WTK (4243) - Stock Review – WTK(4243) - 2



image source from Big Chart Marketplace

image source from Big Chart Marketplace

Bursa Malaysia - 4243
Bloomberg - WTKH:MK
Yahoo - 4243 .kl
Webpage - http://www.wtkholdings.com/



Recommendation: -
Date
Status
Price
Current Price (RM)
Accumulate Dividend (RM)
Gain / Loss (%)
14/2/16
BUY
1.37
1.01
0.00
-26.27%
On 14th February 2016, I had first written about KIMHIN and recommended a buy at RM 1.37. Now WTK is down by 26.27%, these does not mean that WTK is not a good company to buy. For those interest to read the first review on 14th February 2016 you can find it here.
Annual Report 2016

From 2016 WTK annual report, WTK operates in five major segments as follows:
1) Timber – 79.16 % of revenue
2) Manufacture – 8.71% of revenue
3) Trading – 6.57% of revenue
4) Oil & Gas – 3.52% of revenue
5) Plantation – 1.52% of revenue

The adjusted earning per share on 2015 after the adjustment for non-recurring income (gain on disposal, foreign currency gain and etc) is 9.72 sen compared to 9.13 sen in 2014 (unadjusted). WTK cash and bank balances for 2015 has increase from RM 272,588,000 to RM 352,626,000. Besides that WTK had enough cash to cover all the loan and borrowing with the amount of RM 310,682,000 as reported in annual report 2015.

However WTK has RM 71,214,000 investment in an associate of which RM 53,465,000. The associate company is Alanya Marine Ventures Sdn Bhd which chartering and managing oil and gas exploration support vessels. Base on annual report 2015 the oil and gas sector making revenue of RM 25,545,000 which contributed to 3.52% of the company 2015 revenue. If the associated company can maintain its revenue WTK can get back the premium they paid for the company in about 2 years.
PROS:
è The adjusted EPS for 2015 is higher than the unadjusted EPS for 2014, 6.46% increase.
è Cash and bank balance for 2015 has increase by 29.36%.
è WTK had enough cash to settle all the loans and borrowing.
CONS:
è WTK has RM 53,465,000 of Goodwill from the purchase of 49% of the oil and gas associate.
Quarterly Report for First Quarter 2016

WTK quarterly report for period end 31 March 2016 show that its cash and bank balance increase to RM 423,949,000 from RM 352,626,000 as report in annual report 2015. However its loan and borrowing had increase to RM 334,349,000 from RM 310,682,000. The increase of cash is more than increase of loan and borrowing. The cash flow from operation is RM 55,602,000 which is about 61.79% of the cash flow from operation for the entire year 2015.

PROS:
è WTK cash increase by 20.23% in just three months.
è The cash flow from operation for the three months in 2016 is about 61.79% of the cash flow from operation for the entire year 2015.
Family Tussle

The news from the Edge Malaysia regarding multiple lawsuits between the family member of the late founder of WTK. According to the news report there are 34 ongoing cases. The lawsuits  is about the share in the family private investment arm W T K Realty Sdn Bhd which owned 13.80% of WTK (base on 2015 annual report).

CONS:
è 34 ongoing lawsuits between the board of director.
Conclusion

After review the annual report 2015, I still believe that WTK is a good company to invest in. Hence I would maintained my recommendation as BUY to WTK.


As a value investor, I definitely had add some risk premium to WTK because of the multiple lawsuits. After adding the risk premium, WTK still shows a good company to buy. Even with the lawsuits which had go on for years, the WTK still able to grow hence I personally still has trust on the management of WTK and believe the Plantation sector will contribute ore profit in the near future when the oil palm trees are mature.

Summary of Stock Reviews
WTK (4243) - Stock Review – WTK(4243) - 2
http://ivkls.blogspot.my/2016/06/stock-review-wtk4243-2.html