发表于 7/5/2010 23:49
Just to share: One of the undervalued companies that I have bought...FIMACORP
Last Nov, bought a boring company named FIMACORP. Why I said it's boring, cause this stocks almost have no trading everyday. Everyday also the seller is reluctant to sell at low price, while buyers are reluctant to buy at high price. So sometimes there can b no transaction even for a week.
Bought 500 shares of it with just RM2.95 per share. So it's juz a RM1475 of capital. The reason that I buy it:
1. Company has shown consistent growth in net profit for the past 5 years. EPS grow from 28.5 sen in 2005 to 70sen in 2009. Yet, the price is still as low as RM2.95. P/E ratio 4.2++, meaning each year earn 70 sen, after 4.2 yeas u can earn back ur capital of RM2.95.
2. So why this company is undervalued? I supposed the company have had some poor performance in the past, might even had lose money before, thus many people edi neglected this company.
3. This company basically operates on 2 business. Rental from a 4 storey plaza and printing security documents, revenue stamp, JPJ documents, and even bank notes. But why the profit increase so much for the last 5 years? Especially in March 2008, EPS only 38 sen but in March 2009, EPS is 70sen. That's because in 2006, company switch their organization, they have capital expenditure on Palm Oil plantations since 2006. So the company begins to focus on palm oil business, aiming to make it one of their primary business.
4. The company has low debts and liabilities. With an equity of RM250 million, all the long term borrowings and loans are less than 10 million. Summore the company has cash and bank balance of 82 million. Enough to cover everything even if something happens. The only concern is that the receivables are quite high...about 80 million. Meaning got RM80 million of inventories given, yet haven't receive money. But later on I found that RM70 million of it are owe by Government of Malaysia, so it's not a concern that u can't get back the money on receivables. Usually receivables are money that u can get back within 1 year, mayb 3-6 months like that.
5. The net tangible asset of the company itself (property, assets, machines, inventories, cash, investment funds) edi worth RM3.20 a share. So buying something worth RM3.20 at price of RM2.95 has limited amount of risk.
6. From what I know as a biochem student, the trees of palm oil takes 3 years time from date planted to be able to harvest fresh fruit bunches (FFB). And usually the harvest is at peak between year 5 - 20. And can have a life span of up to 25 years. So even they have fruits after 3 years, the harvest is not highly profitable until the 5th year. And as soon as the trees aged 3 years, they are quite big and strong enough to resist from pest and disease. So maintenance cost for palm oil trees basically greatly reduce by more than 80% after the 3rd year.
7. So, planted trees back in 2006, and I bought at Nov of 2009. Meaning now those trees have jz began to harvest fruits and yield profits. So, I do estimate that the maintenance cost will be greatly reduce for the coming years, and few years later the profits will go even higher on year 5 onwards. Summore the company have total of 19k hectares of land in indonesia. The book value of those lands are cheap, average only RM700 per hectares while it cost you RM20k to buy 1 hectare of palm oil land in Malaysia. I know a land in Kalimantan is worthless to be convert into other lands for profit, but at least for plantation, getting a hectare at RM700 is very cheap.
8. I treat stocks as business. If I wanna buy a palm oil company, means I'm more or less like doing palm oil business on my own. But if I do on my own, I have to buy 1 hectare at RM20k in Malaysia. If I buy all 82 million shares of FIMACORP at RM2.95, I'm using RM241 million to buy the whole company. Meaning RM241 million / 19k hectares = average of RM12k per hectare (relatively cheap). Even the land itself of the company edi worth market price of RM20k X 19k hectares = RM380 million (or RM4.63 per share). So if I buy at RM2.95, it's juz like I'm buying a 380 million company at price of 241 million (if u compare it to doing palm oil business on ur own).
9. The company has cash and bank balance of RM82 million/ 82 million shares, meaning each share itself edi got RM1 of cash. So what is my risk? Almost zero (unless the boss do anything bad in company). But the return is uncountable. So I dun have any reason why I can't give it a try with juz RM1.4k.
9. The company only has 6k hectares of land planted so far, the remaining 12k+ still pending approval from Indonesia Gov. So even 6k hectares planted also got such profit, what happens if all 19k hectares planted? Means the company still got a high potential to go up in share price.
10. But not much people seems to be interested in this company. Mainly becoz 60% of the share owns by the director, Ahmad Basir (also director of United Plantation company, so palm oil to him is easy job). Director and all big share holders edi have more than 80% of the shares, leaving only 16 million of shares traded in the market. Each day there were less than 10,000 shares traded. So with this kind of volume, big buyers (fund and issurance manager) and technical investors are not interested cause it's hard for them to get in and get out for profit on price. That's y even the company has such good profit also, the newspaper seems to neglect its presence. Those so called experts only know how to focus on those hot pick companies, hot tips etc.
11. So I bought at RM2.95, and 3 weeks later...end of Nov, quater results show that the revenue remains the same, but the company has 29% growth in profit due to reduction in cost. And the price went up to RM3.20, after getting an interim dividend of 8 sen per share, the price diluted to abt RM3.15 for quite some time until Dec. Total dividend is about 18sen a year, which is abt 6.1% if I buy at RM2.95...double the amount of bank savings. So even the price didn't go up, at least I still have 6.1% every year.
12. There's an advantage of picking such stocks for small buyers like me...there are twice when there's a drop in market due to Dubai Crisis in Nov and when China and US plans to reduce loans in Jan. But however, this company is standing still at RM3.10-3.15...y? Bcoz there's no trading done! =P so the price won't change if there's no transaction.
13. And when the company announced their 3rd quater results, it shows that their 9 month cumulative profit grow by 55% compare to last year...I supposed mainly due to growth in the harvest of FFB. And the price begin to soars...RM3.2, RM3.45, until RM3.60 for quite a few days. But yet, the newspaper and media mentioned nothing abt this company, seems as nobody ever knows it. But a week later, when the company starts to draw some attention, the price went up to RM4.15, with a daily trading volume of more than 10,000 shares everyday (previously always no trading). Yesterday, this company is edi trading at RM4.48. And to me, it's still quite worth buying bcoz the PE is still low and there are still many lands not planted, jz that I dun have any excessive cash edi =P
So, bought 500shares at RM2.95 in 2nd Nov, capital of RM1475, today worth ~RM4.50 X 500 shares, value is ~RM2250, gain 52.5% in 5 months. Should I convinced myself that I'm right that time?