16th Nov 2013 - Fibon

From your post as below, may I know why Fair value of Fibon = 15.3*0.05 = RM0.76 what is 0.05 mean? If FIBON PE 15.3 as your analysis, is it mean our return only 2.85% base on today FIBON price (0.435/0.0285=15.3). If base on FIBON PE 8.7 then return is 5.4% (0.435/0.0543=8.7) and fair value of FIBON =8.7*0.05=0.435. Please advice if I am wrong. Thank in advance.


"Basic PE for Fibon with a growth of 3% and a dividend yield for last year of 3.9%,

Basic PE = 8 + 0.65*3 + 3.9 = 13.9

Business risk: Fibon’s business has high efficiencies with high return of assets of 16.4% and high return of capital of 46%. Cash return (FCF/IC) is also great at 26%. Hence there may a good moat in its business. An arbitrary 5% premium is applied to its business risk.

Financial risk: Fibon has a very healthy balance sheet with no debt. Hence a premium of 5% is applied.

Earnings visibility: Fibon has quite stable and high operating profit margins of 39%. Its cash flow from operations is also stable though they are slightly below the net income. As it is a small company, no premium nor discount is applied.

Hence the absolute PE for Fibon is:

Abs PE = 13.9* [1+(1-95%)] *[1+(1-95%)] * [1+(1-100%)] = 15.3

Fair value of Fibon = 15.3*0.05 = RM0.76"