CCK(7035) - CCK CONSOLIDATED HOLDINGS BHD Stock Review


CCK(7035) - CCK CONSOLIDATED HOLDINGS BHD Stock Review


image source from Big Chart Marketplace

image source from Big Chart Marketplace
Bursa Malaysia - 7035
Bloomberg - CCK:MK
Yahoo - 7035 .kl

Webpage - http://www.cck.com.my/

Key Value Investor Criteria: -

Description
Value
Criteria
Point
Price to Tangible Book Ratio
0.78*
< 1
5/5
Return on Asset
3.06*
> 0
4/5
Return on Common Equity
7.32*
> 0
5/5
Quick Ratio
0.58*
>1
0/5
Total Liability / Total Asset
34.82 %
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3/5
Continue Dividend over Past 10 Years / Since Inception
Yes
Yes
1/1
Historical Dividend Yield
4.85 %
>3%
1/2
Cash From Operation
Positive > 5 years
Positive
5/5
P/E
12.22
10
0/2
Total Point
24/35
Note:
 *            Data obtain from Bursa Marketplace on 12/9/2016
Company Profile

CCK had three major business segments as follows:
1)   Poultry (28.48% of 2015 revenue)
2)   Retail (54.56% of 2015 revenue)
3)   Corporate (10.60% of 2015 revenue)
4)   Prawn (5.26% of 2015 revenue)

1) Poultry

CCK poultry division is capable to process 4000 birds per hours. CCK poultry is the only poultry abattoir in Sarawak with a HACCP certificated which enable them to have competitive advantage in the domestic and international market.
These division is mainly focus on chicken meat and eggs. Besides that CCK also have beef and lamb product.
PROS:
  • CCK poultry abattoir is Hazard Analysis Critical Control Point (HACCP) certified which allow them to have advantage in the domestic and international market.
CONS:
  • CCK is located in Sarawak which give them an disadvantage in peninsular market.
2) Retail

This division contributed the largest revenue for the financial year 2015 (56.56%). This division focus of trading cold storage product such as CCK fishball, CCK mix vegetable, CCK Nugget, CCK crab meat, CCK golden fish cake and CCK chicken satay. CCK consists of 40 wholesale and retail stores in Sabah, Sarawak and Peninsular Malaysia.

3) Corporate

CCK did not state clearly what is the main business for these segment in the annual report only state it is provisional for management services. It might be the management service provided to the associate company and joint ventures; CCK-BME Sdn Bhd, Mukah Seafoods Industries Sdn Bhd and PT. Central Coldstorage Khatulistiwa (Indonesia).

CONS:
  • Annual report did not state clearly on the business nature of these segment.
4) Prawn Segment

CCK also consist division for produce and rearing of prawns and other seafood product. CCK has 45 ponds in operation to breed prawns. Most of CCK prawn will be export globally such as Australia, Hong Kong, Japan, Dubai, Vietnam and Indonesia.

PROS:
  • Weakening of Ringgit Malaysia might increase the foreign exchange gain.
CONS:
  • CCK is located in Sarawak which give them an disadvantage in peninsular market.
Financial Statement

From the annual report 2015, CCK Property, Plant and Equipment had increase from RM 129,905,181 (2014) to RM 199,224,168 (2015) but the increase is due to revaluation. CCK had done revaluation to their freehold land and leasehold land of RM 8,975,537 and RM 54,898,984 respectively. Besides that, RM 42,000,000 of the RM 59,375,858 current ban borrowing is revolving credit which mean CCK only had to pay the interest of the revolving credit when it is utilised.

The Operating cash flow had increase from RM 12,339,863 (2014) to RM 23,327,504 (2015). Other than that, the earning per share for the company had increase from 5.33 sen per share (2014) to 8.70 sen per share (2015).

PROS:
  • RM 42,000,000 of the RM 98,916,024 (42.46%) is revolving credit
  • Operating cash flow had increase by 89.04%
  •  EPS has increase by 63.23%
CONS:
  • In 2015 CCK reported a huge revaluation gain these is just a paper gain that lands might not value that much.
Director and Shareholder

CCK is controlled by its founder Datuk Tiong Su Kouk and his family. Datuk is assists by Mr Chong Shaw Fui which has 44 years of experience in the field of poultry business who oversee the poultry division. Besides that, Datuk Tiong Su Kouk is also assists by his two sons. In one of The Star interview last year, Datuk said that he will make sure his business to the best performer between his three sons, daughter and son in law.

PROS:
  • Datuk Tiong Su Kouk, the founder of CCK is still on the board of directors.
  • Poultry division is oversee by Mr Chong Shaw Fui who had 44 years in poultry business
  • Datuk Tiong make sure his business is pass down to the best.
Bonus Issue & Share Buy Back

On 1st July 2016 CCK share had increase to 315,359,400 shares due to the 1:1 bonus issues. On that day itself the price of CCK went down to RM 0.46 and bounced back and closed at RM 0.52. When a company issue a bonus issue the company share is diluted and the asset per share of the company is reduced hence theoretically the price per share will be reduced as well. However CCK share price is able to maintain close to its price before bonus issue. After further study, CCK share price is maintain mainly because of the share buy back. These means that the management is using the company to buy the diluted shares which is not a good sign unless the company is really undervalue.

CONS:
  • Bonus issue but the share price maintained which mean it is more expensive to buy the stock compared to before.
  • Share buy back after the share is diluted.
Conclusion

After the review on CCK, I will recommend SELL to CCK. This is because of the revaluation and the share buy back after the bonus issue which had diluted the share.

Summary of Stock Reviews
 
CCK(7035) - CCK CONSOLIDATED HOLDINGS BHD Stock Review 
http://ivkls.blogspot.my/2016/09/stock-review-cck7035.html