Insider Asia’s Stock Of The Day: Mega First Corporation

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Mega First Corporation Bhd
Mega First Corporation Berhad (MFCB) has good underlying fundamentals and is trading at relatively attractive valuations — price-to-book of 0.8 times and trailing 12-month P/E ratio of 8.1 times.

The company has a market capitalization of RM554.1 million — while net cash stood at RM109.9 million plus some RM68 million in quoted shares at end-June 2014. The latter do cause some swings in earnings from year-to-year. But strong balance sheet and recurring income from the power generation business should support future dividends. Dividends totaled 7.5 sen per share last year, which translates into yield of 3.0%.

Last year, about 69% of the company pre-tax earnings were derived from power generation. MFCB partially-owns and operates a 83MW coal-fired heat and power plant in Shaoxing, China as well as a 36MW diesel plant in Tawau, Sabah. The power purchase agreements for these projects are set to expire in 2017-2018.

A major re-rating catalyst could come from the 256mw Don Sahong hydropower project in Laos. The project, estimated to cost RM1.5 billion, is slated for completion in 2019. It would replace the loss of income from the above-mentioned projects (if their concessions are not extended) — and more.

The resources arm accounted for roughly 14% of pre-tax profit in 2013. This encompasses quarrying of limestone, manufacturing and trading of calcium carbonate powder, lime based products and bricks. At present, the company is one of the country’s largest producers of lime products. MFCB is in the midst of expanding its manufacturing plant. The increased production capacity will cater to steadily growing demand, primarily from overseas markets including India, Indonesia and Philippine.

MFCB owns investment properties, primarily PJ8 in Petaling Jaya, worth some RM121 million — from which the company earns recurring rental income. It has also diversified into property development.

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This article first appeared in The Edge Financial Daily, on November 26, 2014.