FARLIM (6041) - FARLIM - Air Itam Dai Kor
FARLIM - Air Itam Dai Kor
With its well established recognition in Penang, none in Penang has never heard of FARLIM. But why FARLIM? We see FARLIM as one of the undervalued GEM due to the below aspects:
Company Background
The main thrust of Farlim's activities is the development of a new township known as Bandar Baru Ayer Itam amount to RM1.31bil on the island of Penang. The township is located in a targeted growth area, three miles from Georgetown.
Ongoing Development
FARLIM has established themselves at Northen Region (Penang, Perak and Terengganu) as well as Southern Region (Selangor and Melaka). FARLIM has ongoing projects in Penang, Selangor, and Perak. FARLIM will continue to see high progress billings recognised in revenue from these three projects.
(Source: The Star)
Another interesting event, on January 2017 the company has fully acquired a wholly subsidairy named MH Consortium Sdn Bhd to fully engage in Perak property development with HUGE ADDITIONAL LANDBANK. Do you see the determination and structure?
Financial Analysis
Overall FARLIM has improved its financial in FYE2016 as compared with FYE2015 despite the property market soften. FARLIM still maintain high margin of PBT (43%!!!!) and Net Profit (33%!!!). The profit growth of 9% YOY is achieved due to cost savings. WHY FARLIM CAN ACHIEVE SUCH HIGH PBT AND NET PROFIT? Kindly refer below to our findings.
Properties Undervalue/ Low Cost Land Acquisition
(Source: Annual Report 2016)
Properties Undervalue: Many of the properties are not revalued up to date. Many properties in Penang and Selangor are only revalued since the 90's (as described below). With the minimal price per sf, the property is undervalued with a deficit of RM21mil which is equivalent to 15 cents EPS gain on revaluation.
Land Undervalue: The Management is smart, they acquired the land way years back on minimal cost. If you were to buy any land for development at present, you will not get any of the above offer! With low cost of sales, they can achieve high PBT and Net Profit!!
NTA - Cash & Other Investment valued at RM115mil
As a value investor, we always opt to buy in company with huge net cash. SURPRISING FACT - the sum of cash of RM115mil is higher than the company market capitalisation of only RM79mil itself. The Net Tangible Asset is valued at RM1.20 which is 93% discounted of the closing price RM0.62. One share you are buying, you are entitled to partial of the company asset. After taking in account of new subsidiary RM38.5mil landbank and revaluation, the NTA should be even higher.
Dividend
When FARLIM starts to make money, they are very generous on the dividend payout (DY: 3.54% ~ 4.00%). With the capital appreciation in addition to the dividend payout return, by holding FARLIM shares, you are generating at least more than 20% in 2017.
With its well established recognition in Penang, none in Penang has never heard of FARLIM. But why FARLIM? We see FARLIM as one of the undervalued GEM due to the below aspects:
Company Background
The main thrust of Farlim's activities is the development of a new township known as Bandar Baru Ayer Itam amount to RM1.31bil on the island of Penang. The township is located in a targeted growth area, three miles from Georgetown.
Ongoing Development
FARLIM has established themselves at Northen Region (Penang, Perak and Terengganu) as well as Southern Region (Selangor and Melaka). FARLIM has ongoing projects in Penang, Selangor, and Perak. FARLIM will continue to see high progress billings recognised in revenue from these three projects.
(Source: The Star)
Another interesting event, on January 2017 the company has fully acquired a wholly subsidairy named MH Consortium Sdn Bhd to fully engage in Perak property development with HUGE ADDITIONAL LANDBANK. Do you see the determination and structure?
Financial Analysis
Overall FARLIM has improved its financial in FYE2016 as compared with FYE2015 despite the property market soften. FARLIM still maintain high margin of PBT (43%!!!!) and Net Profit (33%!!!). The profit growth of 9% YOY is achieved due to cost savings. WHY FARLIM CAN ACHIEVE SUCH HIGH PBT AND NET PROFIT? Kindly refer below to our findings.
Properties Undervalue/ Low Cost Land Acquisition
(Source: Annual Report 2016)
Properties Undervalue: Many of the properties are not revalued up to date. Many properties in Penang and Selangor are only revalued since the 90's (as described below). With the minimal price per sf, the property is undervalued with a deficit of RM21mil which is equivalent to 15 cents EPS gain on revaluation.
Land Undervalue: The Management is smart, they acquired the land way years back on minimal cost. If you were to buy any land for development at present, you will not get any of the above offer! With low cost of sales, they can achieve high PBT and Net Profit!!
NTA - Cash & Other Investment valued at RM115mil
As a value investor, we always opt to buy in company with huge net cash. SURPRISING FACT - the sum of cash of RM115mil is higher than the company market capitalisation of only RM79mil itself. The Net Tangible Asset is valued at RM1.20 which is 93% discounted of the closing price RM0.62. One share you are buying, you are entitled to partial of the company asset. After taking in account of new subsidiary RM38.5mil landbank and revaluation, the NTA should be even higher.
Dividend
When FARLIM starts to make money, they are very generous on the dividend payout (DY: 3.54% ~ 4.00%). With the capital appreciation in addition to the dividend payout return, by holding FARLIM shares, you are generating at least more than 20% in 2017.
Conclusion
With the
trilling events we have mentioned/updated above, we strongly believe
FARLIM is ridiculously undervalued. With the industry PE of BERTAM
(Negative PE @ RM0.50), MUIPROP (PE:24 @ RM0.32) approximately 15, the
share price should be valued at RM1.47 (havent taken account of future
earning growth), 237% upside from current price. FARLIM is only trading
at PE of 7, a true gem that haven't been identified.
Disclaimer:
The information contained in this channel is for general information purposes only and NOT a recommendation for buying or selling stock. Any reliance you place on such information which incur profits/losses is therefore strictly at your own risk. We are merely sharing our trades and hold no enforcement on issuing buy calls. If you share the same view with us on stocks, let time prevail.
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FARLIM (6041) - FARLIM - Air Itam Dai Kor
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