Business Background

• For over 40 years the Favelle Favco Group has been driving crane technologyforward and pushing the envelopes of tailor made, high speed heavy lifting.

• The principal activities of Favco subsidiaries are designing, manufacturing, supply, servicing, trading and renting of cranes.

• Favco offers four types of cranes:
  –Tower Cranes (used in dam building, bridge building, shipyards, power plants and high rise structures).
  –Offshore Cranes (used on platforms, on jack-up barges, on vessels and submersibles).
  –Crawler Cranes (used in general construction work sites and pipe laying works).
  –Wharf Cranes (used in shipyards, bulk handling terminals and general purpose terminals).

      Crawler Crane                  Wharf Crane             Offshore Crane              Tower Crane

Board of Directors

• Tan Sri A. Razak bin Ramli
  • Chairman, Senior Independent Non-Executive Director
  • Aged 66, Malaysian (2014)
  • Appointed to the board of Favelle Favco Bhd on 1 November 2004

• Mac Chung Hui
  • Managing Director / Chief Executive Officer
  • Aged 37, Malaysian (2014)
  • Appointed to the board of Favelle Favco Bhd on 5 May 2004

• Mac Ngan Boon
  • Executive Director
  • Aged 71, Malaysian (2014)
  • Appointed to the board of Favelle Favco Bhd on 23 March 1993

Financial

SWOT

• Strengths
  • Net Cash Company. Plenty of cash for future dividends and growth
  • Increasing revenue, profit and profit margins
  • Dividends that grow at a constant rate
  • Long history of stable earnings and cash flow

• Weaknesses
  • Heavy dependence in the oil and gas industry

• Opportunities
  • Construction industry bullish on growth
  • The rebound of crude oil prices

• Threats
  • The negative impacts on oil and gas industry

Conclusion

Favelle Favco Berhad is a company with strong fundamentals. It has a long history of stable earnings and cash flows. As shown in the financial highlights, their profits and assets have been increasing over the last 5 years. On top of that, their dividends have been increasing steadily throughout the years, not to mention current dividend yield of 4.4% with a pay-out ratio of just 28%.

However, people might think there is risk in investing in Favco due to its heavy dependence in the oil and gas industry. While others see it as a risk, I see it as a great opportunity to buy it at low. No one knows when will crude oil prices rebound, but there is a high chance that it will happen. If you still feel uncomfortable with this investment, you could hedge it with export stocks such as Liihen, FLBHD and Magni.

To conclude, Favco is not an exciting stock as there is not much publicity and action, but it is definitely an undervalued stock. So ask yourself, do you want excitements or profits? “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” (Philip Fisher)

Sources: https://stockhuat.wordpress.com/2016/04/21/favco-7229/