Fast and Furious

Fast and Furious

Mention the word "Fast and Furious" and most moviegoers will know that it is all about the action movie that is actually a very popular movie, so much so that the movie has  sequel after sequel. In fact, the Fast and Furious movie No. 7 is actually slated for release in 2015 only. Originally slated for release in 2014 but was postponed due to the untimely death of one of its main actor, Paul Walker in a car accident on Nov 2013. Rupert Friend is believed to be his replacement.

The first movie was released in 2001 with the title The Fast and the Furious. However not all the subsequent sequels were the same title.  Nevertheless, all the "Fast and Furious" movies were packed with actions and car racings driven at very fast and super speed.

In Bursa Malaysia, we also have our own versions of "Fast and Furious" actions for some companies, especially when they release their quarterly results that were either above market expectation or below market expectation.

Not up to investors' expectations

To know how fast and furious investors will react, just check on consumer stock Zhulian Corporation Berhad engaging in multi-level marketing (MLM). Zhulian's share price peaked at RM5.15 on Nov 20, 2013. But on Jan 22, 2014, Zhulian released a quarterly result that saw a more than 50% drop of net profit compared to its many steady previous quarters, coupled with the ongoing unrest in Thailand (Zhulian has distributions's business in Thailand), investors wasted no time to dispose off their shares the very next day and the many more subsequent days to come.

It was quite common to see Zhulian hogging in the top losers category for many days. So much so that Zhulian's share price touched a low of RM2.75 on Feb 20. (Hey, that is a 46.6% off from the RM5.15 peak price!)

At the time  of writing, the unrest in Thailand is getting more and more serious. Definitely, business operation in Thailand must be affected. However how serious the complications will be felt only when Zhulian releases its 1st Quarterly results on April 2014. Zhulian closed at RM2.97 on Mar 4.

Another stock that witnessed the fast and furious reaction from its investors is Pos Malaysia Bhd. On Feb 20, after the market closed, it released its 3rd Quarterly results that was not up to investors' expectation.

Guess what? Pos hogged the No. 1 top losers' list when its shares dropped by a whopping 67 sen loss or a  plunge of 12.7% to close at RM4.62. That was not all yet. The next day its shares dropped a further 12 sen to close at RM4.50. Pos' share price peaked at RM6.05 on Nov 29, 2013. (That is a 25.6% off from that peak price or a loss of RM1.55).

Pos did not make any loss. It just made a net profit of RM22.83 million (for the third quarter ended Dec 31, 2013) compared to RM51.6 million in the same period previously. Several research house were quick enough to downgrade the stock immediately. Since then at the time of writing, shares of Pos has closed at RM4.64 on Mar 4.

Sterling Results

What if a company announces an exceptional good quarter results? Take for example Fima Corporation Bhd, the rich son of its rich mother, Kumpulan Fima Bhd. Fimacor was featured in my blog on Jan 20, 2014 titled : One rich generous printing and plantation son.

Fimacor announced a sterling set of 3rd Quarter results that earned an earning per share of 29.98 sen, thus bringing its total cumulative 9 months to 71.11 sen.

Surprisingly, it was the Production and trading of security and confidential documents' segment that saw revenue  improved by 17.9% to RM183.6 million from RM155.7 million last year, mainly due to higher sales volume of certain documents. In tandem with higher revenue, profit before tax increased by 24.5% or RM10.7 million compared to corresponding period of previous year.

Again very surprisingly, the oil palm production and processing segment didn't produce the results which was expected. Revenue from this segment was RM8.7 million or 12.3% lower than corresponding period last year. A pre-tax profit of RM21.2 million was registered, a shortfall of RM913,000 or 4.1% compared to previous year. The drop in profit was mainly due to lower revenue of palm oil products.

Going forward, I expect the oil palm production to do better as crude palm oil has been trading at a high of RM2,600 during the last few months.

After the results was announced, Fimacor's share price shot up by a massive 53 sen or 8.3% to close at RM6.95 on Feb 21. It was the number two top gainer.  The next trading day on Feb 24, the fast and furious buying spree of investors did not abate. The share shot up a further 41 sen or 5.9% to close at RM7.36. It was the number one top gainer. On Feb 25, the share surged again further to close at RM7.70, up 34 sen or 4.62%. Again it was the day's number one top gainer.

At the time of writing of Mar 4, Fimacor closed at RM7.55.

Should Fimacor announces another sterling 4th Quarterly results on May, its eps might cross the RM1 mark (assuming an eps of 30 sen), its shareholders are going to be rewarded for at least a final dividend of RM235 (interim RM150) bringing its total dividend to RM385. But personally, my hunch tells me that a final dividend of RM250 or RM300 looks a strong possibility.

As I have been a Fimacor shareholders since the last nearly ten years and most likely for many more years to come, its rising dividends payout is always a very good reason to keep and hold on the shares for as long as possible. Of course provided that the fundamentals business of Fimacor remain unchange, i.e. printing and palm oil in the future.

OS asked which other counters

which I feel have growth potential.

He commented that most counters has gone up.

First, it is very difficult to know which stocks display growth potential. Unless one reads a lot and does a lot of research, one would be left in the dark. Even if we come across a report of a certain stock that is poised for a re-rating due to some potential big contract or jobs, chances are the share price would have move up a few notches. By then, would you still jump in to invest knowing that the share price has move up already?

Take for examples the current water crisis in Selangor. We all know that most stocks connected to the water crisis should have potential for room to grow, but do we buy the stocks? Another example is the current hot spell. Any stocks involved in the mineral water business should benefit from this hot spell. Do we buy the stocks?

Therefore, it is my personal belief that it is easier to spot on stocks that have boring but quite predictable consistent earning. Sadly these type of stocks do not appear attractive to many investors who do not have the patience to wait for the "durian runtuh" season one day.  But I love these type of stocks especially when these type of stocks also pay reasonable regular dividends.

Secondly, not most counters (stocks) have gone up. Stocks' share price will only go up and stay at a certain level only when they are supported by their good and consistent quarterly results. Without the good and consistent quarterly results, you can bet that the share price will be low. That is why we see plenty of penny stocks and meagre few sen stocks.

Correction: Bernas did pay out a 12% Taxable First Interim Dividend for the year 2012 on Jan 29, 2013. In earlier blog : The Dilemma of Over Supply of Rice, I mentioned that Bernas has not pay any dividend in 2013. My apology for not checking out the details thoroughly.