Pinepac

Pinepac - A Prime Transformer

I believe that everyone that had been putting up a high expectation from the latest Transformer 4 : Age of Extinction might had felt a little bit of let down due to it's storyline. However, for those that are expecting high level of non stop action with huge explosion after explosion, Transformer might not be a let down as it can cater to your explosive hunger on it's almost 3 hours long movie.

While Transformer 4 is going hot at the cinema gallery, Pinehill Pacific Berhad (Pinepac -1902) might be another big hit in the KLSE.

Let's have a quick brief on the latest price movement of Pinepac.

Pinepac had not seen any activeness in it's trading, however, not until the recent movement that had saw Pinepac pacing higher after a 8mth long consolidation at the range of RM 0.35 to RM 0.40. Pinepac had tapped into the uncharted territory, and will be looking to test on the psychological barrier of RM 0.50 in the coming days with notable volume.


Pinepac is formerly known as Multi Vest Resources Berhad. Pinepac primarily involves in the plantation segment, which is in the business of cultivation of oil palm and processing of palm oil. It offers crude palm oil, palm kernel and other oil palm products for sale. Most of the plantation land is situated at Indonesia and Perak.

The recent El-Nino warning that had been issued by global climate agencies had warned about the possibility of the drought developing in the South East Asia region that could possibly see a dry spell hitting the countries from 2H of 2014 for a possible period of 6 months, a worrying sign that will see an escalation in food prices as the supplies dwindle down due to the lower production as affected by the lower amount of rain fall. As of today, the CPO had regained back it's pace and started to challenge above the 2500 mark. CPO had been predicted to soar above RM 3000 per tonne like what happened last round, which is a bullish indicator for plantation company.

Pinepac, currently trading at a 57% discount towards it's NTA of RM 1.00 had been in a series of rough waters as earning had been inconsistent. However, the stronger uptrend in the CPO might be able to see Pinepac putting a brave front to challenge ahead of RM 0.50 in the coming days.


Pinepac - The wild card

One of the notable fact between Pinepac and ABN (Asian Broadcasting Network) is a common shareholder by the name of Tan Sri Datuk K.K Eswaran (known as Tan Sri Ketheesawaran).

 

While the licensing for the Pay-TV space had been a very lengthy and hard process to obtain, it hadn't come too hard for ABN (previously known as Nilaimas Corporation Sdn Bhd) to obtain the license to for the broadcasting under politically well connected Tan Sri Datuk K.K Eswaran.

To date, ABNxcess, which is powered by cable network will be competing head to head with current market leader Astro that is offering satellite network. The ultimate difference between a cable powered TV is that it will not be affected by bad weather condition.

Till date, ABN rolled out had been serving approx 100,000 customer, and will be seeking to expand in a aggressive manner in the coming days. While arranging for an IPO might be a little bit of lengthy process for ABN, a outright RTO on Pinepac to get ABN listed into the public market to source for private placement and more working capital might be one of the best solution that ABN will be considering. ABN had previously secure RM500m of working capital from Bank Pembangunan Malaysia. Tan Sri Datuk K.K Eswaran will be looking at RM 2.5 billion for a start that will be in the form of equities and loan.

Given that the industry is capital intensive, ABN will be looking to enlarge their working capital in order to expand their coverage and secure more customer. Currently, ABN will focus to build their market base in the KL and Johor region. In the coming days, ABN will be tapping into the East Malaysia which is another golden mine after satellite TV failed to provide up to expectation.

Conclusion

I believe that Pinepac will be an interesting counter moving forward. With the current uptrend of CPO prices and palm kernel, Pinepac will be expecting to record a high margin on it's production. However, the prime transformer for Pinepac might be a potential RTO on the company to pave the way for ABN to be listed into the KLSE. To heat up on the game, it had been informed that the internal sources had also considered the option on this entry as being the fastest manner to secure the funding needed for ABN to expand further without delay.

ABN will be a good buy based on:
- Rising CPO prices

- Trading at a 57% discount on the NTA of RM 1.00

- Major shareholder, Tan Sri Datuk K.K Eswaran, politically well connected with the prime minister family

- Pinepac being a high potential RTO target for ABN

In a short term outlook, Pinepac will be looking to challenge RM 0.50, however, a longer term outlook might place Pinepac at RM 2.00 should be it be transformed into ABN

Are you game in or out? You decide.

Bone's short term TP: RM 0.60

Cheers and have a nice day