Sunday, 23 August 2015

Stock Review – FIAMMA (6939) - 2 (FIAMMA HOLDING BERHAD)


image source from Big Chart Marketplace

image source from Big Chart Marketplace
Bursa Malaysia - 6939
Bloomberg - FHB:MK
Yahoo - 6939 .kl
Webpage - http://www.fiamma.com.my/


Income Statement

For Q3 2015 FIAMMA recorded lower revenue compared to Q3 2014. This is mainly because the decline of the property revenue where Menara Centara had been completed in early 2015 and the revenue had been fully recognised in March 2015. Currently the property segment will only depend on the revenue from Vida Height in Johor. The property market in Johor is slowing down in 2015 hence the property segment did not do well in these quarter.

However the trading and services segment had 10.4% growth compared to last year despite there is GST implemented this year. As I had stated in the earlier post many new houses is completed within 2015 and 2016 these will help to increase the sales for FIAMMA which focus on home appliances. However the depreciation of the Ringgit Malaysia had increase the cost of good sold of the company and might reduce the profit margin of FIAMMA. With the large depreciation of Ringgit Malaysia in the last few weeks to make it to 17 years historical low, these will cause a challenge to FIAMMA on the fourth quarter as well (July 2015 – September 2015).

PROS:

  • Implementation of GST did not affect the revenue of the service and trading segment.

CONS:

  • Revenues from the property segment had drop significantly upon completion of Menara Centera in Kuala Lumpur.

  • The depreciation of Ringgit Malaysia might increase the cost of good sales of the home appliances as the brands are mostly imported from oversea and denote in USD.

Balance Sheet & Cash Flow

In these quarter there show a significant increase in the land for property development compare to previous quarter (Q3) these is because of the bought of the land in Kuala Lumpur in 30 April 2015. However the cash and cash equivalent balance has reduced about 50% in the Q3 2015 compared to Q2 2015. The reduction of cash might due to the increase of the inventory cost and the trade payable payment in US dollar.

For Q3 2015, FIAMMA also double its non-current liability, these might be because of the money borrowed to purchase the land in April 2015. Besides that, the trade payable also increase mainly due to the US dollar trade payable.

As for the cash flow, the operating cash flow for Q3 2015 is negative. This is mainly due to the increment of inventory cost due to depreciating Ringgit Malaysia. However these company is still able to sustain the short term effect of depreciating Ringgit Malaysia because it had large cash reserved. If these Ringgit Malaysia still depreciate these company might face a very large challenge and might not be sustainable anymore.

CONS:

  • Cash and cash equivalent balance reduce 50% compare to Q2 2015.
  • Non current liability had double compared to Q2 2015.
  • Negative operating cash flow.