Fiamma is listed in Bursamalaysia. Not the darling counter so far but it is trending up gradually. I just came across the research paper published by OSK/RHB Research house, which I record here for my own reference.
The valuation is not demanding and will by worth monitoring so that I may buy some on weakness.
Fiamma stands to benefit from the housing boom of the last 2-3 years.While its distribution business is experiencing annual resilient growth of 4-13%, property development is a new growth driver. A few strategic land parcels are now held at low costs, which mean high development margins. The company is also in a net cash position. Based on our SOP valuations, the stock could be valued at MYR3.20-3.30.
Distribution: a resilient business. Fiamma distributes home appliances and has a property development division, which indirectly and directly ride on the local property cycle respectively. Despite the housing market’s mini ups and downs, its distribution segment has achieved 4-13% growth per annum previously. It has been strong in the home appliances market with a wide distribution network nationwide. This segment typically yields 30-40% gross margins.
Property – a new source of growth. Fiamma will see a new growth driver led by its property development wing. The market may not be aware of this business as yet, but it contributes ~25% of total turnover.While Fiamma’s existing Centara project is expected to be completed in Oct/Nov 2014, it has >MYR1bn worth of projects in the pipeline, including MYR600m high-rise developments at Jalan Yap Kwan Seng (Kuala Lumpur) and the MYR400m VIDA residenz (Johor Bahru). By end-2015, management also plans to utilise its land behind Wisma Fiamma for development after an existing warehouse there is moved to Klang.
Low land costs creates RNAV re-rating angle. The property development division gives gross margins of 30-35%. This trend is expected to continue as Fiamma’s landbank is carried at low book costs.The most significant contributor to RNAV is the 1.4-acre Jalan Yap Kwan Seng land, with a land cost of only MYR631psf. The current market price for land parcels in the vicinity is already going at above MYR3,000 psf.
Net cash now. Fiamma is currently in a MYR54m net cash position. We expect it to gear up gradually to ~20-30% over the next two years in view of its upcoming slew of high-rise projects. Dividend payout should remain at about 30%, translating into a decent yield of almost 4%.
MYR3.20-3.30 FV. Fiamma’s land parcels are in deep value while the distribution segment provides stable income growth. Based on our SOP valuations, the stock could be valued at MYR3.20-3.30. It is currently trading at an undemanding 6.2x FY15f P/E.
Property – a new source of growth. Fiamma will see a new growth driver led by its property development wing. The market may not be aware of this business as yet, but it contributes ~25% of total turnover.While Fiamma’s existing Centara project is expected to be completed in Oct/Nov 2014, it has >MYR1bn worth of projects in the pipeline, including MYR600m high-rise developments at Jalan Yap Kwan Seng (Kuala Lumpur) and the MYR400m VIDA residenz (Johor Bahru). By end-2015, management also plans to utilise its land behind Wisma Fiamma for development after an existing warehouse there is moved to Klang.
Low land costs creates RNAV re-rating angle. The property development division gives gross margins of 30-35%. This trend is expected to continue as Fiamma’s landbank is carried at low book costs.The most significant contributor to RNAV is the 1.4-acre Jalan Yap Kwan Seng land, with a land cost of only MYR631psf. The current market price for land parcels in the vicinity is already going at above MYR3,000 psf.
Net cash now. Fiamma is currently in a MYR54m net cash position. We expect it to gear up gradually to ~20-30% over the next two years in view of its upcoming slew of high-rise projects. Dividend payout should remain at about 30%, translating into a decent yield of almost 4%.
MYR3.20-3.30 FV. Fiamma’s land parcels are in deep value while the distribution segment provides stable income growth. Based on our SOP valuations, the stock could be valued at MYR3.20-3.30. It is currently trading at an undemanding 6.2x FY15f P/E.
A Beneficiary Of The Housing Boom
Company background
Fiamma started up marketing mainly the Elba brand of electrical home appliances in 1997. Since then, the company has managed to pick up a number of other brands to widen its distribution reach. Key brands currently carried include Elba, Rubine, Faber, MEC, Tuscani, Haustern and EBAC Home. It also handles agency brands (sole distributorship) such as Omron, Whirlpool and Braun. Given the number of brands it carries, Fiamma has a wide product range to cater for the mass and high-endmarkets. These cover kitchen appliances, pre-fabricated kitchen cabinets, electrical home appliances, bathroom accessories and sanitary ware. Currently, the company has a nationwide distribution network and these products are distributed mainly to electrical shops/outlets and hypermarkets.
Company background
Fiamma started up marketing mainly the Elba brand of electrical home appliances in 1997. Since then, the company has managed to pick up a number of other brands to widen its distribution reach. Key brands currently carried include Elba, Rubine, Faber, MEC, Tuscani, Haustern and EBAC Home. It also handles agency brands (sole distributorship) such as Omron, Whirlpool and Braun. Given the number of brands it carries, Fiamma has a wide product range to cater for the mass and high-endmarkets. These cover kitchen appliances, pre-fabricated kitchen cabinets, electrical home appliances, bathroom accessories and sanitary ware. Currently, the company has a nationwide distribution network and these products are distributed mainly to electrical shops/outlets and hypermarkets.
While the distribution business has been generating resilient earnings, management decided to have property development exposure a few years ago. In Dec 2008, Fiamma completed the acquisition of two subsidiaries – Uniphoenix Jaya SB and
Oaksvilla SB – that own landbank in Kota Tinggi, Johor. Note that property development is not a new venture for the company, as these subsidiaries were previously owned by its founders. Over the years, Fiamma acquired several other
land parcels, such as the 1.12 acres at Jalan Tuanku Abdul Rahman and 1.4 acres at Jalan Yap Kwan Seng. Currently, the company’s distribution and property development segments contribute 75% and 25% of the company’s earnings
respectively.
Fiamma is now managed by Mr Lim Choo Hong, who is the CEO/group MD of the company. Choo Hong, Mr Lim Soo Kong (non-executive director) and Mr Ngo Wee Bin are the founder members and major shareholders. Choo Hong has more than 30 years of experience in dealing in home appliances. He also has more than 15 years of expertise in property development.
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