Friday, June 24, 2011

Some Comments On Fajarbaru

Got a set of comments posted on an old posting: Review Of Fajarbaru's Earnings

  • HLB said...

    Hi Moola, I found this post when I was trying to get some update of Fajarbaru. I used to be an investor of this counter. But the price and volume seems going down recently. I know the last quarter result was no better than preceding year's quarter. I like your style of analysis, would you give some update and your point of view regarding this stock. I am still holding some.
I stopped posting on  because there wasn't much interest and feedback.

Anyway, for your info, here's the updated earnings table on Fajarbaru.

Fundamentally, the company's balance sheet is indeed rather solid and its dividends have been pretty solid recently. ( I am not writing on the DY stuff cos it's pointless cos the yield would depend on your existing cost of investment)

I would agree with you that based on earnings, Fajarbaru's not too happening. As mentioned before in my last posting on Fajarbaru, it's fy 2010 Q4 earnings of 10.463 was distorted by recovery of bad debts worth some 2.7 million. And if we exclude that set of earnings, we are currently looking at a current ytd 3 quarters earnings of some 11.5 million vs 14.2 million recorded the previous year. And we are looking at a possible earnings of maybe less than 15 year for this fiscal year (this is my estimate hor)

Which is rather poor when compared to what it had done the previous years.

And I am not sure if you would notice there's constant exercise of warrants announced on Bursa website, which means if I want to prevent eps dilution shock, perhaps it's best that I calculate Fajarbaru's eps based on the assumption that all its warrants will be converted into ordinary shares.

From my live quotes, currently there are 172,691,075 shares of Fajarbaru and there are some 25,016,025 warrants. Which means for eps calculation sake, I would use 197.7 million shares as the base when I calculate my eps.

The initial announcement from Fajar on this can be found here: FAJAR BARU CAPITAL BERHAD (“FBC” OR “COMPANY”) o PROPOSED PRIVATE PLACEMENT o PROPOSED SHARE SPLIT o PROPOSED RIGHTS ISSUE WITH WARRANTS o PROPOSED AMENDMENTS - note it's a 2007 announcement.

Yes, the share base now is bigger cos there was a private placement done later.

All in with an earnings of 15 million and a share base of 197.7 million, we are looking at a possible eps of 7.6 sen. I would use this set of numbers to estimate the current PER and ask myself if the current traded price if fair, undervalue or perhaps too optmistic.

Back to the earnings issue. As you have noted yourself, earnings is not too happening. Now think about it. What's the possible current business economics for a builder like Fajarbaru?

Would exchange rate be a factor?

Or would soaring commodity prices cause a havoc to the building material prices? If so, what's the impact on Fajarbaru's construction business?

And .... what kind of news are we hearing about Fajarbaru nowadays?

Any new project that would boost its order book?

Ah.. this one important... cos without any new orders, the outlook then would be un-exciting. Not much reason for 'others' to buy the stock. Yes? If I am not mistaken it was bidding bits and pieces for some LRT and some LCCT work. Did it win?

And how is Fajarbaru progressing in its recent attempt to diversify into the property sector?

Posted last July: Fajarbaru Venturing More Into Property Development. I wasn't too impressed because of the lack of information and I thought the deal was rather dodgy and recently there were a couple of news of Fajarbaru trying to diversify more into property. (for eample Fajarbaru JV buying Penang land for RM200m ) Despite my personal dislike of companies diversifying, a property ventrue for a builder like Fajarbaru isn't too bad an idea and more since Fajarbaru is very cash rich. It rather makes sense for it to venture more into property development. Make its 'cash on hand' more prodctive. That's my thinking.

However... if you look at the business segmental from Fajarbaru last reported earnings, progress in the property development is slow....

From Quarterly rpt on consolidated results for the financial period ended 31/3/2011 - see page 11 of the pdf file attached in that link.

And yeah, as pointed out, the share price performance have been disappointing recently.

ps: hope this set of second opinion helps (and yes, I do acknowledge there is some share buybacks activities from Fajarbaru)


HLB said...

Hi Moola, I never expect you to fast..
It's simply difficult for fajarbaru to achieve the same earning as last year in this 2011 Q4. Thanks for comfirming that (If I got you right).
Again, thanks for your fact and questions raised. I think I know what to do, haha! Have a nice weekend!

Moolah said...

HLB: May you make the best decision. :)

staind said...

Hi Moola,
I would like to share some comments on this counter.:)

Regarding Fajarbaru’s intention to buy land in Penang for RM200m, the company had made announcement back in May-11 to clarify that the news is not true.

They had been awarded the Kelana Jaya (RM87m) and Ampang LRT(RM62m) extension work. However, both projects will only take effect on their financial year on June-12 and June-13 it seems.

I agree with you on its current earnings and EPS. It is quite disappointing. There may be a minor selldown when the company announces their 4QY11 results later. haha.

The company had been busy buying back share since 4th May with total of 3.5m shares purchase so far. At the same time, one of its shareholder Dato JB Tan disposed 5m share recently. The company seems to want to support the share price at current level and is trying to purchase the number of share disposed back to their treasury.


solomon said...

One the political maestro vehicle, I can guess still but in real favor now.

If it is compared to BCG matrix, it looks like a dog. Maybe time to liquidate some??

Moolah said...

staind: thanks for your views.