Revenue of Focus Lumber have achieved a remarkable consistent growth throughout the 4 years of listing. Average year to year growth achieved is at 7.186% from financial year 2011 to 2014. In terms of net profit, although there is a slight dip in financial year 2012, the overall net profit is still in a growing trend with and average year to year growth of 3.99%. Net profit margin wise it is currently at 10.66% which is on par with the average manufacturing industry profit margin.

The main strength of Focus Lumber’s financial figures are its ultra low current and long term liabilities. This results in an extremely high Current Ratio (Current Asset/ Current Liability) of 14.3 due to the low current liability that they incur yearly. In addition, Focus Lumber is also cash rich, which results in the extremely high Cash Ratio (Cash and Cash Equivalent/Current Liability) of 7.93. In fact in the latest financial year, Focus Lumber have recorded a RM56.3 million cash and cash equivalent on hand, which is one third of their yearly turnover.

Not forgetting the third financial highlight, Focus Lumber has a generous dividend payout ratio of 51.5%, which results in the high dividend yield of 4.103%.

FA Comment: In summary, the strengths of this small company is its ultra low debt, cash rich and consistent growth. With its higher than average dividend payout, this company can be considered having the best of both worlds for both capital gain seeking investors and dividend seeking investors. A very little short coming for this company is that the capital expenditure is slightly on the low side (1.3% of its annual revenue whereby growing companies in the manufacturing sectors on average will use 3% to 5% of its annual revenue as expansion funds). Capital gain seekers will be hoping for higher capital expenditure for greater company growth which translates to more annual earnings. Current PE ratio of the company’s share price is at 10.21 percent which is close to the industry average. Investors can consider investing in this company in view that the depreciating Ringgit will generally benefit exporting manufacturers. (8 Oct 2015 share price: RM 1.89)

Calculation of Intrinsic Value Using DCF - Focus Lumber with Discount 32.8%

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software toolkit - Focus Lumber

iVSAChart Comment:

Stock on mark up after a nice 3rd break out. The stock is currently on pullback with low volume with unconfirmed upthrust (mid week - 8 Oct 2015). Focus Lumber may test RM1.83-RM1.92 on low vol.

Watch for test and spring here for sign of strength. If successful, stock can still move higher, breaking old high @ RM1.99. Inversely, if volume increase and Upthrust (Sign of weakness) confirmed at the range of RM1.83 till RM1.92, Focus Lumber will see weakness.