FPI 2019 Annual Report & Q1 2020

Highlights in FPI 2019 Annual Report

• Revenue increased by 37%, EBITA incrased by 26%, net profit increased by 14% (Increase in revenue mainly due to increase sales to its holding company: Wistron Group. Lower net profit due to higher ITDA)

• Inventories turnover days = 23 days to sell its inventory upon receiving it from suppliers
  Receivable / debtors turnover days = 49 days to collect money from customers after billing them
  Payable / creditors turnover days = 64 days to pay its suppliers after being billed by them
  Cash Conversion Cycle days = 23 + 49 - 64 = 8 days.   
• Strong cash flow from operating of RM 71 million which is 173% of its net profit. 
• In 2019 FPI only spend RM 9 million on purchase of PPE as compared to RM 20 million in 2018. This could further strengthen FPI balance sheet.                                                                                              

• Forex gain in 2019 amounting to RM 7 million which accounts for 13% of its net profit. Excluding the forex gain, FPI net profit is RM 34 million where the profit margin is about 4.5%. 

• Sales to Customer A (Sony) in 2018 - RM 256 million, 2019 - RM 263 million
• Sales to Customer B (Roland) in 2018 - RM 109 million, 2019 - RM 150 million
• Sales to Customer C (Wistron) in 2018 - Nil, 2019 - RM 189 million

• 56% of its trade receivables are in USD while remaining in MYR. 

• Only 0.5% of their receivables have chances of becoming bad debts. 

• Only 32% of their payable is denominated in USD and 62% in MYR. 
• This could probably explain the high forex gain for FPI. A stronger USD is beneficial to FPI. As they sell most of their products in USD but pay most of their supplier in MYR.

FPI Q1 2020

• Q1 always serves as the weakest quarter for FPI and Q3 the strongest due to christmas and new year sales. 
• Revenue reduced by 13% however profit reduced by 30% due to lower sales volume as the Group shut down its operations from 18 March 2020 in compliance with the MCO. (one quarter has 90 days, MCO close down for 12 days  = 13% drop in sales is in line with the drop in revenue. Fixed cost remain the same which causes its net profit to drop 30%)
• Higher other income in Q1 2020 most likely due to a forex gain of RM 3.2 million. If exclude the forex gain, its net profit would likely be somewhere around RM 2 million (its EBITA is RM10 million for Q1 2020)

• Sales to Wistron grew by 100% as compared to previous year (this is something good). 

• Expect the performance 2020 to be impacted. 

Valuation of FPI at RM1.36

• At the price of RM1.36 with EPS of 15.84 sen , current PE of FPI is 8.59 times. 
• Assuming a 30% drop in EPS for 2021, Its estimated EPS for 2021 is 11.76 sen. 
• Average PE of FPI from 2016 - 2019 is 9.5 times. PE of 9.5 with EPS of 11.76 sen, its share price with margin of safety should be RM1.12
• FPI paid out around 65% of its earnings as dividend in the past 2 years. Assuming a 7.5 sen of dividend payout for 2020, its dividend yield is 5.5% based on its current share price of RM1.36.