FLBHD is a small-cap stock with a paid-up
capital of RM51.6 ml as at 31.12.2015. Its par value per share is 50
sen. Its principal activities are the manufacturing and sale of plywood,
veneer and laminated veneer lumber and investment holding.
The company was listed on 28.4.2011 in the main board. The earnings of the company are as follows:
Year 2011 : EPS 14.15 sen; 2012 : 11.24 sen; 2013 : 14.66 sen; 2014 : 15.53 sen; 2015 : 30.74 sen.
Comparing the EPS of 2015 to that of 2011, earnings have more than doubled. This is excellent growth.
As at 30.12.2015, its current assets total RM121.563 ml of which
RM57.819 ml is cash. Total liabilities amount to only RM12.715 ml of
which current liabilities amount to RM9,699. The Current Ratio stands at
12.53!!!
The company has no borrowings. Its cash alone is enough to cover total
liabilities by 4.547 times!!! Is there another company listed in Bursa
with such a strong cash position? Please let me know if you know of one.
In respect of dividends paid, there are as follows: 2011: 6 sen; 2012: 6
sen; 2013: 8 sen; 2014: 8 sen & 2015: 15 sen. Thus dividend growth
is excellent as well. With so much cash in the banks, the company should
have no problem maintaining its dividend payments. Although the company
does not have a dividend policy, we can see that it usually pays out
about 50% of its earnings as dividends. This is good for those who love
dividends.
I understand that the company does not have concession in any
timberland. I called the inter-relation officer to find out how the
company sources its raw materials, especially timber logs and glue.
Unfortunately he refused to tell me about this, saying that was the
secret of the company.
The new minimum wages commence on July 1, 2016. This will have an impact
on the production cost of plywood. To mitigate this, the company will
modernise and automate the manufacturing facilities of the group. This
should not be a problem as the company has lots of cash to implement
this intention.
The company exports 92% of its products, the bulk of which (76%) goes to
US and the rest to other countries, mainly Taiwan & Korea. The
value of the US$ has a great impact on the bottom line of the group. The
more it appreciates against the Ringgit, the more the group will
benefit. The reverse is the other way round. So, keep an eye on the
exchange rates.
One of the things I like about this company is that it is
environmentally friendly. Its mill is the first Malaysian plywood mill
that is certified as a CARB Certified Manufacturer in 2008 by
Professional Service Industries, Inc. The company was also awarded with
the JAS certification by the Ministry of Agriculture, Forestry and
Fisheries of Japan in 2009 as a proven qualified plywood manufacturer.
These certifications certify that the groups’ products are of high
quality, and goes a long way to enhance customers’ confidence.
In additions to the above awards, the company was accredited as a
certified Lacey Compliant Wood Products Manufacturer by Benchmark
International, LLC (BMH) under the BMH Lacey Compliance Verification
(LCV) Program. This means that its timber logs are confirmed to be
sourced legally.
I like to use the metric, ROACE (Return On Average Capital Employed) to
appraise the competency of the management. The higher this is, the
better. Using the figures in its balance sheet as at 31.12.2015 and
31.12.2014, FLBHD’s ROACE is 25.67% which is deemed to be on the high
side.
Going by the track record of this company, I have full confidence that
it will continue to grow well. I give a 5-star rating to the management.
The chart below shows that the stock hit a bottom on 17.8.15 at RM1.22,
and then moved up to RM3.09 on 11.1.2016. It is now undergoing a
correction phase. The last done price is RM2.23. Should it drift lower,
the support levels are: RM2.08 and 2.02 while its immediate resistance
is RM2.37.
Action to take: Buy at support and also when it decisively crossed RM2.37.
This is my opinion. Whatever action you take, you do so at your own risk absolutely.
If you find this article useful and wish to join my group, Intelligent Investing, use the link below.
https://telegram.me/joinchat/BO0NxTua7NZ57y2pV6Mzrg
FLBHD (5197) - Focus Lumber Bhd
http://blisswise.blogspot.my/2016/03/flbhd-5197-flbhd-is-small-cap-stock.html
