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Saturday, November 15, 2014

UPDATED: Another GEM with >100% UPSIDE!


Update: Another stock that is undercovered due to its small market capitalization! This stock has the potential to double within 3 years, giving investors average annual return of 30%!

Fiamma will launch two service apartment projects by end of 2014: the RM600million GDV high rise development at Jalan Yap Kwan Seng, behind Public Bank Tower, and the RM400million VIDA residenz in Johor Bahru.

Its other project is the redevelopment of its three-acre Bandar Manjalara land with GDV of RM300mn, adjoining its headquarters. Currently, Fiamma is using this portion of the land for its warehouse facility.

"But given the market rate and our need for more space, we will be moving our warehouse to Klang where we have bought a piece of land to build a bigger facility.” says its CEO Lim Choo Hong.

The project, with a GDV of more than RM300mil, will also offer over 400 units of serviced apartments in two blocks, albeit with bigger floorplans offering up to three rooms.

Unlike its city-centre counterpart, the Bandar Manjalara project will cater to young local executives and will be priced around the RM500,000 range.

In total, Fiamma has 3 high value property projects with GDV of RM1.3bn over the next 5 years. Average sales would be RM260mn/year. Assuming 20% net margin, which is very conservative for highrise development, EPS would be 38sen from property development.

Average net profit from appliances business is RM20mn. EPS is 14sen.

Total EPS is 52sen. Assuming PER of 10 times, Fiamma has a target price of RM5.20! More than DOUBLE its share price of RM2.20.

Fiamma will announce its results within the next 2 weeks! EPS is expected at 33sen. Total dividend expected to be at least 9sen or yield of 4%! Not bad for a business that will grow by >20% for the next 3 years.


Previous article: Another GEM with >50% UPSIDE!
Following my first pick KSL which has gone up by >80%, here is the next GEM!

Fiamma is a market leader in household appliances with popular brands such as Elba and Faber. Many have one of its products at home but probably miss out its UNDERVALUED stock. Profit margins are above 20% for this stable business with growth depending on economy and house ownerships. Taking out the investment properties and lands for property development, return on asset and equity are high >20% (Your return from FD is only 3.5%). But the stock is still selling at a discount of 25% to book value! I wonder why!

Due to mature market for household appliances, Fiamma ventured into property development in 2012 with GDV of RM160mn at Jalan TAR, KL. Fiamma will keep some 30% of the office building for recurring income. Profits contribution from this project will peak this year!

Next year, Fiamma will develop more properties with total GDV of RM1.2bn over the next 5 years. That’s 7 TIMES more than the first project! Fiamma can afford to develop more properties due to its RECURRING CASHFLOWS from appliance business. Sales will peak in 2016/2017. EPS expected at 50sen! PER is ONLY 4.4 times for a business growing >20%/year!! If dividend payout ratio is maintained, DPS is 15sen! You count the yield!

Fiamma is different from other newcomers to the property development business as they are not latecomer. The founder has been in the property business for 15 years! Fiamma acquired lands in 2007 when most were out of the market, one of the best times to buy!

Fiamma will announce its results by the end of this month. EPS is expected at 33sen. My target price for Fiamma is RM3.96 based on 12 times PER. This is justified based on its superior profit margins and >20% growth in profits expected for the next 3 years! This is just the beginning. I will revise my target price again after the results announcement.

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