SYSCORP (5173) - Syscorp - Just 2 Cool
The market should be starting to talk about the next upcoming political event that is going to happen in Malaysia, which is non other than the Sarawak Election. Sarawak had their last election during the 6th April 2011, and a 5 year tenure will means Sarawak will see election probably before 2016 comes.There had been many major development and FDI in Sarawak as of lately, with the huge topic focusing on the SCORE and the booming Samalaju Industrial Park. With the already lowered oil price, and the expectation to see an even lower oil price from the oversupply to a situation of not enough of storage capacity coupled with the strong rising USD against MYR, what could be an interesting take with all this factor in line?
With Syscorp in the line, things might be very interesting then. With most of the economical event pointing towards a positive hit on Syscorp, this counter is considered as severely under coverage with huge potential on the upside.
Let's have a quick look at Syscorp latest chart price.
Syscorp had been range bound at RM 0.42 to RM 0.46 prior to the equity sell down that had shaken up the market. The stock had been laying in a consolidation at this range for a period of 3 months, which might suggest to see fresh interest to revisit the counter soon after seeing a volume build up in the overall market of the KLSE as the trade details had identified a positive net buying from the foreign funds. We continue to view more foreign player to channel fund back to Asean developing country after a possible year end rate hike from the Federal Reserve and the ongoing stimulus from the ECB.
Should there be a firm build up in volume that challenges above RM 0.50, Syscorp could be seeing it's rising tide in the coming days after consolidating for a period of time. Short term outlook could poised to see RM 0.55 to RM 0.60.
Syscorp - Hitting a Better Note from a Lower Crude
Syscorp had been a good beneficial from the growing economy of Sarawak. What makes Syscorp different from other freight forwarding company is because on it's diversified involvement in the shipping industry which include - domestic and international freight forwarding, ship building and maintenance, and involvement in the Middle East shipping as well.
While Syscorp had been always weathering tough and rough times in a prudent manner, 2015 should be the starting point for Syscorp to finally see a better position.
While the freight forwarding division could be a challenging year due to lower freight rates as well due to massive challenges, the whole situation might still had a silver lining after with the plunging effect of crude oil.
With 297 vessel, marine oil make up of 35 to 40% of the operational cost. However, due to the cheaper marine oil which had dropped from USD 650 per tonne to approx USD 450 per tonne, it will contribute to 5% saving to the total operational cost.
Crude prices will be projected to plunge into another low once storage capacity start to overflow. Analyst expect Marine Oil to possible dip into USD 300 per tonne, this could result in another 2 to 3% saving in the total operational cost.
On Samalaju Exposure
Samalaju had been expanding in a very quick manner. Not long after the multi billion ringgit investment from Press Metal in the aluminium smelting plant that had started it's operation, now Press Metal is seeking to invest another RM 2 billion in it's Phase 3 expansion growth to drive up production capacity, bringing the total investment to RM 5.5 billion. The energy intensive industrial park had been consuming so much of energy that it had saw one of the smelter plant of Press Metal seeing power outage.
Pioneering along with Press Metal in the Samalaju Industrial Park are Japanese firm Tokuyama which own a polycrystalline plant and OM Material Sarawak (a JV with 25% stake from CMSB) with on the Ferro-Alloy production.
Press
Metal alone will be looking to contribute 766,000 ton of exportable
goods per annum. Tokuyama which had just started commercial production
from it's polycrystalline plant will going to add more exportable goods
into the Samalaju port.Samalaju will be expected to handle up to 6 million tonne of cargo in it's full operation capacity in the first year.
With the great volume in hand, Syscorp exposure in the Sarawak shipping business will see more freight service from the greater volume, and also more ship repair and maintenance work to be done due to the increase volume.
The exit of Hubline
With the challenging freight forwarding business in the global and local front, this had eventually lead to the consolidation of business. Earlier, Swee Joo Berhad was defeated by stiff competition, and Syscorp bought over it's ship to beef up it's business. Now, with Hubline exiting the freight forwarding business in Sarawak, things had definitely became sweeter for Syscorp now after seeing a lesser competition. Syscorp endurance had finally paid off in a very good season - Higher Volume at a lower cost from crude.
The sweetener is so sweet that the stronger USD against MYR had also put Syscorp into an even favorable position after seeing a considerable amount of freight charges that are denominated in USD. Based on the 2014 annual report, the a 5% stronger USD will be seeing a forex gain of RM 5million. With USD appreciated almost 12% against the MYR, the substantial amount of Forex Gain in Syscorp could be impactful towards the financial quarterly.
In conclusion, Syscorp is really sitting at a very interesting price at the moment. The counter which is currently not under investment bank coverage will soon see greater pick up once funds start to enter.
Syscorp will see great year ahead due to
- Already lowered Crude prices which could be lower, benefiting operation cost
- Huge Samalaju exposure, and huge freight export market totaling 6 million tonnage a year
- Exit of Hubline in freight business, lesser competition. (Leaving only Harbour-Link Berhad and MTT Shipping Sdn Bhd in Sarawak presence)
- Stronger USD chalking up higher forex gain
- Syscorp to see higher international freight towards Japan and China, with the 2 being intensive Alumnium importer.
Grow with Syscorp? You decide
Bone's short term TP: RM 0.60
Cheers and have a nice day
Regards,
Bone
http://klse.i3investor.com
