Fibon Berhad (“Fibon”) is principally engaged in the formulation, manufacturing and sales of polymer matrix fiber composite materials and products for the electrical, electronic, petrochemical and automotive industries. Fibon has diversified into the higher-margin factoring finance business after acquiring a new subsidiary, Fibon Capital S/B (formerly known as OPES Management S/B) in mid-July. OPES was granted a license to conduct factoring finance business by Bank Negara Malaysia in July 2010 and subsequently became the Ministry of Finance Malaysia’s approved Factoring Company for Government contracts. While we believe the earnings contribution from this division may not be meaningful during the gestation period due to the learning curve, it could 

grow significantly should the group adopt an aggressive strategy in the future. Meanwhile, Fibon has a strong net cash and cash equivalent balance of RM20.1m as at end-FY13, which translates into 20.5 sen per share or 63% of the group’s current share price. Meanwhile, Fibon also has a strong retained earnings and share premium totaling RM24.7m, which could be utilised to address its tight share liquidity issue in the future. 

 

The group is currently trading at 6.5x FY14 PER, which is undemanding in our view. We have a fair value of RM0.40 for Fibon based on a targeted FY14 PER of 7.6x, which is at a 30% discount to the FBM small cap forward PER of 10.9x due to its relatively small market capitalisation and tight shares liquidity concerns.

 

Source: Kenanga