FPI: 5 reasons NOT TO MISS THIS STOCK (Stock code 9172)

I have written about Formosa Prosonics Industries or FPI on 18-Nov-2010, the full link: FPI Introduction.

To recap, FPI produces a variety of products which include Home Theatre Audio Systems, Satellite Speaker, High-End Audio Systems, AV Racks, WI-FI Internet Radio, WI-FI Internet Adaptor, Outdoor Speaker, Bluetooth Speaker, Receptor Radio, CD Radio & Car Speaker Series.


The Group’s manufacturing facilities are located in Port Klang (Selangor), Sungai Petani (Kedah) and Dongguan (Guangzhou, China). Overall, the Group owns 2,908,170 square feet in total of land area.

Let's do some KISS (Ooops, I mean Keep It Short and Simple) and look at the 5 reasons not to miss this stock.

No 1. Attractive value with historical PER of only 6.1x
Considering that: i) FPI has more than 20 years experience in manufacturing high end speaker, ii) net profit jumped 175% in FY2010 and iii) strong balance sheet with net cash of RM81.4m... the market may have given too much discount to FPI with only 6.1x historical PER. Even at 9x historical PER, FPI should worth at least RM1.33.
No 2. > 10% Dividend Yield (Historical)
In FY2009, FPI distributed total dividend of 10 sen. Based on closing price of 90 sen, this is 11.1% dividend yield. Bear in mind though that this is historical dividend. FPI announced 3 sen dividend in 2Q2009 but did not do so this year during 2Q2010. Nevertheless, FPI distributed 7 sen dividend in 4Q2009 and it is still possible the Company may pay 7 sen or 10 sen. Worst case, 5 sen still not bad as it translates into 5.6% yield.

No 3. Unusual volume increase today
Let's have a look at the previous 5 day volume (rounded to nearest 1000):
28-Dec-2010: 35000
29-Dec-2010: 60000
30-Dec-2010: 55000
3-Jan-2011:    20000
Today 4-Jan-2011, FPI total traded volume is 289000

Which is about 700% increase as compared to its normal average volume of 42.5k. This means that the stock is getting more attention from investors after being neglected for some time. Significant increase in volume in good fundamental stocks may be followed by share price surge.

No 4. Laggards among small cap counters
With market cap of around RM200m, FPI is a small cap counter which has yet to appreciate significantly. When the main market increase cool down, mid cap and small cap counter will normally come into investors attention. From the significant volume increase, FPI seems to be the next stock you should really look at...

No 5. Have potential to increase 47.8% to RM1.33
Wait, don't think I am too bullish here for FPI. Look at my previous post FPI Introduction and FPI 2Q2011 Result, look at the balance sheet, look at the Company's potential in high end speaker manufacturing. Giving a 9x historical PER is certainly not too demanding. If the market agree to 9x historical PER for FPI, then this stock is poised to go all the way to RM1.33.