Insider Asia’s Stock Pick: Fitters Diversified

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Fitters Diversified Bhd
Listed since 1994, Fitters Diversified Bhd has built up its reputation over time as a “one-stop fire protection specialist”. Apart steady earnings from this core business, the company has also diversified into property, industrial products and renewable energy, which has borne fruit and led to higher levels of profitability.

Since 2007,the company began its diversification strategy, first into property development and renewable energy, and then into PVC pipes.

Its maiden property development project was Zeta Parkin Setapak, and the company has 50 acres of land in Rawang which will be developed into a landed residential development. Its renewable energy division is housed under its FUTURE NRG Sdn Bhd, which is seeking listing on Singapore Exchange’s Catalist market. The division uses proprietary technologies to produce renewable energy from waste.

Fitters has also expanded into oriented PVC pipes business which is expected to begin commercial production next year following the completion of a RM90 million plant in Kuantan in Oct 2014.

The company expects this division to churn out revenue of RM150 million for the first full year of operations, with a doubling of capacity planned next year. Once fully operational, it will provide a significant boost to revenue and profitability, with a 30% increase over its revenue of RM472.5 million for 2013.

Fitters has consistently chalked up increases in revenue and net profit for the past three years, with double-digit ROE and a healthy balance sheet despite its expansion strategy. Its net gearing ratio is 15%. The stock is trading at an attractive trailing 12-month P/E of 7.8 times, and a price-to-book ratio of 1.1 times. In February, Fitters announced a dividend policy with a minimum 30% payout starting from
2014.

FittersDiversified_theedgemarkets

This article first appeared in The Edge Financial Daily, on October 20, 2014.