Ecobuilt - Dud or Gem?
There has been a lot of controversy about this counter Ecobuilt previously known as Mmode mainly because this counter bought over another construction company namely Rexallent Assets (RCSB) for a whopping 45 million ringgit. Understandably this company only has net assets worth 4.5 million! This corporate exercise is expected to complete by 30 September 2019
The question arises why the huge amount of premium paid for the RCSB and the end results entails a takeover by the owners of RCSB being the majority shareholders. Who are the future shareholders?
The two future major shareholders are Chan Moy and Tan Chuan Cheong. Chan Moy is the mother of Chan Peng Kooh. These two individuals are personalities has been linked with selling of land to Titijaya for development namely the Shore in Kota Kinabalu and 3rd Avenue in Kuala Lumpur. Note that Chan Peng Koh sold the 3rd Avenue land to JV partners Titijaya - CREC hence a possible CREC connection for future business ventures especially when Bandar Malaysia takes off.
So, the question arises weather there is bigger things in store for Ecobuilt, a smallish company with a development book order of 450million as at June 2019. RCSB has also recently secured about 248 million project in Brickfields another Titijaya project. Both this companies shared the construction of a medium cost project . Perhaps Ecobuilt does not have the muscles to pull off the projects alone, hence rather than outsourcing they decided to enhance earnings by doing it themselves. In total the book order after the exercise is 698 million. The paid up capital is 313.5 million after the exercise.
What is the potential?
1. If you were to take the profit margin of 7% of their last completed project H2O, this book order would translate to 48.8 million profit over the construction period of 2.5 years. That would translate to 19.5 million per year of eps of 6.2 cents
2. Note that the new Ecobuilt is virtually debt free or negligible borrowings
3. The purchase is financed by issuance of new shares and private placement at 24.5 cents and cash of 9 million.
4. The 9 million cash is replenish with the sale of their IT division at 12 million.
5. The private placees are currently the shareholders of Titijaya. Note that the private placement price of 24.5 cents is above the market price of 20 cents as at 20 September 2019.
6. There is also a profit guarantee of 3.75 million per year for 2 years from RCSB
The question arises as to why a major shareholder Michael Ong will give up the majority control of the company especially when he purchased the controlling stake at 57 cents?
Perhaps there are more projects to come...namely the 2nd phase of 3rd Avenue and Damai Suria, both launched recently from Titijaya. Note that Damai Suria is already listed in their website as an ongoing project.
The possible of potential of 1 billion book order if another 2 projects are awarded to Ecobuilt. This will alleviate the eps to 8 cents.
Recently all the construction counters are in doldrums due to lack of catalyst especially the delay of Bandar Malaysia. This has put selling pressure on the construction counters. The prices has reached all time low and I believe that it has reached bottom as they can last another 2 to 3 years without new projects.
Ecobuilt, is it a dud or a rising gem
The question arises why the huge amount of premium paid for the RCSB and the end results entails a takeover by the owners of RCSB being the majority shareholders. Who are the future shareholders?
The two future major shareholders are Chan Moy and Tan Chuan Cheong. Chan Moy is the mother of Chan Peng Kooh. These two individuals are personalities has been linked with selling of land to Titijaya for development namely the Shore in Kota Kinabalu and 3rd Avenue in Kuala Lumpur. Note that Chan Peng Koh sold the 3rd Avenue land to JV partners Titijaya - CREC hence a possible CREC connection for future business ventures especially when Bandar Malaysia takes off.
So, the question arises weather there is bigger things in store for Ecobuilt, a smallish company with a development book order of 450million as at June 2019. RCSB has also recently secured about 248 million project in Brickfields another Titijaya project. Both this companies shared the construction of a medium cost project . Perhaps Ecobuilt does not have the muscles to pull off the projects alone, hence rather than outsourcing they decided to enhance earnings by doing it themselves. In total the book order after the exercise is 698 million. The paid up capital is 313.5 million after the exercise.
What is the potential?
1. If you were to take the profit margin of 7% of their last completed project H2O, this book order would translate to 48.8 million profit over the construction period of 2.5 years. That would translate to 19.5 million per year of eps of 6.2 cents
2. Note that the new Ecobuilt is virtually debt free or negligible borrowings
3. The purchase is financed by issuance of new shares and private placement at 24.5 cents and cash of 9 million.
4. The 9 million cash is replenish with the sale of their IT division at 12 million.
5. The private placees are currently the shareholders of Titijaya. Note that the private placement price of 24.5 cents is above the market price of 20 cents as at 20 September 2019.
6. There is also a profit guarantee of 3.75 million per year for 2 years from RCSB
The question arises as to why a major shareholder Michael Ong will give up the majority control of the company especially when he purchased the controlling stake at 57 cents?
Perhaps there are more projects to come...namely the 2nd phase of 3rd Avenue and Damai Suria, both launched recently from Titijaya. Note that Damai Suria is already listed in their website as an ongoing project.
The possible of potential of 1 billion book order if another 2 projects are awarded to Ecobuilt. This will alleviate the eps to 8 cents.
Recently all the construction counters are in doldrums due to lack of catalyst especially the delay of Bandar Malaysia. This has put selling pressure on the construction counters. The prices has reached all time low and I believe that it has reached bottom as they can last another 2 to 3 years without new projects.
Ecobuilt, is it a dud or a rising gem
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