From zero to hero to zero again

From zero to hero

to zero again

What can I say about Focus Lumber Berhad's share price performance since I started investing it in the beginning last year? It's share price had gone like one round the world and back to its starting point, I think, haha.

My huge paper profit has just vanished into thin air just like that. I think the declining of its share price is as fast as its rising share price too.

For those who went in for short term and have gone out with some profits, I would like to congratulate them for their right or lucky execution to exit. For those who bought higher than the current price or even near its RM3.09 peaks and still holding, I share your disappointment and pain as well.

For those like me who had been sitting on a near 100% paper profit gain and let it disappear off just like that, do not feel sad although not every one will feel the same. Some might still feel very hati sakit for letting off an wonderful opportunity to let go of such a massive paper profit gain.

I wonder if there are some who might feel bad or sorry for following me in this Focus Lumber investment all the way. If you feel so, you have reason to be. I feel bad too because I didn't sell when there is a big profit to take. Some of you might feel to take profit at certain stage, but because I wasn't taking profit yet, some of you might hold off the idea of selling and instead in the same boat as me now.

So what went wrong

for Focus Lumber actually?

Here, I would like to break down into several sections to see a clearer picture of what were the good points (if any depending on individual's perceptions) and the disappointing points.

Revenue

Revenue for Quarter Two 2016 was RM52.74 million which was a slight decrease of just RM0.55 million from the preceding quarter. So we can safely say it is still business as usual which should be alright for its usual business operation. What one should fear is there is a gradual decrease of revenue indicating that business are dwindling down and that is a bad sign which investor should take note of.

Higher Quarterly Profit

Quarter Two 2016 profit of 4.5 sen was 40% higher than its preceding quarter of 3.21 sen. Isn't this an improving result which investor should rejoice if we are able to see our companies reporting a stronger set of result than its preceding quarter?

I would be happy if this sort of 4.5 sen earnings per share is just maintained for many more quarters to come. It would amount to an annualised 18 sen  per share which in my opinion, a dividend of 8 to 10 sen would still be in the comfortable range for Focus Lumber to pay out.

Absence of a Dividend Announcement

I think many investors are disappointed of an absence of an expected interim dividend (which was a five sen dividend last year) that did not happen. This must have put off many dividend loving investors to invest in this stock.

I understand that there are many conservative investors who are dividends lovers just like me. A stock that is able to pay a reasonable regular dividends that amount to nearly 5% or more would normally have a steady base on its share price.

Increased of fund in

Other Investment

Its cash hoard has been reduced to RM 19,614 million as at June 2016 while its Other Investment sees an increase to RM62,510 million. According to its Annual Report 2015, the fund is invested in something called Structured Investment where it will earns 3.08% per annum, plus bonus interest of 2% for the first quarter of the year for Year 1, followed by 0.34% per annum, plus enhanced interest (3M KLIBOR) of 2.7% per annum for the number of days that the daily 3M KLIBOR is fixed at or below a predefined level throughout Year 2-5.

The purpose in this investment is to provide income for investors through investments in fixed deposits with financial institutions and/or money market instruments. The weighted average effective interest rate at Dec 31, 2015 was 3.61%.

As an investor, I think it is alright as long as the management would want to enhance more returns from this hoard of cash, but then there should be a reasonable amount for such investment that is comfortable, certainly not more than 50%.

What if such investment goes awry? Who would suffer the massive loss? In such investment, there is always some new potential risk which might effect it without a warning.

Why not return some of its money to shareholders in the form of special dividends and let individual investor decide what to do with their windfall? Isn't this most individual investor would prefer?

I am 100% sure if management allows minority to vote for special dividend or investment in this structured typed, the majority minorities would vote for the former. But sadly, management decided on their own which must have not gone down well as reflected in its share price having a declination   to RM1.54 as at September 2, 2016.

Management must understand all this money belongs to all shareholders although the majority minorities are not in the power to decide as the minority majorities shareholders are.

Is there anything to learn

from this episode?

Is there anything we can learn from here? How could a much touted rising star suddenly in just a few months is ditched so badly that those who still keep faith in it must be reeling their mistake badly. Is is better to take profit rather than keeping for long term investment?

In this instance, short term investors who profited are mostly likely to argue it is always better to trade short term rather than long term. In this particular case, they were 100% right and I congratulate them for their precise judgement.

For those who are still holding like me, we can only hope that all will turn up well in the end. We never know when if there could be a new catalyst again that will make share price rise again.

By the way, have a wonderful belated Merdeka Day!!!!!!!!