The POSITIVES despite FIBON 9M14 EPS decline of 27% YoY

1. 9M14 EPS declined 27% YoY to 2.90 sen.
According to its announcement to Bursa, the decline was due to lower operating margin and higher admin expenses incurred. Zooming in, the sales to Indonesia has declined to RM0.5m from RM2.0m previously possibly due to slower growth experienced in Indonesia economy.

2. But there are three positives despite the earnings decline:
a. Super strong net cash of RM20.8m or 21.2 sen per share. This is an increase of 4% from RM20.0m as of end FY13.
b. Business Cash Flow generation remained healthy. Operating Cash Flow is RM2.3m, Capex RM0.4m, Financing Cash Flow RM1.2m. Meaning this Company business is still generating positive cash flow to shareholder.
c. Outlook for FY15 (Year End May) should be better. Although FY14 earnings likely to be lower, FY15 prospect is better. Remember FIBON secured the factoring business in Aug 2013 and is now in the gestation period to get the business running efficiently. After one year, the Company should perform better in FY15 as its factoring business improve.

3. VALUE OF FIBON is RM0.61. BUYING OPPORTUNITY if share price stay below RM0.50.
a. Assuming 8x PE to FY15 EPS of 5.0 sen, the Company business is valued at 40 sen. Add the net cash of 21.2 sen, the Company is worth 61 sen per share.
b. The 8.0x PE is conservative as it is significantly lower than Small Cap PE of 11x currently.
c. The 5.0 sen EPS is assuming Fibon can grow its business back to FY13 level of 5.0 sen EPS based on growth seen in its factoring business.
d. Overall, potential return is 24% but one must take a longer term view (6 to 12 months holding power) to wait for the potential of FIBON factoring business to grow.