June Special Edition - Benalec

While there are many different style in investing into the equities market, investing into a company which had a unique business model with a series of track record, have a great growth potential, have powerful business ties and relationship, and lastly, a powerful and strong driver in the company management team will seldom goes wrong. With all these being said, Benalec Holdings Berhad might be one of the company that you might be looking to.

Benalec had been involved in land reclamation works in the peninsula Malaysia. Benalec started their journey to high rise with a project offered to them in Langkawi to construct a wave breaker back then at 2000. As they continue to grow, Benalec had been involves in reclamation work from Penang to Melaka. Benalec's upcoming long haul project will be in Johor that will be covering more than 5500 acres of land from Tanjung Piai and Pengerang Integrated Petroleum Complex.

Currently, Benalec is sitting on a several prime projects which includes:
- Phase 1 of E&O STP2 project in Penang with a total 720 acre which will be worth more than RM3 billion
- Oriental Boon Siew (M) Sdn Bhd contract worth RM204m (excluding rock revetment works) in Melaka. Benalec will undertake the construction, completion and maintenance of coastal reclamation for Ultra Green under Phase 2A, Phase 3A, Phase 3B and Phase 4, a total of 415 acre.
- Tanjung Piai Integrated Petroleum & Petrochemical Hub with 3485 acre and Pengerang Integrated Petroleum & Petrochemical Hub with 1760 acre that will worth more than RM15 to RM20 billion.





With a total of more than RM25b projects in their pipeline, and a huge area of reclamation to be covered from Tanjung Piai to Pengerang, Benalec will definitely be a great company to look into as the prospectus of the company will be very interesting in the coming years ahead, especially when the projects kicks off and revenue start to kick into the balance sheet of the company.

However, due to the scale of the projects in Johor, Benalec current outfit and settings might not be able to see it delivering them in an interesting time frame. Benalec current operation hadn't been seeing a pause as of today as projects are coming in faster than what they could handle. Benalec will probably need to increase their scale of operation by at least 150% to 200% to push the production in order meet timeline and expectation.


Potential Capital Raising via Private Placement

Petronas capex of RM300b from 2011 to 2015 had only seen a utilization of RM76b as of January 2014. While Petronas will be committed in using up all the RM300b allocated for the nation oil and gas industry, Malaysia will be seeing another RM200b of projects to be dished out in the coming 1.5 years. The commitment in Petronas capex had placed the oil and gas industry trading at a high premium. The Oil and Gas sector had been one of the prime focus where the government had laid out 13 pointers to be focused. The 13th pointer "Increasing Petrochemical Output", will be seeing a kick start soon in the 2H of 2014.

While Benalec might be facing a problem of "How to increase the scale of operation", however, seeing this as a good problem will be pushing forward to a potential capital raising through private placement in the company. The company's current great prospectus will not be shy of seeing potential great tycoons and foreign investment fund that had been eagerly eying for potential oil and gas catalyst in Malaysia.

Let's have a view of prime candidates that could be interested in Benalec's private placement.

1. Tan Sri Quek Leng Chan

Tan Sri Quek Leng Chan had been in a huge rampage mode recently as the tycoon had started to hunt down a number of oil and gas company in Malaysia after seeing the bullish sector in the coming days. As of to date, Tan Sri Quek Leng Chan had notable vested interest in Alam Maritim, TH Heavy, Scomi Energy, Sona Petroleum, while foreign firms includes Singapore listed Ezion Holdings Ltd.

Tan Sri Quek always doesn't come in a single note bang. His side kick partner, Paul Poh, had been taking up position in notable oil and gas company through his private vehicle, Caprice Capital.

Benalec's business prospect, current market capitalization, total shares issued and market liquidity will be a good target for Tan Sri Quek Leng Chan.


2. Johor Corporation

Johor state owned investment and administrative vehicle - Johor Corporation, had recently stir up attention in the market after their latest news in DBHD. What is stirring up more attention is the possible intervention of Sultan Ibrahim Sultan Iskandar in the administrative of the JPHC (Johor Property and Housing Commission). Sultan Ibrahim Sultan Iskandar had been very active in turning Johor into one of the major economy hub in Malaysia.

Currently, under Johor Corporation's business portfolio includes Plantation, F&B, Healthcare, Hospitality, Property and Logistic and Services.

While Benalec involvement in Johor is a huge scale, will there possibility of a spin between them?

3. Tan Sri Chua Ma Yu

Tan Sri Chua Ma Yu came into the limelight after his savvy investment portfolio had grown into
multi billions. While Tan Sri Chua Ma Yu had been a low profile investor, his private investment vehicle, CMY Capital had appeared as cornerstone investor in several huge corporate including IHH Healthcare Berhad and Astro Malaysia Holdings Berhad.


CMY Capital is currently developing a high profile 6 star hotel in Kuala Lumpur, dubbed St Regis at KL Sentral is a stunning RM 1.2b investment that will be soon to ready in the end of 2014.

Currently, Tan Sri Chua Ma Yu eldest son, Simon Chua, had been seen creeping up quietly into the corporate world. At 27, Chua Sai Men is still learning the ropes in the corporate world from his father. The recent limelight came when Chua Sai Men had acquired 5.1% of stakes in Cypark Resources Bhd.

In a public statement, Chua Sai Men had expressed interest in the companies which is involved in oil and gas, particularly those that will see projects and contracts from Petronas. To put things even more interesting, Chua Sai Men had also mentioned that he had been investing in stocks in the oil and gas sector.

Benalec robust outlook and growth in the belt could be a high potential candidate for CMY Capital to see interest into it.

4. Termasek Holdings

Termasek Holdings is Singapore largest fund. Incorporated in 25 June 1974 with a portfolio of just
S$354 million, today Termasek Holding is holding a record portfolio of more than S$215 billion. Termasek portfolio tremendous growth started from March 2003 at S$61 billion, and in the 10 years journey had tripled up the value of the portfolio.

While Singapore land had been scarce, the demand of land reclamation will never come shy in the coming days ahead as Singapore continue to drive their economy higher, which will directly look into more land to cater the growth. Termasek investment's decision will be focusing on 4 themes which includes Transforming Economies, Growing Middle Income Population, Deepening Comparative Advantages and Emerging Champion.

Benalec involvement in Tanjung Piai and Pengerang had started to see attention from Termasek Holdings. Recently, Termasek had been rumored as one of the purchaser for a plot in the Tanjung Piai reclamation project.

5. Norges Investment Fund

Norway had been seen as 1 of the richest country with a strong sovereign fund that comes from their bullish oil and gas sector.

 Norges Fund, one of the largest foreign fund that is investing in Malaysia had been seen nibbling at Malaysian small and mid cap companies which are directly or indirectly related to the oil and gas industry. As of end of 2013, Norges Fund had been taking up small stakes in 53 Bursa Malaysia listed companies with an investment value of around RM 1.7 billion. Norges Fund had started to invest in the Malaysian market since 2010, and is currently sitting on a paper gain of more than RM 600m, giving their current portfolio valuation at RM 2.3 billion.

While Norges Fund had targeted most of the prominent name in the oil and gas industry, Benalec could be an upcoming rising star in the industry after seeing it's large role in the oil and gas industry in Pengerang and Tanjung Piai.


Major Corporate Exercise in the pipeline
Benalec current business is a capital intensive industry. The undertaking of the future projects will be looking at huge capital being played down the line. While private placement will be one of the high potential corporate exercise, we will definitely not play down a possibility of rights issues and bonus issues.

Benalec will definitely need to raise capital in order to see a larger scale of operation to cater for the huge area covered in the projects. At the current scale, should Tanjung Piai have to see extension to a further date to kick off, it should be actually a very good blessing in disguise as Benalec will benefit from a higher operation margin, and a lower risk of LAD (late delivery) that will incurred unnecessary cost.


Benalec - Invest in growth
Investing into a growing company will definitely be good. However, investing in the different stages of time is what it makes differences in the investment return. To be able to see the company prospect and invest into Benalec before any new influential substantial shareholder will be an even powerful advantage. While a company with good business model and prospect, if loomed with bad management, it will still another rotten fruit. While a number of event had happened in Benalec, things had taken a huge change as the EGM on 26th June 2014 will officiate everything into order, and Benalec will be seeing their best ever transformation under Dato Vincent Leaw full control on the company to steer it into greater heights.

Benalec will be one of the black horse in the coming days ahead. However, before the black horse will take is tour, had you decided in your investment now?

Benalec - Mounting A Solid Front

Ever heard of the saying of "Too many chefs ruin the soup"? It couldn't be more true in Benalec, however, not after the Dato Vincent Leaw took back the total control of the company with an off-court settlement with the brothers.

Dato Vincent Leaw, being the youngest of all the siblings, had been the main pile driver of the company. Benalec had been able to transform from private company with a NTA of RM30 million in 2005 to a market capitalization of approximately RM1 billion today is a great journey for the company. However, the best moment for the company now is when Dato Vincent Leaw took full control of the company, where he will be steering Benalec in full steam ahead for the coming days. Dato Vincent Leaw full control of the company will be marking a new chapter in Benalec.


Let's have a brief outlook at Benalec share price movement of recent.

Benalec had been trading at the range of RM 1.15 for the past couple of week. On 14th May 2014, Benalec recorded a breaking high volume where more than 60m of share changed hand after closing in a solid note at RM 1.10. Currently on consolidation stage, Benalec will be looking back to see another surge of stronger volume in the coming days as it will penetrate above RM 1.20.


Benalec and the Golden Shores

Benalec unique business model could be considered as the 1 and only in Malaysia as they specialized in the reclamation of lands. Till date, Benalec had so many notable achievement under their belt ranging from reclamation works in Pulau Pinang, Port Dickson and currently focusing in Kuala Sungai Melaka.

To put it more interesting in Benalec, Benalec had the ready in house machinery and equipment that will play in a higher profit margin, which could be as high as 40%. With their unique technology that Benalec had developed, the reclamation had made much easier as they will only need to "relocate" the sea sand into the place for reclamation which will further boost up their operational profits.

With the current equipment, Benalec is able to reclaim more than 1 acre of land in a day, which will shortened the reclamation process by nearly half the timeline. With more project coming up in hand, and under the aggressive leadership and driving forces of Dato Vincent Leaw, we might not discount that Benalec will be looking to increase production by another 100% which will further shortened the reclamation process.

Currently, Benalec is sitting on a several prime projects which includes:
- Phase 1 of E&O STP2 project in Penang with a total 720 acre which will be worth more than RM3 billion
- Oriental Boon Siew (M) Sdn Bhd contract worth RM204m (excluding rock revetment works) in Melaka. Benalec will undertake the construction, completion and maintenance of coastal reclamation for Ultra Green under Phase 2A, Phase 3A, Phase 3B and Phase 4, a total of 415 acre.
- Tanjung Piai Integrated Petroleum & Petrochemical Hub with 3485 acre and Pengerang Integrated Petroleum & Petrochemical Hub with 1760 acre that will worth more than RM15 to RM20 billion.

With a total of RM 25 billion worth of projects for the span of 5 to 6 years, and with a skeptical profit margin of 30% due to it's in house equipment, Benalec could be looking at a massively huge windfall profit of RM 7.5 billion, which could be interpreting at RM 9.27 net profit per share (based on 808.515m shares) in 6 years. In a 6 years average, Benalec is looking to see a RM 1.54 net profit per share, while trading at a PER of x8, Benalec valuation might be able to blow over to more than RM12 per share in the coming days. To put things in a more skeptical manner, taking 50% off from perfect scenario for other provision in the operation and unforeseeable cost, Benalec will still be sitting at RM 6.00.


The Current Catalyst

While good things doesn't come alone, Benalec will be looking to see the kick off for Phase 1 of E&O STP2 projects in the coming couples of weeks. Insiders sources had seen the green light given by the Penang authority in the STP2 projects as E&O had started to rally in a very fierce manner. STP 2, carrying more than RM3 billion will be looking to give Benalec revenue a huge boost in the coming financial year. While the exact terms had not been fully ironed out, should the project is to be settled by cash, Benalec will be looking to see their balance sheet stronger by RM3 billion.

Benalec had also secured more than RM 600m of land sale in the reclaimed Melaka land which will give the company another lift as well.

In my opinion, Benalec is really undervalued at the current price. Benalec will be a company to be traded or invested based on:
- RM 25 billion worth of projects in hand
- Sole player in the industry without any possible market competitor sighted in the next 5 years
- Reputable and notable solid track of record in delivering
- High profit margin in operational activities due to strong in house resouces
- Strong political ties, especially with the Johor Government
- Huge exposure to the Oil and Gas industry, especially Pengerang.
- Strong and solid management team lead by Dato Vincent Leaw
- Attractive target for both local and foreign funds due to it's market liquidity

Benalec will be looking to challenge above RM 1.30 in the short term outlook. A medium to long term outlook will position Benalec above RM2.00 as the projects start to take off in the 2H of 2014. Benalec will be the black horse of KLSE for the coming days.

Are you decided for Benalec? Good things never wait for the slow to decide. The game is yours.

Bone's short term TP: RM 1.30

Cheers and have a good day