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Kumpulan Fima sell sell sell kcchongnz
Highlights / Stock Picks of the Day - Kumpulan Fima Bhd (KFIMA) – Take Profit
Author: kiasutrader | Publish date: Tue, 27 May 10:19
KFIMA recently announced an uninspiring 4Q14 financial result - the Group’s net profit plunged 55% YoY to RM6.6m. KFIMA’s share price was down by 3 sen (-1.29%) to close at RM2.29 yesterday. From a technical chart perspective, KFIMA has been on a downtrend since reaching a high of RM2.45 two months ago. MACD indicator has also started to dip, lending a hand to the bearish bias. Besides, key indicators like Stochastic and RSI are also negative, reinforcing the near-term bearish trend. We believe the share price could fall further during the near-term amid the poor results announced recently. Thus, we are placing a ‘Take Profit’ gesture on this stock and may relook into it when the share price looks attractive again. Source: Kenanga
"If you look carefully, almost all Old Money secrets can be traced to a single source: a longer-term outlook." -- Bill Bonner
This is the immediate report from an investment bank about Kumpulan Fima. Let us just forget its mumbo jumbo on MACD, RSI, Stochastic and all other bombastic names but focus on the business. We invest in a stock to participate in part of its business, ok?
First of all, is there much profit to take as suggested by Kenanga? Kumpulan Fima definitely provide a long-term investor a very good return over the last 5 years in the order of more than 25% CAGR. Since last year, the return is still above the broad market but there is nothing to shout about compared to many other not-so-good stocks. I doubt many people have bought it long ago and can really “take profit” as advised.
Secondly what do you mean by “may relook into it when the share price looks attractive again?” You mean the present price is expensive? But compared to what? What is your value of the business of Kumpulan Fima from your valuation? What is your price-value relationship of Kumpulan Fima? Do you have any?
“the Group’s net profit plunged 55% YoY to RM6.6m”. Are you talking about a quarter compared to another quarter? Year to year, its profit dropped less than 10%, not more than 55%. Revenue wise it actually increased by another 3.7%. But again most people invest base on quarter to quarter, unlike some long-term value investors who invest base on a time horizon of 5 years or even 10 years. Can’t really blame them, can we? Yeah, some people expect continuous unabated growth in profit, year after year, no bumps at all. Wonder they can show us one company like that in Bursa here.
But just what is the drop of profit that warrants an immediate sell call? Looking at its core business in security printing and palm oil, there is generally a steady growth in revenue and profit as shown in their recent quarter result in the appendix here. Bulking is still good though revenue and profit dropped by about 10% last year. Oh yeah, the drop in profit, the main culprit is the sardine business in Fiji. It made a loss of 5.2m last quarter, or 14.3m last year. It is bad for this business. But it is the only problem child, right now.
But what is so bad and serious about Kfima’s whole business with the revenue and profit of its core business still steady and growing? Can’t the sardine business be improved? If not, can’t Kfima just cut this losing business out? What would be its value then?
With the seemingly poor result last year, the return on invested capital of Kfima has dropped to 13.2%. Nothing to shout about. But to me for a company which has been making increasing profit for the last 10 years, except a slight drop for the most recent year, a company with abundant cash flow and free cash flows, and a squeaky clean balance sheet, this ROIC indicates that it is an excellent company to invest in.
Moreover, at a price of RM2.20 now, the PE ratio of 10 (with abundant excess cash) and an enterprise value of just about 5 times earnings before interest and tax, or an earning yield of 20%, Kumpulan Fima is cheap and safe to invest in.
My opinion on Kumpulan Fima is also expressed in the link below:
http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/34118.jsp
K C Chong (27/5/14)
Appendix
March 2014
|
Segmental results |
|||||||
|
Individual quarter |
Cumulative Quarter |
||||||
|
Current year |
last year |
Current year |
last year |
||||
|
31/03/2014 |
31/03/2013 |
31/03/2014 |
31/03/2013 |
||||
|
Revenue |
Change |
Change |
|||||
|
Manufacturing |
58024 |
46233 |
26% |
241486 |
201869 |
19.6% |
|
|
Plantation |
42885 |
30044 |
43% |
110480 |
106316 |
3.9% |
|
|
Bulking |
16778 |
19492 |
-14% |
63784 |
74027 |
-13.8% |
|
|
Food |
17480 |
25792 |
-32% |
83530 |
99631 |
-16.2% |
|
|
Others |
9905 |
12157 |
-19% |
23897 |
44305 |
-46.1% |
|
|
145072 |
133718 |
8.5% |
523177 |
526148 |
-0.6% |
||
|
Inter-segment Elimination |
-8560 |
-11120 |
|
-18591 |
-39624 |
|
|
|
136512 |
122598 |
11.3% |
504586 |
486524 |
3.7% |
||
|
Profit before tax |
|||||||
|
Manufacturing |
9237 |
9659 |
-4.4% |
63392 |
53145 |
19.3% |
|
|
Plantation |
10767 |
9071 |
18.7% |
29399 |
30555 |
-3.8% |
|
|
Bulking |
10186 |
11498 |
-11.4% |
37280 |
42089 |
-11.4% |
|
|
Food |
-5273 |
4568 |
-215.4% |
-3440 |
14316 |
-124.0% |
|
|
Others |
-2324 |
-118 |
1869.5% |
-1414 |
-1523 |
-7.2% |
|
|
22593 |
34678 |
-34.8% |
125217 |
138582 |
-9.6% |
||
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Discussions
2 people like this. Showing 25 of 25 comments
hi kcchongz, can you paste some useful link on clear explanation of ROIC here? thank you
2014-05-27 12:14
If everybody keeps throwing everything that they don't want, I really wonder if the market will go Bust one day. Well, market just keeps everything that everybody throws and keeps quiet.
2014-05-27 12:24
I hope ppl sell more so that i can collect at the price that i have missed few months ago.
2014-05-27 12:48
Mr kcchong......two months ago I wrote that kum. Fima sales is sluggish.... you gsve me 10 years profit of past years......what for......we see the future and the price coming back to around two.......it is coming....no need for crsytal ball.....
2014-05-27 14:53
Posted by Tang Michael > May 27, 2014 02:53 PM | Report Abuse
Mr kcchong......two months ago I wrote that kum. Fima sales is sluggish.... you gsve me 10 years profit of past years......what for......we see the future and the price coming back to around two.......it is coming....no need for crsytal ball.....
Just copy and paste it here for record purpose.
"we see the future and the price coming back to around two"
Btw, I have never argued with you about its price movement in the future. I have no your kind of ability to see future share prices.
I welcome you to discuss about fundamentals, whether past or future of Kfima, not guessing about future share price of Kfima, or any other stock.
2014-05-27 15:21
To be fair the result is over whether good or bad. Going forward we shall see if company has capability to turnaround for current year.
2014-05-27 16:49
they are selling like this company is making lossess, but actually they make profit but just lower...
2014-05-27 16:53
well we accept price drops if earning is not up to expectation. Moving forward the earning Base is low Now.
2014-05-27 17:00
Mr Chong, I like your blog title.
Please sell sell sell. I want to collect KFIMA too.
2014-05-27 20:41
“Here a confession is in order: In my early days I, too, rejoiced when the market rose. Then I read Chapter Eight of Ben Graham’s The Intelligent Investor, the chapter dealing with how investors should view fluctuations in stock prices. Immediately the scales fell from my eyes, and low prices became my friend. Picking up that book was one of the luckiest moments in my life.” Warren Buffet
2014-05-28 06:09
Hi KC, i have the chance to look again your FCF model calculation on Kfima again based on above link.
1) It is noted that you use paid-up capital as your base and also included cash on hand of RM272m as your cash flow calculation but leaving out the retained earning whereas the retained earning and cash on hand is interlinked. If you leave out retained earning then your calculation is inflated, right?
2) IF you want to take in cash on hand then you have to take in the whole capital structure as your base that includes retained earnings right?
3) Probably we should leave out cash on hand and just take in share capital?
4) Retained Earning could be swapped for paid-up capital once Bonus declared and share price adjusted accordingly. But what we usually notice is that Share price will jump before and after the Bonus declared and issued to go back to prior level. Does it explain that we should take in the whole capital structure as our calculation that is shareholder funds?
Just want to clarify.
2014-05-28 13:34
stockoperator,
Sorry, not sure of your question.
The intrinsic value is derived from discounting all future expected FCF to the present. Add back non-operating cash, other investments, less minority interest, less debt, and what is left is for common shareholders. Then divide by the number of shares outstanding, and you get intrinsic value per share.
2014-05-28 13:51
if i am right on the above then the undervaluation of Fima/Kfima is more towards liquidity issue, right? It is high time Now as Retained Earning especially on Fima is about 5x the issue capital. Do we have any accounting standards governing this issue?
2014-05-28 13:51
I think it is a mistake to invest on Kfima based on its supposedly attractive valuation. If you do study the long term financial performance of the company, you will notice that Kfima is a poorly managed one. First, the financial performance of Kfima is solely dependent on the performance of its plantation division. If you look further into the numbers behind, you will find that the company has constantly producing returns that are below the industrial average from its plantation division time to time. So, what does this tell me? It tells me that Kfima is a below average and inefficient plantation player among its industry peers.
No doubt Kfima is producing good cash flow year by year, especially from its stable printing division. I feel the management has not done enough to reward its shareholders with its cash hoard. Hence, you see the low valuation in its market value. The share price of Kfima will track the long term performance of CPO prices. As long as we see increased liquidity into the plantation sector from the broader market, Kfima share price will go up. In my opinion, Kfima will most likely realized its intrinsic value through privatization.
2014-05-29 10:40
That's the reason why kfima value at Pe 11x compare to bluechips like KLK at pe 22x loh.....!!
When u invest....u must buy....below intrinsic value & u sell it is above intrinsic value mah....!!
Kfima....is now at undervalue category loh...!!
2014-05-29 10:46
I would like to discuss about this post here. My response is in capital letters to differentiate that of the commentator.
Posted by Bateman > May 29, 2014 10:40 AM | Report Abuse
I think it is a mistake to invest on Kfima based on its supposedly attractive valuation. If you do study the long term financial performance of the company, you will notice that Kfima is a poorly managed one. First, the financial performance of Kfima is solely dependent on the performance of its plantation division. If you look further into the numbers behind, you will find that the company has constantly producing returns that are below the industrial average from its plantation division time to time. So, what does this tell me? It tells me that Kfima is a below average and inefficient plantation player among its industry peers.
ARE YOU SURE THE FINANCIAL PERFORMANCE OF KFIMA IS "SOLELY" DEPENDENT ON PLANTATION?
1) HOW MUCH IS THE REVENUE AND PROFIT OF PLANTATION MADE UP OF?
2) CAN YOU SUBSTANTIATE "THAT THE COMPANY HAS CONSTANTLY PRODUCING RETURNS THAT ARE BELOW THE INDUSTRY AVERAGE"?
3) WHAT IS YOUR COMPUTATION OF THE RETURN OF EQUITY OR RETURN OF INVESTED CAPITAL TO WARRANT YOUR STATEMENT THAT KFIMA IS A POORLY MANAGED COMPANY?
4)WHAT IS YOUR BENCHMARK OF A POORLY MANAGED COMPANY? WHY DO YOU CONSIDER A COMPANY, AT AN ADJUSTED PRICE OF 66 SEN 5 YEARS AGO, HAS PRODUCED A TOTAL GROWTH IN SHAREHOLDER VALUE OF RM1.38, 36 SEN IN DIVIDEND, AND RM1.02 IN GROWTH IN BOOK VALUE, A POORLY MANAGED COMPANY?
No doubt Kfima is producing good cash flow year by year, especially from its stable printing division. I feel the management has not done enough to reward its shareholders with its cash hoard. Hence, you see the low valuation in its market value. The share price of Kfima will track the long term performance of CPO prices. As long as we see increased liquidity into the plantation sector from the broader market, Kfima share price will go up. In my opinion, Kfima will most likely realized its intrinsic value through privatization
NOTE THE "CASH HOARD" YOU ARE TALKING ABOUT IS NOT WITH KFIMA BUT WITH FIMA CORP. IT IS ONLY FIMA CORP'S FINANCIAL STATEMENT CONSOLIDATED IN KFIMA.
BUT A CONSISTENT 8 SEN DIVIDEND VERY POOR FOR THE LAST THREE YEARS?
CONSISTENTLY GROWING IN BOOK VALUE IS SUCH A MANNER NOT DOING ANYTHING FOR THE SHAREHOLDERS? THEN WHAT IS?
IF YOU THINK OF RIDING ON KFIMA ON CPO PRICE, I THINK YOU ARE NOT RIDING ON THE RIGHT HORSE. PLANTATION ONLY MADE UP ABOUT 30% OF REVENUE AND PROFIT OF KFIMA.
I DON'T KNOW WHAT IS YOUR HORIZON OF INVESTMENT? ONE WEEK? ONE MONTH? ONE YEAR? IF YOU HAVE BOUGHT KFIMA 5 YEARS AGO LE A LONG-TERM INVESTOR AT AN ADJUSTED PRICE OF 66 SEN THEN, AT RM2.17 AT THIS MORNING CLOSE, YOUR TOTAL RETURN IS 230%, OR A COMPOUNDED ANNUAL GROWTH RATE OF 27% FOR 5 YEARS. WHAT IS THE KLSE RETURN? 15%? SO WHAT IS THE FUSS?
2014-05-29 13:54
Management cant manage the panic selling, nobody can control the crowd behavior. Management can only manage damage control over lost-making division, probably then you can take advantage of crowd behavior.
IN fact, Fima share price as at Now drop more than Kfima while its Qtr earning is about 20% better yoy, so should i keep reasoning myself for that...?
2014-05-29 16:06
As at price Now Kfima is having about 10% positive return for this year, OR annualized 20%.
If we are Not happy Just take profit and walk away.
2014-05-29 16:21
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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I like the title.. almost fell of my chair when I saw the author name :)
2014-05-27 12:04