Faster Than Kfima
For those minority shareholders (including
yours truly) of Fima Corporation Berhad (Fimacor) who happened not to scroll through the announcements
website of Bursa Malaysia after the closing on June 26, 2014 must have waken up
to a very pleasant surprise morning the very next day when trading started
again.
The usually quiet counter, Fimacor sprang
to action with a massive surge in its share price to close at RM9.12 (up by a
walloping RM1.02 or 13 %). Fimacor was the day's No. 1 top gainer.
The reason must be due to an announcement
on June 26 evening that Fimacor is going for a share split and bonus issue.
(The exercise entails that one share is split into 2 shares and then a bonus
for every two split shares. To make it unconfusing, if you have 1,000 shares of
Fimacor, after the share split and bonus exercise, you will effectively be
holding 3,000 shares).
Closing at RM9.12 on June 27 was the
highest close since 1987. And if you think enough is enough, Fimacor continued
to record even higher close again on June 30 at RM9.20 and eventually closed at
RM9.21 on July 4.
Shareholders of Fimacor must be jumping
with joys of these sudden massive price appreciation. Suddenly these
shareholders are sitting on additional thousand of RM profits (paper profits
assuming they are still holding on the shares).
Guess Hari Raya bonus comes early for them!
But while shareholders of Fimacor are in
euphoria, the same could not be felt by
those minorities of Fimacor's mother company, Kumpulan Fima
Bhd. (Kfima). Kfima's
share price merely rose 6 sen to close at RM2.28 on June 27. The mother's share
price obviously did not move in tandem with its runaway son's surging charge.
Why?
Kfima owned 60.9% of Fimacor, therefore as
there are 80,479,710 shares of Fimacor, Kfima holds about 49 million shares. At
the current price of RM9.21 on July 4, this investment is alone worth RM451
million. Divided by the number of Kfima's shares of 274.7 million shares and
each Kfima shares is worth RM1.65! This does not include the assets and the
logistic, food and other businesses Kfima owns. Kfima also has about RM100
million in investment properties and interest in associates.
Fimacor earned 83.74 sen for Financial Year
ending March 2014. (FYM 2014) Kfima's should earned at least 18 sen based on
its 60.9% stakes (83.74 sen x 60.9% = 51 sen divided by 274 million Kfima
shares = 18 sen). But Kfima only reported an eps of 21.81 sen for FYM 2014.
This indicated that after stripping out the 18 sen contribution from Fimacor,
Kfima's other businesses only generated 3.81 sen!
Fimacor paid out a total dividend of 38 sen
for FYM 2014. Kfima would have pocketed RM18,620,000 in dividends. Divided by
its 274 million shares and each Kfima share would be entitled to almost 7 sen
dividend. Not surprisingly, Kfima only
declared a final dividend of 8 sen for FYM 2014.
But if Fimacor continues its surging share
price, will its mother follows in tandem eventually? The gap between the mother
and its son's shares price is getting wider and wider especially since the
annoucement during the last several days.
Here is a chart from Dec 2009 to July 4,
2014. The purpose of the chart is to show that the ratio of 1 Fimacor share to
1 Kfima share (meaning how many 1 Fimacor share can buy how many Kfima shares
since Dec 2009).
From the chart, it is obvious that the son,
Fimacor is simply running ahead in terms of share price's performance compared
to Kfima. Although both have seen their share price appreciated, the widening
gap is very much favourable for Fimacor shareholders. So there are two
pertinent questions. Should Fimacor shareholders sell their shares and switch
to Kfima? Afterall, one Fimacor share is able to buy more than 4 Kfima shares,
at the moment. Or should Kfima shareholders sell their shares and switch to
Fimacor before the latter runs further ahead in its share price?
Understandable, normally the parent company
trades at a discount to its subsidiary. In this case it is true for Kfima and
Fimacor.
During one of my previous blog on Jan 20, I
wrote about Fimacor : One rich generous printing and plantation son. I
mentioned that now and then, Kfima and Fimacor would be mentioned in write-up articles from time
to time. And it really happened.
Incidentally, after Fimacor's announcement
about the share split and bonus issue was released on June 26 evening, a big
write up on Kfima (titled : Kfima a cheaper entry than Fima Corp) was published
in the latest Focus Malaysia weekly issue (June 298 - July 4, 2014) issue.
So for those who wish to invest, would it
better to invest directly into Fimacor or the mother company Kfima? I do not have a crystal ball to help me.
But common sense prevails that if this widening gap share price persists, it
would be a matter of times that there would be a major corporate exercise that
would entail a privatisation exercise or a merger between the two listed
companies. Should
that happens, you can bet that by then that the controlling company would be at
a great advantage to plan and execute a move that would result in a win-win
situation for both companies.
Christophe Yap emailed me this on June 12, 2014 :
Thanks for sharing your thoughts on
investment. Your points of view and articles give me some useful hints on
investment. Do you mind sharing any other useful or interesting blogs
discussing or commenting on investment like what you are doing?
Dear Christophe Yap,
I am most glad that my efforts to share my
simple thoughts in my blog can be of some help to you when it comes to investment.
Investing is not difficult if we try not to be too smart to think we know
everything. Tell you a secret, I do not know a lot of things and my knowledge
in a lot of other subjects is rather poor, but perhaps when it comes to
investing, I pride myself in knowing that I know this best, apply it to the
fullest and hopefully to reap the sow of my rewards.
There are also several bloggers writing
interesting blogs with good ideas. The point is what is interesting may not be
interesting to you. Similarly what is interesting to you may not be interesting
to me.
So read more but do not believe in all,
some are just trying to promote certain stocks of their interest. It is easy to
promote one own's stock if one has some flair in writing. But my style is
different. I stand by my conviction. I dare to challenge readers to be with me
by buying shares (example Mercury Industries Berhad) at current market prices
not once, but three times! I provide proof with my purchase contract notes
every time).
Dear OS,
Sorry for not replying to your two
questions. Sometimes I do overlooked this and that. After all, when you are
over the fifties, the memory system is not that good anymore.
No, Harrisons is not going to be a
10-bagger stock. But I believe that Harrisons will continue to be just as it is
doing "fine" right now for more years to come. It will be business as
usual.
Definitely, Harrsions' profits for 2014
will all go towards paying off the payment to Kastam DiRaja Malaysia. Whether
it might be enough or not depends on the last three quarters. But rest assured
based on Harrisons' paying records, it is unlikely that the company will not
pay any dividends for Financial year 2014 at all. Perhaps at a lower range. As
long as Harrisons continues to earn 30 to 35 eps (earnings per share),
Harrsions should be trading in the tight range of RM3 to RM4 levels. At this
levels, Harrisons is considered not expensive and trading at a PE of 10 plus
which is very undemanding.
This month July, also marked a milestone
for me to be able to complete sharing my humble thoughts for one whole year
i.e. from July 2013 to the beginning of
July 2014. When I first thought of
starting to pen my thoughts in Kassimsthoughts.blogspot.com, I asked myself if
I am able to last for one year. Although my blog appears usually twice a month
with the rare occasion of three times a month, I have always strived to create
an unusually style by wording my headlines with more curious catching titles.
Actually I also surprised myself with all
those curious catching headlines. Who could have thought a headline that reads
as : One Good "Seng" of Bursa Malaysia? Who could have thought that
the comment started by mentioning that the word "Seng" is a very
famous Chinese names in those early days and then related unexpected to several
"Seng" of Bursa Malaysia, ultimately Hup Seng Industries Berhad.
For those who have been faithfully reading
my blogs (this is the 27th blog) and find it enjoying and entertaining and
perhaps useful, I say "Arigato" to you. I look forward to share more
of my thoughts again in the coming period.
For those who emailed to me comments and
enquiries, thanks a lot. My humble apology if I did not reply to everyone
because sometimes there are certain stocks I am not familiar with and hence, am
not in the right position to comment on it.
Seriously, it has been a wonderful year for
me to be able to pen my thoughts. My wish is that I would be able to deliver
another year of interesting blogs that will brighten your moment with joys when
you are reading my blogs.
Cheers to you!
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