Saturday 23 July 2016

WZSATU- Awakening of Bauxite

Happy Sunday everyone.
Recently, market is surrounded by hot stocks such as Vivocom, Air Asia, AAX and Bornoil. To give you all a " refreshment ", I would like to introduce a much low-profile company, Wzsatu.

Wzsatu















( i ) Background
Wzsatu was previously a manufacturer of steel products. The performance was not well back then due to the stiff competitions and dropping of the steel price.

However, thing had changed in Oct 2013 where there was a major transformation of company from the emergence of new management team and substantial share holder, Dato Seri Tengku Uzir bin Tengku Dato Ubaidillah to the acquisition of new business. Since then, the company had became the limelight of the investors and the stock price had increased from RM 0. 32 to RM 2.4.
Now, the company is trading at the price around  RM 1.0-1.10.

( ii ) Core business
Wzsatu is involved in four segments which are:

- Civil Engineering and Construction
Most of the projects from this segment are related to construction and maintenance of highway.

- Oil & Gas
Wzsatu is the onshore oil & gas service provider and most of the jobs come from RAPID.

- Mining
Bauxite mining in Kelantan.

- Manufacturing and others business

It also involves in steel manufacturing and trading of cold drawn bright steel and set up a factory recently in Indonesia to reduce the costs and expand its market.


( iii ) Financial Performance


- Revenue 

It can be seen that the revenue from 2012 and 2013 is much more the same which is around RM 85 m and had increased significantly after 2013.
In 2014, the revenue has increased from around RM 89 m to RM 120.29 m ( + 35 % ) and from RM 120.29 m to RM 351.42 ( + 65 % ) in 2015.


- Profit

Same as the revenue, the profit also increased tremendously after 2013 from RM 1.39 m to RM 8.76 m in 2014 ( + 530 % ) and RM 20.73 m in 2015 ( + 136 % ).


# Both of the revenue and profit of Wzsatu has increased significantly after the transformation in 2013.


Debt to Equity Ratio

2015- 0.82

2016- 0.68

# Total liabilities has dropped from RM 203 m  to RM 194 m


Cash Flow-

Net cash has increased significantly from RM 57 m to RM 83m.



( iv ) Advantage-

( i )  Strong performance from Construction segment

- Wzsatu has secured many projects recently such as West Coast Expressway.

- Order book has increased from RM 261 m last year to RM 768 m

- With the current order book, managements are confident that it can last the group for over next two to three years.


( ii ) Bauxite  mining restart

- Bauxite is the main source of aluminium. Increased demand for bauxite is set to continue as aluminium use in developing countries is well below that typical of more developed economies.

- Due to environmental issue, the mining of bauxite has been banned by government for 8 months effective on 15 Jan 16 and now the ban is over and we can expect the mining segment to contribute more profit to the group.

( iii ) Rapid Project

- Despite the negative outlook of O&G sector, Wzsatu has just secured a RM 32.7 m contracts for Rapid Project.

- The project will contribute positive earning for group in 2017 and 2018.


( iv )  Consistent share buy back by the CEO

- YM Dato Seri Tengku Uzir bin Tengku Dato Ubaidillah, which is the CEO of the group has consistently buy back the share since 2014 and his stake has grown to around 25 %.

- I always believe that there can be many reasons why a director sell his share but there can only be one reason for director to buy back his share. It is because the company is undervalued. 




( v ) Disadvantage

- Negative outlook of O&G sector

- Doubts on profitability of SILK

- Environmental issue of Bauxite



# In conclusion, in my humble opinion, with the strong book order of construction segment, Rapid project and restart of Bauxite mining, the prospect of Wzsatu is endless and worth more than its current price.













2 comments :

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  2. I'am glad to read the whole content of this topic and am very excited.Thank you.
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