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Home HIAPTEK ooiteikbee HIAPTEK (5072) HIAP TECK VENTURE BHD - Unearthing the jewel of the east (Steel stock)

HIAPTEK (5072) HIAP TECK VENTURE BHD - Unearthing the jewel of the east (Steel stock)

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Dear valued members,
 
Special note:
This is an educational program, stock selection criteria is based on TA and FA facts. 
This article is strictly for reference only. It is not a buy recommendation. Never trust anyone as far as your investment is concerned. Please do your homework before you decide to invest. It is your money, you make your own decision and you are responsible for the final outcome.

I have a certain code of ethics when I write my article in I3.
If the article is beneficial to all the readers here, I will write and post it.
If it is harmful to the majority, I will avoid it at all times.
I have followed this code of ethics since day one when I posted my article in I3.
 
 
I do not intend to post this article here initially.
I post it because someone attacked my private group article on Hiaptek which is strictly for private circulation only.
All my clients are worried and want me to tell the actual story with facts and figures.
I write with facts and figures to dissipate all negative false news.
 
My stock selection criteria
Below is my stock selection criteria, I want all of you to remember this keyword "UBS GMF". 
Hiaptek passed 6/6 of my stock selection criteria.
 
TA comes first 
U - Up trending stock -  Cross 200-day SMA - Passed
B - Breakout chart - Break above 20-day EMA - Passed
S - Sector to focus - Cross 200-day SMA -  Passed (Ind/Prod - Metal)
 
FA comes second
G - Growth > 2,541% per year -  Passed 
M - Margin of safety > 59% - Passed 
F -  Forecast current year EPS must be better than previous year EPS - Passed 
 
Please note that I consider TA ahead of FA in my stock recommendation.
 
Enclosed is the technical chart of Hiaptek for your perusal.
 
TA reading
  1. The price is above the 20-day EMA and 200-day SMA.
  2. The share price is below the "Golden Cross Buy" signal which is bearish.
  3. The share price was at a new high at 0.705 on 7/5/2021.
  4. Stochastic and Force Index showed a buy signal.
  5. Daily MACD buy signal is still bearish. 
  6. The share price is inside a symmetrical triangle awaiting to break out. The breakout level is at 0.55.
  7. TA of Hiaptek is just coming out from consolidation, I do not want to wait for the share price to go up north further, I prefer to buy at a lower price as long as the share price crosses the 20-day EMA. 
FA report
Hiaptek
Excellent Q3 2021 quarter results
Please read the below link.
There are 2 consecutive quarter of strong growths in this stock.
The Q4 2021 result is anticipated to be low due to MCO lockdown. 
 
FY2021 results 
  1. The total PAT of last 3 quarter results is 102.9 million, which is already more than RHB's projection of 102 million for FY 2021.
  2. Q4 2021 results cover May, June and July 2021 results.
  3. Hiaptek is working full swing in May 2021.
  4. Hiaptek is operating at 60% or less capacity in June and July 2021 (Miti approval to operate).
  5. I believe MCO lockdown will affect Q4 2021 results for 1.5 months only because the factories in Selangor and Terengganu are allowed to operate during EMCO and MCO respectively.
  6. The PAT for Q3 2021 is 65.9 million.
  7. I believe Q4 2021 will still be a profit. I project a PAT of 30 million
Below is the FA report from RHB
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My comments
  1. The projected Revenue and PAT are 1,188 million and 102 million respectively in 2021.
  2. There is a strong growth of PAT and Revenue in 2021 and 2022 respectively. I believe the strong growths of PAT and Revenue in 2021 and 2022 respectively indicate that Hiaptek will perform well in the next 2 years.
  3. The target price of 1.03 in 2021 and 1.16 in 2022 respectively is not a dream going forward.
New machines (blast furnace) in FY 2022.
  1. The current capacity of the blast furnace plant is 700 thousand tonnes of billets/slab, in FY 2022 the capacity is increased to 1.5 million tonnes.
  2. This blast furnace will save a lot of electricity next year, electricity is one of the main cost components of steel production.
  3. The price of iron ore will come down a bit at the end of this year, hence the PAT will improve in FY 2022.
  4. Assuming the selling price is about the same or slightly increase as 2021, I believe PAT will be around 200 million in FY 2022 (I want to be conservative in case of MCO lockdown). 
  5. I believe the growth of PAT in FY 2022 is still very strong.
The share price of Hiaptek below 0.50 is cheap enough
  1. The exercise price for the warrant is 0.50, the present price is 0.48, the downside risk is very small now. It should be a buying opportunity rather than a cut loss. All directors of Hiaptek have the esos of Hiaptek shares, the price is quoted at 0.50.
  2. I believe the share price of Hiaptek will come back after this MCO is over, just invest them for a bit longer term.
  3. All workers in the factories are vaccinated fully, hence any future MCO lockdown will affect Hiaptek very minimally. 
My FA report
  1. Enclosed is my FA report for your perusal.
  2. Please note that all parameters set are fulfilled, it is seldom and very difficult to find this type of stock that can pass all my parameters set.
  3. The FA report of Hiaptek is very good, High PAT or EPS growth, low PER, high ROE, low EV/EBIT and high free cash flow.
Target price
  Price   Q Before Latest Q Latest Q FY 2022     FY 2022    
Stock 14/7/21 NOSI PAT PAT EPS If PAT EPS Target If PAT EPS Target
Hiaptek 0.48 1730000 30052 65925 4.79 179000 0.103 1.03 200000 0.116 1.16
 
Note :
If the PAT is 179 million, the target price is 1.03. If you buy at 0.48, the potential gain is 115%. 
If the PAT is 200 million, the target price is 1.16. If you buy at 0.48, the potential gain is 142%. 
 
Investors are fearful about Covid-19 pandemic
  1. Looking at the USA as a good example, we need to have lockdowns and vaccinations to stop the spread of this disease.
  2. Malaysia administered 460 thousand doses of Covid-19 vaccines yesterday (July 15). This is also the highest number of shots recorded per day. 
  3. In my view, with the current speed and arrival of 12 million vaccines in July, we can expect 60-80 per cent of the population completing their doses by the end of September 2021.
  4. NBA basketball stadiums in the USA are full of spectators once the US government vaccinated > 60% of its people.
  5. Britain will lift MCO lockdown on 19/7/2021 and Singapore will lift MCO lockdown in August 2021. They will lift MCO lockdown once more than 60% of the population is vaccinated.
  6. I believe Malaysian government will lift the MCO lockdown once more than 60% of the population is vaccinated.
  7. Based on the high administered rate of more than 300,000 jabs per day, I believe more than 60% of the population will be vaccinated by September 2021.
  8. I am very confident this Covid-19 pandemic fear will be over by September 2021.
 
Stock market is always forward looking
  1. The most important factor to select a stock to outperform the market is the growth of earning (Profit after tax or PAT).
  2. When the stock market (KLSE) is very bearish, the opportunity to buy cheap shares is always there. 
  3. In Chinese words, danger is always an opportunity. You will not be able to buy cheap shares if there is no danger in the stock market. I like this strategy quoted by Warren Buffet, "Be greedy when others are fearful".
  4. Q4 2021 result will be bad due to MCO lockdown. I believe the share price is already price in the current share price at 0.48.
  5. Based on projected EPS for FY 2022 at 0.116, the present price is 0.48, the forward PER is 4.13.
  6. Based on TA, the share price is well supported at 0.48. 
  7. As long as the economy is performing well, the stock market (KLSE) will perform well too. The current setback is temporary and it can be resolved after Covid-19 pandemic is under control. I believe we will see a better KLSE in September 2021.
Steel price will increase in the next 12 months
  1. Please read the link below. https://tradingeconomics.com/commodity/steel
  2. The steel price closed at 5,458 Yuan/MT on 16/7/2021, it went up 408 yuan in one day.
  3. According to an analyst, he forecasts the steel price will trade at 5,772.32 Yuan/MT in the next 12 month.
  4. I had a long discussion with a friend who is involved in the steel industry in Malaysia, we feel that the steel price will go up about 15% in the next 12 months. We forecast the steel price to be around 5,750 Yuan/MT in the next 12 months.
International events to confirm a high steel price
The biggest producer of crude steel is China, followed by European unions, Japan, USA, India, Russia and South Korea.
  1. China is facing a shortage of coal, steel production is affected.
  2. China is cutting production of steel products by 30% from 1/7/2021 till 31/12/2021.
  3. China was dumping steel products below cost previously, it is the main reason to cause the steel price to drop. China has stopped exporting steel products to the world now. This bad news will disappear permanently by now.
  4. Steel production in European Unions and India are reduced drastically due to Covid-19 pandemic.
  5. Japan is booking all steel products for her ship building sector until May 2022, demand is greater than supply.
  6. The US President is starting to spend USD1.2 trillion on top of USD579 billion on infrastructure projects over 8 years. When the US President announced this news, all steel stocks involved in Construction and Electric Vehicle (EV) in the US hit new highs.
  7. The Properties Index in the US is already up 28% since 2021.
  8. Electric Vehicle (EV car) production in the US is already up 98% since 2021.
  9. In the US, most of the steel industries are in shutdown to install new machines for expansion. There is a big reduction of steel production in the US now.
  10. Russia imposed 15% export tax effective 1/8/2021. 26 steel stocks listed in Russia stock exchange hit limit up after this announcement.
  11. South Korea is focusing on exporting steel products to the US market only and stopping selling to other parts of the world.
  12. There is more demand than supply of steel products in the current world market, hence the steel price will go up in price. No way China is able to control it.
  13. Previously, Malaysia bought steel from China. Presently, China buys steel from Malaysia. The economy of China is still very strong, infrastructure projects are many, the demand for steel products from China is very high. Malaysia should export more steel to China after this MCO lockdown is over.
  14. All steel stocks listed in KLSE should perform very well after this MCO lockdown is over.
Recommendation
  1. The share price of Hiaptek started to move up north from 0.46 on 26/3/2021 after good Q2 2021 results.
  2. The share price of Hiaptek dropped from 0.56 on 30/6/2021 after good Q3 2021 results. In actual fact the share price of Hiaptek did not move up north despite good quarter results. The share price started a down trend after good Q3 2021 results.
  3. The strong growth of EPS or low PER is not reflected in the share price. The worst part is the share price dropped very drastically after a good quarter result. That is no logic to justify this big drop.
  4. Hiaptek is trading at a PER of 4.13 if the PAT is 200 million in FY 2022. The chance for the share price to drop a lot is not possible. To me it is a buying opportunity rather than a cut loss.
  5. I still believe the current drop in the share prices of steel stocks is temporary due to sluggish market sentiment in KLSE and investors are fearful on Covid-19 pandemic.
  6. I believe the share price of steel stock will perform very well in the next 2 years because China is no longer exporting steel products below cost to the whole world. I hope the next up cycle starts again after a minor correction is over. China steel prices rebounded strongly on 15/7/2021.
  7. The share price of steel stock 20 years ago was very high because there was no dumping of steel products below cost from China. I believe the share price of steel stock will rise up slowly and surely in the next 2 years.
  8. I believe Covid-19 pandemic is slowly recovering in 2021 because of the effective vaccines. Once Covid-19 pandemic is under control, all industrial nations worldwide, especially European nations and the US will start to spend money on infrastructure, it will boost up the usages and the selling prices of steel products.
  9. US President Biden's infrastructure plan will cost USD 2.2 trillion. I believe the steel products worldwide will be in a bullish uptrend for the next two to three years. Hence I have very high hopes for steel stocks listed in KLSE since China is no longer dumping steel products below cost in the world markets. 
  10. I believe the high daily infectivity rate in Malaysia is due to higher testing in Selangor and KL. I also believe once > 40% of the population is vaccinated, the daily infectivity rate will drop automatically.
  11. The number of Covid-19 vaccines administered in the country exceeded 400,000 for three consecutive days. Do not worry, the daily infectivity rate will come down very soon.
  12. All workers in the factories are vaccinated fully, hence any future MCO lockdown will affect Hiaptek very minimally. 
  13. I believe the MCO lockdown will be lifted by August 2021 as announced by Malaysian government.
  14. The share price of steel stock began to run up in December 2020, it is still in the infant stage. I strongly believe this run up will last at least 1 to 2 years down the road. 
  15. The selling price of steel is already up 100% since the end of last year. Theoretically the share price of Hiaptek should move up north to reflect the fair value. Presently, the share price is very undervalued.
  16. Previously, Malaysia bought steel from China. Presently, China buys steel from Malaysia. I believe the steel price will be high to enable Malaysian steel stocks to export steel to China and USA.
  17. Hiaptek is no longer a penny stock after 2021, the Revenue is more than a billion in 2021. It is one of the major steel manufacturers and traders in Malaysia.
  18. I am very impressed by the strong growth of Revenue and PAT in 2021 and 2022 respectively. I believe the good FA of Hiaptek will justify the share price to be at least at 1.03 in 2021 and 1.16 in 2022 respectively. Buy and hold will be a very good strategy to win big on this stock.
  19. I like Hiaptek because there is a 100% expansion in capacity in the blast furnace plant for FY 2022.
  20. The strategy used for Hiaptek is to buy and hold to win big. I expect at least > 100% profit to be made if you buy and hold until September 2022.
  21. I recommend a strong buy on Hiaptek below 0.50. The share price of Hiaptek now is at a cheap sale price.
This article is strictly for reference only. It is not a buy recommendation. Never trust anyone as far as your investment is concerned. Please do your homework before you decide to invest. It is your money, you make your own decision and you are responsible for the final outcome.

Thank you.  
Ooi
寧可天下人負我, 休教我負天下人
 
Disclaimer :
This is an educational program, stock selection criteria is based on TA and FA facts.   
Please be informed that the aforesaid stocks are solely for the purpose of education only ; it is neither a trading advice nor an invitation to trade. For trading advice, please speak to your remisier or dealer representative.
The final decision to buy is always yours.


https://klse.i3investor.com/blogs/OoiTeikBee/2021-07-17-story-h1568038457-Hiaptek_Unearthing_the_jewel_of_the_east_Steel_stock.jsp

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