Canone Q2 2014

CAN-ONE BHD
CANONE
9/16/2014
Financial Year:
Latest Quarter:
Price:
FBMKLCI:
Board:
Reuters Code:
Industry:
Sub-Sector:
Ownership:
2014-12-31
2014-06-30
2.48
NO
Main Board
CNON.KL
INDUSTRIAL PRODUCTS
PACKAGING AND LABEL/BOTTLING AND CANNING
- Corporate Owned (Local)
Table of Contents
Financial
Statements
Quality
Valuation
Income Statement
Balance Sheet
Cash Flow
Ownership Summary
Key Ratios
Charts
Growth
Yield History
Discount Rate & Uncertainty
DCF Valuation
Absolute EY% Valuation
Notes for CANONE
L. C. Chong is NOT an investment advisor nor a financial advisor, and no information provided
here is to be interpreted as a suggestion to buy or sell securities.
All figures in thousands of Ringgit Malaysia except per share values and ratios
Click here to understand definition of some financial terms
Prepared by:
L. C. Chong
L. C. Chong
Website:
Page 1 of 21
http://lcchong.wordpress.com
Financial Statements
Financial Year End
Income Statement
Pr. YTD
2004-12-31
2005-12-31
2006-12-31
2007-12-31
2008-12-31
2009-12-31
2010-12-31
2011-12-31
2012-12-31
2013-12-31
2014-06-30
2013-06-30
Revenue
120,860
166,906
201,197
260,495
413,705
405,926
449,051
630,983
789,815
772,881
425,110
415,642
Cost of Revenue/Goods Sold
(98,245)
(136,503)
(167,898)
(225,008)
(367,347)
(336,465)
(397,812)
(553,487)
(682,443)
(662,967)
(379,423)
(361,696)
22,615
30,403
33,299
35,487
46,358
69,461
51,239
77,496
107,372
109,914
45,687
53,946
571
243
136
5,056
2,232
4,003
2,114
519
582
Operating Expenses
(6,596)
(7,470)
(9,059)
(11,609)
(17,243)
(21,066)
(20,671)
(28,995)
(28,867)
(36,686)
(16,860)
(16,591)
Other (losses)/gains
Operating Income
16,589
23,175
24,376
23,878
29,115
48,395
35,624
50,733
82,508
75,342
29,346
37,937
Net Finance (Cost)/Income
(2,307)
(4,602)
(6,340)
(8,850)
(9,755)
(11,288)
(9,233)
(8,822)
(22,607)
(20,402)
(8,592)
(9,450)
Net FX gain/(loss) on financing activities
Investment Income
Share of profits from associates/JCE
134,980
39,016
15,331
18,667
Non-operating Income
Non-Operating Expenses
Income Before Taxes
14,282
18,573
18,036
15,028
19,360
37,107
26,391
41,911
194,881
93,956
36,085
47,154
Net Income Tax Income/(Expense)
(2,168)
(3,245)
(2,201)
(2,922)
(1,911)
(5,764)
(5,601)
(7,389)
(16,753)
(16,686)
(9,531)
(8,407)
Profit from Discontinued Operations
Profit from Share of Pre-acquisition
12,115
15,328
15,836
12,106
17,449
31,343
20,790
34,522
178,128
77,270
26,554
38,747
Non-controlling Interests
338
32
134
296
1,348
2,109
7,403
7,601
2,710
3,528
Holders of perpetual capital securities of a subsidiary
12,115
15,328
15,498
12,074
17,315
31,047
19,442
32,413
170,725
69,669
23,844
35,219
103,754
12,115
15,328
15,498
12,074
17,315
31,047
19,442
32,413
66,971
69,669
23,844
35,219
EPS
0.093
0.110
0.102
0.079
0.114
0.204
0.128
0.213
1.120
0.457
0.156
0.231
Normalised EPS
0.093
0.110
0.102
0.079
0.114
0.204
0.128
0.213
0.439
0.457
0.156
0.231
DPS
0.000
0.040
0.040
0.030
0.030
0.030
0.030
0.030
0.040
0.050
0.000
0.000
FCFPS
0.243
-0.092
0.045
0.089
0.262
0.297
-0.009
0.306
1.520
-0.095
0.066
0.232
0.0%
36.5%
39.3%
37.9%
26.4%
14.7%
23.5%
14.1%
3.6%
10.9%
0.0%
0.0%
130,400
139,863
152,400
152,400
152,400
152,400
152,400
152,400
152,400
152,400
152,400
152,400
11,944
16,686
17,551
17,431
21,545
36,296
26,718
38,050
61,881
56,507
22,010
28,453
Gross Profit
Other Operating Income
Net Income
Net P/L To Shareholders

Unusual Items
Net P/L To Shareholders (Excl. Unusual Items)
Dividend Payout
Outstanding Shares
NOPAT
L. C. Chong
Cu. YTD
Page 2 of 21
Financial Year End
Balance Sheet
Pr. YTD
2004-12-31
2005-12-31
2006-12-31
2007-12-31
2008-12-31
2009-12-31
2010-12-31
2011-12-31
2012-12-31
2013-12-31
2014-06-30
2013-06-30
105,119
140,367
156,550
183,143
237,881
248,886
264,543
310,622
347,200
378,545
387,337
407,439
60,590
86,593
125,635
138,772
168,933
196,001
202,752
256,857
643,871
670,026
678,450
664,499
3,644
165,710
226,960
282,185
321,915
406,814
444,887
467,295
567,479
991,071
1,052,215
1,065,787
1,071,938
Total Current Liabilities
34,707
51,501
83,201
101,959
202,459
166,269
177,389
230,548
243,655
240,717
258,827
284,721
Total Long-Term Liabilities
53,535
63,102
73,533
86,849
57,371
99,945
84,294
101,379
336,129
328,974
307,281
336,373
Total Liabilities
88,242
114,603
156,734
188,809
259,830
266,214
261,683
331,927
579,784
569,691
566,108
621,094
Shareholders' Equity
77,468
112,356
123,465
131,089
143,831
175,224
200,815
228,646
396,978
460,614
475,059
433,007
Non-Controlling Interests
1,986
2,018
3,152
3,449
4,797
6,906
14,309
21,910
24,620
17,837
Holders of perpetual capital securities of a subsidiary
Negative Goodwill
Total Equity
77,468
112,356
125,451
133,107
146,983
178,673
205,612
235,552
411,287
482,524
499,679
450,844
Total Debt
72,334
92,101
125,113
158,177
203,640
197,415
190,044
247,447
454,664
430,183
432,751
497,261
Excess Cash
17,127
9,212
8,149
7,190
22,412
27,283
22,808
31,755
52,354
38,021
50,640
78,424
113,875
155,185
178,536
200,637
166,390
249,623
265,386
303,464
693,350
772,069
754,912
707,385
Total Current Assets

Total Long-Term Assets
Assets held for sale
Total Assets
Liabilities held for sale
Invested Capital
L. C. Chong
Cu. YTD
Page 3 of 21
Financial Year End
Cash Flow
Pr. YTD
2004-12-31
2005-12-31
2006-12-31
2007-12-31
2008-12-31
2009-12-31
2010-12-31
2011-12-31
2012-12-31
2013-12-31
2014-06-30
2013-06-30
Net Cash From Operations
(16,659)
(13,549)
3,205
770
22,247
86,750
31,432
30,799
78,283
43,971
24,054
2,130
Net Cash From Investing Activities
(13,825)
(26,958)
(14,917)
(16,921)
(35,342)
(58,581)
(14,377)
(65,679)
(239,153)
(6,709)
1,451
(8,345)
Net Cash From Financing Activities
44,045
31,187
11,410
15,834
28,317
(23,298)
(21,530)
43,453
175,411
(51,385)
(13,348)
32,562
Net Cash
13,561
(9,319)
(302)
(317)
15,222
4,871
(4,475)
8,573
14,541
(14,123)
12,157
26,347
(10,101)
(21,691)
(15,470)
(17,055)
(33,029)
(34,553)
(14,365)
(66,154)
(39,844)
(25,210)
(8,033)
(8,459)
31,694
(12,881)
6,876
13,558
39,883
45,230
(1,362)
46,638
231,629
(14,466)
10,002
35,395
Net Capex.
Free Cash Flow
L. C. Chong
Cu. YTD
Page 4 of 21
Ownership Analysis
Top 5 Shareholders
OWNERSHIP SUMMARY %
Public and Other
16.1%
11.0%
9.7%
Corporations
(Private)
40.0%
6.5%
23.5%
65.5%
Institutions
25.6%
7.3%
Eller Axis Sdn Bhd
Goh Cheng Suan
Jin Hoe Yeoh
Sanwoi (Malaysia) Sdn Bhd
Yeoh Min Hsing
Individuals/Insiders
18.3%
Performance Charts
Profitability
MILLIONS
Revenue
Profit Margin
900
20.0%
18.7%
18.2%
18.0%
800
17.1%
16.6%
16.0%
700
13.6%
14.0%
600
13.6%
14.2%
12.3%
11.4%
11.2%
12.0%
10.0%
500
9.2%
10.0%
7.7%
8.0%
400
8.5%
6.0%
300
9.0%
7.6%
4.6%
5.1%
4.3%
4.2%
4.0%
200
2.0%
100
0.0%
2004
2005
2006
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2007
Gross Profit Margin
2013
Net Profit
MILLIONS
2008
2009
2010
2011
2012
2013
Net Profit Margin
ROIC
180
20.0%
160
18.0%
17.4%
16.0%
140
13.4%
14.0%
120
12.4%
12.0%
100
12.4%
11.7%
10.5%
10.5%
10.4%
9.2%
10.0%
80
7.7%
8.0%
60
6.0%
40
4.0%
20
2.0%
0.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
250
70
60
200
50
150
40
30
100
20
50
10
0
12/2010
03/2011
06/2011
09/2011
12/2011
03/2012
06/2012
09/2012
12/2012
03/2013
06/2013
09/2013
12/2013
03/2014
06/2014
Turnover
12/2010
132,170
03/2011
131,015
06/2011
172,115
09/2011
160,555
12/2011
167,298
03/2012
181,661
06/2012
201,447
09/2012
200,036
12/2012
199,569
03/2013
194,474
06/2013
221,168
09/2013
171,439
12/2013
185,800
03/2014
192,373
06/2014
232,737
Net Profit
8,759
3,491
8,734
7,787
12,401
91,334
34,925
21,378
23,088
17,858
17,361
20,432
14,018
15,299
20,786
EPS
5.75
2.59
5.44
5.11
8.14
59.93
22.92
14.03
15.15
11.72
11.39
13.41
9.2
6.81
8.83
PER SHARE VALUE (CENTS)
MILLIONS
Quarterly Results
Cash Flow
MILLIONS
Free Cash Flow
CROIC
250
50.0%
46.5%
40.0%
200
30.0%
27.8%
150
21.7%
21.7%
20.0%
16.4%
100
7.2%
10.0%
4.1%
50
-0.5%
-2.0%
0.0%
2004
-9.6%
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
(50)
-10.0%
-20.0%
Liquidity
300
250
200
176
167
148
150
122
147
119
114
115
100
103
99
100
99100
81
34
31
39
34
97
76
51
50
2005
49
31
83
83
62
57
40
56
43
0
2004
2005
Days In Inventory
2006
2007
Days In Receivables
2008
2009
2010
Days Payable Outstanding
2011
2012
2013
Cash Conversion Cycle
2006
2007
2008
2009
2010
2011
2012
2013
Leverage
MILLIONS
Debts
Debt Coverage
500
60.0%
50.9%
50.0%
43.8%
450
40.0%
30.0%
22.9%
400
19.6%
18.8%
20.0%
8.6%
10.0%
5.5%
350
-0.7%
0.0%
2004
-10.0%
300
2005
2006
2007
2008
2009
2010
2011
2012
-3.4%
2013
-14.0%
-20.0%
250
Debt/Equity
160.0%
200
138.5%
140.0%
118.8%
120.0%
110.5%
110.5%
150
105.0%
99.7%
100.0%
93.4%
92.4%
89.2%
82.0%
80.0%
100
60.0%
40.0%
50
20.0%
0.0%
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Red Flags
Investment/Asset Impairment Charges
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
(100)
Millions
Millions
Expenses
5
4
4
(200)
(300)
3
(400)
2
(500)
2
(600)
1
(700)
1
(800)
Cost of Goods Sold
Operating Expenses
2004
2005
2006
Millions
Capex.
2007
2008
2009
2010
2011
2012
2013
2011
2012
2013
Revenue Growth vs. AR Growth
80.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
70.0%
(10)
60.0%
(20)
50.0%
40.0%
(30)
(40)
30.0%
20.0%
10.0%
(50)
0.0%
2004
(60)
2005
2006
2007
2008
2009
2010
-10.0%
-20.0%
(70)
Revenue
Accounts Receivable
Growth Analysis
Growth
2004-12-31
2005-12-31
2006-12-31
2007-12-31
2008-12-31
2009-12-31
2010-12-31
2011-12-31
2012-12-31
2013-12-31
Revenue
120,860
166,906
201,197
260,495
413,705
405,926
449,051
630,983
789,815
772,881
YoY
38.1%
20.5%
29.5%
58.8%
-1.9%
10.6%
40.5%
25.2%
-2.1%
25.2%
3-Y Avg.
25.5%
22.3%
36.0%
22.2%
4.1%
22.1%
28.2%
10.1%
18.1%
5-Y Avg.
29.1%
25.0%
20.5%
18.5%
17.3%
18.5%
21.1%
10-Y Avg.
21.2%
21.2%
Net Profit
12,115
15,328
15,498
12,074
17,315
31,047
19,442
32,413
170,725
69,669
YoY
26.5%
1.1%
-22.1%
43.4%
79.3%
-37.4%
66.7%
426.7%
-59.2%
26.5%
3-Y Avg.
12.3%
-11.9%
5.5%
47.2%
5.8%
2.2%
108.6%
38.3%
9.1%
5-Y Avg.
4.8%
15.2%
14.0%
20.9%
46.2%
37.9%
18.3%
10-Y Avg.
23.2%
23.2%
31,694
(12,881)
6,876
13,558
39,883
45,230
(1,362)
46,638
231,629
(14,466)
YoY
-140.6%
153.4%
97.2%
194.2%
13.4%
-103.0%
3524.2%
396.7%
-106.2%
97.2%
3-Y Avg.
-53.4%
205.3%
87.9%
60.2%
-103.4%
1.5%
17106.5%
-131.0%
30.9%
5-Y Avg.
5.9%
451.1%
-119.8%
36.2%
55.2%
-132.0%
21.1%
10-Y Avg.
-145.6%
-145.6%
Free Cash Flow
Individual Period
Revenue
Net P/L To Shareholders (Excl. Unusual Items)
Normalised EPS
Free Cash Flow
L. C. Chong
2014-06-30
2013-06-30
232,737
221,168
20,786
0.09
Cumulative Period
2014-06-30
2013-06-30
5.2%
425,110
415,642
17,361
19.7%
23,844
0.11
-22.5%
Financial Year End
2014-06-30
2013-12-31
2.3%
425,110
772,881
-45.0%
35,219
-32.3%
23,844
69,669
-65.8%
0.16
0.23
-32.3%
0.16
0.46
-65.8%
10,002
35,395
-71.7%
10,002
(14,466)
169.1%
Page 11 of 21
Growth Rate
Discount Rate & Uncertainty

Systematic Risk
0.9
Revenue Cyclicality:
Low
1.1
Operating Leverage:
High
1.1
Financial Leverage:
High
Uncertainty Risk
Uncertainty Risk:*
High
High
Self Defined Uncertainty Risk:
Unadjusted Discount Rate

1.089
12%
Unadjusted Discount Rate:*
Nonsystematic/Company-Specific Risk
1
Local Political Risk:
Medium
1
Foreign Political Risk:
Medium
Concentrated Customer Risk:
Medium
Service Disruption Risk:
Medium
1
Concentrated Product Risk:
Medium
IP/Patent Expirations Risk:
Medium
1
Litigation Risk:
Medium
1
Environmental Risk:
Medium
Currency Risk:
High
Price Taker:
High
1
Commodity Risk:
Medium
Changing Competition:
High
1.1
1.1
1.1
0.9
Unpredictable Management:
Low
1
Questionable Capital Allocation:
1
Project Delivery Risk:
Medium
Adjusted Discount Rate

Adjusted Discount Rate:
Self Defined Discount Rate
14.00%
14.00%
Medium
Discounted/Reverse Cash Flows Valuation

Fair Values
Good 30%
Fair Value
Price/Fair Value
Fair Value Uncertainty
Base 26%
-1.44
-1.72
3-Y
Bad 22%
-1.30
-1.91
Ugly 18%
-1.17
-2.13
Good 30%
-1.04
-2.38
Growth rate applied in Reverse DCF to reach the current stock price (2.48):
-1.85
-1.34
Base 26%
5-Y
Bad 22%
-1.61
-1.54
Ugly 18%
-1.39
-1.78
Good 30%
-1.19
-2.08
-2.77
-0.90
Base 26%
10-Y
Bad 22%
-2.25
-1.10
Ugly 18%
-1.82
-1.36
-1.47
-1.69
0.0%
Growth Estimation
Financial Figures
34553
OE GR.
OE GR. (DCF) (RDCF)
Terminal %
26%
3%
Decay Rate
(Y4-Y7)
Extra Decay
(Y8-Y10)
15%
29.97%
20%
23450.4715
Shares Out.
21.97%
17.97%
2014 FCF
152
Excess Cash
(14)
Intangibles
Assets
Intangibles%
Add to DCF
38
0%
1
Projection of Present Value and Fair Value (DCF)

FV - Future Value; DPV - Discounted Perpetuity Value; PV - Present Value
Ba
se
26
%
Senario
Yearly GR.
FV
DPV
PV
Go
od
30
%
Fair Value
Yearly GR.
FV
DPV
PV
Ug
l
y1
8%
Ba
d
22
Fair Value
Yearly GR.
FV
DPV
PV
Fair Value
Yearly GR.
FV
DPV
PV
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
26%
(18)
(150)
(128)
26%
(23)
(165)
(161)
26%
(29)
(183)
(198)
22%
(32)
(178)
(212)
22%
(39)
(191)
(245)
22%
(48)
(204)
(281)
22%
(58)
(219)
(318)
18%
(53)
(174)
(293)
18%
(63)
(180)
(318)
18%
(74)
(186)
(343)
30%
(19)
(154)
(133)
3-Y:
30%
(24)
(176)
(173)
-1.30
30%
(32)
(201)
(219)
5-Y:
25%
(36)
(199)
(239)
-1.61
25%
(45)
(219)
(282)
25%
(56)
(241)
(330)
25%
(71)
(265)
(382)
20%
(64)
(209)
(349)
10-Y:
20%
(77)
(221)
(384)
-2.25
20%
(92)
(234)
(422)
22%
(18)
(145)
(122)
3-Y:
22%
(22)
(155)
(149)
-1.44
22%
(26)
(166)
(178)
5-Y:
19%
(29)
(159)
(188)
-1.85
19%
(34)
(166)
(212)
15%
(44)
(145)
(244)
10-Y:
15%
(51)
(146)
(261)
-2.77
15%
(58)
(147)
(278)
18%
(17)
(140)
(117)
3-Y:
18%
(20)
(145)
(137)
-1.17
18%
(24)
(150)
(159)
5-Y:
15%
(26)
(142)
(165)
-1.39
15%
(29)
(143)
(182)
12%
(36)
(119)
(202)
10-Y:
12%
(41)
(118)
(213)
-1.82
12%
(46)
(116)
(223)
3-Y:
-1.04
5-Y:
-1.19
10-Y:
-1.47
Fair Value
19%
(40)
(172)
(237)
15%
(34)
(145)
(199)
19%
(48)
(179)
(263)
15%
(39)
(146)
(216)
Reasonable Growth Rate (RDCF)
Yearly GR.
FV
DPV
PV
Fair Value
L. C. Chong
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
0%
(14)
(119)
(93)
0%
(14)
(104)
(90)
0%
(14)
(91)
(87)
0%
(14)
(80)
(84)
0%
(14)
(70)
(82)
0%
(14)
(62)
(80)
0%
(14)
(54)
(78)
0%
(14)
(47)
(77)
0%
(14)
(42)
(75)
0%
(14)
(37)
(74)
3-Y:
-0.57
5-Y:
-0.54
10-Y:
-0.49
Page 13 of 21
Yield History
EY% History
4
25.00%
3.5
20.00%
3
2.5
15.00%
10.00%
1.5
1
5.00%
0.5
0.00%
Unadjusted Price
EY%
DY% History
4
4.00%
3.5
3.50%
3.00%
2.5
2.50%
2.00%
1.5
1.50%
1.00%
0.5
0.50%
0.00%
Unadjusted Price
DY%
Absolute EY% Valuation

EY% HI
EY% LO
Buffer
17.52%
12.04%
P/E:
5.7
8.3
Fair EY%
10%
Downside EY%
12.59%
16.97%
7.9
5.9
FY13-EY%
R4Q-EY%
18.43%
18.66%
5.4
5.4
Fair Value
Price/Fair Value
Fair Value Uncertainty
Downside
Trailing:
- FY13 (EPS: 0.457) Fair value 3.63 (Fair Value Uncertainty: MEDIUM)
- R4Q (EPS: 0.463) Fair value 3.68 (Fair Value Uncertainty: MEDIUM)
Forward:
- FY15 (EPS: 0.504) Fair value 4 (Fair Value Uncertainty: MEDIUM)
EPS applied to reach the current stock price (2.48): 0.312
L. C. Chong
FY13-EPS
0.457
R4Q-EPS
FY14-EPS
FY15-EPS
Reverse EY%
0.463
0.480
0.504
0.312
3.63
3.68
0.68
0.67
####
2.69
2.73
3.81
0.65
2.83
4.00
0.62
2.97
2.48
Simple Yield Valuation (for reference)

FY13:
- EY%: 18.4%
- DY%: 2%
- FCFY%: -3.8%
R4Q:
- EY%: 18.7%
Page 16 of 21
Notes
Economic Moats
Cost Advantage: Narrow
- Gross profit was above more 10% and increasing from 11% to 14% in the past 4 years.
- However, fluctuation of raw material cost will impact gross profit severely.
Switching Costs: Narrow
- Customers unlikely to change tin supplier as the supplier familiar with their requirements.
- The majority of these customers have been trading with the group for more than 10 years.
- However, cost of switching supplier may not high.
Network Effect: Narrow
- The largest edible oil tin can producers in Malaysia that also produces jerry cans and dairy products.
- Can-One has weathered the intense competition by redefining its market position as an edible oil cans specialist.
Intangible Assets: Wide

- Its close relationship with most of the major palm oil players in Malaysia has effectively helped it to secure sizeable
recurring orders for the division.
- The majority of these customers have been trading with the group for more than 10 years.
- The long-lasting relationship with its customers is attributed to its well thought out strategy of placing all its factories
within 10km of major refineries and packers as well as at sea ports in Malaysia to cut logistical impediments. Such close
proximity to its customers enables the group to react more quickly to customers' request and foster closer
relationships.
Efficient Scale:
Not available or no moat found
Stewardship
1. Have most investments and acquisitions been in line with the company's core competencies, or does management
like to make diversifying acquisitions?
- Expanded production lines
- Acquisition of competitors, such as 32% of Kian Joo
- With 80% already owned, the Group announced an acquisition of the remaining 20% in F&B Nutrition Sdn Bhd (F&B)
for RM112.9m via the issuance of 39.753m shares at RM2.84 apiece. F&B is principally involved in manufacturing of
dairy and non-dairy products, principally sweetened creamer, sweetened condensed filled milk and evaporated
creamer for the African, Asian and Middle East markets.
2. Have investments and acquisitions been moat-widening?
- Yes
3: Does the company have a record of taking large impairment charges?

- RM4mil of impairment loss on unquoted bond.
4: Is management's investment focus on building long-term shareholder value, or has it engaged in a growth-forgrowth's-sake strategy?
- Yes
5: Does the firm have a history of cost overruns or expensive operational missteps?
- Not that I am aware of
6: Does the firm have the appropriate dividend and buyback policy?
- Not that I am aware of, but dividend payout of CANONE is not really attractive.
7: Does the firm have an appropriate amount of debt given the cyclicality and capital intensity of its business?
- High net gearing.
8: Does the ownership structure serve as a benefit or detriment to minority shareholders?
- Balance float is 12%.
9: Has the board of directors established an appropriate incentive structure that rewards value creation?
- Looks OK and not alarming
10: Do you think management is forthcoming about strategic missteps and challenges?
- Not that I am aware of
Result Analysis
Current quarter compared with previous corresponding quarter
- The Groups revenue increased from RM221.2 million in the previous year corresponding quarter to RM232.7 million
in the quarter under review. The pre-tax and post-tax profit dropped from RM23.2 million and RM19.1 million in the
previous year corresponding quarter to RM20.8 million and RM14.8 million respectively in the current quarter.
General cans division

- Revenue from General cans division for the quarter under review decreased by 4.5%to RM97.9 million from RM102.5
million in the preceding year corresponding quarter mainly due to lower demand of jerry cans.
- Gross profit margin for General cans division decreased from 12.3% to 12.1% mainly due to increase in raw material
cost of resins.
Food products division
- Revenue from Food products division increased from RM137.8 million in the preceding year corresponding quarter to
RM160.3 million in the current quarter mainly due to higher demand of products.
- Gross profit margin dropped compared to the previous quarter mainly due to higher operating cost and raw material
costs especially skim milk powder.
International trading division
- Revenue from International trading division decreased from RM26.4 million in the preceding year corresponding
quarter to RM24.4 million in the current quarter.
Investment in associate
- Associated company, Kian Joo Can Factory Berhad (KJCFB) contributed RM8.9 million net profit to the Group for the
quarter under review, an increase of RM0.8 million compared with the corresponding quarter.
Current year to date compared with previous year to date

- The Groups revenue increased from RM415.6 million in the previous year to RM425.1 million in the current year
under review. The pre-tax and post-tax profit dropped from RM47.2 million and RM38.7 million in the previous year to
RM36.1 million and RM26.6 million respectively in the current year.
General Cans division
- Revenue from General Cans division for the year under review decreased by 1.9% to RM189.2 million from RM193.0
million in the preceding year mainly due to decrease in jerry can sales.
- Gross profit margin reduced by 2.0% to 10.1% from the corresponding period last year mainly due to high raw material
cost of resins.
Food Products division
- Revenue from Food Products division increased from RM257.4 million in the preceding year to RM277.1 million in the
current year due to higher demand of products.
- Gross profit margin decreased compared against the previous year due to higher operating cost and raw materials
costs.
International Trading division
- Revenue from International Trading division increased from RM46.7 million in the preceding year to RM50.1 million in
the current year.
Investment in associate
- Associated company, KJCFB contributed RM15.3 million net profit to the Group for the year under review compared to
RM18.7 million in the previous year.
Variation of results against immediate preceding quarter
- The Groups net revenue increased from RM192.4 million in the immediate preceding quarter to RM232.7 million in
the quarter under review. Pre-tax and post-tax profit increased in tandem from RM15.3 million and RM11.8 million in
the immediate preceding quarter to RM20.8 million and RM14.8 million in the quarter under review respectively.
General cans division

- Revenue from General cans division increased from RM91.3 million in the immediate preceding quarter to RM97.9
million in the current quarter attributable mainly to increased in demand of tin cans.
- Gross profit margin for General cans division increased from 8.0% to 12.1% mainly due to better performance in the
tin can divisions.
Food products division

- Revenue from Food products division increased from RM116.8 million in the immediate preceding quarter to RM160.3
million in the current quarter. However gross profit margin for the quarter under review decreased from 10.9% to 8.1%
due to lower average selling price.
International trading division
- International trading division contributed revenue of RM24.4 million for the current quarter.
Growth Drivers
- Consistently growing demand in edible oil can, jerry cans, and sweetened condensed milk.
- With 32% of stakes in Kian Joo, CANONE will gain benefits from Kian Joo's growth.
- Over the years, Can-One has built a name for itself as a niche packaging supplier for the edible oil sector and is
currently the largest supplier of tin cans and jerry cans used for edible oils domestically. Growth going forward is
expected to come from increased export orders for Can-Ones customers. Malaysian edible oil products have been
aggressively promoted overseas for some years now, and these efforts have started to bear fruit with new demand
already being seen from markets such as the Middle East.
- With 80% already owned, the Group announced an acquisition of the remaining 20% in F&B Nutrition Sdn Bhd (F&B)
for RM112.9m via the issuance of 39.753m shares at RM2.84 apiece. F&B is principally involved in manufacturing of
dairy and non-dairy products, principally sweetened creamer, sweetened condensed filled milk and evaporated
creamer for the African, Asian and Middle East markets.
Risks/Challenges
- Lower demand from customers
- Higher cost of raw materials
- Can-One is highly dependent on Perstima Group to supply its main raw material tinplate which is used in the
production of tin cans. Perstima is the sole tinplate provider controlling the supply and prices of tinplates in Malaysia.
Tin can makers are unable to source material at cheaper prices elsewhere as a 15% duty is imposed on all imported
tinplates. To mitigate the risk of supply shortage, a 3-month tin plate stockpile is in place to ensure an uninterrupted
production schedule. Can-One is, however, still highly susceptible to fluctuations in raw material prices.
- High net gearing
My View
- Fair Value:
- Absolute EY%:
- Trailing:
- R4Q (EPS: 0.463) Fair value 3.68 (Fair Value Uncertainty: MEDIUM)
- Forward:
- FY15 (EPS: 0.504) Fair value 4 (Fair Value Uncertainty: MEDIUM)
- EPS applied to reach the current stock price (2.48): 0.312
- As of now, valuation of CANONE looks quite attractive.

- I have to further study this counter and compare with its competitors.
- Another thing I need to study is the story of KIANJOO and CANONE.
- I will put this stock in my watch list for the time being.

Canone Q2 2014

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Canone Q2 2014

Uploaded by

Copyright:

Available Formats

CAN-ONE BHD

Cost of Revenue/Goods Sold

Net Finance (Cost)/Income

Net FX gain/(loss) on financing activities

Share of profits from associates/JCE

Income Before Taxes

Net Income Tax Income/(Expense)

Profit from Discontinued Operations

Profit from Share of Pre-acquisition

Holders of perpetual capital securities of a subsidiary

Net P/L To Shareholders

Total Current Liabilities

Total Long-Term Liabilities

Holders of perpetual capital securities of a subsidiary

Total Current Assets

Liabilities held for sale

Net Cash From Operations

Net Cash From Investing Activities

Net Cash From Financing Activities

Eller Axis Sdn Bhd

Goh Cheng Suan

Jin Hoe Yeoh

Sanwoi (Malaysia) Sdn Bhd

Yeoh Min Hsing

Gross Profit Margin

Net Profit Margin

PER SHARE VALUE (CENTS)

Free Cash Flow

Days Payable Outstanding

Cash Conversion Cycle

Investment/Asset Impairment Charges

Revenue Growth vs. AR Growth

Free Cash Flow

Financial Year End

Discount Rate & Uncertainty

Self Defined Uncertainty Risk:

Unadjusted Discount Rate

Unadjusted Discount Rate:*

Concentrated Customer Risk:

Service Disruption Risk:

IP/Patent Expirations Risk:

Adjusted Discount Rate

Discounted/Reverse Cash Flows Valuation

Projection of Present Value and Fair Value (DCF)

Reasonable Growth Rate (RDCF)

Absolute EY% Valuation

Simple Yield Valuation (for reference)

Intangible Assets: Wide

3: Does the company have a record of taking large impairment charges?

General cans division

Current year to date compared with previous year to date

General cans division

Food products division

- As of now, valuation of CANONE looks quite attractive.

You might also like