Investing July 2019 (part 2) ... FuYu + 42.6% gain
[Disclaimer: I am an amateur investor and not a financial advisor. I blog here to chronicle my investment journey. My stock purchases and sales are unique to my temperament, life situation, risk appetite and investment goals. All information that you find on my blog such as ideas, commentaries, predictions, or stock picks, whether expressed or implied, are not to be construed as personal investment advice. I repeat, I am only an amateur investor. I cannot and will not be held liable for any action that you take as a result of what you read here. Do your own due diligence and/or seek the help of a qualified financial advisor.]
I have not been using MBKE's RSP program for long before they canceled the program (tsk!), and thus I was left with some odd units of STI ETF, OCBC and Singtel. I sold them all and bought FuYu. Why FuYu?
Fuyu engages in the manufacture and sub-assembly of precision plastic parts and components in Singapore, Malaysia, and China. FuYu is also involved in the fabrication of precision molds and dies; trading activities; and provision of management services. It serves companies in the printing and imaging, networking and communications, consumer, medical, and automotive sectors.
In recent years, FuYu has broadened and diversified its customer base in market segments that are characterised by greater stability, longer product life cycles, and higher growth potential, i.e. medical products and automotive parts. Its revenue from its traditional sources in printing and imaging industries has been greatly reduced with the greater portion of income (>70%) now coming from these new market segments. FuYu is embracing technology and seeking opportunities in new growth segments in its bid to be the "preferred global partner in engineering plastic products, from design to full assembly."
A forward-looking company with ambitions. I like.
In these times of economic uncertainty, FuYu fits my definition of a strong company that will withstand economic turmoils. From its latest annual report, I gathered the following:
A. Revenue increased 1.4%: $195 million (2017) to $197.7 million (2018)
B. Gross profit increased 5.9%: $33.3 million (2017) to $35.5 million (2018)
C. Gross profit margin expanded from 17.1% (2017) to 17.8 (2018)
D. Profitability before tax jumped 91.4%: $8.3 million (2017) to $15.9 million (2018) on the back of higher gross profit and other operating income, before excluding FX impact and share of results of joint venture.
E. Net profit after tax rose 165%: $4.5 million (2017) to $11.9 million (2018)
F. FuYu maintained a sound financial position with a cash balance of $80.3 million and zero borrowings. Its strong net cash position represents about 50% of its current market capitalisation.
A company with 0% gearing that sits on bags of cash. I like.
I was comfortable getting the shares @0.215 (price over NAV: 0.9715). My calculation of fair value for FuYu fell between the range of 0.22 to 0.25. What about dividend yield? FuYu currently offers 7.44% dividend yield. Pretty yummy, eh?
A company whose dividend is above the market's top 25% of dividend players in Singapore. I like.
Key risks faced by FuYu are mainly related to foreign exchange and an economic recession. I'm quite assured that FuYu is a safe haven should economic conditions worsen, and I will probably accumulate more should the share price drop. Since the time I bought Fuyu, its share price has been hovering between 0.215 and 0.2.
Interestingly, there were speculations a couple of years ago that FuYu would make an attractive takeover target. That, of course, did not happen ... or may I say, "has not happened yet?" Whatever the case maybe, I wouldn't mind as long as the takeover is made at a higher valuation than FuYu's current market value.
2. Memtech International
Back in April this year, one of the stocks I bought was Memtech (https://latemonkeyslife.blogspot.com/2019/04/investing-2019-apr-3rd-4th-and-5th.html). Not soon after in May, news that Memtech was going to be privatised and delisted hit the headlines. When the cash offer of $1.34 per share was offered, I took it, thus pocketing a 42.6% gain in profit (bought @0.955) and dividends.
So just like that, without having to do anything, I gained several hundred dollars. How I wish I had bought more of Memtech! But being a rookie investor, I didn't dare to risk too much on each counter. Anyway, inch by inch, yard by yard, my investment kingdom of "Rome" will be built.
Now wish me luck, will ya?