JAKS (4723): JAKS RESOURCES BHD - A Great Long Term Choice
Jaks Resources Berhad (RM 0.68 as of this post)
The infamous stock of the old times
As many people say, we must not put emotion and failure as a priority, as it will cloud our best judgements. Regardless of any outside influence, if the company fundamentals can improve, they can always turn from failure into growth. JAKS is a very good example of hope,failure into a new beginning. Bad luck is just a delay of the of the positive inevitabiltity.
Jaks Hai Duong Power Plant (JHDP) will comprise of two 600MW units , which will bring generation of 1200MW, According to the rights issue. This plant will bring up to 300mil in annual profits over the span of 25 years, guaranteed. JAKS also has the option to increase the shareholding to 40% which will further increase the EPS of the share.
They are also candiates for our government's LSS Projects and also searching for suitable locations for a third plant, which will bring much more expansion and growth in future.
The Calculations
I have always believed and applied the FPE (Forward Price) Ratio.
It is very straightforward and clean cut to the most important question we all ask, which is, the Future Price.
Formula : No. of Shares / PAT =( EPS *4) * FPE (x)
1,755,000,000 No of Shares (Ex-Rights) / 73.5m (or 82.25m)
30% = RM981m x 30% = RM294m / 4 (QR) = 73.5m
40% = RM981m x 40% = RM392m / 4 (QR) = 82.25m
30% Share
FPE 10 - RM 1.68 (147.05%)
FPE 15 - Rm 2.51 (269.11%)
40% Share
FPE 10 - RM 1.87 (175%)
FPE 15 - RM 2.81 (313.23%)
We can take 30% safety of margin ,FPE 10 - RM 1.68 x 70% = RM 1.176 , which is compared to 68 cents , JAKS still has a minimum upside of 72.94%.
Some extra insights
We can use MFCB as a comparison , their powerplant is located in Laos, whereas JAKS is in Hai Duong , Vietnam.
Laos has an annual GDP of 17bn , with an increment of 6.2% compared to Vietnam's whopping 245.2b USD, Growth of 7.1%
This shows that Vietnam is growing much faster and with higher GDP comes more infrastructure , business and overall upgrades on advancement of the country. As a country is nearing fast development, more expansion and power is required which will be extremely beneficial to JAKS as their plant will be close to 100% operation speed to meet with expectations and demands.
Vietnam is also a US favoured country , yet neutral towards the US-China Trade war. This means that Vietnam benefits from businesses around the world and many companies have started expanding their coverage to areas such as Vietnam , Thailand and Laos. Vietnam is also COVID-19 free, which acts as a catalyst for maximum output and improvement of money flow as there is near to no usage of medical expenses to mitigate the pandemic.
Laos is one of the world's few remaining communist sates and one of East Asia's poorest countries. But despite economic reforms, the country is still heavily dependent on foreign aid. Most of their citizens live in rural areas with 80% working in agriculture, mostly growing rice.
By doing this quick comparison, we can easily see that Vietnam is a much more favourable area to expand compared to Laos.
In conclusion , i would choose JAKS over MFCB due to :
Jaks is undervalued, therefore providing greater chance for capital upside.
Vietnam is a high potential growth country with very hardworking citizens
MFCB's story has been repeated countlessly, and also valued correctly.
MFCB's plant is located in Laos, which is barren and does not bring much future growth
This is my first post , there might be slight inconsistencies towards any information I have provided. Constructive criticsm is greatly appreciated.
Thank you.
Disclaimer : This is based upon personal opinion and is in no way meant to influence decision making . Final decision to buy/sell any shares is at your own discretion.
https://klse.i3investor.com/blogs/Jaks_A_Bright_Future_Ahead/2020-12-01-story-h1537354845-JAKS_A_Great_Long_Term_Choice.jsp
