FPI: 5 Updates That You Should Not Miss

Update 1: As of 2:50am, FPI gained 2.73% or 2.5 sen to 94 sen. 85% of the volume is BUY, signalling increasing interest in this stock.

Update 2: Despite gaining about 4 sen from 90 sen since my last writing on FPI on 4-Jan-2011, FPI's RSI is now only at 60. This means that there is still room for share price increase with 70 acting as Overbought level.

Update 3: According to sources, FPI may release its 3Q2011 result on 11-Feb-2011. This may explain the share price gain recently.

Update 4: I still think FPI is worth RM1.33, representing 41.5% upside. This is based on 9x historical PER.


Update 5: FPI fundamental remained solid with: i) 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...
 
Watch out this stock, I think the price increase is still in the early stage...

3 Signs Of Bullish Sentiment After Chinese New Year

Sign 1: The poll at The Edge Malaysia website shows positive result among readers... See the pics below, I have voted at around 1215pm 3-Feb-2011...

Sign 2: Many of my Chinese friends and relatives received Chinese New Year SMS greetings from Prime Minister...Well this is quite straightforward as another strong sign of possible general elections this year, which will then benefit stock market...

Sign 3: Strong market performance despite only half day trading on Chinese New Year Eve. FBM KLCI surged 11.88 points (Well, 1188 is a good number, isn't it?) with 674 gainers and 137 losers. Volume was strong too with 1.53 billion shares valued at RM1.70 billion changed hand.

What's the stock I am looking at? CBIP, FPI and SPSETIA. Will try to write on these companies soon...

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.

Outlook for 27-Dec-2010

Last Friday, US market was closed for Christmast Eve. However, European market ended mixed with FTSE up 12.85p to 6008.92p while DAX lost 10.23p to 7057.69p.

Here are some of major news over the weekend:
i) China's PBOC's Christmas rate rise to weigh on commods at open Click for full report at Reuters
ii) World economy can withstand US$100 oil price: Kuwait Click for full report at Reuters

My view:
The surprise interest rate increase by 25bp is negative to the market, especially to commodity linked sectors such as Oil & Gas and Plantation. This is due to possible pressure to oil price and thus indirectly CPO price. However, the knee-jerk reaction should be temporary. With the low interest rate regime in US, the money flow should be gravitated towards commodity and equity for growth and inflation hedge. Overall, today should be slightly negative for KLCI as investors are likely to use the news from China as an excuse to take some profit off the table. This may represent opportunity for bargain hunting at the afternoon session.

Stocks that I STILL find attractive:

1. DRBHCOM (HwangDBS Target Price at RM3.55, still trading at huge discount compared to other conglomerates in Malaysia, got potential to go up to RM3.00)
2. AXIATA (Recently sold its stake in Samart, growth to come from Indonesia market, stable Malaysian Celcom recurring income, maiden dividend payout in 2011 should be a major rerating catalyst, average consensus Target Price RM5.28)
3. FPI (Trade at attractive historical PER of less than 6.0x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)

Today's outlook 20-Dec-2010

Last Friday, US market ended flat with DJIA down 7.34p to 11491.90p while S&P gained 1.04p to 1243.91p.

Here are some of the news that may have affected last Friday's US market:
ii) Oracle reported quarterly profit which rose 28% yoy
ii) RIM revenue jumped 40% yoy
iii) Volatility Index has gone down to its 8 months low
iv) Bank of Montreal will buy Marshall & IlsleyCorp for US$4.1b
The major news during the weekend is the news that South Korea plans levy on foreign currency bank debt.


My view:
Overall, US market was flat with the news flow are mostly related to US local economy. However, the robust financial result from Oracle and RIM are positive for technology counters. The South Korea plan is generally negative to equity market but the impact should not be as high as China, due to their smaller GDP. Overall, today should be slightly bearish for KLCI as investors are likely to stay cautious while waiting for further indicators.

Stocks that I STILL find attractive:

1. SCIENTX (Hit RM2.00 on Friday close, capex of RM14.4m in FY2011 should grow the Manufacturing earnings by 10%, still cum 6 sen dividend ex date 7-Jan-2011, new potential: may go up to RM2.16)
2. DRBHCOM (HwangDBS Target Price at RM3.55, historical PER of 7.49x now means it is still trading at huge discount compared to other conglomerates in Malaysia, got potential to go up to RM3.00)
3. FPI (Trade at attractive historical PER of only 5.92x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)

How do I see the market today? 14-Dec-2010

Overnight, US market ended flat with DJIA up 18.24p to 11428.56p while S&P gained 0.06p to 1240.46p.

According to Reuters, "The Nasdaq closed lower to end eight straight days of gains on Monday as some large-cap tech stocks slid in a late-day sell-off. The Dow cut its gains and the S&P 500 ended a thinly traded session flat as optimism faded over China's move to tame its growth, and as some technical indicators suggested a near-term pullback could be in the cards". Put it simply, at first investors are excited on China decision to maintain interest rate, but later feels it is better to take profit or sell first.


My view:
China proved to the world once again that its decision is hard to predict as it maintained interest rate despite inflation surge to 5.1%. This is a good news but the effect should already been priced in. Keep watching for the oil price though, as the market may get worry again when it surpassed US$90 and US$95 level. (Currently at US$88.44). Overall, I think today should be slightly bearish for KLCI on the lack of catalysts seen.

Stocks that I STILL find attractive:

1. CRESNDO (Pure proxy to Iskandar investment theme, paid 7 sen dividend in the past 5 Financial Years, undemanding Price/NTA of 0.43x only, got potential to go up to RM2.55)
2. FPI (Trade at attractive historical PER of only 5.85x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)

Stocks that I temporary no longer find attractive:

1. SAPIND (14 Sen dividend already gone ex today, short term potential has been realized with the share closed at RM1.33 - exactly same as my earlier estimate)

How do I see the market today? 13-Dec-2010

Last Friday, US market ended slightly higher with DJIA up 40.26p to 11410.32p while S&P gained 7.40p to 1240.40p.

What happened during the weekend?

1. China inflation at 5.1%, exceeds expectation
China’s risks a more abrupt tightening in monetary policy next year after refraining from raising interest rates since October even as inflation accelerated to the fastest pace in more than two years. Consumer prices jumped 5.1 percent in November, a statistics bureau report showed Dec. 11. A measure of wholesale costs climbed 6.1 percent, exceeding all 28 estimates in a Bloomberg News survey of economists. (Source: Bloomberg) Click here to read full report


2. EU leaders to agree on law change for euro stability
European Union leaders will agree next week to insert two sentences into the EU treaty to pave the way for the creation of the European Stability Mechanism from 2013, draft conclusions of the summit showed. (Source: Reuters) Click here for full report

My view:

Greater than expected inflation in China will likely caused the Chinese Government to be more aggressive in implementing interest rate increase or lending restrictions. This is bad for the stock market. The EU development should decrease the worry among investors on Europe but the positive impact should be minimal to the market. Overall, I think today should be slightly bearish for KLCI.

Stocks that I STILL find attractive:

1. CRESNDO (Pure proxy to Iskandar investment theme, paid 7 sen dividend in the past 5 Financial Years, undemanding Price/NTA of 0.45x only, got potential to go up to RM2.55)
2. DRBHCOM (HwangDBS initiates coverage on this stock with Target Price of RM3.55, historical PER of 7.37x now means it is still trading at huge discount compared to other conglomerates in Malaysia, got potential to go up to RM3.00)
3. FPI (Trade at attractive historical PER of only 5.85x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)