Friday, November 18, 2011

Ewein Is Ripe For Harvesting

Not many people have heard of Ewein. It was listed back in 2008 around RM1.00, and has been profitable since day one. Which is to say the market accorded nothing to its profits for the past 2-3 years at all. 
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The shares are not that frequently traded but volume started to pick up a couple of days ago, which led me to look further into the stock. 


Ewein Berhad (Ewein) is a Malaysia-based investment holding company. Ewein is principally engaged in the business of precision sheet metal fabrication, specializing in sheet metal enclosure; designing and fabrication of precision molds, tools and dies, and precision injection molding and product finishing. The Company's products are exported, directly and indirectly, to various countries, such as Australia, Brazil, Canada, China, Finland, Hong Kong, Hungary, Ireland, India, Japan, Mexico, Romania, Singapore, Taiwan, Thailand and the United States. 


Financial performance: Profits dipped over the last 6 months but according to an analyst who brought this up to management, it had more to do with rejection of some orders by the company on clients who might be poor paymasters. 


The company has also proposed buying Menara IJM Land for RM50mil from IJM Properties Sdn Bhd, a subsidiary of IJM Land Berhad.  Ewein said the expected total gross income per annum from the renting of the units and car parks comprising Menara IJM Land was about RM4mil per annum.


“The proposed acquisition will widen and diversify the business activities as well as provide an additional recurrent regular income stream for the group,” according to the announcement.


Menara IJM Land, located on Lebuh Tunku Kudin, next to e-Gate commercial centre and Tesco hypermarket along the Tun Dr Lim Chong Eu Expressway in Penang, has a net lettable area of 94,413sq ft.


Of the total, 91,496sq ft is currently occupied, representing an occupancy rate of 97%. Menara IJM Land, comprising a 16-storey building and a seven-storey car park, is located on a 46,823sq ft freehold site.
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Comment: OK, why am I highlighting a mundane business with profits dipping, and then buying a property? Yes, the company is diversifying but sometimes you can still find great upside for the stock even when the overall fundamentals do not excite you.


Look further, year ended 08 they had RM30m cash in the bank, 09 they have RM34m and up till now they have over RM41m cash. Total borrowings RM1.8m only. OK, starting to get warm. Total retained profits is RM51.9m.


Management probably know that they have to do something to reward shareholders. The word I got from some investment banker was that it is likely to propose a 1 for 2 bonus and a 1 for 2 free warrants - which they can easily afford.


That being the case, the jump in volume and share price would indicate a strong likelihood of such an event in the pipeline. For a virginal share that has never been played up before, I take a lot of comfort in that aspect. 


Its all time high of RM1.08 looks to be a soft resistance given the potential corporate proposals. I think RM1.30 would be a fair pre ex-all price. After being dormant for so long, its finally ripe for the harvesting.


Total number of share is 105.4m, meaning the market cap is around RM100m and 41% of that is in cash ... hmmm.







NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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