Lion Diversified Holdings Berhad (LIONDIV, 2887, RM7.05)

Lion Diversified Holdings Berhad has interest in retailing, property development and computer business. LIONDIV used to have a brewery business in China, which has been disposed in 2003. Its retailing unit has a nett income of RM203 million in 2006 while its property development and computer business unit manage to chalk up RM30 million and RM22 million respectively.

The group’s investment in the retailing industry is through its chain of 68 Parkson departmental stores, with 29 in Malaysia, 38 in China and 1 in Vietnam. Its nett income for the 1st Qtr 2007 was RM77 million compared to RM21 million a year ago. That is huge jump of over 270%. This indicates how robust is the retailing industry under LIONDIV. Excluding all exceptional gains, LIONDIV previous quarter still came up 80% compared to the 4th Qtr 2006. Looking at the figures and the China factor, I would say LIONDIV is definitely a growth story pending to be written.

People in China are spending more, restaurant and food industries are booming, many are eating out and last but not least, their shopping malls are always packed. I have already noted my optimism towards LIONDIV in my previous post after my recent trip to Chongqing, China. The tabulation above shows the calculation of LIONDIV value which is solely based on its 55.5% stake in Parkson Group that is listed in HKEX together with the cash in its piggy bank. Not to forget LIONDIV other business unit are also profitable, its property development unit in Bandar Mahkota, Cheras and its computer business segment under the banner, LIKOM. So do you think LIONDIV is undervalued? Its definitely a YES for me. . .

Regarding the previous announcement on the LIONDIV - ACB deal whereby a sale of Parkson Group to ACB was valued at a measly RM4 billion but based on the latest transacted price for Parkson Group over at HKEX, it should easily be valued at RM6 billion based on its 55.5% stake. Well, this cannot be blamed as the announcement was first mooted somewhere in September 2006 when Parkson Group was trading at HK$29 and the price tag of RM4 billion do sound reasonable at that time. Since now the price of Parkson Group has surged to HK$48.05 (Target price by Goldman Sachs : HK$56.10), should any ammendments be made to the previous proposal? Should we be getting 2 ACB shares for every 1 LIONDIV share instead? Of course many can say that after the proposal, the precious assets of Parkson Group still stays within the LIONDIV's stable, but at the end of the day would it be fair to its minorities for selling the assets worth RM6 billion at a huge discount?

Kong Hee Fatt Choy

Totomaster would like to take this opportunity to wish all a very "Happy Chinese New Year". Wishing all readers a very prosperous and abundance health ahead. . . Eat more, Drink more & Be Merry. . . Kong Hee!! Kong Hee!!

Stock Portfolio Ending 09 Feb 2007

Last week, Totomaster did not manage to update his stock portfolio due to work commitments. Totomaster was posted away to Chongqing, China for a week to perform some inspection works. During this period, Totomaster went for some sight seeing over at Sanxia, long boat rides with full view of mountains, waters and pretty scenery. Its good to take a rest and some time off the current market. Beautiful skies, chilling weather, cheap food, cheap beers. . . but arggghhhh. . . the MARKET CONTINUE TO RALLY AND I END UP MISSING MOST OF IT!!! But its okay. . .

Hhmmm. . . over the 2 weeks period, the KLCI creep up 6% thanks to the good run up from the blue chips. Well no doubt it does outperform my portfolio by more than 3 times. During this time, BJTOTO being the most laggard of all blue chips finally broke off its down trend triangle and surge to a high of RM4.96 with huge volume. However, as of today it seems that it will soon get back to the down trend again due to profit taking. Boo boo boo. . .

I have dispose the whole lot of MAEMODE-WA @ RM0.54 last week as I see further selling pressure towards the mother share. In turn, I have purchase 10,000 units of CYMAO @ RM1.62 leaving my cash balance at a mere RM309.09. The reason I have swapped to CYMAO is noted in my previous posting on timber industry. TAWIN too has made a rebound from its low @ RM1.62 to hit a high of RM1.82 but succummed to profit taking and is currently lingering at the RM1.70+ level. Has the share price been manipulated?

LIONDIV is currently trading sideways for a few good weeks already. However, this is not the case for its retailing chain subsidiary Parkson Retail Group Ltd which is listed in HKEX, which has recently surge to a new high of HK$49.60 with a target price of HK$56.10 set by the reputable Goldman Sachs. In which I feel that LIONDIV will move in tandem with the share price of Parkson. Do note that the 2nd quarterly results for LIONDIV will be due some time this month. In my visit to Chongqing, I am surprise that there is a Parkson mall over there. According to the locals, Parkson is planning to spore like mushroom all over mainland China. If Parkson were to be introduce in over 30 provinces in China with a population of 1.37 billion, could you imagine what the growth would be like for LIONDIV in future? But their recent proposed disposal of Parkson to ACB is kind of unfair to LIONDIV minorities, because LIONDIV has given away the most precious assets away. Thus, LIONDIV will always trade at a discount due to it being a holding company status!

Timber Industry

As everyone should know, the timber industry in Malaysia is going through a boom for quite sometime. Share prices of all timber counters have shot up by a huge percentage, some have even gone up more than 100% over the last 12 months. Big timber companies, for instance, TAANN have shot up from RM5.60 a year ago to currently trading at above RM10.00. Table above shows some of the timber related companies that I manage to extract. Do tell me which would be your best pick?

Mine would be CYMAO, first, the share price is currently at a consolidation stage (for quite sometime already IMO), secondly, its kind of undervalued compared to it peers. I think CYMAO can easily trade above RM2.00 based on its latest results. First 3 quarters CYMAO's EPS almost surpass the EPS for the entire year of 2005. Of course, many can say commodity prices is always fluctuating depending on demand - supply equation but can one guarantee the price to drop back to their all time low? If the high price is here to stay, now would be the best entry for CYMAO as it is undergoing consolidation.

Since CYMAO its more into plywood products, do go through the graph below. Hope it will change the minds of those who are pessimistic on CYMAO. Even JAVA which has a similar business structure as CYMAO has shot up RM0.38 last Friday. Latest plywood prices is between USD397 - 503 per m3 as of mid January 2007 as compared to USD340 - 448 per m3 a year ago. I am sure it is just a matter of time when CYMAO will get the attention similar to its peers.