FU YU: 4Q results preview, expected dividend yield 8%

Fu Yu Corp: Based on its Q3 YTD results, revenue was up only 5% vs previous year. However, attributable profits were $8.9 million vs previous YTD of $2 million. The two key improvements are: (1) gross profit percent, which is 1.5% better than previous year, thus contributing to the additional $3 million to the bottom line; and (2) a reversal from FX loss in previous year to FX gain, giving additional $4 million to net profits. YTD free cash flow is $10 million positive vs previous year's $1 million negative.

Therefore, expected full year EPS is about 1.6 cents and NAV per share at 22 cents. The company had already paid two interim dividends, totally 0.6 cents.

My expectation is that the final dividend may be 1 cent, giving a full year total of 1.6 cents. Current share price is 20 cents. Therefore, PE is 12.5 times, dividend yield is 8% and price-to-book ratio is 0.9 times.

Balance sheet is strong and healthy, therefore, dividends may be sustainable. From the company reports, about 50% of its business come from China.

Its full year 2018 results should come in around 28 February.

Number of ordinary shares outstanding is about 753 million. There are about 6,500 shareholders on its register.

Three major shareholders who are also active directors, hold about 38% of the company shares. Free float is about 61%. Most of the active directors are more than 60 years of age.

From a technical view, using Fu Yu weekly chart below, its 3-year high is 22 cents, and resistance is set at between 20 to 22 cents. The trend is bullish, but momentum is weakening as seen in the retracing RSI. Breaking out above 22 cents will see the share price turn higher, but could only happen if its Q4 numbers demonstrate strong performance and Q4 attributable profits exceed $2.4 million. Again, FX gain or loss will be the key in determining Q4 results vs previous year.

This analysis is for information only. It is not a call for buy or sell. Please do your own due diligence if you want to act on this counter.

Prior to his retirement, Chan Kit Whye (left) worked more than 30 years as Regional Finance Director, Financial Controller and Manager in a multinational specialty chemical business. He has played an active role in CPA (Australia) Singapore Branch, taking up positions in its Continuing Professional Development and Social Committees.   Kit Whye is a Fellow of CPA Australia, CA of Institute of Singapore Chartered Accountants and CA of the Malaysian Institute of Accountants. He holds a BBus(Transport) Degree from RMIT, MAcc Degree from Charles Sturt University and MBA from Durham Business School.