In my original post on "Thoughts on the market"i mentioned that i was vested in 5 stocks. Federal is one of the 5. For this posting I wish to share with you why I pick Federal. Here goes ....
1. it's a turn around company. In the last financial year the company registered a loss of S$35 mil mainly from various impairment, but since the beginning of this financial year the company has turn around w 3 quarters of decent profit. See below :
1st quarter profit : S$1,178,000
2nd quarter profit : S$2,993,000
3rd quarter profit : S$2,132,000
Profit for 9 months : S$6,303,000
2. company is under the SGX watchlist. Normally when a company has turn around it should have no problem exiting from the "watchlist" status. Historically, when a company exit it's "watchlist" status the share price go up to reflect the new fundamentals.
3. it has an absolute low price of 3.1 cts (based on the last closing price on 27 dec 2013).The 52 weeks high is 4.6 cts and low is 2.2 cts. The low was a reflection of it's huge loss in the last financial year but given that it has shown continuous improvement in the last 3 quarters the 2.2 cts low is likely to be a thing of the past. The potential for a price review is very high given it's present profitability.
4. it is currently trading below it's nav of 5.56 cts
5. as of 8 oct 2013 it has a book order of S$38 mil .. this compares with it's 3rd quarter of S$37 mil. And management commented that : "The Group remains focused on the core trading business and expects a healthy flow of orders for 2014." The core business take up 95% of it's total revenue.
6. it's in the oil n gas sector .. a vibrant sector and certainly not a sunset industry.
7. it had recently resolved it's problem with it's business in Panzhihua City. I believe this to be good news as it frees up management time for more important business. Further the disposal seem to have other benefits. See below on a quote from the management :
Quote : "The divestment of the Group’s 99% interest in FEEW will improve the Group’s networth and gearing positions. Assuming that the Proposed Transaction was completed on 31 December 2012, the Group’s net asset value per share would have increased from 6.84 cents to 6.92 cents. The Group’s gearing ratio would have reduced from 0.93 to 0.63."
8. Given the recent in interest in the company, I expect to see better days ahead w regards to it's share price barring unforseen circunstances or a major market crash. See below for volume traded in the last few days :
17 dec (tuesday) - 0.5 mil shares traded.
18 dec (wed) - 0.6 mil
19 dec (thurs) - 6.2 mil
20 dec (fri) - 7.5 mil
23 dec (mon) - 8.3 mil
24 dec (tuesday, Christmas eve) - 1.3 mil
26 dec (thurs) - 22.5 mil
27 dec (fri) - 25.2 mil
Conclusion : I am vested in the counter and above are just my views n ways of looking at things. I could be wrong in my assessment, so if you should be interested in the counter, pls do your own analysis n draw your own conclusion.
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Hi Zen, how about a game? Just a friendly game. You pick 3 stocks from the "hundreds of better stocks". Within 3 months if any of your "better stocks" perform better than Federal you win. To make it more interesting if you win I pay you S$100 and if you loose you pay me S$10.0 only. Just a friendly game .. no hard feelings. Okay? Frankly I am not sure if I can win but for the fun of it I don't mind loosing.
ZEN wrote: No way , i am not touching
Anyway , there are hundreds of better stocks out there
Any news on the progress of conversion and disposal of Federal II? Based on 3QFY2013 forward statement, "the earliest legal and physical delivery of the vessel is expected to be in the fourth quarter of 2013.". If the above transaction is completed, the net gearing of federal will be able to reduce substantially since the purchase consideration is amount to USD$52 million
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