FIAMMA: the Double edged Sword

Fear and then relief gripped the markets this week, testing investors’ nerves. The problems were not particularly new -- concerns about a China-led global slowdown, collapsing oil prices and the end of Federal Reserve support had been rattling traders for months, leading to a plunge in equities back in August. The same issues reached a crescendo again by Wednesday before a rebound on central-bank optimism. ( This showed the turbulence of Human's emotion as well)


The slower pace of growth in China’s economy puts into question the outlook for demand from the world’s biggest consumer of commodities. A supply glut that torpedoed the price of oil made things worse, wreaking havoc on markets and especially the metals, mining and energy industries. Volatility also jumped, a sign market jitters were entrenched across the board among all asset classes. A relief rally eased concerns later in the week. Things started looking better by Thursday, when European Central Bank President Mario Draghi floated the prospect of more economic stimulus as early as March. 


So, what are your strategics for current turbulence market? 
1. wait and keep your bullets? ( bottom fishing?)
2. nibble bit by bit the stocks with good potential growth?
3. play safe by investing in high dividend stock/ Defensive stocks?

Well, it is a difficult decision to make. But, YOU MUST make a decision! 

Let's discuss about FIAMMA:

This Group has 3 reportable segments, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed based on the Group’s management and internal reporting structure. The following summary describes the operations in each of the Groups’ reportable segments:

1. Investment holding and property investment (1%)
2. Property development (9%)
3. Trading and services ( 90 % of  company's revenue) 

The Group recorded a lower revenue of RM333.488 million for the current financial year compared to RM338.161 million achieved in the preceding financial year. This is mainly due to lower contribution from the property development segment. (8.6% of net revenue). The Group recorded a higher profit before taxation (“PBT”) of RM75.415 million for the current financial year compared to RM63.182 million achieved in the preceding financial year. The PBT of RM75.415 million comprise RM50.577 million arising from operations and RM24.838 million from increase in fair value of investment properties.

The Group’s revenue is derived primarily from the trading and services segment which contributed 90.7% of the Group’s net revenue. The segment recorded a net revenue of RM302.542 million as compared to RM274.440 million recorded in the preceding financial year, representing a growth of 10.2%. Consequently, this segment recorded a higher PBT of RM44.770 million against PBT of RM41.436 million for the preceding financial year, representing an increase of 8.0%. The current financial year’s PBT from this segment represented 59.4% of the Group’s PBT.

Do take note that there is a recent JUMP in its EPS for its investment holding segment. The investment holding and property investment segment contributed 0.7% of the Group’s net revenue. This segment recorded a higher PBT of RM27.567 million against PBT of RM2.019 million for the preceding financial year, representing an increase of 1265.4%. Included in the PBT of RM27.567 million is an amount of RM24.838 million arising from the increase in fair value of investment properties located in Jalan Tuanku Abdul Rahman. The current financial year’s PBT from this segment represented 36.5% of the Group’s PBT.


Looking forwards: ( is there any potential growth for this company?) 

1. The relocation and centralisation of the existing warehouse in Bandar Manjalara to a new and larger capacity warehouse in Bukit Raja Industrial Hub, Klang (Phase 1) has been completed in October 2015. This is expected to improve operation efficiency as it will cater to all the Group’s logistic operations under one roof. In addition, the new warehouse is expected to provide additional income stream from the provision of storage space and logistic services to third party customers. ( How much will this new warehouse contribute to the subsequent financial quarter? ) 

2. More contribution from property segment despite the property market slowdown?

The proposed redevelopment of the existing warehouse land in Bandar Manjalara, Kuala Lumpur into commercial properties targeted in early 2016 will contribute to the Group’s revenue and profit in the coming financial years. The proposed new commercial development in Jalan Yap Kwan Seng and the proposed new mixed development in Jalan Sungai Besi, both in Kuala Lumpur are expected to contribute to the Group’s future income stream once the proposed developments are launched and sold. 

 

What makes this STOCK defensive ?
1. Dividend play: Pending 7.5 cents dividend in Feb/ March awaiting AGM approval in Feb 2016.
2. Share split and bonus issue play: Most likely will be materialise in ? March 2016. 

(i)         proposed share split involving the subdivision of every one (1) existing ordinary share of RM1.00 each in Fiamma (“Fiamma Share(s)” or “Share(s)”) into two (2) ordinary shares of RM0.50 each in Fiamma (“Subdivided Share(s)”) held on a split entitlement date to be determined and announced later (“SplitEntitlement Date”) (“Proposed Share Split”);

(ii)        proposed bonus issue of up to 177,555,700 new Subdivided Shares (“Bonus Share(s)”) to be fully credited as fully paid-up, on the basis of one (1) Bonus Share for every two (2) Subdivided Shares held on a bonus entitlement date to be determined and announced later (“Bonus Entitlement Date”) (“Proposed Bonus Issue”);

Company Announcement

* please study and make your own judgement before buying or selling stocks, BUY at your OWN risk*