FIBON Berhad - A neglected quality counter

1. Company Background

FIBON Bhd is principally engaged in the business of investment holding.The principal activities are the formulation, manufacturing and sales of polymer matrix fiber composite materials and products for the Electrical, Electronic, Petrochemical and Automotive industries. It deals in manufacturing and sales of electrical insulators, electrical enclosures and meter boards. Fibon bhd is based in Johor Darul Takzim, Malaysia.

2. Financial Performance

In the current quarter ended 31 May 2016, the Group registered higher revenue of RM4,806,000 compared to previous corresponding quarter ended 31 May 2015 of RM3,511,000 as a result of both increase in manufacturing and trading sales. 

Profit before tax has increased from RM1,611,000 to RM1,810,000 as a result of higher sales and higher other income.   

Despite facing various general economic challenges, the Board of Directors of Fibon Berhad is of the opinion that the performance of the Group for the financial year ending 31 May 2017 will not be severely affected.

3. Basic FA

Fibon has a healthy balance sheet since listing. It never had to borrow any money as there is adequate amount of free cash flow every year. Total equity attributed to shareholders has been increasing every year . Its cash holding also increases every year.  

In recent quarter, the cash holding is RM28.26 Million or around half of market capitalization. If we exclude the cash holding, the adjusted PE will be 5.87 instead of current 11.65. The business quality is undeniably  good with net profit margin at 31%. 

At the price of 59.5 sen, the adjusted PE ratio is 5.87 and Enterprise value/ EBIT is trading below 5 (which is very attractive). This may be due to its small market capitalization and hence not a liquid stock. There are also not much analysts covering this company. 

EPS : 5.11

NTA :0.43

PE    : 11.65

ROE :12.08

Net income margin: 31%

M.Capitalization: RM58M

EBIT         : 6.8M

Deposit/cash : 28.26M

Short term bank borrowing: 0

T.Asset    : RM44.3M

T.Liability: RM2.57

T. Equity  :RM41.8
Current Ratio: 25.72
DY:1.65%
EV: 29.7

4. Basic TA

After good quarter earning, we can see that buying volume is increasing (circle in above chart) with Volume EMA above average volume. Currently, for moving average, Fibon is above 20d EMA, 70d sma and 200d sma which shows bullish sign.

For above chart, the trading price for Fibon is close to upper band which shows buyer's interest is relatively strong. Parabolic indicator also shows Fibon on uptrending trend with strong Force Index to reinforce bullish trend. 

In conclusion, Fibon is just on early up-trending phase and there is likely further upside for its share price.

5. Catalyst



Electricity Demand is Growing
According to market research firm NRG Expert, the demand of electricity is growing, hence demand for cables, insulators, transmission towers will also be growing with it. The increase in the global energy demand are encouraging the demand for electrical insulator for power transmission and distribution application. The electrical insulator market is projected to grow at a CAGR of 6.5% in between 2014 to 2019.

On the local outlook, the massive development in Johor, ranging from property to massive industrial development continue to push the demand in building related components, such as cabling, piping, insulation and wiring.

With Fibon stationed at Johor, it will stand to benefit from all these massive development. Continuation of infrastructure upgrade in Singapore will also continue to benefit Fibon.

For recent news, FIBON Group has decided to expand into the service sector (acquisition of BEEPS), as a service platform for the exports of unregistered used vehicles from Japan to the worldwide market.

6.  Ownership Summary

For ownership summary, we can note that insider tightly controls 83% of total share and public shareholding less than 10%. One may wonder on why not much funds are interested in investing in  Fibon?  Small cap with low liquidity probably? 

7. Valuation: 

Based on EV/EBIT=8  projection:       FV= RM0.85
(Projection is based on 10% minimum growth)

(22.5*EPS*Book value per share)^0.5 :RM 0.7 TP:   RM0.78 ( from above average)

8. Strategy

Based on current price (30 July 2016),

Entry                  :RM0.595
TP                       :RM0.78
Stop loss          :   Below RM0.55 (with high volume)

Potential gain  : 44%
Potential loss  : 7.6%



information contained herein
Disclaimer: This is a personal weblog, reflecting my personal views and not the views of anyone or any organization, which I may be affiliated to. All information provided here, including recommendations (if any), should be treated for informational purposes only. The author should not be held liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.

Stocks Say Goodbye to Brexit Losses As They Near All Time Highs

It’s like Brexit never even happened.

U.S. stocks rallied Friday after the June jobs report came in much better than expected, with the Dow Jones Industrial Average recovering all the ground it lost during the Brexit selloff.

By mid-afternoon, the Dow Jones index was up 220 points, rising more than 1%, and climbed back above 18,000 for the first time since the U.K. voted to leave the European Union. So far this year, Dow Jones stocks have risen about 4% (and 6% since their post-Brexit lows), though they still remain below their all time highs. At 18,120, the Dow is nearly 200 points below its record closing price of 18,312 on May 19, 2015.

The S&P 500 and Nasdaq also rose more than 1% each on Friday. S&P 500 stocks have gained 4% year to date, while the Nasdaq is still down more than 1% in 2016.

Investors cheered the jobs report showing that the U.S. added 287,000 jobs in June, exceeding economists’ expectations by more than 100,000 jobs.

Almost all Dow Jones stocks rose on Friday, with equipment manufacturer Caterpillar  CAT 3.09%  in the lead, up almost 3%. Shares of American Express  AXP 2.81%  and Goldman Sachs  GS 2.30%  gained nearly as much, bouncing back after a particularly harsh beating following Brexit.

Meanwhile, gun stocks such as Smith & Wesson  SWHC 2.72%  also approached new highs after the shooting of Dallas police officers sparked a renewed gun control debate.

On the flip side, the only stocks to fall during the day were those that had been among the few winners after the British vote. Walmart  WMT 0.42% , which was the only stock to rise immediately following Brexit, fell slightly after the jobs report. Johnson & Johnson  JNJ 0.28% , whose dividend and U.S.-focused business had lured investors amid the economic uncertainty over the past weeks, traded down Friday morning, but recovered in the afternoon.

Source: http://fortune.com/

PENTAMASTER CORP - Next gem in the making

1. Company Background

Pentamaster Corporation Berhad is a Malaysia-based company engaged in investment holding and provision of management services.

Through its subsidiaries, the Company operates in five segments: designing and installation of automation systems and contract manufacturing; manufacturing of automated and semi-automated machinery and equipment; designing and manufacturing of precision machinery components; development and implementation of information technology system, and designing and manufacturing of automated testing equipment and test and measurement system.manufacturing.

2. Financial Performance

                     

In term of net profit, PENTA was able to turn from net loss in year 2012 to net profit of MYR4.65m in year 2014. If we look at recent few quarter result, there is significant growth of EPS.  Coming quarter is expected to be good judging from track record from last few year.

For latest quarter report, the group recorded higher revenue at RM28.6 million in the current quarter as compared to RM19.3 million registered in the corresponding quarter last year.

The higher revenue recorded was mainly due to increase in sales from automated equipment operating segment and revenue contribution from smart control solution system which was partially offset by the lower revenue from automated manufacturing solution operating segment.

Due to the higher revenue achieved and better product mix secured, the Group recorded a higher profit before tax of RM4.2 million in the current quarter as compared to the pre-tax profit of RM1.4 million in the previous corresponding quarter.

3. Basic FA

Basically, Penta had improved its fundamental in this recent years, by implementing below actions:

• Disposal of its loss making subsidiaries
• Acquisition of Origo to diversify into property project management
• Acquisition of land to build a new plant for expansion

EPS : 9.96

NTA :0.576

PE    : 7.8

ROE :16.28

Net income margin: 14.4%

M.Capitalization: RM107M

EBIT         : 17.5M

Deposit/cash : 16.9M

Short term bank borrowing: RM175K

T.Asset    : RM105.7M

T.Liability: RM21.6M

T. Equity  :RM84.1M
EY: 17%

4. Basic TA

After good quarter earning, we can see that buying volume is increasing with Volume EMA above average volume. Currently, for moving average, Penta is above 20d EMA, 70d sma and 200d sma which shows bullish sign.

For above chart, the trading price for Penta is close to upper band which shows buyer's interest is relatively strong. Parabolic indicator also shows Penta on uptrending trend with strong Force Index to reinforce bullish trend. Stochastic indicator is currently neutral, no overbought or no oversold. 

In conclusion, it is pretty obvious that Penta is on strong uptrend at the moment.



5.  Ownership Summary

For ownership summary, we can note that insider & public made up of  around 96% of total share. One may wonder on why not much funds are interested in investing in Pentamaster?  Small cap with low liquidity or erratic earning? 

6. Valuation: 

Based on projected PE 10.5  : 0.974 x 10.5=  RM1.03
(PE 10.5 is derived from 30% discount from sector PE at 15 judging from Penta smaller market cap)

Based on EV/EBIT=8  projection:       FV= RM1.05
(Projection is based on 10% minimum growth)

(22.5*EPS*Book value per share)^0.5 :RM1.12

7. Strategy

Based on current price (7July 2016),

Entry :RM0.78
TP    :RM1.1
Breakout:  RM0.82, RM0.90
Stop loss:   < RM0.73 

Short term TP: RM0.90

Potential gain : 41%
Potential loss  : 6.8%


Related Article

Pentamaster gets RM45mil orders, for delivery in H1

Pentamaster bullish on 2016 prospects

Pentamaster to invest RM20mil in Batu Kawan plant

Smart home system from Pentamaster

information contained herein
Disclaimer: This is a personal weblog, reflecting my personal views and not the views of anyone or any organization, which I may be affiliated to. All information provided here, including recommendations (if any), should be treated for informational purposes only. The author should not be held liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein.