Today, I see an interesting news from China Press about FACB INDUSTRIES INCORPORATED BERHAD (FACBIND, 2984). The article mentioned that the cash per share of FACBIND will be increased to RM1.90 after disposing its Steel business. With closed price of RM1.05 on Friday, FACBIND attracted my attention immediately with more than 50% potential profit. Thus, in this article, I would like to share my "homework" regarding FACBIND.
Firstly, based on the announcement from Bursa Malaysia entitled:
"I. PROPOSED DISPOSAL BY KANZEN KAGU SDN BHD ("KKSB"), A WHOLLY-OWNEDSUBSIDIARY COMPANY OF FACB, OF A PARCEL OF LEASEHOLD INDUSTRIAL LANDERECTED UPON WITH TWO (2) DETACHED FACTORIES AND OTHER SUPPORTINGSTRUCTURES, MEASURING 81,520.56 SQUARE METRES HELD UNDER H.S.(D)132498/ LOT PT 64, SECTION 23, CITY OF SHAH ALAM, DISTRICT OF PETALING,SELANGOR DARUL EHSAN, TO ABSOLUTE DEAL SDN BHD ("ADSB") FOR A TOTALCASH CONSIDERATION OF RM97.00 MILLION ("PROPOSED DISPOSAL OFPROPERTY");
AND
II. PROPOSED DISPOSAL BY FACB OF 10,000,000 ORDINARY SHARES OF RM1.00 EACH,REPRESENTING 100% EQUITY INTEREST IN KANZEN TETSU SDN BHD ("KTSB") TOKENTZU STEEL SDN BHD ("KENTZU STEEL") FOR A TOTAL CASH CONSIDERATIONOF RM34.50 MILLION ("PROPOSED DISPOSAL OF KTSB")"
Thus, the total expected one-off gross profit will be RM 131.50 (RM97.00 + RM34.50) million.
Since the weighted average number of shares in issue (excluding treasury shares) = 83,882,800, expected earning per share (EPS) = RM131.50/83.8828 = RM1.57. Although it is slightly lower than the amount stated in the newspaper, it is still quite attractive.
Next, from the note 6.3 as follows:
"6.3 Earnings and earnings per share ("EPS")
The Proposed Disposals are expected to be completed in the second quarter of 2013. As such, upon completion of the Proposed Disposals, FACB Group is expected to realise estimated total gross gains (excluding incidental costs to be incurred for the Proposed Disposals) amounting to approximately RM67.75 million. For illustration purposes, assuming the Proposed Disposals were effected as at the beginning ofFYE 30 June 2012, this in turn is expected to translate into an increase in EPS by approximately RM0.81 from a loss per share of RM0.19 to an EPS of RM0.62. "
This EPS is only RM0.81. It may due to the fact that the EPS is only based on the earning from the disposals (that is, EPS = the selling amount - the cost).
"Aggregate land area: 81,520.56 square metres (approximately 20.14 acres)
Postal address : Lot No. 4, Persiaran Perusahaan, Section 23, 40708 Shah Alam, Selangor Darul Ehsan"
In other words, the selling price of land (let's exclude the building) is RM97 million/20.14 acres = RM4.816 million per acres or RM97 million/81520.56 square metres = RM1,189 per square metres or approximately RM110 per square feet. Does the price sound pausible and reasonable?
Next, "The disposal consideration for the Sale Shares is RM34.50 million which was arrived at on a willing-buyer willing-seller basis, after taking into consideration the adjusted net assets ("NA") of KTSB amounting to RM29.42 million based on the audited financial statements of KTSB for the FYE 30 June 2012."
The expected one-off income is RM1.57 cash per share, excluding incidental costs to be incurred in relation to the proposed disposals. If those costs are in total 10%, then the expected one-off income will be RM1.57*0.90 = RM1.413 per share. With the price of RM1.00, upon the completion of the proposed, we can earn another RM0.413 cash per share profit plus free profitable bedding business, after excluding our cost of RM1.00. Is it a good deal? Obviously, it is. But I must highlight that all the potential profit will be realized, if and only if, the deals (the proposed disposals) are completed.
After list out the pros and cons of FACBIND's proposed disposals, I believe the sharesholders will very willing to prove these proposed in the coming extraordinary general meeting.
That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.
Written by: Xaivier Chia
Firstly, based on the announcement from Bursa Malaysia entitled:
"I. PROPOSED DISPOSAL BY KANZEN KAGU SDN BHD ("KKSB"), A WHOLLY-OWNEDSUBSIDIARY COMPANY OF FACB, OF A PARCEL OF LEASEHOLD INDUSTRIAL LANDERECTED UPON WITH TWO (2) DETACHED FACTORIES AND OTHER SUPPORTINGSTRUCTURES, MEASURING 81,520.56 SQUARE METRES HELD UNDER H.S.(D)132498/ LOT PT 64, SECTION 23, CITY OF SHAH ALAM, DISTRICT OF PETALING,SELANGOR DARUL EHSAN, TO ABSOLUTE DEAL SDN BHD ("ADSB") FOR A TOTALCASH CONSIDERATION OF RM97.00 MILLION ("PROPOSED DISPOSAL OFPROPERTY");
AND
II. PROPOSED DISPOSAL BY FACB OF 10,000,000 ORDINARY SHARES OF RM1.00 EACH,REPRESENTING 100% EQUITY INTEREST IN KANZEN TETSU SDN BHD ("KTSB") TOKENTZU STEEL SDN BHD ("KENTZU STEEL") FOR A TOTAL CASH CONSIDERATIONOF RM34.50 MILLION ("PROPOSED DISPOSAL OF KTSB")"
Thus, the total expected one-off gross profit will be RM 131.50 (RM97.00 + RM34.50) million.
Since the weighted average number of shares in issue (excluding treasury shares) = 83,882,800, expected earning per share (EPS) = RM131.50/83.8828 = RM1.57. Although it is slightly lower than the amount stated in the newspaper, it is still quite attractive.
Next, from the note 6.3 as follows:
"6.3 Earnings and earnings per share ("EPS")
The Proposed Disposals are expected to be completed in the second quarter of 2013. As such, upon completion of the Proposed Disposals, FACB Group is expected to realise estimated total gross gains (excluding incidental costs to be incurred for the Proposed Disposals) amounting to approximately RM67.75 million. For illustration purposes, assuming the Proposed Disposals were effected as at the beginning ofFYE 30 June 2012, this in turn is expected to translate into an increase in EPS by approximately RM0.81 from a loss per share of RM0.19 to an EPS of RM0.62. "
This EPS is only RM0.81. It may due to the fact that the EPS is only based on the earning from the disposals (that is, EPS = the selling amount - the cost).
Does the proposed sound promising?
Now, let's go back the announcement again to extract relevant information:"Aggregate land area: 81,520.56 square metres (approximately 20.14 acres)
Postal address : Lot No. 4, Persiaran Perusahaan, Section 23, 40708 Shah Alam, Selangor Darul Ehsan"
In other words, the selling price of land (let's exclude the building) is RM97 million/20.14 acres = RM4.816 million per acres or RM97 million/81520.56 square metres = RM1,189 per square metres or approximately RM110 per square feet. Does the price sound pausible and reasonable?
Next, "The disposal consideration for the Sale Shares is RM34.50 million which was arrived at on a willing-buyer willing-seller basis, after taking into consideration the adjusted net assets ("NA") of KTSB amounting to RM29.42 million based on the audited financial statements of KTSB for the FYE 30 June 2012."
So when the proposed disposals will be completed?
"The Proposed Disposals are expected to be completed in the second quarter of 2013."The expected one-off income is RM1.57 cash per share, excluding incidental costs to be incurred in relation to the proposed disposals. If those costs are in total 10%, then the expected one-off income will be RM1.57*0.90 = RM1.413 per share. With the price of RM1.00, upon the completion of the proposed, we can earn another RM0.413 cash per share profit plus free profitable bedding business, after excluding our cost of RM1.00. Is it a good deal? Obviously, it is. But I must highlight that all the potential profit will be realized, if and only if, the deals (the proposed disposals) are completed.
After list out the pros and cons of FACBIND's proposed disposals, I believe the sharesholders will very willing to prove these proposed in the coming extraordinary general meeting.
That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.
Written by: Xaivier Chia
(P/S: The above sharing is solely based on personal insight. Please do not take it seriously. However, your valuable feedback are very welcome.)
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