Seacera Group Berhad, originally incorporated in 1987, and subsequently listed on KLSE on 1999.

Originally, a fully vitrified homogenous porcelain tiles manufacturing, currently it has diversified into
property and construction division, which are related to the core business of Seacera Group Berhad.

With an ambitious target to achieve RM1bil market cap in five years, Seacera Group Bhd is slowly
moving away from tiles manufacturing to construction and property development. Seacera Group
can be understood via its 3 separate businesses, the original core business of tiles manufacturing
and trading, and two new divisions of property & construction, mainly via incorporation of new
companies, and acquisition of SPAZ Sdn Bhd.

TILES DIVISION

The company’s manufacturing and warehousing facility is presently located in the Selayang Industrial
Area in Selangor. Since 2016, the group has started to embark on growing organically via internal
expansion as well as making external acquisitions.

Within the tiles divisions, it was constructing a new manufacturing and warehousing facility for its
tiles division in Kamunting, Perak to double the Tiles manufacturing capacity from 6,000 sqm to
12,000 sqm once the new factory completed in 3rd quarter of 2018.

Further plan to install new machines and automations will max its capacity in the new plant up to
24,000 sqm. This expansion is necessary to support is planned development of 501 acres of future
project under its property division.

Seacera Ceramics Sdn Bhd, also has completed an acquisition of a warehouse in Malacca for
RM16.9mil in October 2017, which will serve as distribution center for central & southern
peninsular.

PROPERTY DIVISION

With the view of property market slowing down, Seacera Group has not launched any property
project yet but using the period of depressed market condition to buy and acquire and expand its
landbank in strategic location for future use under its property arm. This has lead to the completion
of acquisition of Duta Nilai Holdings Sdn Bhd in August 2017 for purchase consideration of RM 165
millions via shares issuance.

With this acquisition, Seacera will come to own a 501.50-acre landbank belonging to Duta Nilai, on
which it plans to develop a township with a gross development value (GDV) of RM10 billion over 10
to 15 years.

Zulkarnin (Managing Director) said the group is banking on the land for its future growth. He added
that Seacera has signed a non-disclosure agreement with a “big player”, whose identity he declined
to divulge, to jointly develop the land. The group is looking to roll out the project comprising
medium to high-end development on the site, which is about 8km from Kajang and Semenyih town
centres, in two years’ time.

CONSTRUCTION DIVISIONS

Under its construction arm, Seacera has been making active progress in winning and refreshing its
order books as well expanding this division via acquisition of new construction outfit. Seacera’s
current tender book value stands at about RM1 billion. Out of this tendering projects of RM1billion,
it has won and orderbook of up to RM 492 mil
This includes a RM250 million 1Malaysia People’s Housing Scheme (PR1MA) housing project in
Rembau, Negri Sembilan won in August 2017, and RM242mil contract from Fire Global Development
Sdn Bhd to undertake a mixed development 989 houses project in Bandar Permaisuri, Terengganu
on a 110 acres of Terengganu Govt Land

The RM 492mil orderbook would keep Seacera Construction arms busy for the next 5 years. As
comparison, average Revenue for construction division for last 3 years was RM 30 mil, at current
orderbook size, it stands at 16x Average Annual Revenue from Seacera Construction Division.

On 22 February 2018, Seacera group announced a planned acquisition of 70% ownership of Teras
Sari Resources Sdn Bhd for RM 35mil to be satisfied via issuance of new shares. Teras sari has
recently won a RM 338 mil roadwork contract in Pahang. The contract is for the upgrading of the
federal road from Bandar Pekan to Kampung Sungai Miang, Pekan and is valid for four years from
March 1. Yet to be completed, The deal, once sealed, will be provided with “profit guarantee” given
to Seacera group of at least RM 70mil over 4 years.

FINANCIALS & VALUATION

Currently Seacera Group Berhad, as of 26 March 2018, is made up of 375,594,450 mil shares. It has
an outstanding ESOS 4.07mil shares, and Warrants-B of 39,425,608 unit, and a bloated Warrants-C
of 143,765,680 unit. (Once Teras Sari acquisition completed, seacera group berhad will expand into
410,594,450 mil shares)

If All 3 Convertible is finally converted, Seacera Group Berhad will be expanded into a 562,785,738
mil shares (not including new shares to be issued once Teras Sari Resources acquisition completed),
after this this amount will be call fully diluted numbers of shares.

As of 2017 full year financials, Seacera Group Berhad Net Asset Value stood at RM 847 mil (most of
the assets valued under the property division)

It has about RM 70 mil in borrowings, which put its gearing at 0.08x, which is healthy.

For the full year ended December 2017, Seacera saw its net profit jump 46.2 per cent to RM8.92
million from RM6.1 million, previously. This increase in Profit came due to higher operating cost the
year before in view of 2 construction projects were under development in 2016.

In 2017, improvement in Margins also contributed to increased profit, despite reducing revenue
mainly contributed from excellent numbers from Tiles division. Tiles division recorded 16mil in
profit, while property/construction division recorded about close to RM 8mil in loss. The loss mainly
due to landbank property acquisition and construction projects nearly completion phase.

Futures prospect & valuation

1. Expansion of Tiles Manufacturing division (assuming 10% increase annually)

2. GDV of RM 10 bil within 10-15 years in Property Division
3. Construction division orderbook of RM492mil (+ another RM 330 mil if Teras Sari acquisition
completed)
Sum-of-Parts valuation estimation of annual profit increase of Tiles manufacturing division to be
about RM 18mil in FY2018, while we expect no contribution from property division in the coming
years. Teras sari will provide RM 7mil profit in FY2018 (assuming rm70mil profit in 4 years, in the first
year we will only take about 10%). At most conservative, we assume orderbook from RM 492mil will
not lead to any profit in FY2018.

SOP valuation estimates put 18+7 = RM 25mil profit in FY2018, representing an increase of 300%
from FY2017 net profit. We apply margin of safety of 30% to our estimate as to account for any
unforeseen circumstances, we will get estimated profit of RM 17mil for FY2018.

At current level, Seacera last valued at RM 251 mil by the Stock market, as of 30th March 2018, with
last traded price of RM 0.67 per share.

At this market value, Seacera Group has a Forward PE Ratio of 14x FY2018, which put current price
at fair value considering bright prospect and conservatism in arriving at Forward PER value.

In the Book Value calculation, even at expanded 410mil shares, Book value or Net Asset Value stands
at RM 2.02 per share, making current price at undervalued in terms of Net Asset by 67% discount to
its true Net Asset Value. Bear in mind, the large proportion of asset will not be earnings accretive
within 5 years ahead, as Ulu Semenyih Land will not be developed in the near future.

However, the gold and silver lining, lies in the sleeping gem of 501 acres of land with GDV of up to
RM 10 bil. With strategic location and backed by construction firm (already signed non-disclosure
agreements), Long term prospect of Seacera Group Berhad is intact.

While waiting for Ulu Semenyih land to be developed, rest assured, Tiles & Construction division will
be pulling and working to maintain continuous, adequate profit and growth to the group.

Share price target: RM 1.50 within 2 years, and RM 4-5 within 10 years

We arrived at this target, taking into account the growth of the tiles division with new factory to be
completed in 3rd quarter 2018, and the pending completion of acquisition of Teras Sari Resources
Sdn Bhd.

Key risk, immediate risk is failure of Teras Sari acquisition, inability to start development of Ulu
Semenyih Land development within 5 years, and unforeseen start up cost at new factory in the tiles
division.

“Only those who have the patience will be able to polish and own this gem, which is called Seacera
Group Berhad”

Written by,

Dr. Abdul Jabbar bin Ismail

BFV GROUP PLT

abduljabbarismail@gmail.com

This write up intended for BFV GROUP PLT internal use, any copy or publication will need a proper consent. This is not a
recommendation for buy, or investment in the said particular company. It is meant for educational purpose as BFV GROUP PLT is not a
stock advisory company, but mainly focus on education on the stock market