Thursday, 5 January 2017

New Year, New Life, New Journey with the next Genting in making

Firstly, I want to wish all my readers a happy new year. As we know, 2016 is a very rough year for some businesses, and as usual, the equity market in KLSE is even harsher due to multiple factor from a weakening RM, foreign selling pressure, under performing result as well as with some company plague with fraud and scam investment.

It has never been easy in the investment of equity market. Anyone who can tell you that investing in equity market is easy is definitely portraying the wrong image.

4 days after entering into 2017, this new year, we began with a new lease of life, a new journey altogether. Let the bygone be bygone, but do not forget the lesson you had learn throughout the journey.

As I would to speak of a new life, I would also like to point towards some companies with a new lease of life, new mission and new adventure. Of course, I am not going to talk about a "char siew pau" seller having a new lease of life by selling "dao sha pau". This kind of story, you also got no interest lor. But what if I am going to tell you a developing corporate story of an IT company which will be going to evolve into the next huge gaming entity like Genting ?
Wah! Now this will only be something that is worth my time and your time, right?

So which is this company that is going to replicate the successful Genting Berhad which is founded by the late Tan Sri Lim Goh Tong?

As both Tan Sri Lim Kok Thay and Dato Lim Chee Wah are the son of late Tan Sri Lim Goh Tong, they are like a ferocious tiger ready to pound anytime. So come the old saying, 1 mountain cannot keep 2 tigers. While it is Tan Sri Lim Kok Thay who took over the helm as the Chairman of Genting Berhad, so where is Dato Lim Chee Wah going to be ?

That's right, Dato Lim Chee Wah headed over to China - Hong Kong to build his own empire, the VXL Group.  The VXL Group had a diverse portfolio ranging from properties investment in China, U-Inns Hotel brand, Genting Secret Garden in China, Master planner for Cambodia-Vietnam entertainment city (Bavet) and others. However, VXL Capital Limited is taken over by Dato Lim Chee Wah in 2003, but he before that, he did bought into Dataprep in 2002.

So what is the relationship of Dataprep Holding Berhad and VXL Group ?

Let's have a quick run using the Annual Reports of Dataprep Holding Berhad.

 Dataprep Annual Report 2014 - VXL Holdings Sdn Bhd (53.09%)

 Dataprep Annual Report 2015 - VXL Holdings Sdn Bhd (60.62%)

Dataprep Annual Report 2016 - VXL Holdings Sdn Bhd (64.20%)

Since 2002, VXL came into Dataprep as a major shareholder with a 30% stake. Through a series of corporate exercise in order to rescue the company after falling into financial difficulties and dropping into PN 17 twice, this had resulted in VXL increasing it's stake into 53%. Despite Dataprep uninteresting financial performance, the last 2 years saw VXL pumping more money into Dataprep through a direct business direction and private placement exercise, totaling more than RM 10 million. First is a direct business transaction involving 28.8 million of shares at RM 0.20, while the second one is a 38.8 million private placement at RM 0.145.

So what is the leading cause for VXL to be buying and increasing it's stakes in an ailing and non performing company? Truly this will not make sense to you, right?

But if you would to read in detail of those annual report, it is the company intention to diversify into other sector in order to grow the company.

According to the annual report of Dataprep in 2014 and 2015, the Chairman had informed that the group is planning to introduce new revenue channel from areas such as Gaming, Property and Leisure. Wow, did you read properly ? Gaming !!! Gaming is inclusive of slots and casinos.

Alright, if you are still reading, you should be very excited by now, because you know that you are really coming towards an opportunity where this Dataprep could be the next Genting in the making. So, before I am going to share with you my in depth exploration in Dataprep and VXL Holdings Sdn Bhd, I would like to tell you that Dataprep will be undergoing several corporate exercise in order to raise fund for new business.

It is notable that Dataprep had underwent a major corporate exercise involving par value reduction and cleaning up balance sheet from it's past losses as well as a private placement by VXL in order to clear all it's debt and also fund for working capital. Now the company is in net positive cash position.

What I am looking to happen here is
1. Private placement
2. Right Issue with free warrants
3. Bonus Issue (in a much later date)

If you are familiar with corporate finance, you will reckon that my prediction on Dataprep next move will make sense. I am expecting the coming private placement and or right issue to be command a share premium, probably priced at RM 0.20 to RM 0.25. The share premium will then be rewarded back to investor through bonus issues (That is the reason for the company to clean up it's balance sheet). In order to attract investor, I would believe that VXL will be going to award huge contracts, or concession to Dataprep. (VXL did it once by appointing Dataprep as PDP on ICT for Genting Secret Garden).

Probably you might be thinking, why trust my prediction ?

So I will show cast to you some of my example, like the case of Perdana being taken over at RM 1.55. In my blog entitled "Perdana - A Diamond Eye", I had shared my analysis when Perdana is just trading at RM 1.20 and come out with a projection of RM 1.60 as the take over offer, which is just a mere 5 cents difference.

Still not convinced? If you had been following me long enough, you would know that I am the first person in KLSE to unveil the master plan behind Euro Holdings Berhad in several chapter, from prediction of company direction change, take over offer and it's price thereafter and even corporate exercise such as Bonus issue which indeed happened.

Needless to say much, if you are given a chance 20 years ago to invest in Genting Berhad, will you do so? Surely everyone would say yes. But let's come to reality, what is past is past, however, what is going to happen in the future is the path that you should focus on. Now, you hold the key to your own destiny.

Dataprep at the all time low price now in 10 years. Don't thank me for this, but thanks to those volatile equity market that help brought Dataprep to such a lucrative price now. Yes, only valid for now.

Well, too much of information for now. But these are good enough to make you give a real thinker on what are you doing now to capitalize on the next Genting in making.

Next, I will be sharing with you more on Dataprep business in China, Cambodia and Vietnam, which includes massive plan in hotel, leisure and it's most captivating gaming industry.

So, go and have a good thinker, but don't be too late.

Cheers to you.

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