FPI – RM1.10

Our daily, weekly and monthly charts indicate that FPI is in a very strong uptrend. We suggest buying FPI on dips to the support areas of RM0.93 and RM1.10. We expect FPI to rise towards its target areas of RM1.45, RM1.75 and RM2.15 in the medium-term. Stop-loss is at RM0.91.

On the fundamental side, we do not cover FPI. Other houses do not cover the stock too. It pays a consistent yearly dividend of at least 5% over the last few years. This makes FPI a very stable buy for the medium-term.Our daily, weekly and monthly charts indicate that FPI has further strong upside potential. The very strong chart buy signals reaffirmed our positive views on FPI. We believe this is a good opportunity to buy FPI at its keysupport areas of RM0.93 to RM1.10 on any price declines, with stop-loss at RM0.91.

From a technical point of view, FPI has been gaining interest as volume picked up recently. Its price trend is in a strong upward phase, with 19-day moving average trending way above its 50-day moving average line. As such, this points to a very strong upward momentum move for FPI. Directional movement indicators began reflecting the daily uptrend in end April 2009 and till today continues to point upward. Its weekly Parabolic also supports FPI’s rising price trend.

Contrarian indicators (such as RSI and Stochastic indicators) also indicate a firm upward momentum for FPI. FPI will potentially break above RM1.13 (a key resistance level) in a very bullish Ascending Triangle formation.

FPI is involved in producing and assembling a variety of audio systems, such as home theater systems, carspeakers, high-end audio systems, WiFi-internet radios, receptor radios and other audio speakers. The maincustomers of FPI are well known brands like Sony, Kenwood, Boston, Marantz, Onkyo, Denon and Koi. Its largest shareholder is PNB with a 24.78 stake%. FPI in turn, also owns the largest stake in ACOSTEC (another speaker maker) listed on Bursa Malaysia.

FPI’s latest 3Q10 recorded a group turnover and net profit growth of 5% and 9.5% respectively QoQ, while YoY turnover and rose 14% while net profit grew by 12 times. The YoY-improved performance was attributed to better product mix and higher sales. We feel that the improving economic condition in countries that FPIexports to, are gaining strength as consumer spending improves. A breakdown in revenue from a geographic point shows the following sales contribution for the 9-month period, Malaysia with RM197.8m (49.7%), Asia(46.8%), Europe (1.2%), other America (2.2%) and other countries (0.1%). FPI’s balance sheet shows that it is in a strong cash position. Other positives are that non-current liabilities have been on a down trend since 2002, while improving sales with declining account receivables QoQ probably explains its strengthening cash position.

On the fundamental side, neither Maybank IB nor Bloomberg has coverage on FPI. This is probably due to its mid-size capitalisation and lack of volatility. Nevertheless, its balance sheet and strong cash position warrants very keen investor interest as duly reflected in its recent steady price rise. We also note that FPI indicated dividend yield for the past 12 months is at 7.66%. Over the last few years, the consistent dividend yield that paid was about 5%.

Extracted from yy's blog