NTPM's 2Q2013 results: A short review

Over the last one month, NTPM has spent around RM3.7 million to buyback its own shares. Their purchase price was around RM0.425 - RM0.445 and if I am not wrong close to 8.6 million shares was bought back.

These shares I believe are mainly from Tabung Haji's ("TH") portion which has reduced its portion to below 5% (see below) since 7 November and I think it is still selling.

Sometimes, I wanted to know as a shareholder, what makes these fund selling? Are they selling to have opportunity to buy something else or could they just be losing interest in these stocks. Or could it be just year-end effect. Note that NTPM's shares have not been rising much over the years, hence the selling may not allow TH to gain much from their interests. I have noted of the same scenario happened to Bonia where PNB was selling. However, I think Bonia in this case did it better by getting the block off market.

Now, back to NTPM - is it a bad stock? It just announced an improved  performance in its most recent quarter. Its balance sheet in fact improved as well with better cash position against debt (gearing). There's nothing to fault the company here.

So, where are the contributions coming from? I am actually quite surprise actually as I thought the paper products division would continue to do better while the personal care products are the one facing competitive pressure. It is the other way, the paper products have actually sort of tapered in terms of growth while the personal care registered improved performance. See below.

Now, as I am living in cities, I would not have noticed these things. I have always thought that it has stiff competition as well as (to me), its going to be tough for the personal care (especially diapers) division with so many brands in the market.

I noticed NTPM does not promote (via adverts) its Diapex (baby diaper) brand in the bigger cities, but if you drive around, it does promotes its products via billboards (and other manners) along the smaller towns / cities. Hence, I could be seeing that NTPM either has better distributions itself or because of the pricing (cheaper) of its Diapex brand, it does have tractions in the smaller cities.

As I see it while its tissue brands are probably as strong as Kleenex (owned by Kimberley-Clark) in Malaysia, it may have a different strategy for the personal care segment.

Let's see how Vietnam goes as it seems that NTPM is investing quite substantially there with recent announcements.

And, lastly I do not see the selling by TH to be due to performance. Note that NTPM is not in the fashion industry like Padini, Bonia. Fashion changes (and these companies have to keep up with he fashion). Tissue papers on the other hand remain the same for a long period of time. More people means more tissue papers being used. More modern babies means more diapers as well. It is more of a strategy, marketing, distribution, quality, manufacturing differentiators.

Oldtown: How do you turn away from this kind of rumour?

On a lighter side, since today is a Friday (and my blog has been on more serious stuffs all this while), I received email for the below topic on apparently, our PM's wife - Datin Seri Rosmah is now the owner of Oldtown.

Well, I think this is a rumour. There are nothing to substantiate this and as far as I can see Oldtown is still a public company. Notice, the word "Bought over" and it basically means in control. I think sometimes rumour can be way overdone.

Understand the "nominee" thing, but there are no facts to proof on this. No announcements - nothing. No shares changed hands in large quantities. Anyway, the way these things have been circulating around is a bit too much. Not protecting anyone here...

Subject:: ROSMAH NOW OWNS IPOH OLD TOWN KOPITIAM Yes, you heard it right. This is no rumour !! Rosmah, ............, has bought over the ubiquitous "Ipoh Old Town White Coffee Kopitiam".  Isn't it amazing? First, the big diamond ring, then the posh and unaffordable handbags and now this? Where does she get all the $$$$? Do your maths, guys. Even if her parents started savings when Rosmah was still in her mother's womb and she carried on since a toddler, it will take, like the song says- as long as the 12th of never... Now you get why we have to continue paying North-South Highway tolls even after they have made three folds profit of its capital outlay.. Now you understand why Penang Port was awarded to Syed Mokhtar? Why AES was privatized and we have to pay full summon of RM300?? Why they coveted but failed to implement the National Medical Insurance scheme ? Why they turned to brain-washing mechanisms such as BTN (Biro Tata Negara) to champion the cause of -------------------- Enough said and what are we going to do about it ??  Yeah..I heard you loud and clear....START SPREADING THE WORDS.... BOYCOTT IPOH OLD TOWN WHITE COFFEE KOPITIAM OR BUST!!!

Malaysia Airport has a strong case

Generally, I do not really favor a business that largely depends on rent for revenue. This is especially so for Malaysia Airport ("MAB"). I always felt that it is a monopoly and that position itself is no good for business. MAB is a monopoly allright but when comes to competing against other airports around the region it is not. Within Malaysia, it is probably the only player in town (except for Senai, I think).

Over the years, I have to admit that MAB has done very well - depending largely on the rise of low cost carrier business in Asia especially. I looked at MAB more than a year ago - and at that time it was trading close to RM7.00. Felt that it was overpriced although I already liked the business during then.

On the business of airport, the success of MAB is very dependent on Airasia's hardwork. There are expected new competition from Malindo although I am yet to be convinced of it doing well in a market where Airasia is becoming very dominant. If you go to LCCT (low cost carrier terminal) in Sepang, one could not help to be mistaken that the airport is owned by Airasia itself. Such is that amount of traffic Airasia has brought to the LCCT, but the main beneficiary sitting down and collecting toll is MAB. MAB is doing so well to the extent that for the last 8 years, it has not failed to grow - not one year. See below.

5 years performance for Airport from 2007 - 2011

Rewind a few years back, although it may sound easy, the business of managing airports may not seem that simple. Let me bring you back to year 2003. A mediocre management will not be able to grow the revenue as seen in the stagnation of revenue below. Yes, it is probably due to the rise of low cost airlines after 2003 but a good manager will only allow a star player to shine. A poor manager will not be able to spot the talent or allow the talent to be groomed.

4 years performance of MAB from 2000 - 2003

One may point to the quarrel between Airasia and MAB to the extent that at one point of time, there was a threat by Airasia to build its own airport in Nilai but this I think could be a thing of the past.

If you noticed, year 2003 was also a year of change in MAB. There was much changed in focus i.e. on running the airport operations well as it in later years sold off its F1 circuit and the management (as well as government) objectives became much clearer.

The write-up on the left is picked from the Chairman's statement in the Annual Report of MAB, and one could notice that MAB changed its management team mid 2003. Coincidentally, from 2004 onward, MAB's performance started to get better. To me, it is no coincident. There must be something in it.

In a business, it is much harder to convince people that the business or the managers have managed to turnaround or made them a lot better than convince on continuing the steady performances of some companies. This is why, it is much easier to convince that Nestle or Carlsberg will continue to do well than telling investors that there's already a change in performance (to the better) of MAB or a company like Time Dotcom where they have had bad past.

The biggest story in the near or medium term future for MAB though is not all of the above, but KLIA2. Despite all the hoo-hah about the costs overrun (or maybe overly expensive to build), is the potential it may bring. If one google on KLIA2, you would have noticed, the proposed initial retail space itself is more than 4 times the size of the current LCCT. It will be able to accommodate 3 times the traffic of the current LCCT. From there, looking at the growth prospect of Airasia, and bringing in several of its potential competitors, the revenue from KLIA2 is to grow exponential again - pretty much when LCCT opened in 2007 (despite the rush). This time, it is a serious one and KLIA2 will be able to accommodate for more space for the future as long as low cost carrier business continues to grow well. I think it will, as flying be it for business or holiday travel will continue to grow. MAB's business of renting out retail space I foresee will be doing very well too, if one notice the lack of space for retailers in the current LCCT. I am convinced.

On bringing more traffic, one need not be smart to know that Airasia will be planning for more planes as this is where its profits are mainly from. The rush for low costs will naturally allow it to grow - both MAB and Airasia (in fact MAB more due to its monopolistic nature). Look at SIA's sudden focus on regional flights as well as low costs focus in initiating Scoot. More people will fly, no doubt about it.

I am positive on MAB's future as long as it does not do anything stupid - and with that, I have bought some 2,100 units between RM5.29 and RM5.32.

Time Engineering is not related to Time Dotcom anymore

Just wanted investors or traders to know. Today, Time Dotcom (TdC) is having a good run due to its announcement of distributing (proposal) 6 shares of Digi's shares for every 25 shares of TdC held. While this is good in terms of untangling its Digi shares held hence allowing shareholders to directly hold Digi now, for shareholders of Time Engineering, one should note that it is no longer related to TdC. See below. I see that Time Engineering rose 8% as well today. Should not happen.

I would say Time Engineering now has not much of a business, but its balance sheet is clean with some RM60 million cash. Don't think its worth RM244 million of market cap as at now though. Look below, it is struggling to find good businesses from its liquid assets it holds.

On another note, TdC by distributing Digi's shares, it's performance in future will be more reflective of its own performance as investment income (dividends contribution from Digi) may be reduced by half. Also, assuming Digi's price is RM4.84, the value of Digi's shares that is to be distributed by TdC per share is at 0.24 x RM4.84 = RM1.16.

Selling Genting for other opportunities

Genting has always been a stock which I was not going to hold for long. It went to as low as RM8.50 for the last few months, but I bought the stock at RM8.92. It is a good stock with very good cashflow over the coming next few years, but its business has sort being challenged recently. The Singapore together with the Malaysian business somehow or rather are tapering down both from the perspective of volume (revenue) as well as margin.

I guess the strong Singapore effect is slowing down. The government of Singapore if you notice is very comfortable with the current situation and at the same time trying to discourage its own citizens to frequent the casinos. This does not augur well for Genting relying much more from its casino business rather than hospitality and theme park business for profits. Genting's gaming and convention businesses in UK and US seem to have slow pick-up rate - probably due to the management's over confidence on its success hence going in big into this area of business. It seems to be getting tougher due to the increasing competition and with many countries now planning to have casinos in their own countries.

At the same time, Genting's other businesses in plantation and power plant are facing some sort of slowdown recently - the first due to the poor palm oil prices while it is selling its power plant business in Malaysia. Power plants are businesses which provide consistent much calculated revenue but it is not exciting if you want strong growth.

With this, I feel that there could be better opportunities from elsewhere. I have hence decided to sell Genting at RM9.17, making a small gain.

Over the last few months, it is getting tougher to pick stocks due to the market getting expensive. From the list of stocks which I have picked, some are doing well while others are facing selling pressure from very large funds.

Position as at 7 Dec 2012

2 of the stocks I hold - Airasia and NTPM are facing selling pressure from large local funds if you notice - Airasia from EPF with this largest fund in Malaysia selling few million shares a day. I have noticed that Tony Fernandez and his partner have been buying but their buying would not be able to provide support to the large volume selling by EPF.

NTPM similarly is being sold by Tabung Haji to the extent that now the fund is holding less than 5% of its stock. I believe that TH is still selling despite it not needing to report the transactions. If large funds are selling, there is no point supporting the stock. Let them sell as fundamentals remain the same while share price is the only one that changes. The lower the share price, the more opportunities it presents for future buying.

Anyway, the small fund that I present here continues to hold on with my latest purchase Padini springing a surprise in a short period from my purchase on 29 Nov 2012. If you notice, the shares that I hold in this portfolio have very good dividend payment track record except for maybe Airasia and TimeDotcom. I like companies with good cashflow and confidently provide good dividends from its cashflow. However, do not buy overly expensive companies though despite the high dividends. There are some which are providing high dividends but are expensive.

On another note, if you notice today's evening announcement, Time Dotcom is proposing for dividend in specie of Digi's shares it holds. It is proposing to distribute 6 shares of Digi for every 25 shares in TimeDotcom held. By doing this, TdC is freeing up and untangling the Digi shares it held for its shareholders, a commendable move. I expect upside for the share on Monday.