Monday, July 19, 2010

A Quick Simple Look At Bina Puri's Valuation

Sometimes when a stock flies up, up and away, the euphoria over the stock simply makes you ... smile. :D

On Saturday's Business Times..

  • UEM-Bina Puri venture wins RM997m LCCT deal

    By Jeeva Arulampalam Published: 2010/07/17

    UEM Construction-Bina Puri joint venture will be the main contractor for the construction of the new LCCT at KLIA in Sepang.

    UEM Construction Sdn Bhd (UEMC) has won a RM997.23 million contract with Bina Puri Holdings Bhd to build a much-anticipated permanent low-cost carrier terminal (LCCT) at the KL International Airport (KLIA) in Sepang for airport operator Malaysia Airports Holdings Bhd (MAHB).

    MAHB told Bursa Malaysia yesterday that it had appointed the UEMC-Bina Puri joint venture (JV), a 60:40 JV that was established in February, as the main contractor for the construction of the new LCCT..... MAHB managing director Tan Sri Bashir Ahmad recently told reporters that the new LCCT that will be ready by March 2012 will be bigger than previously planned...... source:
    UEM-Bina Puri venture win RM997m LCCT deal

For UEMC-Bina Puri joint venture (JV), it's a 60:40 JV only.

Let me be lazy and do a quick scan lookup via Star business webpage.

Now a quick look can tell that the profit margins from the above table posted on Star website, Bina Puri's net profit margins are really razor thin... but if you need confirmation it works out to something like this below..

  • Q1 ... 0.66%
    Q4 ... 0.79%
    Q3 ... 1.02%
    Q2 ... 1.06%

Feb 2010: BPuri's Q4 numbers: Quarterly rpt on consolidated results for the financial period ended 31/12/2009.

  • We can see 2009 net profit 6.394 million. Total sales 780.144 million. Profit margin = 0.8%!
  • We can see 2008 net profit 4.283 million. Total sales 676.542 million. Profit margin = 0.6%!

Let's look back at one more Q4 earnings.

Feb 2007: Quarterly rpt on consolidated results for the financial period ended 31/12/2006

  • We can see 2007 net profit 5.288 million. Total sales 489.086 million. Profit margin = 1.08%!
  • We can see 2006 net profit 4.054 million. Total sales 464.768 million. Profit margin = 0.8%!

Now we can have some fun with numbers...

It's a 60:40 contract... and it has to be ready by March 2012... or if my counting is not wrong, it's a 20 months rush job.

Contract is worth 997.23 million.

Since it's a 60:40 JV, 40% profit of 997.23 million = 391.089 sales.

What kind of profit margins to assume?

If based on historical recent trends, a 1% profit margin = 3.91 million only!!!! Would Bina Puri dare do a 20 month rush job on a 1% margin? Would it?

Ok, benefit of a doubt! Maybe one could argue that perhaps Bina Puri should able to get a better net profit margin? Understandable but how much is better? Say 10%? That would work to a profit of 39 million. Now based on a share base of 105 million shares, this would be a nice chunk of around an eps of 37 sen for this JV contract.


Two assumptions. Me? I might be wrong but I would go for perhaps the lower margins. Say 3%. Which means I would be assuming a profit of only 11.7 for the entire project.


Pick your own poison. :D

So how much do you think Bina Puri should be worth?

However, sometimes, it just does not matter. Really. :D

Stock europhia simply rules.

4 comments: said...

1% margin? Pure poison.

Moolah said...

Well that's what it track record shows. ;)

Like I said, since this is a 'rush job'.. would Bina Puri contemplate such razor thin margins?

Me? LOL! I try not to be so nasty. I give them a benefit of a doubt and say.... 3%. :P


solomon said...

Did Kenanga build in the implementation/execution risk in their valuation? did the contract allow for variation order from MAHB? if there is sudden oil price spike, would this turn the fortune of the company??

Aiyo yo Samy...maybe everyone is amazed with the BIG contract and assuming everything BIG is good??

If today, everyone assume Moolah is big sotong, then he is good forever then.....(joking)

I think the big commodity price spike in 2H will come every soon....oil price =USD90 per barrel or more.

Moolah said...

My give it a benefit of a doubt is 3%. My other side? LOL! 1%.