Fimacor - still strong, steady and generous

Fimacor - still strong,

steady and generous

Owning business or assets especially in another country is not always assumed as safe. Many times that particular country's government could see a change of hands and the new government will sometimes decide to change the current rules set by the previous government.

Such change of rules sometimes can seriously affect a wide spectrum of people and business in the countries, But sometimes even without any change of new government, the existing one could still  to amend or over-ride existing rules or agreements done years back due to certain reasons.

Recently one of my companies, Fima Corporation Berhad (Fimacor) was experiencing such shocking amendments of rules/agreements of their plantation business in Indonesia.

Fimacor's 80% owned PT Nunukan Jaya Lestari (PTNJL) has a lease hold term that expires in 2038 and covers 49,356.75 acres of agricultural land in Nunukan Regency, East Kalimantan, Indonesia. Between 2006 and 2007, Fimacor paid a total of RM 96 million to acquire PTNJL.

The plantation business in Indonesia accounted for around 30% of the group's revenue since the last eight financial year. But during these last eight years, its total profit easily exceeded its original investment of RM 96 million. It has turned out to be a good investment after all.

But now the Indonesian government has revoked its 80%-owned Indonesian subsidiary's cultivation rights, reasons were it had been improperly issued resulting in the overlapping of some of Fimacor's planted areas with forestry areas.

Fima has started legal proceedings to challenge the ministerial order. But what will the outcome be? If it loses, the loss of this will seriously hurt its earnings although it still has a stable security printing business to rely on. (But then again, isn't it better to enjoy two earnings than one?).

Fimacor was featured twice before here. I first wrote it on Jan 20, 2014 : One rich generous printing and plantation son and later on July 2014 : Fimacor is running faster than Kfima. My original investment of 4,000 shares in 2004 has now ballooned to 12,000 shares following its bonus and split exercise in 2014.

Total dividends received to date is around RM 11,000.00 which has exceeded my original cost of RM 5,722.36. Fimacor remains a top dividend class paymaster. Between 2011 and 2014, (before its bonus and split exercise), its average dividends were RM 346 per share. For 2015 and 2016, it paid RM 125 per share each year, but when I calculated my 12,000 shares x RM 125, it is a total of RM 1,500.00 per year.

Although my investments are free, it doesn't mean I don't have to worry about what will happen to my investment in Fimacor at all. I am in a dilemma of how the outcome will be? If I don't sell now and it loses the Indonesian plantation business, its share price will easily fall below RM 2 and beyond. What if it wins? I think in the event it wins, it will not have any effect on its current price of RM 2.15 plus minus range.

On the other hand, had it been the other way round that the plantation business accounted for 70% of its revenue instead of 30%, meaning the security printing business just accounted for 30% only, I believe its share price would have fallen to below RM 2 the moments the news came out.

Right now, its seems to have priced in this revocation news already. I believed many minorities shareholders like me are keen to know the outcome although it may take months or more than that when it comes to counter legal proceedings of this type of case.

The goodness at the moment is it is still business as usual there. The icing  on the cake is palm oil price has been trading rather higher during these few months.

Interestingly, Fimacor had just announced a set of impressive results for its 2nd Quarterly Report (July - September) for Financial Year ended March 2017.

Fimacor earned 7.32 sen, together with its 1st Quarterly of 5.93 sen, bring its total half year earnings to 13.25 sen. On an annualised basis will bring it to around 26 sen. A first interim dividend of 5 sen has been announced, payable on Dec 30, 2016. I am confident a final dividend of at least 7.5 sen will be rewarded to shareholders when it announces its 4th Quarterly Report result somewhere in May next year.

For dividends lovers like me, Fimacor remains a share I would like to keep for more years as long as the dividends are banked in to me at this kind of rate which is easily more than banks' fixed deposit rate.

A New Wonderful Experience

I have a true confession to share. Recently I decided to abstain from reading the share price of Bursa Malaysia. I wanted to know how it the feeling would be by totally not knowing the changes of my shares. So the only sure way is not to check on the gainers list or from the newspapers.

But I continued to keep abreast with current business issues by reading the business pages, The Edge and Focus Malaysia. I continue to check on the results and dividends announcement as well.

So what was the feeling like to be? Well, you never try you never know. I can only say it is something like peace of mind when one doesn't really know what is happening to the share price.

That is why I did not post any update on my Kassim's Basket of Defensive Stocks table. Incidentally the day I abstained from knowing the share price was on Oct 21, 2016. It was a day I started to see life differently after my possible near miss day on Oct 19.

Thank You so much

For those who wished me well after reading my previous blog, I like to say thank you so much. They were a few friends who called up to ask. I am doing fine. I have decided to increase my morning exercise more times rather than confine to my usual Saturday and Sunday football games only.