Wisdom Wise
FLBHD (5197)
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.
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Discussions
3 people like this. Showing 30 of 30 comments
Good write up Ben Gan.
Another stock comparable to FLBhd is Liihen which possess cash of RM 120.4mil in cash and FD with a borrowings of just RM 6.9mil. The cash yield of LiiHen is 18% much more than our banks FD.
2016-03-20 19:36
Also FYI, the minimum wage is only for Peninsular Malaysia. FLBhd is Sabah based and its plywood production and manufacturing will not be affected.
2016-03-20 19:37
when the share price drop until it has no logic, the return on average capital employed is 25%,
the X factor of the company has become negative, it is time for the Company to issue some clarifications.
2016-03-20 20:34
ROCE is profits divide by assets employed.
High ROCE means high profits for every $ employed.
it reflects the fact that is a very neat and simple operation.
problem with this kind of company...what happens after 1 or 2 good years?
it will be the same sawmill, with the same machineries and subject to the same limiting factors such as raw logs and market conditions.
has there been any transformational change? what steps taken to put the company to the next level? expansion plans? steps taken to reduce the company risks and fluctuations?
we call that, the negative X factors that quickly come to people's mind when share price drop until no logic.
2016-03-20 20:50
Thanks for elaborating.
Meaning that for expansion plans in future,it has to increase its CAPEX which may eat into its FCF. However with its so much cash that it has currently, I think FLBhd can grow aggressively.
2016-03-20 20:58
sawmilling and plywood...the most basic of all industries when a developing country starts to industrialize.
when prices are good, they mushroom all over the world.
when prices bad, they all die.
Has been like that for a 100 years. no change.
2016-03-20 20:59
2020 is Japan organizing the Olympics. Plywood demand should increase from Malaysia.
2016-03-20 21:02
in my experience, Japan has always been our largest importer of plywood.
This Company managed to break into the US market. It is surely a plus for them and their competence and a credit to them.
I am not bearish on the share. Just pointing out some obvious points.
2016-03-20 21:10
Agreed to have pros and cons on certain issues. Not be too over confident and over optimistic which may leed to a let down later.
2016-03-20 21:21
pros and cons...very important. That tests the analytic abilities.
all share prices have two components....valuation of existing business plus the X factors.
X factors can be positive or negatives, it is market's valuation of the Company's growth or negative growth discounted backwards.
everyone should pay equal attention to the X factors, not just the results announced.
2016-03-20 21:32
Successful people are quick to make decisions ( I include KYY in the category of successful people) slow to reverse decisions made.
Successful people have a bad habit they have to watch out for. They loath, hate to change decisions as doing that is an attack on their ego. ...in the stock market, this can be very painful.
For common people, we have to push them to make decisions,
For KYY, we have to push them before they can reverse their decisions.
2016-03-20 22:04
Dear Rosmah Lii Hen has 120mil cash and debt of 30mil. Net cash is 90mil.
I think u miss short term debt of 23mil.
2016-03-20 22:46
Dear ben , plz look at IQ group. Net cash 53mil. No debt. Total shares 88mil.
PE less than 10. Your opinion on IQ ?
2016-03-20 22:52
Dear Ben plz look into IQ group. Net cash 53mil. No debt. Paidup 88mil shares. PE less than 10
2016-03-20 23:06
Tq for correcting shareinvestor...neithertheless, liihen still cash rich and i belief it can pare down its debts soon.
2016-03-20 23:13
Agreed that IQ is cash-rich with no borrowings. But its 3rd Qtr earning is a poor show when compared to the corresponding period of the previous year. It has dropped 31.85%. It's a good stock to monitor. Watch the chart for a good entry point.
2016-03-21 09:01
Dear rosmah yes i think lii hen can pare down the debt fast. Lii hen net cash 90mil meaning 50c per share net cash. EPS 10c last 3 months. Liihen shud be able to earn 30-40c per share this year. Applying pe of 10x lii hen is worth 3.00 to 4.00
2016-03-21 21:51
Liihen, FLBhd and Chinwell fullfills the criteria of a no brainer investment. It is cash rich with cash yield of 9-18% much better than the banks FD.
2016-03-21 21:54
Wow,no brainer investment, is it?
Then why not all in, use margin buy.
Let c u run or not when USD drop below RM4.
2016-03-21 21:59
Trade and invest within your means. Only silly and brainless ppl like u will put all your eggs into one basket.
2016-03-21 22:06
Rosmah, where you get news min wages impose in West only. East Msia also impose min wages, just the different is Sabah have too many Foreign worker until Immigration unable to take action in most sector. Even Kopitam also employ foreign worker
2016-03-21 22:19
@ harold Huong : regarding the recent hike.
http://www.thestar.com.my/news/nation/2016/03/18/foreign-worker-levies-penisular-malaysia/
Pls read my above statement carefully.
2016-03-21 23:25
Rosmah veli smart, please buy more your no brainer top pick.
USD to RM 3.99 liao.
Posted by RosmahMansur > Mar 21, 2016 09:54 PM | Report Abuse
Liihen, FLBhd and Chinwell fullfills the criteria of a no brainer investment. It is cash rich with cash yield of 9-18% much better than the banks FD.
2016-03-22 14:45
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2016-03-20 17:50