Fibon Bhd
Fibon is involved in manufacturing chemical and electrical products, as well as financing activities. The company formulates polymer matrix fibre composites, manufactures and sell electrical insulators, electrical enclosures and meter boards. One third of its sales are derived from the domestic market and the rest overseas, mainly from Singapore, Australia and Europe.

Despite having a small market capitalisation of only RM 46.1 million, Fibon also has operations in the UK and Australia, and has seen consistent revenue and profits, with high margins.

Fibon’s turnover has been steady at between RM12 million and RM17 million from FY May 2010 to FY2014. Its net margins averaged over 25% annually, and were at 26.1% in FY2014. This translated to annual net profit of RM4 million to RM5 million in the same period. ROE was a high 12.3%.

The company has a history of maintaining a roughly 25% payout ratio, with annual dividends of between 1.1 sen and 1.25 sen over the last three years. Net dividends in FY 14 equalled 1.1 sen per share — translating to a yield of 2.3%.

As a result, its cash pile has been increasing, with net cash of RM23.4 million as of 31 Aug 2014. This is equivalent to a hefty 23.9 sen per share, or half of its current share price of 45 sen. The stock is trading at a small premium of 11.8 sen or 1.27 times its book value of 35.2 sen, with a 12-month trailing P/E ratio of 15.3x.

With steady earnings and a cash-rich balance sheet, it will be interesting to see what Fibon may do to boost shareholder value. Possibilities include acquiring more assets to boost growth, expanding its new factoring and financing arm, or increasing dividends, which will not only reward shareholders, but also reduce the stock’s underlying P/E valuations.

This article first appeared in The Edge Financial Daily, on November 12, 2014.