Buying Focus Lumber shares

Buying Focus Lumber shares

Cash rich companies with stable earnings and paying good dividends with a focus management team are companies that would usually attract conservative investors who don't mind much about the share price, but rather the consistent good dividends dished out every year.

Sometimes, such companies' share price are stable or on a steady slow gradual chart. Over a period of times, its share price could even be at its new or near new high or 52-week high.

At this price, how many investors would be jumping into the wagon. The adage that "buy low sell high" or better to buy near its 52-week low than near its 52-week high" would deter many an investor.

But if that company is able to repeat and maintain its stable earnings or better still, improved earnings, then nature will take its course. Its share price would move higher again in tandem with rising earnings.

One such stock that is trading near its 52-week high is Sabah-based plywood manufacturer Focus Lumber Bhd. The company was recently featured in The Edge issue on Mar 30, 2015.

Having read the feature and digested it, it is not difficult to understand why it is trading near its 52-week high.

As Focus Lumber's exports over 90% to the world, and  almost all is mainly denominated in US dollars, the current weak ringgit exchange is indeed a BIG boon to the company.

The US is the largest market which over 67% of Focus Lumber's products were exported there. India, South Korea and Taiwan are the other markets. Also as the weak ringgit again the greenback situation looks likely to persist for months to come, the bottom-line become more favorable for Focus Lumber in the longer run.

Steady & rising dividends

Dividends of 8 sen for Financial year 2013 and 2014 translate to a dividend yield of around 5% at the current price of RM1.50 plus minus. This is considered a very attractive one for conservative investors. Looking forward, I also believed the management will slowly increase the dividend payout to 10 sen in the coming years and that would increase the yield even more attractive to 6%.

Cash hoard keeps on increasing

Focus Lumber's cash hoard has been increasing since 2010. From 2010, its cash was RM25.8 Million. But by the end of 2014, its cash hoard has been more than double at RM59 Million. Such astonishing rise of cash is indeed good for the company and shareholders because it can be used for merger or acquire another company or well, for conservative investors is to reward with special dividends or one off bumper dividends.

At the current rate, Focus Lumber's cash is set to rise even higher from a cash per share of 57.5 sen.

Less men more share

There are only a total of 103,200,00 shares of Focus Lumber. Surprisingly and much to my delight, the top thirty largest shareholders "cornered" up to a staggering of 91.47% shares or 94,382,400 shares (according to its Annual Report 2013).

This leaves only a mere number of 9,427,920 shares left in the open market. As the saying say, Less Men More Share means there are less shares in the open market, the greater demand will result in stronger share price.

But there are some investors who are worried due to this low liquidity stock. I beg to differ as based on my experience, this is really not true. Readers will remember that another of my favorites company Mercury Industries Berhad also has a low liquidity trading activity. But due to its stable earnings and good dividends, the share price has also appreciated gradually from below RM1 to the RM1.40 - RM1.50 levels - low liquidity or not.

The "Leng Kam" feeling is there!

The Hokkien people has a saying that when one feels the "Leng Kam", then  that motivation to act is at a very high level. One must be brave enough to go for it. "Leng Kam" means one feels that this is it, do not wait anymore, be bold enough to do it or buy it or bet on it.

In this case, when I finished reading the Focus Lumber  article, my body was full of "Leng Kam" feeling for this stock. Never mind that it is now trading near its 52-week high.

When I first invested in Integrax in July 2013, the stock was already trading near its 52-week high and the new high of the last 8 years. But the "Leng Kam" feeling was so powerful inside me that I went for the kill and invested not one, but to the tune of 18,000 shares!

For the average man in the street, the amount is rather quiet a big sum. But my "Leng Kam" was proven to be very right in the end as we all know that Integrax is being offered at RM3.25 by Tenaga Nasional Berhad.

Buying 10,000 shares of

Focus Lumber Berhad

at RM1.52.

On Apr 3, 2015, my strong "Leng Kam" feeling told me what to do. I have decided to invest in this cash rich company at RM1.52 even though I know that it is trading near its 52-week high.

Based on its current business direction with the prolonged weak ringgit against the greenback, Focus Lumber should be poised to report higher earnings in the several coming quarters and hence, the good performance will be reflected in its share price ....  meaning new 52-week high again!

So dear friends, after reading this

and if you have the "Leng Kam" feeling,

go ahead and be brave just like me.

Together we will ride this new journey

with Focus Lumber.

Please take note that this posting supercedes an article about Integrax Berhad which I wanted to post, because I want readers to know as fast as possible the timing of my purchase of Focus Lumber shares.

I shall be posting my contract notes in the next blog.