting information is that from 2014 until 2015, the group has only spent RM55 mil on capex.
What is the implication ?
Thong Guan has stated numerous time that during the period from 2014 until 2016, the group will be spending RM100 mil on capex. As such, the RM55 mil capex so far is only half way through.
If you still don't get it - the recent earning explosion is caused by half of the capex only. What will happen after the entire RM100 mil was fully spent ? It is time to stretch your imagination !!!
Previously, if you tell people that Thong Guan can make RM60 mil per annum, people will say you are crazy. This is because in the past 10 years, Thong Guan's profit hovered around RM20 mil to RM30 mil.
But with this latest quarter's net profit of RM15.5 mil, most people will readily accept that RM60 mil can be the norm (let's just say that strong USD will be here for the next few years - which is my view).
But now with this latest insight gained from analysing the cashflow statement, I would like to be the first one to plant the flag - should we revise upwards our expectation and aim for earnings of at least RM70 mil ? (EPS of 44 sen based on 158 mil shares)
The possibility is there. However, as usual, only time can tell.
My optimisim does not exist in vacuum - the following article dated 26 June 2015 contains details of 2016 capex.
As stated in the article above, the group will be spending RM35 mil on capex in 2016 to produce nano layered strecth flm and stretch hood. These two new products will be KEY CONTRIBUTORS TO GROUP REVENUE IN TWO YEARS.
Sounds like big impact projects !!!
Just in case you wonder what is strecth hood, this is how it looked like.
4. Noodle Division Will Be The New Star Performer
If you think that whatever I wrote above is already sizzling hot, just wait until you read about its noodle division. In the latest quarterly report, the company has some positive things to say about this division :-
If you are scratching your head wondering what is happening in the noodle division, you must have missed out this latest article dated 11 February 2016 :-
For your information, COFCO is no kicimeow company. It is a State Owned Enterprise and is the largest food trading and distribution company in China. It handles a wide variety of agricultural produce including edible oil, wheat, rice, sugar, tea, milk, etc.
Appendix - Thong Guan's Organic Noodles Partner - COFCO