Tuesday, July 28, 2009

Foreland Fabrictech

Going through my filter and saw Foreland Fabrictech among the top few in ROA and EPS for their FY2008. The latest quarterly report shows no growth in income therefore the ROA must be dropping. The company manufacture functional fabric to differentiate from the highly competitive market. Also, like that Mr Tsoi Kin Chit, Executive Chairman, had 63% of remuneration from bonus, making it more performance orientated. The IPO proceed from 2007 had been mostly used, with only S$5,269 left for New Equipment and S$2,957 for wastewater, treatment, recycling plant. Segmentation of profit: ~27% tax, 22% dividend 2008 (12% 2007), 19% capex 2008 (9% 2007). Also a "General reserve fund" law requiring 10% of net profit till the company reach 50% of registered capital.

What I like
1) Simple company business model, manufacture and sell + R&D for higher margin fabric
2) Chairman bought own share during July 08, @ S$0.199

Catalyst
1) Govt Support:
- Increase tax rebate from 14% to 15% from Feb 2009. (very small)
2) Possible dividend payout of 20% based on prospectus, although in 2008 it only gave 5%

Risk
1) Poor liquidity
2) Slower growth of 6%
3) Small Cap (although I like this point since less chance of interference)
4) Chairman holds 60+ % of share and his decision can greatly affect stock price
5) Resignation of asst company secretary w/o explanation

Competitor in SG
Qian Feng
Li Heng
Sinotech Fibre
China Fibretech
China Sky
Fibrechem
Hongwei Technologies Limited
C&G Industrial Holdings
China Printing & Dyeing Holding?

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