The secret value in Protasco? - by SOS

Actually there is no secrets, the title is just to attract readers.

Average earnings of Protasco over the last 5 years actually about RM40m.

Protasco has potential because of the following reasons (assuming their core of RM40m is sustainable, mainly comes from the maintenance of roads):

1. DeCentrum is their line of biz.  GDV of RM10billion. Just take a net profit of say, 20%, it will be about RM2 billion, say over 20 years, it will contribute about RM100m p.a. [A more conservative approach is say RM70-80m].  There is further upside to this land in Uniten, Bangi, is the proposed MRT Line 2, will have a station at Uniten.  The land has been fully settled.

2. Protasco has constructions projects for low cost housing for Government, about RM500m and other project to-date of another RM200m. Give it a net 10% net profit margin, say for 5 years, you will get about RM14m p.a. for next 5 years. [A more conservative approach will give it, say, about RM10m]

3. Protasco bought a land about RM40m in Iskandar for cash, near Gelang Patah, for future development. Say, a conservative GDV of RM300m, say for 8 years, it will have about RM7.5m p.a.

4. Protasco has a JV with Nextnation, to develop a piece of land in Cyberjaya for about RM400m (I remeber read it from somewhere).  Say, in the JV, Protasco will get about 10% (normally, in the market, when one party provide the land, it will get 30% of the GDV, the developer will get 70%).  Hence, Protasco portion of GDV is RM280m, profit of say 20% for 8 years, it will contribute about RM7m p.a. [subject to finalisation of the MOU]

5. Oil and gas, Protasco has acquired about RM72m in a oil and gas company in Indonesia, with a profit guarantee on the cost of investment.  Assuming it is for 5 years, a profit of about RM14.4m p.a.

6. Protasco has its own construction arm, hence, they can control their cost of construction better and also make a small margin from the contruction works can be keep within the Group.

7. Protasco has a strong cash position.

CONCLUSION

With the sustained core biz, maintenance of roads remain, about say RM40m, additional earnings from item 1-6 can bring in about additional earnings of RM108.5m (70+10+7.5+7+14).  Say, a long term earnings of RM120-140m and PE of say 12 times, you will get market capitalisation of RM1.4billion.  At the moment, it is about RM630m.  

[ Disclaimer - it is my personal opinion, and it is a free opinion, don't forget what your parents have taught you, nothing is free in this world, when something is free, better be careful]