The Dilemma of Focus Lumber Shareholders

The Dilemma of

Focus Lumber

Shareholders

The recent below expectation results for Q1/FY2016 (Quarter One for Financial Year  2016) of Focus Lumber Berhad was reflected on its performance of its share price.

The result was announced on May 21 evening after the closing market. As such, there were a period of two days for many anxious shareholders of Focus Lumber to discuss busily in the website of i3investor.com.

Amongst the discussions were some who predicted gloomy pictures while a few brave heroes were defending the company, pointing out the good fundamentals. We shall never know who will be right or wrong.

What matters is the direction of the share price. It will affect various groups of shareholders or short term players.

So what went wrong with Focus Lumber or was that anything really wrong with the company. I did a bit of "csi" (ha, ha, csi stands for criminal scene investigation, actually). But in this case, I am merely joking, rather I tried to analyse its reasons for its Q1/FY2016 results.

Revenue

Revenue for Q1/FY2016 was RM53.29 million compared to preceding quarter of RM57.77 million. It is a decrease of RM4.48 million which means business is still on as usual. A slight increase or decrease in revenue is expected when a quarter to quarter comparison is used.

Ringgit vs USD

The Ringgit were traded on average mostly between RM3.80 to RM4 during the first quarter of 2016. As such, it has impacted its bottom line. In fact, there was even a huge loss from foreign currency transaction. But we should also note that the Ringgit started to weaken again the USD during the April and has persistently traded above RM4 to RM4.10 despite the widely perceived view that it correlated with crude oil.

But crude oil price has been recently touching or trading near its five months high yet the Ringgit has actually weakened instead. Isn't the Ringgit supposed to be trading higher in tandem with rising crude oil price? But it is not, this time. What will happen to the Ringgit should crude oil price drop to below USD 40 or even lower in the coming months?

Rising cash position

As Focus Lumber continues to make profit (although this time it is making less money), it has a very good cash flow. Its current cash holding is RM88 million (comprising cash RM62 million and Other Investment (OI) RM26 million) compared to RM74 million (cash RM57 million and OI RM17 million.

What is OI? According to its report, it is stated as in Money market fund (unquoted in Malaysia). I believed its cash per share is around 85 sen.

Good Dividend Yield Stock

Focus Lumber is one stock that has been paying increasing dividend each time it has reported a higher level of profits. It has been increasing dividends payout from 6 sen to 8 sen and to 15 sen last year in tandem with rising profits.

How would dividends for 2016 be? To get a good guess, one must first try to get or analyse its eps for 2016. Assuming a conservative eps of 20 sen for this year, I strongly believed a 10 sen to 12 sen dividend payout is there. At current price of just RM1.91, this implies a dividend yield of more than 5 to 6% which is considered high when compared to the fixed deposit rate of bank.

The Dilemma of

Focus Lumber Shareholders

Many shareholders especially long term shareholders are now in a dilemma of whether to cash out or hold on and ride through the storm. There is no one who can tell us the answer of what will happen in the coming  quarters results.

I am also in this dilemma with you as well. Will the share price recover in the coming months if Focus Lumber can double up its eps of Q1/FY2016 in view of a weakening Ringgit since April? What if the USD becomes even stronger and push the Ringgit down to the RM4.20 to RM4.40 level? There are talks that the US Federal Reserve will raise interest rate some times to come this year. All these will have a huge impact the direction of the Ringgit which will eventually has an impact on the bottom line of Focus Lumber.

At the time of writing, Focus Lumber is still trading at the RM1.90 +  levels, earlier having attained the title of Number Biggest Loser on May 23 closing at RM2.07 following a massive drop of 27 sen.

If you think that the coming months, the Ringgit will continue to stay weaken and trade between RM4 to RM4.20 level against the USD, then it is better to hold on to Focus Lumber.

But on the other hand, if you feel that the Ringgit will stay strong and  will continue to trade at RM3.80 to RM4 levels in the coming months, then it might continue to impact the profit of Focus Lumber and hence, another similar result as Q1 might invoke another round of new selling again.

Personally, I feel the Ringgit will weaken in the coming months and those export oriented stocks should resume its higher profits again based on this exchange rate. But I don't have a crystal ball and am just judging this based on my analysis and experience.

The next several coming months will reveal the truth. Stay on course?

You decide because in the investment world, it is every man for himself.

The Accidental Blogger

The Accidental Blogger

For the past ten days, my mind was actually blank of what to write or comment or share any views for my coming blog. There were so many happenings events going on yet I could not pick one up, does a bit of studies and research and bingo! Write a blog about it from my angle or point of view.

I think this is a common problem for many amateur bloggers because there are no definite dateline or pressure to finish an article and have it posted online or published in the newspapers.

I did noticed that many regular stocks bloggers suddenly disappeared from the scene at times and left us wondering what has happened to them.

Perhaps the motivation was not there or the ideas could not be conceived into an interesting story. Strangely, I have been rather lucky to be able to come out with at least two blogs per month since the inception of Kassim's Thoughts first maiden blog on July 21, 2013 entitled : One Good "Seng" Of Bursa Malaysia.

I did not initially wanted to start out like this. If some of you might remember, prior to this, I was "promoting" certain stocks with few  interesting sentences on the famous website : Stocksunleashed's chit chat column. At that time, I was using the name Kassim.

But then after some times, I was shocked when someone else started to promote their stocks using my Kassim name as well! I did not know whether to feel flattered or not at that time. It irked me actually that I posted back with some not very pleasant to hear comment.

It also prompted me to rethink if there is another way someone else would no longer be able to use my name to post comment. This thought conceived eventually into a blogspot name Kassim's Thoughts.

So in a way, I should also be grateful to those who used my names to promote their stocks. If not for them, most probably, I would not have realised I actually posses  a simple flair of writing and with some good points to share too.

In a nutshell, we can safely say I am the accidental blogger! I do hope to be able to continue to share useful comments and thoughts for the next few years. Matter of fact is if the Retirement Aged has not been revised to 60, I would be retiring in 10 months time!

Yes, this give you readers an ideas how "young" I am! So actually I am in a sweet pot to determine if I wish to continue working to the "maximum" times of four years plus or not.

I have several friends in their early 50s who had taken early retirement package compensation from their companies. They advised me to continue working unless there are tremendous working pressure in my work which will cause me to have health problems.

It is a blessing that my work is rather a relaxing one where I can plan to go for either 9am or 11am shift. Of course I need to go off later if I plan to go for the later shift. Apart from these shift, there are at times plenty of free time to do your sendirian berhad work when there is not work for long periods of time.

I think I should skip this boring part or else most of  you are likely not to read further unless I can "stoke" your interest up again with at least a topic on a certain stock. After all, if not for stock market and shares topics, I bet none of you would be wasting your precious time to open up your smart phone/computer/lab top to read the thoughts of an old man!

Something must be brewing at Tek Seng

As the stock market continues to drift lower and lower by the days recently, one stock has been trending on the opposite direction by the days too.

It is Tek Seng Holding Berhad, a stock I have been commenting numerous times that readers might think I am biased when it comes to stocks with the names "Seng".

Hup Seng Industries Berhad, Keck Seng (M) Berhad and Tek Seng Holdings Berhad are three stocks that have been regularly gracing my blogs from time to time. Incidentally, I have at one time or another owned shares in these three companies.

So during the last two days saw heavy volume accompanied by the rising share price of Tek Seng. It share price touched an all time high of RM1.33 on May, 10, 2016.

Are the chasing pack of investors know something is brewing at Tek Seng

or they sensed that Tek Seng is going to announce an even better 1st Quarter Result? And hence they are buying in heavy volume ahead anticipating the good results will spearhead the share price to rise even further?

Based on my investing instinct, it is the latter which investors/speculators are banking on. A friend on mine with connections in this solar cell business told me that supply had not been able to match demand for several months already.

Whether he is telling the truth or not, when Tek Seng announces its 1st Quarter result (which I believe is anytime now), the earnings will determine  his words. At the moment, I believe in my friend because I have known him for several years playing football together and I know he is the type of person to be trusted.

It has been a great wonderful rewarding experience for yours truly with my initial investment in Tek Seng since 2008. I have been rewarded with several thousands of dividends plus another 7,500 free shares of warrant which traded at RM1.05 on May 11, 2016.

If I am to dispose of my warrants, the entire proceeds is more than enough to cover my initial investment with spare cash as well. As such, my current 15,000 shares of its mother share, Tek Seng are also considered free!

Believe it or not, I seem to be lucky when it comes to "Seng" investment in Bursa Malaysia. Perhaps it is times I should look into other shares with "Seng" names too. Ha ha.