Federal - "Thoughts on the market."

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09 Apr 2014 13:01 - 09 Apr 2014 13:33 #19621 by josephyeo
Hi Joes, posted in december 2013 but had sold off my shares when it was around 5.0cts.

I think the current price is attractive n I have bought back at 3.2 cts.

The drop in price could be attributed to the 4th quarter result when the company reported a loss of S$1.6 (figures rounded up). The other concern could be whether the company qualify for exit from the SGX watchlist.

Regarding the 2 issues mentioned, the loss in the 4th qt was mainly due to impairments ... see quote below:

Quote

Overview
In FY2013, turnover increased by 4% to S$128.2 million. The Trading business contributed 97% of the total turnover. Turnover increased by 171% (+S$29.4 million) in 4QFY2013 due mainly to higher sales to customers in China.
The Group recorded a net profit before tax of S$5.0 million for FY2013 as compared with a loss before tax of S$36.9 million in FY2012. The results of the Group were weighed down in 4QFY2013 by the impairment of Federal II of S$6.4 million due to costs overrun and the provision for the maximum penalty relating to the late delivery of the vessel of S$4.4 million. In 4QFY2013, the Group further impaired the investment (which is accounted for as financial receivables in accordance with INT FRS 112) relating to the Chengdu waterplant by S$2.0 million due to lower than expected volume of water produced and also, made an impairment of goodwill of S$0.9 million.

Excluding the impairment losses and the writeback of impairment loss on doubtful receivables of S$10.7 million and the reversal of allowance for slow moving inventories of S$0.2 million, the Group would have reported a profit before tax of S$7.8 million for the full year.

Unquote.

It seems that the losses in the 4th quarter were due mainly to various impairments. All things being equal n assuming that there is no further impairments in current financial year, the company is likely to be more profitable.

Regards to exit from SGX watchlist .. so long as it can rmain profitable, i don't see any issue here.

Above are just my thoughts.
Last edit: 09 Apr 2014 13:33 by josephyeo. Reason: correction wrong statement

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09 Apr 2014 14:50 #19624 by Value Investor
Great analysis....I was following Joseph step by step and benefitted from his insightful advice.
Just bought back 500 lots at 3.3 cents and will continue to monitor the movement of their price for further accumulation.
Just my humble view. Thanks.

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10 Apr 2014 18:55 #19640 by darrickhancock
My view is as follows:

Positive:

-Market cap < revenue,

-share price < net book value.

-Seems to be out of trouble soon, by taking a lot of impairment, they are clearing all the rubbish within the company.

-Director purchase

-Seems to have good operational cash flow. Usually an indication of the health of core business. When you take impairment/provision, it usually does not affect cash flow, only the accounting book.

-Turnaround share usually gives good returns in share price.

Negative:

-Current liabilities > current asset. If bank or creditor or supplier demand payment, may go bankrupt as short term loan is greater than cash/bank deposit. This is usually the factor that prevents me from buying penny stock, as we need to ensure this penny stock does not go bankrupt. If it can hold on (without going bankrupt), it will have a chance to revive its business and hence the share price

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03 May 2014 17:27 #19785 by guragon
Hi,

Anyone Federal Shareholders attended the recent AGM and care to share any news or development regarding the future of Federal.

Thanks

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16 May 2014 15:22 #19908 by ontheball
Hi Joseph Yeo, what is your take on Federal's 1st Q results? Look ok on the surface but do you see any items of concern? Just want to get an expert's view. Thanks.

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16 May 2014 16:05 #19909 by josephyeo
Hi ontheball, the 1st quarter profit was due to, see quote below :

Quote -
Other operating income for 1QFY2014 included a gain of $3.6 million from the disposal of assets held for sale.
Unquote

Check this figure against the attributable profits of S$5,437,000 and profits to share owners of the company of S$2,912,000. It seems that there not much improvements in the bottom line if you take away the onetime profit. The good thing about the company is that they had cleared away a lot of the rubbishes .. impairments. It should be a cleaner n more focus company now.

Personally, i have taken up some shares.

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