Posted by bsngpg > 2014-01-26 08:29 | Report Abuse

Hi KC Chong :
Two points attract my attention: (i) 还没有计算种植资产的Fimacorp最少就值 RM10了, (ii) 5%DY.

Since you have done detailed analysis on KFima, I believe you know FimaCorp well too. Would you mind to drop few lines on FimaCorp ?

浅谈Fimacorp - 第2篇 - 油棕业务 - 糊涂
http://klse.i3investor.com/blogs/kianweiaritcles/45447.jsp

Thank you very much.

Posted by kcchongnz > 2014-01-26 17:01 | Report Abuse

Is Fimacorp a good investment?

As usual, when I want to determine if a company is a good company, I look at its business and return of capitals, and cash flows. The two major income generators of Fimacorp are its manufacturing and printing of security papers (66%) and palm oil (33%). They appear to be good and durable business to last for some time.

The table below shows Fimacorp’s return of capitals for the last few years:
Year 2013 2012 2011 2010 2009 2008 2007 2006
ROE 12.5% 16.5% 20.9% 19.2% 23.3% 14.8% 13.8% 17.8%
ROIC 23.1% 32.5% 44.0% 31.4% 32.9% 16.5% 38.0% 34.9%

Return of equity has been all the time in double digit. Last two years ROE has retreated somewhat but it was still good. By the way, tell me which company with palm oil as a major earner has not got its profit and ROE reduced last two years? Some of them have even gone into losses. The lower ROE last year of 12.5% could also be because of its build up of excess cash in its balance sheet.

A better measure of its efficiency is hence ROIC, taking the whole firm into consideration. You can see ROIC is always very high, even up to 44% in 2011. Even the lower ROIC of last year of 23.1% is still well above the cost of capital of 10%-12%.

Yes the lower ROE and ROIC last year is because of the drop of profit. Again can you tell me which company, especially in the cyclical commodity business can grow its profit every year unabated?
Fimacorp’s cash flow from operations is above its net income on average. It always has free cash flow, averaging more than 20% of revenue. What else can you ask for?

After determining that Fimacorp is a good company due to its high return of capitals and good cash flows, the next thing I look into is if the price is good. You can’t make good return if you don’t know the value and simply pay exorbitant price for it as your return is determined by the price you pay.

At the close of RM6.40 last Friday on 24th January 2014, and with earnings of 72.4 sen in year ended March 2013, the PE ratio is 8.8, not expensive in my book, especially considering its high efficiencies. But as it has a lot of excess cash and also a substantial interest in an associate company, a better metric is enterprise value. It EV is just 3.7 times its ebit, or an earnings yield of 27%, fantastic.

So with this I would conclude that Fimacorp is a great company selling at bargain price. Do I need to consider its growth? I don’t think so, but if good growth comes, it will be extra bonus. But is Fimacorp really a no-growth company as opined by some people?

From the table below, one can see that Fimacorp’s revenue and net income has been growing at a CAGR of about 10% a year from 2006 to 2013. That is a reasonable high and sustainable growth rate. I don’t know much about its future but I do read about Fimacorp has quite a lot of land in Indonesia which has not planted yet. I thought I also read that they have been buying plantation land too. And according to the article in Chinese, its FFB production has been increasing. Its margins are also much higher than many other plantations.

So Fimacorp is definitely a good stock to invest in my opinion. But as I have already invested in Kumpulan Fima which holds 60% of Fimacorp, I do not want to put in money in Fimacorp again. By the way, Kumpulan Fima has a more diversified business and it is also more undervalued in term of EV.


Year 2013 2012 2011 2010 2009 2008 2007 2006
Revenue 305145 300174 298479 279110 223465 176788 157312 157190
Net income 61899 78917 84757 64570 59481 31372 27631 32208

Posted by bsngpg > 2014-01-26 17:15 | Report Abuse

Hi KC Chong : Thank you very much.I need long time to digest and reproduce the numbers. The methods and numbers are more important to me.
Thank you, 预先祝贺你新春愉快, 球技进步.

Posted by digiuser016 > 2014-01-26 23:17 | Report Abuse

It is very good analysis, you analyze the stock using growth,quality and valuation as mentioned by Vitaliy Katsenelson in the Active Value investing. Learn something from here.