What is wrong with Focus Lumber?

What is wrong

with Focus Lumber?

Of late, the share price of Focus Lumber Berhad had been on a downtrend since touching a high of RM1.64 on Apr 21 to as low as RM1.26 on May 25 much to the chagrin of yours truly.

Currently, the price has recovered from that low on May 25 to RM1.36 on June 19.

So what really happened

to Focus Lumber?

One of the main reasons is because of vessel delay due  to congestion at ports in the USA. Because of this, the quantity sold to USA was lower than the preceding quarter, hence lower revenue and slightly lower earning per share.

Focus Lumber reported an eps of 3.22 sen for its 1st Qtr 2015, which is 18% lower compared to its preceding quarter of 3.96 sen. Assuming the earning remain flat or same for the next three quarters, the annual eps would be 12.86 sen.

Now, one must note that its cash hoards has increased tremendously from RM59 Million (end of Dec 2014) to RM72 Million (end of March 2015). The reason is because its receivables of RM15 (end of Dec 2014) has been reduced to only RM6 Million (end of March 2015).

Isn't this good news for the company and shareholders that the company is able to collect back its receivables - hence resulting in its increased cash hoards?

Although I must admit that I am a simple layman and do not understand the calculations of accounts of a company compared to a qualified accountant, I understand that the RM72 Millions if divided by the number of company's shares means a Focus Lumber share is backed by a cash of 70 sen. (Not many companies in Bursa Malaysia can boast of such high cash per share).

Dividends for the last four years were 6 sen, 6 sen, 8 sen and 8 sen for Financial Year 2011, 2012, 2013 and 2014 respectively. Whether there will be a 8 sen dividend for Financial Year 2015 remains to be seen, but based on the last four years' history trend of dividend payment, I believe management will announce a 8 sen dividend in December 2015.

So is the current price of RM1.36 fair, undervalued or still expensive? If you ask several investors, you would get all kinds of different opinions and you would be very confused. Because there are many ways to see it the same thing or issue from many different angels.

But my way is very simple. If one is to strip off its cash per share of 70 sen, investor would only be paying 66s sen for a stock that earns an annualised eps of 12.86 sen. The Price Earning Ratio would just be less than five only!  Besides, the potential dividend of 8 sen would also mean the dividend yield is above 6%!

Again, not many companies can boast these. In conclusion, I personally believed that nothing is wrong with Focus Lumber. I also believed that the issues of delay in arrival of vessel departing to USA will also be settled and eventually result in normal business operation back.

Furthermore, the ringgit continued to experience new low against the US dollars, at one time touching a new 9-year low. As long as the ringgit continues to remain weak against the dollar, the advantage continues to be on Focus Lumber's side and this situation looks likely to continue to persist for many more months to come or even years.

As such, the current weakness share price is an opportunity for investors to pick up for those who have not own any Focus Lumber share at all as the risk is lower now compared to several month ago. 

As my programme buying to average out the share price over a particular period of time for Focus Lumber shares is still above the current price, I shall wait for another round of buying spree should Focus Lumber share price falls to around RM1.25 range, that is if it really happen.

I am still holding on to my 36,000 shares of Focus Lumber, and I strongly believe that there are many of you similar in my position, holding at above the current price or near its 52-week high.

An email from Eric Woo on May 28, 2015 :

"My sister-in-law is taking Elgucare for her spinal problems. I believe there are 3 variants with price ranging from RM128 to RM138 (inclusive of GST) which is available from AA Pharmacy, Lucky Garden - that's just behind TMC supermarket in Bangsar."

First, thank you for sharing on this. It is true that there are three types of variants for its usage to be more effective, that is the upper level, middle level and bottom level. If a person is suffering from pain in the middle of the spinal, then the person should consume the middle level types of Elgucare.

Well, my spouse has been feeling comfortable with her back and can be seen going for light jogs two or three times per week. In fact, I haven't hear of any back pain from her during the last two weeks.

I have to say thanks to Elgucare!