Silver Bird might be yelling Give-Me-5, High-5

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Sep 27 2007
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Bakery business is never easy, what more with the Asian culture where breads are never considered the main staple foods. People still opts for rice (nasi lemak anyone?) or noodles for their daily breakfast. Morning breakfast is the only time breads can stand tall with pride as it will seldom appear on the menu for lunch, dinner or even supper. Modern kids prefer cereals such as KoKo Krunch (yummy).

Mention the name Silver Bird and chances are you think either it’s another U.S. latest jet-fighters produced (who do not know BlackBird?) or another old model of car produced by Nissan (Datsun BlueBird, Hokkien people never buy this model for obvious reason). But if you mention High-5 then people instantly will know that it’s the bread sometimes mistaken for Gardenia due to its packaging design. Seriously if you want to enjoy cost-effective bread with taste almost comparable to Gardenia, High-5 would satisfy your need.

Silver Bird’s Crisis

Somehow in Sept 2006, Silver Bird’s Nilai factory created the buzz in the consumer and media news when it was uncovered that particular factory was using non-halal cooking oil and was operating in unhygienic conditions. That crisis had cost the company its reputation, not to mention losses in sales. It posted a net loss of RM18.25 million for the first quarter ended Jan 31, 2007 which among other things inclusive of its operation start-up losses in Singapore as well.

The year 2006 wasn’t a good year for Silver Bird (KLSE: SILVER, stock-code 7136), that’s for sure considering the business of bakery depends very much on global commodity prices such as fuel (petrol), electricity and flour. Hence the escalated production costs ate into its profit for financial year 2006.

What’s the fundamental of Silver Bird?

From the revenue point of view, the company continues to register healthy growth from 2002 to 2006. However for the first half of financial year 2007 (ended May), Silver Bird plunged into a net loss of RM31.2 million despite a 10% rise in turnover to RM269.1 million from RM295.5 million. The second quarter of 2007 alone registered a RM12.9 million in net-loss.

SILVER Bird financial statementSilver Bird put the losses’ blame on its joint-venture in Singapore and is still in the midst of recovery. Earlier the Group has secured an exclusive supply contract from Singapore-based Dairy Farm International Holdings Ltd to supply bakery products to the retailer in Singapore. That was supposed to turnaround the Singapore’s operation in 2007. The plan was to leverage on Dairy Farm’s wide-network of Cold Storage supermarket chain and 7 Eleven.

It has been reported that Silver Bird planned to up its production capacity to over 400,000 loaves daily by 2009. However analysts said Silver Bird was actually facing an uphill battle in gaining a foothold in Singapore’s bread market because market leaders such as Gardenia have a strong grip in the country.
Silver Bird RevenueSilver Bird Net ProfitSo, while the fundamental was shattered by the crisis and the joint-venture, it’s still too early to write this stock off the book. After all, the net profit growth was in good form from 2002 till 2005. On the prepaid card business, the wafer-thin margin of 1.5% in commission rates has only brought in pre-tax profit of only RM400,000 on a revenue of RM107 million and hence can be ignored.

Technical Analysis is saying otherwise

Wednesday 26th Sept 2007 was the day when Silver Bird stock finally breached its resistance of RM0.58 (with high volume) after the stock plunged from its high in 2005 to the low of pennies. After the closing bell today (27th Sept), the stock appeared to manage to stay above RM0.58 with equally good volume.
SILVER Bird stock chartLosses aside, the stock could be scouting for its new support now, assuming the RM0.58 is not the new support level yet. The fact that it’s comfortably trading above 200-days moving average could means the bull has just started. Other technical indicators are saying the stock is in the bullish trend. So if you’re a punter, punt it at your own risk. Furthermore high risk high gain right *evil grin*.

Shareholding changes – something’s brewing?

High 5 breadsIn July Loss-making Silver Bird Group Bhd, whose proposed two-call rights issue was rejected by the Securities Commission (SC) earlier this month, has proposed to place out up to 10% of its share capital to raise up to RM16 million. On Sept 13th, Australia-based CVC Limited has subscribed 20 million shares via private placement.

In Sept 6th, Perkasa Normandy Managers had purchased additional 4 million shares to raise its stake to 9.34 percent from the initial 5.87 percent. What was interesting is the filing which saw multiple acquisitions by Lembaga Tabung Haji within the month of Sept 2007 alone.

In early September, A UK-based venture capital company 3i Group plc, a substantial shareholder in Silver Bird Group Bhd since its listing in 2002, has exited the company after selling all its 21.56 million shares or 13%. The shares were then acquired by Lembaga Tabung Haji and the recent acquisition raised its shareholding to 21.56 million shares. More acquisition was registered by Lembaga Tabung Haji thereafter:

  • On Sept 11th – raised its stake by acquiring another 4.82 million shares to a total of 44.61 million shares or 20.79%.
  • On Sept 20th – raised its stake to 22.82% to a total of 53.54 million shares.

After reportedly reduced his stake (rumored to be to Perkasa Normandy Managers), existing major shareholder Dato’ Tan Han Kook has started to accumulate. He acquired 20 million shares to raise its
stake to 17.06 percent on 24th Sept.

With the excitement shown above, the rumor that Silver Bird might see a new substantial shareholder coming into the board-room is circulating. Some even said the business direction and its model might change for the better.

Punters’ new heaven

CIMB Research might be screaming “Sell” with target price of 20 sen (in June) due to its losses, the fact that the stock price might already hit the bottom created a betting table for the punters on Silver Bird’s mother shares or its warrants. So, let’s eat bread while monitoring the stock’s movement, High-5 bread, will ya?

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