Wednesday, December 30, 2009

Fung Choi Media Group Limited (F11)


Looking into Fung Choi, because a friend asked for thoughts on it. Honestly, I had stop looking into financial because
1) the huge variation in numbers and expected growth, I find that I am very bad at estimating with historical data.
2) the huge time and effort needed, M&A seems more easy but of course have limited growth
3) Most importantly, I don't know how to set a target price range


Company Info:

Fung Choi Media Group Limited is an investment holding company. Through its subsidiaries, the Company is engaged in printing of advertising materials, magazines, books and light packaging boxes, manufacturing and printing of corrugated carton boxes, provision of advertising agency services and design, manufacture and sale of commercial point-of-sale display units. It operates in four segments: Printing division, which is engaged in printing of advertising materials, magazines, books and light packaging boxes; Packaging division, which is engaged in manufacturing and printing of corrugated carton boxes; Advertising division, which is engaged in provision of advertising agency services, and Commercial displays division, which is engaged in design, manufacture and sale of commercial point-of-sale display units. During the fiscal year ended June 30, 2009, the Company disposed of its entire interest in Guangzhou Fung Choi Printing Co., Ltd.

IPO Detail: (2004)


S$34.7m : Net proceed of which,
$ 6.2m : Invest in joint venture between with FCPL and GPPG,
$ 6.3m : Repay borrowings
$ 5.8m : Fund development, automation and improvement of production managment system
$ 2.1m : Further investment in new joint venture or working capital
$14.3m : Working capital

No formal dividend policy

Competitive Strength:

Strong business partners, National Statistics Bureau in Beijing, Haier Group Corrporation in Qingdao, F&N Investment.

Competition:

Mostly, China based companies. Fragmented market.

Future Plans:

  • Seek alliance with strategic partners
  • Increase market penetration and promotion activities
  • Increase application of production managment system

Why not?

It is easier to find a reason to buy a stock. So I rather ask myself, why I should not buy a stock.
  • Based on IPO, they invest in new and advanced printing machinery with 5 years left. It is almost time to upgrade and increased capex?
  • Slowing revenue growth since IPO at 9%
  • Receivable growth much higher than revenue growth? 48% vs 9% in FY2009. Possible difficulties in recovering the receivables?
  • Dropping profit margin, ROE
  • FY2009 states increased operating cost from transportation, labor and material
  • FY2009 states huge decline in outdoor advertising
  • Increasing current liabilities
  • Q1 FY2010 Profit drops 6% compared to Q1 FY2009
  • Q1 FY2010 Selling expenses rises 40.3% compared to Q1 FY2009, various expenses also increases in double digits.
  • Q1 FY2010 receivable growth of 12% outgrowth Q1 FY2010 Revenue growth of 9.4%
  • Increasing number of issued shares
  • Convertible Bonds representing 12% of issued capital @ S$0.75 for each Share that might dilute values?


Not going to comment about buy or sell since I really don't know how to estimate. However, I am going to track the news of this company.

References:

  1. NextInsight 2007 - FUNG CHOI issues RMB380 m bonds ahead of subsidiary's IPO
  2. SGX - Fung Choi 2004 IPO Details
  3. SGX - Fung Choi Q1 Update
  4. SGX - Fung Choi Respond to SGX Query
  5. SGX - Fung Choi FY2009 Annual Report
  6. SGX - Fung Choi Disposal of Guangzhou Fung Choi Printing
  7. Fung Choi Website

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