TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS)
NON RELATED PARTY TRANSACTIONS
Description
CAB CAKARAN CORPORATION BERHAD ("CAB" OR THE "COMPANY")PROPOSED ACQUISITION BY FARM'S BEST FOOD INDUSTRIES SDN BHD ("FBFI" OR THE "PURCHASER"), A 53.04%-OWNED SUBSIDIARY COMPANY OF CAB, OF 43 PARCELS OF AGRICULTURAL LAND TOGETHER WITH 26 BROILER POULTRY FARMS ERECTED THEREON, FOR A TOTAL PURCHASE CONSIDERATION OF RM58.53 MILLION TO BE SATISFIED ENTIRELY VIA CASH ("PROPOSED ACQUISITION OF BROILER FARMS")
On behalf of the Board of Directors of CAB, RHB Investment Bank Berhad wishes to announce that FBFI, a 53.04%-owned subsidiary company of CAB, had entered into 9 conditional sale and purchase agreements ("SPA(s)") in relation to the Proposed Acquisition of Broiler Farms as set out below:-
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Breeders Sdn Bhd ("Sinmah Breeders"), Sinmah Multifeed Sdn Bhd ("Sinmah Multifeed") and Sinmah Livestocks Sdn Bhd ("Sinmah Livestocks") as the vendors for the proposed acquisition of 2 parcels of freehold agricultural land in Johor, measuring approximately 11.237 acres, together with 2 broiler poultry farms erected thereon, namely Broiler Farms J10 and J16 ("Subject Property 1"), for a total purchase consideration of RM3,529,900 to be satisfied entirely via cash ("SPA 1");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Livestocks as the vendor for the proposed acquisition of 2 parcels of freehold agricultural land in Melaka, measuring approximately 20.8404 acres, together with 1 broiler poultry farm erected thereon, namely Broiler Farm M1 ("Subject Property 2"), for a total purchase consideration of RM5,335,000 to be satisfied entirely via cash ("SPA 2");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Livestocks as the vendor for the proposed acquisition of 10 parcels of freehold agricultural land in Johor, measuring approximately 58.6474 acres, together with 6 broiler poultry farms erected thereon, namely Broiler Farms J6, J8, J12, J13, J14 and J15 ("Subject Property 3"), for a total purchase consideration of RM13,645,500 to be satisfied entirely via cash ("SPA 3");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Multifeed and Sinmah Livestocks as the vendors for the proposed acquisition of 1 parcel of freehold agricultural land in Johor, measuring approximately 6.000 acres, together with 1 broiler poultry farm erected thereon, namely Broiler Farm J9 ("Subject Property 4"), for a total purchase consideration of RM1,212,200 to be satisfied entirely via cash ("SPA 4");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Livestocks as the vendor for the proposed acquisition of 4 parcels of freehold agricultural land in Johor, measuring approximately 13.6130 acres, together with 1 broiler poultry farm erected thereon, namely Broiler Farm J5 ("Subject Property 5"), for a total purchase consideration of RM2,497,000 to be satisfied entirely via cash ("SPA 5");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Breeders, Sinmah Multifeed and Sinmah Livestocks as the vendors for the proposed acquisition of 9 parcels of freehold agricultural land in Negeri Sembilan, measuring approximately 57.273 acres, together with 6 broiler poultry farms erected thereon, namely Broiler Farms NS1, NS8, NS10, NS11, NS18 and NS19 ("Subject Property 6"), for a total purchase consideration of RM9,072,000 to be satisfied entirely via cash ("SPA 6");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Sinmah Multifeed and Sinmah Livestocks as the vendors for the proposed acquisition of 10 parcels of freehold agricultural land in Negeri Sembilan, measuring approximately 75.7825 acres, together with 7 broiler poultry farms erected thereon, namely Broiler Farms NS2, NS3, NS6, NS9, NS13, NS16 and NS17 ("Subject Property 7"), for a total purchase consideration of RM13,576,500 to be satisfied entirely via cash ("SPA 7");
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Bersatu Segar Sdn Bhd ("Bersatu Segar") as the vendor for the proposed acquisition of 2 parcels of leasehold agricultural land in Johor, measuring approximately 36.700 acres, together with 1 broiler poultry farm erected thereon, namely Broiler Farm BS1 ("Subject Property 8"), for a total purchase consideration of RM6,138,000 to be satisfied entirely via cash ("SPA 8"); and
the SPA dated 24 January 2017 entered into between FBFI as the Purchaser and Dee Huat Farming Trading Sdn Bhd ("Dee Huat Farming") as the vendor for the proposed acquisition of 3 parcels of leasehold agricultural land in Johor, measuring approximately 14.262 acres, together with 1 broiler poultry farm erected thereon, namely Broiler Farm BS2 ("Subject Property 9"), for a total purchase consideration of RM3,520,000 to be satisfied entirely via cash ("SPA 9").
The Subject Property 1, Subject Property 2, Subject Property 3, Subject Property 4, Subject Property 5, Subject Property 6, Subject Property 7, Subject Property 8 and Subject Property 9 which consist of 43 parcels of land together with 26 broiler poultry farms erected thereon, are collectively referred to as the "Subject Property".
Sinmah Breeders, Sinmah Multifeed, Sinmah Livestocks, Bersatu Segar and Dee Huat Farming are subsidiary companies of Farm's Best Berhad ("FBB"), which is a public company listed on the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities"). Sinmah Breeders, Sinmah Multifeed, Sinmah Livestocks, Bersatu Segar and Dee Huat Farming are referred to as the "Vendor(s)" as the case may be.
The total purchase consideration of the Subject Property is RM58,526,100 which shall be satisfied entirely via cash by the Purchaser to the Vendors.
The SPA 1, SPA 2, SPA 3, SPA 4, SPA 5, SPA 6, SPA 7, SPA 8 and SPA 9 are not inter-conditional upon one another.
Details of the Proposed Acquisition of Broiler Farms are set out in the attachment enclosed.
Since I came to i3 september last year, I have so far recommended 2 stocks, one was MYCRON & the other one was EKOVEST.
I had predicted MYCRON to reach RM1.12 when price was RM0.59, representing upside potential of 90%. Mycron had reached peak at RM1.20 later.
I had predicted EKOVEST to reach RM3.80 when price was RM2.08, representing upside potential of 84%. (After split, RM3.80=>1.52 & RM2.08=>RM0.83). Today, I have Ekovest valued at RM1.35 & pocketed special & final dividend of RM0.112 (after split). Please click here for reasons I am still holding Ekovest.
Today, I am going to recommend my 3rd stock in i3, that's CAB Cakaran.
My first target price will be RM3.04, representing upside potential of 81% based on yesterday's closing of RM1.68.
For more details & information about CAB Cakaran, please find out at CAB's Annual Reports & Headlines at i3.
On 9 Jan 2017, Managing Director Chris Chuah said the sales of quarterly period (31/12/2016) will increase by about 10% compared to the previous corresponding period & he expected improvement in margins. (Source: thestar)
We received the following results on 27/2/2017:
Market has not responded to the above quarterly results. In fact, the company's share price has been flat for almost 1 years as at today:
To get a clearer picture of how CAB has been doing in the past 3 years, you may refer to the following chart:
Historically, the 3 months period ending December was the weakest quarter in a year, but the Company has delivered fantastic results in the recently released quarterly report:
Expansion Plans in Malaysia
The acquisition of Farm’s Best Bhd will see an increase in the company’s broiler production capacity, from the current 5 million broilers per month to 7 million broilers.
Concurrently, CAB Cakaran’s production of chicks will increase from about 4.5 million chicks per month to 6 million. “In the next two years, we will be producing 8 to 10 million chicks each month,” Chris Chuah tells StarBizWeek.
Note: The acquisition is expected to be completed by mid of 2017.
Expansion Plans in Indonesia (with Salim Group) CAB Cakaran’s partnership with Indonesia’s Salim Group is awaiting approvals from the Indonesian authorities before construction of integrated poultry farm and plants in Jakarta can take place.
Land locations for the integrated poultry farm have been identified and confirmed, which are spread across north and south Jakarta.
Earnings contribution from the Indonesian operations will only commence end-2018 or early 2019 & the Indonesian operations is envisaged to produce 4 million broilers per month and 3 million eggs per day
(Source: StarBizWeek)
Note: The Indonesia operations is expected to kick off in 1 1/2 years, it is not so far from now.
That's It? What Next? Based on the above, the company is clearly undervalued & overlooked by the market:
1. Sales & Profit are expected to grow at least 30% in 2017 & 2018 respectively
2. Salim Group (Indonesia's biggest conglomerates) is holding 20% in CAB by paying RM2.07 per share
3. The management is looking to do great with all the expansion plans in the progress
More to come on the following:
1. Good capital management by the Company
2. Lowest PE compared to peers (Lay Hong & QL)
3. The beginning of another growth
I will discuss more on all the above projections & valuation in my next few articles, Part 2.
This part will discuss on the factors that affecting the company & the industry
1. Broiler ex-farm price
2. Poultry feed price
3. US currency movement
4. Poultry industry & production growth
5. CAB Cakaran & other competitors
6. Capital management & Production Efficiency of CAB
1. Broiler ex-farm price & average selling price of CAB
Broilers are controlled items in Malaysia & broilers' selling prices are therefore pre-determined by the Government from time to time. As such, it is important to know the relationship between the selling price & the profit performance of respective companies.
Based on the prices listed at table below, the broilers' selling price were higher in Jan to March 2017, my calculation of average selling price is RM5.15.
Source: http://www.dvs.gov.my/index.php/pages/view/440
This is in line with the comment from the management in the latest quarterly report:
2. Poultry feed price
Prices of feed ingredients, especially maize and soya, accounted for 70% of the production cost.
The management has said below:
But it is interesting to know the prices of both Corn & Soybean in the table below:
Click here for US Corn Price Chart & SoyBean Price Chart
3. US currency movement
Ringgit Malaysia has been staple against US Dollar:
4. Poultry industry & production growth
Thanks to donkeystock.biz, the infographic below helps to make easier understanding on how a poultry is run.
According to a report titled "Review of Domestic Broiler Market" (page 11), it is learnt that CAB Breeding Farm Sdn Bhd, a 100% owned subisidary of CAB, is one of the only 4 grandparent stock poultry farmers in Peninsular Malaysia.
5. CAB & other competitors
Except Leong Hup which was delisted in 2012 & lack of relevant financial information, the following are the comparison among 4 public listed companies in Bursa:
Sources: quarterly reports of respective companies at Bursa Website
6. Capital management & Production Efficiency of CAB
Net Debts Over Equity Ratio
The Company has agressively expanding its farming assets via internally generated funds & borrowings. However, the net debts ratio has indeed been dropped from 92% (31/12/2015) to 65% (31/12/2016).
ROE
The agressive expansion has contributed positively to the shareholders' return and it proved that every ringgit reinvested brought greater return over time.
Stock Turnover (Months)
CAB has maintained one of the best stock turnover ratio among all poultry farmers, its stock value was almost HALF of its monthly sales only.
Receivables over Sales (Months)
CAB has maintained very tight credit control over its receivables and the average receivables turnover is only about 1.3 months.
ALL THE ABOVE POINTED TO ONE DIRECTION FOR CAB CAKARAN, SOMETHING BIG IS COMING.
I will share my profit projection, basis & assumptions used in my next article, Part 3. Thank you for reading.
With Forward PE of 12, it gives CAB Cakaran a good potential upside when the price was RM1.68 (Share price of the Company has gone up since the release of my part 1 article):
The following are the workings in arriving the sales & profit projections:
Note: There were fair value adjustments income of RM5mil+ recognised in the final quarter of last 2 financial years, no provision has been made in the above projection.
The following are merely my projections for revenue of poultry segment:
Quarterly Results for 4 Quarters in financial year 2016:
As a result of the above projections, I have prepared the following charts for easier understanding:
Note: There were fair value adjustments income of RM5mil+ recognised in the final quarter of last 2 financial years, no provision has been made in the above projection.
IMPORTANT REMINDER:
All the working, calculation & assumptions are presented based on my personal own judgement & findings, and are for sharing purposes only.
I never think I can move anything unless the thing want to move by itself.
Do your homework, read all news/reports, make your best judged assumptions & understand the business before invest any company.
Invest with FREE money only, using emergency fund to invest is gambling, crazy & suicide act.
CAB CAKARAN CORPORATION BERHAD ("CAB" OR "THE COMPANY")LETTER OF INTENT IN RELATION TO THE AGRICULTURE AND AQUACULTURE BUSINESS ACTIVITIES
The Board of Directors of CAB Cakaran Corporation Berhad ("CAB" or “the Company”) wishes to announce that CAB and FELCRA Food Industries Sdn. Bhd. (“FELCRA”) have through the non-binding letter of intent dated 7 April 2017 (“the Letter of Intent”) mutually agreed to explore the possibility of collaboration in the agriculture and aquaculture business activities.
The Company will make further announcement on the matter in the event both parties reach a formal agreement on this matter.
None of the Directors and/or major shareholders of CAB and/or persons connected with the Directors and/or major shareholders of CAB, has any interest, direct or indirect in the entry of the Letter of Intent.
Reply to Bursa Malaysia's Query Letter - Reference ID
IQL-10042017-00002
Subject
LETTER OF INTENT IN RELATION TO THE AGRICULTURE AND AQUACULTURE BUSINESS ACTIVITIES
Description
CAB CAKARAN CORPORATION BERHAD ("CAB" OR THE "COMPANY")LETTER OF INTENT IN RELATION TO THE AGRICULTURE AND AQUACULTURE BUSINESS ACTIVITIES
Query Letter Contents
We refer to your Company’s announcement dated 7 April 2017, in respect of the aforesaid matter.
In this connection, kindly furnish Bursa Securities with the following additional information for public release:-
1) Background information on FELCRA Food Industries Sdn. Bhd., including but not limited to the principal activities, directors and major shareholders together with their respective shareholdings.
2) Details of the Letter of Intent, including but not limited to the duration of validity and termination clauses.
3) Detailed elaboration on the collaboration to be undertaken in the agriculture and aquaculture business activities.
We refer to our announcement dated 7 April 2017 and the query letter from Bursa Malaysia Securities Berhad dated 11 April 2017 in respect of the Letter of Intent.
Please refer to the attachment for further details.
TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS)
RELATED PARTY TRANSACTIONS
Description
ACQUISITION OF PROPERTY BY HOME MART FRESH & FROZEN SDN. BHD. (FORMERLY KNOWN AS CAB FOOD SDN. BHD.), A WHOLLY-OWNED SUB-SUBSIDIARY OF CAKARAN CORPORATION BERHAD ("THE ACQUISITION")
We refer to our earlier announcements dated 18 January 2017 and 23 January 2017 in relation to the Acquisition (“the Announcements”). Unless otherwise stated, the defined terms used in this announcement shall carry the same meaning as defined in the Announcements.
The Board of Directors of the Company wishes to announce that Home Mart Fresh & Frozen Sdn. Bhd. (formerly known as CAB Food Sdn. Bhd.) had on 14 April 2017 fully paid the balance of the Purchase Consideration.
The Acquisition is deemed completed on 14 April 2017.
CAB CAKARAN CORPORATION BERHAD ("CAB" OR THE "COMPANY")I. PROPOSED SHARE SPLIT; ANDII. PROPOSED BONUS ISSUE(COLLECTIVELY REFERRED TO AS THE "PROPOSALS")
On behalf of the Board of Directors of CAB ("Board"), RHB Investment Bank Berhad ("RHBIB") wishes to announce that the Company proposes to undertake the following:-
proposed share split involving the subdivision of every 2 existing ordinary shares in CAB ("CAB Share(s)" or "Share(s)") into 5 ordinary shares in CAB ("Split Share(s)") held on an entitlement date to be determined later ("Proposed Share Split"); and
proposed bonus issue of up to 138,649,040 new Split Shares ("Bonus Share(s)") to be credited as fully paid-up on the basis of 1 Bonus Share for every 4 Split Shares held on the same entitlement date as the Proposed Share Split ("Proposed Bonus Issue").
Details of the Proposals are set out in the attachment enclosed.
TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS)
NON RELATED PARTY TRANSACTIONS
Description
CAB CAKARAN CORPORATION BERHADEXERCISE OF THE OPTION TO PURCHASE IN RESPECT OF THE PROPERTY KNOWN AS 24 SENOKO CRESCENT SINGAPORE 758276 GRANTED BY SWEE HENG BAKERY PTE LTD TO TONG HUAT POULTRY PROCESSING FACTORY PTE LTD, A 51% OWNED SUBSIDIARY OF CAB CAKARAN CORPORATION BERHAD
Further details are set out in the attachment enclosed.
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