A penny is still a penny

Shared By Stock Fanatic on Monday, March 18, 2013 | 18.3.13

The penny-stock bubble finally burst this week with sharp price declines for many penny shares. The FTSE Catalist Index which tracks 109 penny stocks is down 4.4% wow while the FTSE Fledgling Index which captures the bottom 2% of SGX stocks is down 1.9% wow.

Myanmar-related stocks took a thrashing
Both indices are also down 11.6% and 5.9% from their recent highs. Myanmar-related stocks were hit by profit-taking as some of these stocks had run far ahead of their profit potential in Myanmar. We highlight Del Monte (newly initiated), Midas, Tat Hong and Riverstone. We also list companies with exposure to the Iskandar development and provide an update from our GuocoLeisure company visit.

New initiation: Del Monte
We see a strong 2015 with adjustments to its unprofitable supply contracts, a cost-saving project and the possibility of breakeven for its Indian JV. Organic operations remain strong.

New contracts, an increase in planned railway FAI and proposed reforms of China’s Ministry of Railway will be positives for Midas, in our view.

Tat Hong
Gary remains positive on Tat Hong as it maintains its position as the leading crane-rental company in Asia.

Iskandar beckons
The Iskandar Development Region in Malaysia is once again the talk of the town. Beneficiaries under our coverage should include CapitaLand, Tat Hong and Yongnam.

 Iskandar’s background
 Introduction :
Iskandar Development region is set within southern peninsular Malaysia's most develped region, where Living, entertainment, environment and business seamlessly converge within a bustling and vibrant metropolis
 Land Size :
Iskandar covers a land size of 2,217 sq km (221,634 hectares)
 Population :
Iskandar is estimated to contain 1.35 million people (or 43% of Johore's population of 3.17 million in 2005) with a workforce of approximately 66% of the population
 GDP :
1) Total Iskandar GDP is about USD 20 billion in 2005 (about 60% of Johore's total GDP of USD 33.4 billion)

2) In 2005, the per capita GDP for Iskandar is about USD 14,790 which is higher than Johors's per capita GDP of USD 10,757

3) Sevices and manufacturing sectors are 2 mail pillars of Iskandar's economy (dominated by the services sector which contributes about USD 10 billion in Iskandar)

4) Within the services sector, Wholesale and Retail Trade contributes (42.2%), Tourism and Hospitality (16.8%), Professional and Business (14.6%), Transport and Related (12.7%), Medical and Educational (6.7%), Educational (6.7%), and Financial (6.6%)
 Iskandar’s location

Companies with involvement in Iskandar
KSH Holdings
KSH was invited to participate in a JV to undertake projects in Iskandar Malaysia and is currently exploring potential opportunities.
Tech Wah Industrial
The Group recently fully paid off loans for factories purchased in the Iskandar Development Zone, Malaysia.
Health Management International
In Malaysia, the Iskandar development region is well-poised to cater to domestic demand as well as medical travellers, being in close proximity to Singapore. Widely regarded as a trusted brand for healthcare, Mahkota Medical Centre Sdn Bhd is well-poised to benefit from Malaysia’s flourishing healthcare industry.
Raffles Education
The group has a piece of land in Iskandar, Malaysia for the Raffles American School development.
Rowsley announced a deal to acquire land (9.23 hectares) in Iskandar.
Cedar Strategic Holdings
The Company is transforming itself into a real estate group and has obtained a right of first refusal in the real estate sector in the Iskandar region, Johor, Malaysia.
Centurion Corporation
Entered agreements to acquire all the shares of Brave Privilege Sdn Bhd, the owner of a land parcel in Senai, Johor Bahru.
Tat Hong
Incorporated Tat Hong Industrial Properties Sdn Bhd in Malaysia to acquire two plots of land totaling approximately 9.9 acres in Iskandar, Malaysia, which is planned to be developed for multipurpose industrial use and for investment purposes.
Old Chang Kee
In August 2011, the Group purchased a factory facility in the Iskandar region, Johor, Malaysia. This is part of the overall plan to enhance the Group’s manufacturing capabilities. The Iskandar manufacturing facility will further support the Group’s expansion plans, both local and overseas
Mapletree Investment
MLT extended its footprint in Iskandar, the key industrial hub in Johor, Malaysia, with the acquisition of two warehouse facilities – Fuji Warehouse and Celestica Hub.
Rokko Holdings
The Group has been streamlining its various manufacturing facilities in view of its expansion in Iskandar in Johor (Malaysia).

We visited GuocoLeisure recently. This stock seems to offer deep value and is worth revisiting if management stays committed to unlocking value. Possible privatisation could be the jackpot. (Read Report)

Source : CIMB Research

Posted on Monday, March 18, 2013 | 18.3.13

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