Formosa Prosonic Industries Berhad - The audio maker

 

Company : Formosa Prosonic Industries Berhad

Business:

Design, manufacture and sales of smart audio system including wireless speakers to multinational companies.

 

The companies have operations in Port Klang and Penang. 

It is a Taiwanese managed company with a track record of revenue growth. Seem like a good management as they disposed their loss-making associate (Acoustech & FP Groud Ltd UK). The profit margin is not high but managed to grow the company well.  

They are reaching RM 1 billion revenue soon. Biggest shareholder is Wistron, a Taiwan based ODM company. Cold Eye is one of the major the shareholders.

 

 Fundamental :

Company has net cash of RM270 million as at end of 2020. Revenue dropped slightly in 2020 compared to 2019 due to MCO shutdown. Overall trend is growing with strong cash flow from operation. Company has no problem of paying dividen each year (approx RM 34.6 million or 14 cents).

 

Quick Financial information:

Source: Malaysiastock.biz

Both CAGR revenue and profit after tax are good. The profit margin is around 8-9% and good dividen yield.

 

5 years revenue

Year	2016	2017	2018	2019	2020
Revenue	340,607	461,182	560,520	766,198	756,988
Profit After Tax	20,255	40,491	36,633	41,786	52,513
EBITDA Margin	7.7%	11.4%	9.5%	8.7%	10.7%

 

There is clear growth of revenue from 2016 to 2020. However, profit after tax is a bit fluctuate. Business is generally seasonal according to their report.

 

Customers:

There is no geographical breakdown of their revenue but there 3 major customers as reported in the annual report below.

 

Q2 Result

Profit back to RM23 million with improved margin. The past 4 quarters has seen the revenue surpassed RM200 million. Moving forward, RM 1billion revenue should be achievable.

 

 Prospect:

Company is growing organically with no major expansion in the pipeline.

 There is exposure to USD & GBP currency and should benefit from strong foreign currency.

 

Company will dispose a piece of land in UK. The disposal was completed by 1^st July 2021. So another RM8 million profit into their Q3 report.

 

Risk

COVID shut down

The Port Klang operation has been affected due to MCO3. The 60% work force may have impact to operation as well. See their note in the Q2 report.

  

 DIVIDEN

High dividen payout ratio of > 65%. Dividen is usually paid once a year which normally around April. A minimum of 14 cents is expected for FY 2021 . There is great possibility of higher dividen as revenue and profit for first two quarters are good. Perhaps around 18 cents??

 

Technical Analysis on Chart:

Price peaked at RM3.40 at mid Feb 2021 then slowed down. On Friday the price gap up and broke resistance of RM3.00 when good Q2 result was released (speculation is bit high). The support level is RM2.60 and expected profit taking will take place in the next few months.

 

 

Forecast EPS & price

 

Date	20 August 2021		Current Price	RM 3.13
Current PE	9.5		Fair Value	RM 2.63
EPS
Quarter	Q1	Q2	Q3	Q4	Total
Forecast	8.3	9.4	5	5	27.7
Actual	8.3	9.4

 Coming Q3 revenue will slightly drop due to MCO3 shutdown but it will partially offset by the land disposal gain in UK.

 

At time of writing, I don’t have any FPI shares. Waiting for support level price to re-enter.