Formosa Prosonics Industries (FPI) 2Q2011 Result

The summary of the result is shown above:





Positives:

• Revenue growing at double digit rate both qoq and yoy


• Gross profit also showing good growth (7.3% qoq and 4.1% yoy)


• The Company remained profitable despite lower earnings. The qoq and yoy drop is a fact but if you look throughout longer horizon, this quarter result is actually not bad. For example, this is the 4th highest net income recorded in the past 5 years.
  
• Balance sheet remained strong with net cash of RM81.42m or 33.14 sen per share.

Negatives:

• Pretax profit drop. In the announcement to Bursa, FPI has attributed this to rising material costs and weakening of US$ which resulted in forex loss


• In tandem, net profit to equity drop


• No dividend is announced this quarter (last year 3 sen dividend was announced)

My take:

Yeah, the 2Q2011 result seems bad, but if you look at the stock price it is only trading at around 6x PER, which means that the market maybe have given too much discount to this stock.

Fine, no dividend this time vs 3 sen dividend last year. Let say this Company only pay half of the amount of dividend paid last year, meaning only 5 sen for full year. Hey, this is still good as it translates into 5.3% dividend yield. Remember this is the worst case scenario that I am thinking of...

Conclusion, I think the recent drop maybe some knee jerk reaction...

Lastly, this stock is not covered by any Stockbrokers out there, thus it maybe have been overlooked by those investors out there...