97 - Rising cash
hoard of Fima Corp
Fima Corporation Berhad (Fima Corp) is one company yours
truly is quiet well versed with its steady and easy to understand business
since becoming a shareholder since October 2004.
That is more than twelve years already of becoming a silent minority shareholder and doing nothing at all
other than receiving consistent dividends every year without fail and of course
more free shares. My original 4,000 shares has also become 12,000 shares after
its bonus and split corporate exercise in Oct 2014.
The business of Fima Corp is easy to understand as it mainly derives its
steady income from its security printing business. In its efforts to diversify
for more income, it ventured into plantations in 2007 and done remarkably well
too.
But last year, Fima Corp's 80% owned PT Nunukan Jaya Lestari (PTNJL)
suffered a speed bump when the Indonesian government decided to revoked its
cultivation rights, the reasons were it had been improperly issued resulting in
the overlapping of some of its planted areas with forestry areas.
Although Fima Corp started legal proceedings to challenge the
ministerial order, there has been no latest or updates on this. It has been
more than eight months already.
However in the interest of good order, the local government has given
its undertaking and allowed PTNJL to continue to lawfully operate its
plantation operations until the final determination of the matter by the
Indonesian courts.
In the event of the worst scenario where its loses out its legal
proceedings and loses out all its
plantation business, it will have to fall back to its main core security
printing business for income.
However there might be twist of turns of events in the outcome. Will
there be some form of compensations for Fima Corp? After all, Fima Corp paid a
total of RM96 million for PTNJL "legally". If there is, what will be
the quantum amount?
Or perhaps there will be some form of alienation of its cultivation
lands resulting in smaller areas for Fima Corp as a form of mutual settlement?
All these are only my guesses and I might even be totally wrong.
On the other hand, should Fima Corp gets a positive outcome from its
legal proceeding, it will be business back as usual albeit a big sigh of relief
for all its shareholders including yours truly.
Fima Corp remains a very well managed company throughout the years
despite taking a loan for the purchase of PTNJL. The plantation business
produced another set of consistent profits, sometimes higher, some times lower
depending on the price of palm oil.
Since its purchase of PTNJL in 2007, it has not only managed to pare
down its debts to zero levels (taken to finance PTNJL), Fima Corp has also
grown its cash reserves significantly especially the last few quarters.
Since its announcement of its 4th Quarterly results on May 24, 2017 for
Financial Year ended March 2017, its cash hoard has risen to a record high of
RM336 Mil compared to just RM177 Million a year ago. Besides it has also done
well with its collections of Trade Receivables against Trade Payables.
The table below will illustrate how its cash has risen to an all time
record high from the Jan-Mar 2016 to Jan-Mar 2017 period. Besides its Trade
Receivables has also been in healthy proportion to its Trade Payables.
With RM336 Mil in hand now, its cash per share has also risen to RM1.39
Based on its share base of 241,404,497 shares and at its current price of
around RM2.30 after minus off its cash per share of RM1.39 means an investor is
just paying around 91 sen for its solid security printing business.
Based on its latest security printing business profits of RM 59 Mil (Financial Year 2017 ended March), it is
almost double when compared to oil palm production and processing division
which recorded RM 28 Mil.
Fima Corp's current cash hoard of RM336 Mil in hand is the highest ever recorded as far as I
know. Such remarkable of healthy balance
sheet has enable Fima Corp to continue to pay above average bank dividends
rate.
After its bonus and share split exercise in 2014, its last two years of
dividends has stayed at 12.5 sen. But this year, Fima Corp has decided to even
increase its dividend with a 5 sen special dividend apart from its final 7.5
sen dividend which was announced together with its 4th Qtr results on May 24,
2017.
Yours truly is confident such generous amount of dividends including the
occasional special dividends will continue in years to come. Fima Corp has
remained one of my most top dividend yield stock in my portfolios besides
another steady and generous dividend stock, Harrisons Holdings (M) Bhd.
Both stocks remain my money-good sons of Bursa Malaysia. Both are free
and continuing to bank in generous dividends like "duit minum kopi"
allowance for me year in year out.
