Recommendation: -

 

Since my first review on FIAMMA on 28/6/2015 FIAMMA had drop 6.08%. On 23/8/2015 I had change my recommendation of FIAMMA from Buy to Hold. Today I will like to review the latest quarterly report of FIAMMA publish on 25 November 2015.

 

For those who interest in my previous review on FIAMMA, kindly read FIAMMA-1 and FIAMMA-2.

 

Fourth Quarter End 30 September 2015

 

For these quarter FIAMMA had increase their profit by increase the fair value of their fair value of their investment property by RM 24,838,000. These is what we always say paper gain not until FIAMMA sell their investment properties these profit is just on paper and FIAMMA had to paid income tax with the money they do not earn.

 

FIAMMA also recorded a higher asset compared to previous year. However by looking at the fourth quarter report these is just paper gain on their asset such as property, plant and equipment, investment properties and land held for development. FIAMMA had reduce their cash and cash equivalent holding by 19.61%.

 

Besides that, FIAMMA increase their non current borrowing by 22.6 times and current borrowing by 40%. FIAMMA also had negative operating cash flow in year 2014 and positive financing cash flow. These means that FIAMMA is getting their cash from debt than their operation.

 

Share Buy Back

 

Lately FIAMMA start to accumulate its own stock, in the month of August and September FIAMMA had brought back RM 269,364.12 worth of shares which is 172,300 shares. As of 10 December 2015 FIAMMA owned 8,721,000 of treasury shares or 6.02%. They can buy back the share until it reach 10%. I personally do not see any point for FIAMMA to buy back their shares at the moment. FIAMMA share buy back is maintaining their stock price at RM 1.60 – RM 1.8 level for the past few months. 

 

With share buy back FIAMMA should has negative financing cash flow however the financing cash flow for 2015 is show otherwise. These mean FIAMMA is borrowing more money and only buy back some of their stocks. Instead of share buy back FIAMMA might use the money for other investment and borrow less money.

 

Conclusion

 

I had make a wrong recommendation on 28/6/2015 to called a BUY and I eventually brought it. But by looking at the quarterly report I think FIAMMA is not a good company to invest anymore and I also had sold all my shares for FIAMMA. Hence I will like to change my recommendation for FIAMMA from HOLD to SELL.

 

For those of my loyal reader that had make their investment decision after reading my blog post on June I felt sorry for you guys. As I am still learning to become a value investor I make mistake sometimes. I had learnt from this failure and will keep on improving my stock valuation skills.